ZKTeco 2022 Annual Report
ZKTECO CO. LTD.2022 Annual Report
Announcement No.: 2023-033
April 2023
1ZKTeco 2022 Annual Report
Innovation Traversing the Cycle
A Letter to Shareholders
2022 is the first year of listing of ZKTECO.
We are well aware that listing is a new starting point for the development of ZKTECO but we have been given
higher expectations by our shareholders. The original intention and ideal of ZKTECO staff going public is to achieve
sustainable development and become a respected innovative global enterprise in the field of "multimodal biometrics
and multimodal computer vision". On behalf of the Board of Directors I would like to express sincere gratitude to
all colleagues users partners especially institutional and individual investors of the Company!
As of December 31 2022 ZKTECO has nearly 4000 global employees including over 1100 overseas
employees 95% of whom are local people. There are 42 branches and subsidiaries in China covering major
provinces and regions. There are 40 subsidiaries overseas and the Company's products are sold in more than 100
countries and regions worldwide. We have established R&D centers in Bangalore Xiamen Dalian and Dongguan
and Shenzhen with over 1100 R&D personnel. We have established manufacturing centers in China and Thailand
and invested in the construction of the "American Manufacturing Factory Construction Project" in the United States.In 2022 ZKTECO achieved a consolidated operating revenue of over RMB 1.9 billion which is basically the same
as in 2021; the net profit attributable to the parent company exceeded RMB 190 million an increase of 12.47%
compared to the same period last year. In the current complex international environment and macroeconomic
situation overseas business has achieved stable growth covering the gaps in insufficient domestic business growth
and ensuring the overall business stability.Innovation Traversing the Cycle
We often say that not investing in original R&D means building a house in someone else's house. No matter
how big your business is it will be someone else's sooner or later. Innovation driving is the driving force behind the
development of ZKTECO. In 2022 we invested nearly RMB 190 million in R&D accounting for 9.8% of the
Company's operating revenue.ZKTECO is engaged in the core algorithm research and entrance scene empowerment digital identity
authentication smart office and other businesses combining multimodal biometrics and computer vision.ZKTECO's technical team has developed core technical capabilities in technologies such as small data multitasking
2ZKTeco 2022 Annual Report
and multimodality after years of technical accumulation. In 2022 we combined zero sample single sample and
small sample learning to construct a relatively unified model and also established a multimodal artificial
intelligence (AI) research and direction of "small data and multitasking". Now I would like to report on our
strengthened core capabilities and platform R&D over the past year:
1. Our technical team continues to invest in the research of multimodal hybrid biometric recognition algorithms:
combining traditional pattern recognition with AI algorithms utilizing blockchain technology to unify physical and
digital iris physical and digital fingerprint physical and digital palm vein physical and digital human image related
physical biometric features with digital identity recognition in two dimensions and conducting in-depth research
on electronic payment hardware wallets.
2. We have made a substantial breakthrough in multimodal small sample offline computer vision. We have
upgraded from the traditional biometric "Who are you?" to "I not only know who you are but also can push services
for you interact with you according to the scene and provide value-added services through the cool interactive
experience of digital consumers." Our new generation of digital signage is about to be loaded with ZKTECO based
BioCV pre AI capability which empowers smart retail and catering scenarios.
3. In Bangalore India and Xiamen we have collaborated with Amazon to develop the next-generation Internet
of Things (IoT) platform Minerva which we call the Minerva Platform. With its powerful End-Edge-Cloud
capabilities it showcases excellent digital service capabilities for devices phones cloud services and third-party
ecosystems. ZKTECO Interconnection ZKTECO Cloud Commerce and ZKTECO Cloud Chain based on the IoT
platform base have been launched.Adhering to Globalization Without Wavering
Some people say that globalization has come to an end but we have to say that the 2.0 version of globalization
has just begun and new opportunities for innovation/intelligent manufacturing/services to go global have arrived.Only by possessing a modern governance system strengthening core competitiveness and comprehensive
capabilities focusing on long-term development valuing stakeholder relationships compliance and trustworthiness
and coordinating risk management and development can teams continue to develop under the new version of
globalization. We believe that development brings challenges and challenges bring difficulties. As long as we firmly
believe that human development is the development of civilization and the continuous evolution of time and space
globalization will definitely be the best choice for humanity.Facing the future we deeply understand that the foundation of the spirit of craftsmanship is the focus of
3ZKTeco 2022 Annual Report
craftsmanship. If there is only one choice we will choose the power of honesty because honesty will continue to
elevate our self-awareness allowing the desire for knowledge to stimulate the humility and curiosity of ZKTECO
staff in order to drive our never-ending growth and improvement.Finally thank all shareholders for their trust and support in the Company's management team! We will strive
to achieve good results and not disappoint all investors through the integration and development of core technology
innovation and main business innovation!
Chairman Che Quanhong
4ZKTeco 2022 Annual Report
2022 Annual Report
Section I Important Notes Contents and Definitions
The Board of Directors the Board of Supervisors directors supervisors and
senior management 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
which 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 Company’s current total
share capital of 148492051 shares the Company proposed to distribute cash
5ZKTeco 2022 Annual Report
dividend of RMB 3.5 (tax inclusive) per each 10 shares to all shareholders
No bonus shares will be issued and use capital reserve to increase 3 shares per
each 10 shares to all shareholders.
6ZKTeco 2022 Annual Report
Table of Contents
Section I Important Notes Contents and Definitions... 5
Section II Company Profile and Key Financial Indic.. 12
Section III Management Discussion and Analysis ..... 17
Section IV Corporate Governance .................... 78
Section V Environmental and Social Responsibility . 105
Section VI Significant Events ..................... 109
Section VII Changes in Shares and Information abou. 135
Section VIII Information of Preferred Shares ...... 146
Section IX Bonds................................... 147
Section X Financial Report ........................ 148
7ZKTeco 2022 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
8ZKTeco 2022 Annual Report
Definitions
Terms Refers to Definitions
Company our Company joint-stock
Refers to ZKTECO CO. LTD.company ZKTECO
Refers to Shenzhen ZKTeco Times Investment Co. Ltd. a controlling shareholder ZKTeco Times
of the Company
Refers to ZK TIMES CO. LIMITED a wholly-owned subsidiary of the ZK TIMES
controlling shareholder ZKTeco Times
Refers to Shenzhen JYHY Investment Enterprise (Limited Partnership) a JYHY
shareholder of the Company
Refers to Shenzhen JYSJ Investment Enterprise (Limited Partnership) a JYSJ
shareholder of the Company
Refers to Dongguan LX Investment Partnership Enterprise (Limited Partnership) a LX Investment
shareholder of the Company
JYLX Refers to
Shenzhen JYLX Consulting Enterprise (Limited Partnership) a
shareholder of the Company
Shenzhen JYQL Investment Consulting Enterprise (Limited Partnership)
JYQL Refers to
a shareholder of the Company
Refers to Shenzhen Fuhai Juanyong I Venture Investment Fund (Limited Fuhai Juanyong
Partnership) a shareholder of the Company
Yiwu Walden Yuanjing Venture Capital Center (Limited Partnership) a
Yiwu Walden Refers to
shareholder of the Company
Refers to Qingdao Walden Zhongxiang Equity Investment Center (Limited Qingdao Walden
Partnership) a shareholder of the Company
Refers to ZKTECO (GUANGDONG) CO. LTD a wholly-owned subsidiary of Guangdong Zkteco
the Company
Refers to Shenzhen ZKTeco Biometric Identification Technology Co. Ltd. a Shenzhen ZKTeco
wholly-owned subsidiary of the Company
Refers to ZKCserv Technology Limited Co. Ltd. a company holding 51% equity ZKCserv Technology
of the Company
Refers to Shenzhen Zhongjiang Intelligent Technology Co. Ltd. a company Shenzhen Zhongjiang
holding 51% equity of the Company
XIAMEN ZKTECO CO. LTD. a wholly-owned subsidiary of the
XIAMEN ZKTECO Refers to
Company
Vietnam Subsidiary Refers to ZKTECO VIETNAM TECHNOLOGY COMPANY LIMITED
Romania Subsidiary Refers to ZKTECO ROMANIA S.R.L
Refers to Shenzhen Zhongan Intelligent Control Technology Co. Ltd. previously
Zhongan Intelligent Control 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
Refers to Ministry of Industry and Information Technology of the People's MIIT
Republic of China
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 '0000 Refers to RMB RMB '0000
Reporting Period Refers to 2022
End of Reporting Period Refers to December 31 2022
CV Refers to Computer Vision
9ZKTeco 2022 Annual Report
Terms Refers to Definitions
BioCV Refers to Biometrics & Computer Vision
Refers to 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 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.)
Refers to Used to simulate biological vision using cameras computers and related
equipment; simulate human visual abilities capture and process three-
Computer Vision dimensional information of the scene by using optical systems and image
processing tools understand and command specific devices to execute
decisions
Refers to Radio Frequency Identification (RFID) a wireless communication
technology that can identify specific targets and read and write relevant
RF RFID
data through radio signals without establishing mechanical or optical
contact between the identification system and specific targets
Refers to 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 communicates information through information dissemination media to
achieve intelligent recognition positioning tracking supervision and
other functions
GA/T 1012-2019 Technical Refers to 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
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
Refers to 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
technical requirements test methods inspection rules marking
the Resident ID Card
packaging transportation and storage of desktop ID card readers
Refers to 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 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
Refers to Integrated Circuit Card also known as Smart Card having functions
IC Card such as read-write large capacity and encryptability. It is mainly used in
smart card systems consumption systems etc.Refers to Single Minute Exchange of Die a process improvement method that
minimizes the product die exchange time production startup time or
SMED
adjustment time of the die. It can significantly shorten the time required
for machine installation and die exchange setting
Refers to A type of software that lies between application systems and system
software. It uses the basic services and functions provided by system
Middleware software to connect various parts or different applications of application
systems on the network achieving the goal of resource and function
sharing
Refers to Software as a Service a software application model that provides SaaS
software services through the Internet
Refers to Cyber Trusted Identity an authoritative network identity certificate
CTID 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
10ZKTeco 2022 Annual Report
Terms Refers to Definitions
Refers to A protection level for electrical equipment casings against foreign object
IP65 intrusion which can completely prevent dust from entering and wash
with water without any harm
Refers to The active push technology on the server side enabling the timely
PUSH transmission of data updates which is characterized by high efficiency
and low terminal energy consumption
Refers to Material Requirement Planning the process in which a production
enterprise gradually derives the production and procurement plans for the
MRP Mode 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
SAM Refers to
Secure Access Module a module used for encrypting and decrypting
identity card information
Refers to International standards for environmental management systems ISO14001
developed by the International Organization for Standardization (ISO)
Refers to Frost & Sullivan Consulting an independent third-party industry research
and analysis institution. The Company purchased the professional report
Frost & Sullivan
"Independent Market Research of the Global and Chinese Biometric
Industry" from Frost & Sullivan
Refers to Surface Mount Technology a circuit assembly technology used to install
surface mounted components without pins or with short leads on the
SMT surface of printed circuit boards (PCBs) or other substrates and then
solder and assemble them through methods such as reflow soldering or
immersion soldering
Refers to Printed Circuit Board a substrate used for assembling electronic PCB
components
Refers to Printed Circuit Board Assembly the process of soldering components PCBA
onto a PCB substrate to form a printed circuit board (PCB)
Refers to A professional industry media company under the Messe Frankfurt
Exhibition GmbH aiming to provide market analysis technical
asmag information solution evaluation industry forecasting etc. for
practitioners in smart security smart life smart transportation smart
buildings IT communication and networking
Refers to Computer Numerical Control Machine Tools an automated machine tool CNC
equipped with a program control system
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
Refers to The rebate the Company provides to dealers based on the rebate policy Rebate
and the completion of dealer performance
SDK Refers to Software Development Kit
Refers to Optical character recognition the process of electronic devices (such as
scanners or digital cameras) using image processing and pattern
OCR
recognition techniques to examine characters on images bills or
certificates and translate them into computer text
CMMI Certification Refers to Capability Maturity Model Integration Certification
Note: 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.
11ZKTeco 2022 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
12ZKTeco 2022 Annual Report
IV. Other Relevant Information
Accounting firm engaged by the Company
Baker Tilly China Certified Public Accountants (Special
Name of the accounting firm
General Partnership)
Areas A-1 and A-5 Building 68 No. 19 Chegongzhuang West
Office address of the accounting firm
Road Haidian District Beijing China
Name of signing accountants Li Ming Wang Heli Han Dongxi
Sponsor engaged by the Company to continuously perform its supervisory function duties 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 31 2025
Finance 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
2022 2021 YoY Change 2020
Operating revenue
1918559191.761955286516.10-1.88%1801404719.51
(RMB)
Net profit attributable
to shareholders of
192239793.75170923050.9312.47%186199319.87
listed companies
(RMB)
Net profit attributable
to shareholders of
listed companies after
189342503.20148069383.8527.87%176933283.12
deducting non-
recurring profits and
losses (RMB)
Net cash flows from
operating activities 124520033.18 98120441.87 26.91% 144750016.32
(RMB)
Basic earnings per
1.50271.5347-2.09%1.7249
share (RMB/share)
Diluted earnings per
1.52351.5347-0.73%1.7249
share (RMB/share)
Weighted average
9.39%13.20%-3.81%17.86%
return on net assets
13ZKTeco 2022 Annual Report
Increase or decrease at
the end of this year
At the end of 2022 At the end of 2021 At the end of 2020
compared to the end of
the previous year
Total assets (RMB) 3655960456.30 2082923037.22 75.52% 1887758707.27
Net assets attributable
to shareholders of
3057467189.681372534346.38122.76%1216313453.59
listed companies
(RMB)
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
□ Yes □ No
VI. Main Financial Indicators by Quarter
Unit: RMB
First quarter Second quarter Third quarter Fourth quarter
Operating revenue 432406206.03 492708744.13 478423074.51 515021167.09
Net profit attributable
to shareholders of 29319200.73 40946021.23 63927831.56 58046740.23
listed companies
Net profit attributable
to shareholders of
listed companies after
25767460.2148235370.9560059763.7055279908.34
deducting non-
recurring profits and
losses
Net cash flows from
-17379274.58-4535927.5220242256.25126192979.03
operating activities
Whether there is 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
14ZKTeco 2022 Annual Report
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 2022 Amount in 2021 Amount in 2020 Remarks
Losses and gains from
disposal of non-current
assets (including the
-353911.28-196340.91235140.02
offsetting portion of
the provision for asset
impairment)
Government subsidies
included in current
profits and losses
(except those closely
related to the normal
Mainly due to a slight
business of the
decrease in government
Company which are in 12705234.71 15928005.99 14327480.98
subsidies compared to
line with national
the previous period
policies and regulations
and continue to be
enjoyed in accordance
with certain standards
or quotas)
Capital occupancy fees
charged to non-
financial enterprises 50026.13 45991.54 351467.39
included in current
profits and losses
In addition to the
effective hedging
business related to the
normal business of the
Company the profits
and losses from fair Mainly due to
value changes arising investment gains and
from the holding of losses and changes in
trading financial assets fair value generated by
-5791116.419453151.111781679.15
and trading financial partial forward
liabilities as well as exchange settlement to
investment income hedge against exchange
from the disposal of rate fluctuations risk
trading financial assets
trading financial
liabilities and
available-for-sale
financial assets
Other non-operating
income and expenses
-2833347.63-695883.75-681878.78
other than the above
items
15ZKTeco 2022 Annual Report
Other profit and loss
items that meet the
definition of non- -5095672.54
recurring profits and
losses
Less: income tax
722071.621079847.301456198.56
impact
Minority interest
157523.35601409.60195980.91
impact (after tax)
Total 2897290.55 22853667.08 9266036.75 --
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.
16ZKTeco 2022 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 and solutions. The Company is mainly committed to integrating core biometric technologies such as fingerprints palm veins
facial features veins and iris with computer vision radio frequency IoT and other technologies. It provides smart terminals industry
application software and platforms with 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 2022
(1) Global market overview
In 2022 despite the influence of many factors such as domestic and international economic situation Trade disputes between
China and the United States Russia-Ukraine conflict and so on the global biometric technology application market would continue to
develop at a high speed. In 2022 the global biometric market size would be USD 33.2 billion and it is expected to reach USD 87.4
billion in 2028 with a compound annual growth rate of 17.36%. (Data source: IMARC Group)
(2) Global development of biometric technology
In the global biometric market structure fingerprint recognition (58% share) and facial recognition (18% share) still dominate
followed closely by iris recognition (7% share) and vein recognition voiceprint recognition and signature recognition have also made
some progress in market share. The multimodal biometrics driven by this has gradually become a true mainstream application due to
its higher accuracy and reliability. (Data source: Chinese Academy of Industry Economy Research)
The performance of hybrid 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 hybrid
biometrics identification with computer vision greatly improving customers' offline shopping experience. AI showcases its skills in
smart consumption scenarios from the virtual interaction between front-end perception smart devices and brands in four dimensions of
sound text video and image.
(3) The application situation of the global biometric industry
The main application entities in the international biometric market sorted by market size are: government (including police)
military finance and banking consumer electronics health commercial security and logistics.
17ZKTeco 2022 Annual Report
The main application scenarios for global biometrics in 2022 are non-contact applications mixed online and offline identity
authentication while others are still dominated by traditional applications continuing the trend of application in recent years.The market acceptance of biometric technology has also greatly improved. In May 2022 a survey led by VISA showed that 86%
of consumers approve of using biometric technology for identity authentication and online payments 70% of consumers gave the
reason that biometric authentication is more convenient and 46% of consumers believe that biometric authentication is much safer
than various passwords. The increase in market acceptance has laid a solid foundation for the wider application of biometric technology
in the future. Multiple banks have launched biometric payment credit cards which have performed outstandingly in the international
market. In addition due to the surging trend of digital currency the physical offline encryption "hardware wallets" of digital currency
have all used biometric technology without exception becoming a beautiful scenery.The biometric technology develops towards diversification. 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 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 2022
(1) Overview of China's biometric market
The size of China's biometric market has increased from RMB 12.7 billion in 2016 to RMB 32.6 billion in 2021 with a compound
annual growth rate of 20.7%. The market size of China's biometric industry is expected to reach RMB 40 billion in 2022. (Data source:
Frost & Sullivan)
(2) China's development of biometric technology
Multimodal biometric technology is a fusion application of various biometric technologies such as fingerprint recognition facial
recognition palm vein recognition iris recognition voiceprint recognition etc. Compared to single modal biometric systems
multimodal biometrics has significant advantages in recognition performance accuracy and reliability. In 2022 multimodal
technology products have become mainstream in the Chinese biometric market. In recent years the market's demand for non-contact
technology and other related technologies has made the combination of multimodal biometrics with temperature measurement and
scanning technology the biggest highlight of the application market in 2022.
(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
18ZKTeco 2022 Annual Report
to various industries with applications covering transportation hotels finance social security education and healthcare. In 2022 we
see the rapid growth of biometric authentication applications.New types of infrastructure such as Industrial Internet big data center and basic IoT network continue to promote the wider
application of entrance and exit management equipment and digital identity verification scheme mainly including hybrid biometrics in
parks communities construction sites and other scenarios. These applications have shown a rapid growth momentum in recent years.The future deep integration of entrance and exit management and biometric technology AI IoT and cloud computing will become the
development norm. 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. 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.(III) Overview and development trends of major technologies in the industry in 2022
There are various types of biometric technologies including fingerprint recognition facial recognition palm vein recognition iris
recognition vein 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 hybrid 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 hybrid 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 iris recognition will driven by these application needs evolve iteratively towards 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 August 2021 Norwegian NEXT Biometrics
which has been focusing on fingerprint recognition technology formed a strategic partnership with American Paravision which focuses
on facial recognition technology to provide fingerprint recognition + facial recognition dual authentication fusion technology products
to the market. In March 2022 LexisNexis Risk Solutions a US company engaged in data management and analysis as well as risk
control and compliance technology acquired BehavioSec a Swedish company specializing in online behavior recognition.BehavioSec's technology can continuously track analyze and identify authentication through users' online behavior (habits of surfing
the Internet and using apps etc.). In addition to considering commercial interests these mergers and acquisitions within and outside
the 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
19ZKTeco 2022 Annual Report
such as the strong combination of multimodal hybrid 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 palm vein recognition voiceprint
recognition etc. will continue to win priority development opportunities and achieve better technological progress. 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?" . Especially in retail catering healthcare elderly care and other interactive scenarios there are huge
applications.
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 government military 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 hybrid 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.At present the security field is still the mainstream of traditional biometrics applications. Whether it is security giant traditional
biometrics manufacturer or the rising CV unicorn in recent years security has been placed in the most important product and
application direction. Their massive investment has greatly promoted the development of domestic biometric technology and its
applications. Intelligent monitoring access control and channel management are representative of domestic security applications.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 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. In addition the metaverse world based
on blockchain technology is connected in parallel with the real world achieving the unity of identity and property rights and promoting
the blurring of boundaries between the real and virtual worlds ultimately achieving complete integration. Whether it's digital China or
the metaverse; 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 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 for AI and it is natural to integrate and utilize
biometrics in the field of AI especially intelligent robots. The adoption of facial recognition iris recognition and voice/speech
recognition will be the most common and the combination and integration of these biometric technologies with core AI algorithms
can form a new type of fast iterative path. With the continuous progress and successful marketization of intelligent robot products
their application scale will also grow rapidly.Compared with major projects in the government and public service sectors where most of the applications are in foreign countries
the domestic biometric market is mainly applied in small commercial sectors. This difference in market structure means that there is
20ZKTeco 2022 Annual Report
huge technological development space and application opportunities for key biometric technologies in related fields in China (such as
fingerprint facial recognition and iris hybrid recognition technologies).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 and solutions. The Company is mainly committed to integrating core biometric technologies such as fingerprints facial
features veins and iris with computer vision radio frequency IoT and other technologies. It provides smart terminals industry
application software and platforms with 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.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 is as follows:
Unit: RMB '0000
20222021
Item
Amount Proportion Amount Proportion
I. Smart entrance and exit
139671.5272.99%134098.3168.72%
management products
II. Smart identity
18803.789.83%29308.6515.02%
verification products
III. Smart office products 32880.01 17.18% 31722.12 16.26%
Total 191355.31 100.00% 195129.07 100.00%
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.
21ZKTeco 2022 Annual Report
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
radio frequency verification. According to
different biometric verification methods it
can be divided into fingerprint facial finger
vein and palm recognition access control
integrated machines equipped with RFID
cards passwords and other verification
methods. The device has professional access
control function and supports unified
Access
management on the software platform. The
control
access control is equipped with high-
definition binocular cameras configured
with facial recognition and liveness detection
algorithms which can quickly collect facial
information. It has strong anti-counterfeiting
capabilities for printing photos videos and
3D simulation masks. It can also form a
visual intercom system with the indoor unit
calling the indoor unit with one click through
the doorbell button achieving indoor control
of door opening and voice bidirectional
intercom function.Access The access controller is a smart terminal used
control to receive data from biometrics readers radio
products frequency readers and access control and
perform access permission verification and
logical judgment. It is mainly used in large
Access and medium-sized project locations with a
controller large number of access points and high
security requirements. Accessible collection
methods include fingerprints RFID cards
and passwords. The device has professional
access control function and supports unified
management on the software platform.The RF card reader is mainly used for the
collection and transmission of RFID cards
and passwords and can send the collected
RF card
data to the access controller for comparison
reader
and verification. The data information whose
collection is supported includes RFID cards
passwords etc.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
fingerprint RFID card QR code etc. and can
Elevator Elevator
accurately identify elevator user instructions
control controller
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.
22ZKTeco 2022 Annual Report
Product Product
Product Description Product Image
Category Name
The multimodal collection reader is an
inductive reader used to collect information
such as the cardholder's face fingerprint QR
code RFID card password etc. and transmit
it to the access controller and elevator
controller. It is used in conjunction with
Multimodal software to achieve single or multiple door
collection access control permission verification. The
reader multimodal collection reader 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 channel gate is a channel management
device that can be used in conjunction with
other systems for different special occasions
to play a greater role. With the rapid
development of technology the application
of intelligent pedestrian gates is becoming
increasingly widespread. At present schools
high-end residential areas scenic spots
stations customs airports code gates 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
the safety of control and the accuracy of
passage data.
23ZKTeco 2022 Annual Report
Product Product
Product Description Product Image
Category Name
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
controlled to lift and lower the pole or it can
be accessed through the parking lot
management system to lift and lower the
Vehicle pole. The Company's gate is composed of a
channel 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
vehicles. According to the output power of
the charging pile it is generally divided into
various different power charging methods
Charging such as AC slow charging DC fast charging
pile and overcharging to meet the charging needs
of new energy vehicles in different scenarios.The Company's new energy vehicle charging
pile is a 7kW AC charging pile positioned
for charging scenarios at the departure or
destination of car owners in households
communities office buildings industrial
parks government agencies and other areas
with greater demand in the future. It supports
functions such as card swiping charging QR
code scanning charging mobile payment
24ZKTeco 2022 Annual Report
Product Product
Product Description Product Image
Category Name
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).Metal detectors are mainly used in public
places with high pedestrian flow such as
stations factories public service
departments and large conference venues to
inspect metal objects on people such as guns
Walk and controlled knives. The metal detector
through
device has functions such as adjusting metal
metal
detector detection sensitivity detecting location and
automatic counting. According to usage
requirements the device can integrate
functions such as facial recognition channel
management and body temperature
detection.Security
inspection
products The screening machine is a detection device
used to detect whether packages and other
items contain specific prohibited items. The
Company's screening machine products have
X-ray image collection 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
video monitoring and security management
platform.Entrance and exit video devices are mainly
used to extract facial vehicle and object
features from video streams and to
recognize store compare retrieve analyze
and alert them in smart cameras or smart
boxes. The Company's video surveillance
device can also achieve intelligent analysis
such as facial recognition personnel crossing
Entrance boundaries personnel invasion vehicle
Video and exit crossing boundaries vehicle parking
surveillance video violations vehicle departure personnel
device hovering personnel crossing walls
personnel gathering personnel fighting
personnel falling personnel smoking
personnel running personnel making phone
calls personnel checking mobile phones and
supports the platform to generate alarm
prompts suitable for various entrance and
exit scenarios such as residential areas and
campus areas.
25ZKTeco 2022 Annual Report
Product Product
Product Description Product Image
Category Name
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 RFID
Biometrics
Smart lock cards etc. They can be managed through
smart lock
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 Human Certificate One
card solution Cube Visitor Management
System it can achieve "real name" + "real
person" visitor authentication; support CTID
Visitor trusted identity authentication; support
Visitor Identity mobile visitor appointment dual screen
Terminal Verification display QR code and OCR document
Terminal 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 biometric technology and computer vision 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
incidents and precise verification after the incident providing effective security guarantees for people's production and life.
(3) ZKBio Intelligent Integrated Management Platform V6600
ZKBioV6600 based on multimodal biometric technology and computer vision 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 facial recognition vehicle
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) ZKBioSmart Park Integrated Management Platform V8800
ZKBioV8800 based on multimodal biometric technology and computer vision 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 our 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 effective security guarantees and office convenience for the production and life of the park.
26ZKTeco 2022 Annual Report
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
Product Description Product Image
Category Name
Fingerprint capture device has the
characteristics of large capture area high
Fingerprint fingerprint image pixels and good imaging
scanner effects for dry and wet fingerprints. It
supports the development and use of systems
such as Windows Android and Linux.The specialized fingerprint capture device of
the resident ID cards complies with the
"Technical Specifications for Fingerprint
collection and Comparison of Resident
Identity Card" (GA/T 1012-2019) and the
Fingerprint "General Technical Requirements for
scanner of the Fingerprint Capture Device of the Resident
resident ID 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
Multimodal quality.biometrics
products
It can simultaneously collect fingerprint and
finger vein information. Fingerprint and
finger vein two-factor authentication can
Finger vein improve the anti-counterfeiting ability and
capture device is mostly used in scenarios with high
security requirements. It supports the
development and use of systems such as
Windows Android and Linux.A non-contact binocular iris capture device
that can quickly capture iris images of
standard compatible citizen identity quality
within a comfortable capture distance of 35-
Iris capture
50cm. Moreover it can be adjusted with the
device
knob to adapt to different heights and image
data can be powered and transmitted through
dual USB interfaces suitable for large-scale
iris data collection and database building.
27ZKTeco 2022 Annual Report
Product Product
Product Description Product Image
Category Name
The biometrics reader is a smart terminal
used to collect human biological
characteristics mainly used in access control
Biometrics systems. It can send the collected biometrics
reader information to the access 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-infrared
information
light compensation and can obtain clear
capture device
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 the
"General Technical Requirements for
Desktop Readers of the Resident ID Card"
(GA 450-2013) and can support the
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 comprehensive
Terminal support for recognition and reading of CTID
authentication certificate QR codes
Card mainstream QR codes and one-dimensional
recognition barcodes through docking with strong CTID
and reading authentication certificate decoding code
products verification and other capabilities;
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
ID card reader
and can support the recognition and reading
of the 2nd-generation ID Card 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
28ZKTeco 2022 Annual Report
Product Product
Product Description Product Image
Category Name
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 scenarios
Verification
it can be divided into four types: wall
Terminal
mounted handheld desktop and floor
mounted. The Company's Human Certificate
Verification Terminal is pre-installed with
One card solution Cube Identity
Authentication Software which can be used
in conjunction with the certificate One card
solution Cube Backend Management
Industry System for unified use.Smart A desktop device that integrates various
Terminal functions such as social security card ID
card reading contact/non-contact smart card
recognition and reading one-
dimensional/QR code electronic voucher
recognition fingerprint comparison
recognition etc. The built-in ID card reader
meets the requirements of "General
Medical
Technical Requirements for Desktop
Insurance
Readers of the Resident ID Card" (GA450-
Identity
2013) and supports reading smart cards such
Verification
as social security cards and bank cards. The
Terminal
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
29ZKTeco 2022 Annual Report
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 public security trusted identity authentication capabilities providing authoritative reliable stable and secure identity
authentication services for customers in different vertical fields covering various fields such as government affairs finance justice
medical care public security education and exams and providing a one-stop industry solution of "algorithm+smart
terminal+authentication platform+application" for the identity authentication industry chain.
(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 of the Ministry of Public Security. 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 and CTID authentication certificate 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.
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
Attendance software to scientifically and effectively manage
Attendance
Smart enterprise personnel. The Company's biometrics
product
Terminal attendance terminal can support multiple verification
methods such as fingerprint face palm RFID card and
password and has personnel management functions such
as self-service scheduling and report generation.Support face RFID card QR code and other verification
methods; mainly used in consumption scenarios such as
internal canteens gyms and schools within enterprises
Consumer
Consumer supporting various consumption modes such as free
Smart
product amount deduction count deduction and fixed value
Terminal
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
30ZKTeco 2022 Annual Report
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 computer vision biometrics 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) BioTime 8.0
BioTime 8.0 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. BioTime 8.0 can be stably connected to
standard attendance PUSH devices of the Company. At the same time employees can 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 attendance rules attendance reports
localized languages and localized 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.(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. 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.
31ZKTeco 2022 Annual Report
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. The basic version of the software can be used without customer activation; the advanced
version of the software and platforms require activation. In basic parameter configurations customers are not required to pay for
activation and use. In case of upgrading parameter configurations users are required to pay a software license fee before activation and
use. For large-scale engineering projects the Company 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. During the reporting period the main business
income of the Company's various sales models was as follows:
Unit: RMB '0000
20222021
Sales
model
Amount Proportion Amount Proportion
Distribution 128494.05 67.15% 121581.35 62.31%
Direct sales 62861.26 32.85% 73547.73 37.69%
Total 191355.31 100.00% 195129.07 100.00%
(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.
32ZKTeco 2022 Annual Report
Normally the Company's direct sales business can be divided into two categories based on whether installation and debugging
are required: product sales and project implementation. For project implementation related businesses the Company will customize or
transform its own smart terminals and application software platforms based on different engineering project requirements.(III) Market position of the Company's products during the reporting period
From 2020 to 2022 the Company has been listed as one of the "Top 50 Global Security Companies" by asmag for three
consecutive years ranking 14th 13th and 12th respectively; and won the "2022 Honor Security Technology Innovation Award" and
"2022 Smart IoT and Security Ecology Most Growing Enterprise" from CPS; "Smart City" Construction Excellent Solution and
Innovative Technology Award (Smart Government) "Smart City" Construction Excellent Solution and Innovative Technology Award
(Smart Campus) from Beijing Security Industry Network; Huicong IoT "Top 10 IoT Solution Awards for 2022" and "Top 10 Entrance
and Exit Control Brands for 2022"; the "11th Top 30 Enterprises in China's Intelligent Transportation Network in 2022"; the Company
was also awarded the "Technical Activity Unit of the Chinese Information Technology Application Innovation Working Committee"
and was shortlisted in the list of trusted digital identity QR code module suppliers smart education products and service suppliers (the
first batch). 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 units for 7 consecutive years. In 2022 the Company was selected as a
"Sample Enterprise of China's Foreign Trade Export Leading Index" by the General Administration of Customs of the People's
Republic of China.(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 increasing the difficulty
of forging human biological characteristics and 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 vein 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 access control and attendance recognition real name verification in banks telecommunications
public security customs etc. 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 currently reach the same level as fingerprint recognition in specific
situations. The recognition technology of palm vein and finger vein currently mainly focuses on applications in medium and small
33ZKTeco 2022 Annual Report
scenes such as ATM systems. With the development of wide dynamic image acquisition technology the recognition technology of
palm vein 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.
3. 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
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 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 BioCV technology according to customer needs.
4. The development of new types of infrastructure in China brings market increment
With the acceleration of digital transformation and intelligent upgrading of the economy and society the IoT has become an
important part of new types of infrastructure. In September 2021 the MIIT and seven other departments jointly issued the "Three-year
Action Plan (2021-2023) for the Construction of New Types of Infrastructure for the Internet of Things" (hereinafter referred to as the
"Action Plan") which specifies that by the end of 2023 new types of infrastructure of IoT will be preliminarily built in major cities in
China with the number of IoT connections exceeding 2 billion. Facing the application field of the IoT the Company actively embraces
digital transformation deeply focuses on industry and customer needs and creates a series of scenario based products and solutions
that are suitable for scenarios; promotes the ability of back-end software platform improves the ability of data service continues to
meet the fragmentation and personalized needs of the Artificial Internet of Things (AIoT) and promotes the innovative application of
urban smart scenes.
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. According to the "Report on the Development of China's Digital Economy (2022)" released by the China
Academy of Information and Communications Technology (CAICT) the scale of China's digital economy reached RMB 45.5 trillion
in 2021 accounting for 39.8% of GDP an increase of 9.5 pct compared to 2016. The CAICT predicts that the scale of China's digital
economy will exceed RMB 60 trillion by 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 XN CAPITAL to jointly establish an ecological
34ZKTeco 2022 Annual Report
innovation fund to accelerate product incubation and assist in the ecological construction of the digital industry.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 formed a core technology architecture based on single biometric
technology and multimodal biometric technology. In the field of single biometrics the Company has developed and launched biometric
technologies such as fingerprints facial features digital veins palm veins and iris. The Company's resident ID card fingerprint
recognition algorithm has been recognized by regulatory authorities and is listed in the "Qualified List of Quality Consistency
Evaluation and Inspection of Resident ID Card Fingerprint Application Algorithms". It is one of the seven manufacturers in the list. In
the field of multimodal biometrics the Company has developed and launched multimodal biometric technologies including
"fingerprint+facial recognition" technology "facial+palm vein recognition" technology "fingerprint+finger vein recognition"
technology "facial+iris recognition" technology and "fingerprint+palm+facial recognition" technology and has obtained 14 invention
and utility model patents in the field of multimodal biometrics. The Company has mastered the core algorithms of biometrics and has
a strong competitive advantage in the field of biometrics as well as a comprehensive industry incubation ability that combines with
various application technologies.The Company combines basic R&D of biometrics with application R&D. As of December 31 2022 the Company has obtained
a total of 736 patents including 106 invention patents and obtained a total of 629 computer software copyrights and 59 work copyrights.The Company was awarded the titles of "Guangdong Intellectual Property Advantage Enterprise" and "Guangdong Intellectual Property
Demonstration Enterprise" by the Guangdong IP Protection Association (GDIPPA) in 2018 and 2019 respectively. In 2022 XIAMEN
ZKTECO was awarded the title of National Intellectual Property Advantage Enterprise.
(2) The Company's unique ultra short delay supercomputing technology has first achieved the deployment of its biometric
technology on edge and end devices with lower process requirements. Its outstanding advantages include three aspects: firstly solving
problems on edge and end devices without being constrained by the quality and stability of the network. Secondly it can run on mid
to low frequency chips (such as the ARM9 with 1G main frequency) which can reduce power consumption save costs and avoid high
requirements for chip manufacturing processes achieving autonomy and freedom in today's "chip war" environment. Thirdly it can
minimize the leakage and malicious attacks of sensitive information transmission and centralized storage links.
(3) Deep research on multimodal BioCV AI technology
The Company has gone from the "I'll tell you who you are" attribute of biometric technology to the multimodal BioCV AI attribute
of combining computer vision and biometrics: "Who are you? What kind of service should I provide for you?" . The Company's AIoT
Minerva platform based on smart retail scenarios and independent intellectual property rights has launched a ZKDIGIMAX Level3
digital marketing solution for traditional small and medium-sized retailers. The system provides five core services (Minerva IoT
platform machine vision analysis platform big data analysis platform AIGC platform advertising production and distribution platform)
and corresponding smart terminals relying on the IoT big data and cloud computing. The Company deeply cultivates smart retail
and uses machine vision analysis technology to reflect innovative value in the interaction value between people and scenes and the
empowerment value of scenes; it creates a multi-dimensional intelligent business analysis based on the data lake and establishes a new
service provider of boundless all-round full scene and full chain retail platform.
(4) 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 the end of 2022 the Company has 1125 global R&D and engineering technicians with
R&D Centers in Dongguan Shenzhen Xiamen Dalian and India.
35ZKTeco 2022 Annual Report
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.
(5) 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 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 and smart office.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.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 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 ZKTECO Shang'an Yuntong Smart Park Integrated Management Platform V8800
ZKTECO ZKBio Intelligent Integrated Management Platform V6600 and ZKBio 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.During the reporting period the Company's software development and information security capabilities were further strengthened.In 2022 XIAMEN ZKTECO successfully passed the CMMI5 certification marking that the Company has reached the top international
level in software industry in terms of software R&D capabilities implementation service delivery and project management level;
XIAMEN ZKTECO has been awarded ISO/IEC 27701 and ISO/IEC 27017 dual system certificates after ZKTECO marking the
international recognition of the Company's R&D and software system in privacy and cloud security management and practical
experience.
36ZKTeco 2022 Annual Report
The Company's main products rely on core biometric 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 biometrics applications and provide customers with comprehensive 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 2022 the Company has established 28 branches 14 subsidiaries and 190
service outlets in 31 provinces cities and autonomous regions across China with a sales and service system covering the whole country.In the future the Company will continue to develop the market in the third and fourth tier cities to build marketing and service outlets
and continue to enhance brand awareness. Internationally the Company has established a total of 40 subsidiaries overseas located in
29 countries and regions worldwide with product sales covering over 100 countries and regions.
The Company always adheres to the concept of localized services in the process of developing global markets. The Company has
resident business and technical service personnel 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 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
37ZKTeco 2022 Annual Report
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.
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.From 2020 to 2022 the Company has been listed as one of the "Top 50 Global Security Companies" by asmag for three
consecutive years ranking 14th 13th and 12th respectively; and won the "2022 Honor Security Technology Innovation Award" and
"2022 Smart IoT and Security Ecology Most Growing Enterprise" from CPS; "Smart City" Construction Excellent Solution and
Innovative Technology Award (Smart Government) "Smart City" Construction Excellent Solution and Innovative Technology Award
(Smart Campus) from Beijing Security Industry Network; Huicong IoT "Top 10 IoT Solution Awards for 2022" and "Top 10 Entrance
and Exit Control Brands for 2022"; the "11th Top 30 Enterprises in China's Intelligent Transportation Network in 2022"; the Company
was also awarded the "Technical Activity Unit of the Chinese Information Technology Application Innovation Working Committee"
and was shortlisted in the list of trusted digital identity QR code module suppliers smart education products and service suppliers (the
first batch). 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 units for 7 consecutive years. In 2022 the Company was selected as a
"Sample Enterprise of China's Foreign Trade Export Leading Index" by the General Administration of Customs of the People's
Republic of China.
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 focuses on the design of future equity structure which is conducive to
sustainable and sound' development in the future.
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
38ZKTeco 2022 Annual Report
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".
2. Revenue and cost
(1) Composition of operating revenue
Composition of revenue
Unit: RMB
20222021
Proportion in Proportion in YoY Change
Amount operating Amount operating
revenue revenue
Total operating
1918559191.76100%1955286516.10100%-1.88%
revenue
By industry
By product
Smart office
328800143.5217.14%317221174.0516.22%3.65%
products
Smart entrance and
exit management 1396715150.30 72.80% 1340983095.57 68.58% 4.16%
products
Smart identity
verification 188037838.90 9.80% 293086455.30 14.99% -35.84%
products
Others 5006059.04 0.26% 3995791.18 0.20% 25.28%
By region
Domestic sales 719564575.31 37.51% 960861621.68 49.14% -25.11%
Overseas sales 1198994616.45 62.49% 994424894.42 50.86% 20.57%
By sales model
Distribution 1284940494.64 66.97% 1215813472.72 62.18% 5.69%
Direct sales 628612638.08 32.76% 735477252.20 37.61% -14.53%
Others 5006059.04 0.26% 3995791.18 0.20% 25.28%
(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
Gross YoY Change of
YoY Change YoY Change of
Operating revenue Operating cost profit gross profit
of revenue operating cost
margin margin
By industry
39ZKTeco 2022 Annual Report
By product
Smart office
328800143.52177865251.4745.90%3.65%-21.06%16.93%
products
Including:
attendance 195518911.80 116662078.37 40.33% -18.92% -34.31% 13.98%
products
Other products 133281231.72 61203173.10 54.08% 75.19% 28.28% 16.79%
Smart entrance
and exit
1396715150.30782410874.0443.98%4.16%3.03%0.61%
management
products
Including:
access control 863320156.70 457961656.04 46.95% -0.34% 1.20% -0.81%
products
Other products 533394993.60 324449218.00 39.17% 12.36% 5.72% 3.82%
Smart identity
verification 188037838.90 105362993.92 43.97% -35.84% -35.59% -0.22%
products
Including:
biometrics 68254808.51 28864700.77 57.71% -29.47% -37.97% 5.79%
sensor products
Card products 83067744.00 67564231.17 18.66% -36.96% -37.05% 0.11%
Other products 36715286.39 8934061.98 75.67% -43.11% -8.14% -9.26%
100.00
Other products 5006059.04 0.00 25.28% 0.00%
%
By region
Domestic sales 719564575.31 495969957.35 31.07% -25.11% -26.90% 1.68%
Overseas sales 1198994616.45 569669162.08 52.49% 20.57% 21.26% -0.27%
By sales model
Distribution 1284940494.64 768921322.30 40.16% 5.69% 2.97% 1.58%
Direct sales 628612638.08 296717797.13 52.80% -14.53% -26.11% 7.40%
100.00
Others 5006059.04 25.28% 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 2022 2021 YoY Change
classification
Computer Sales volume Pcs./Set 2836800 3824457 -25.82%
communication
Production Pcs./Set 2777191 3818020 -27.26%
and other
electronic
equipment
Inventory Pcs./Set 468679 528288 -11.28%
manufacturing
industry
Note: 1. The products in the above table include a small amount of purchased finished products.Description of the reasons for the year-on-year change of over 30% in relevant data
□ Applicable □ Not applicable
40ZKTeco 2022 Annual Report
(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
Industry classification
Unit: RMB
20222021
Industry
Item Proportion in Proportion YoY Change
classification Amount operating Amount in operating
costs costs
Computer
communication
and other
Raw
electronic 981136835.29 92.07% 1040281596.92 90.59% -5.69%
materials
equipment
manufacturing
industry
Computer
communication
and other
Labor
electronic 29057564.72 2.73% 37520261.93 3.27% -22.56%
cost
equipment
manufacturing
industry
Computer
communication
and other
Manufact
electronic 55444719.42 5.20% 70494310.44 6.14% -21.35%
ure cost
equipment
manufacturing
industry
Total 1065639119.43 100.00% 1148296169.29 100.00% -7.2%
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
ZKTECO VIETNAM New establishment
1 TECHNOLOGY COMPANY January 21 2022 4550000000.00 VND 100.00% on January 21
LIMITED 2022
New establishment
2 ZKTECO ROMANIA S.R.L September 8 2022 250.00lei 100.00% on September 8
2022
41ZKTeco 2022 Annual Report
(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
Total sales amount of the top five customers (RMB) 194631086.77
Proportion of the total sales amount to the annual total sales
10.15%
amount among the top five customers
Proportion of related party sales to annual total sales among the
1.77%
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 67068273.47 3.50%
2 Customer 2 35974281.25 1.88%
3 TVCENLINEA.COM SA DE CV. 33887845.85 1.77%
International Advance for technology and
430389103.551.58%
communication company
5 ADWAA AL SHUGAA TRADING EST 27311582.65 1.42%
Total -- 194631086.77 10.15%
Other information of major customers
□ Applicable □ Not applicable
Main suppliers of the Company
Total procurement amount of the top five suppliers (RMB) 178656347.17
Proportion of the total procurement amount to the total annual
20.40%
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 53948129.23 6.16%
2 Supplier 2 43119279.24 4.92%
3 Supplier 3 28006276.18 3.20%
4 Guangdong Kapaisi Technology Co. Ltd. 27052668.44 3.09%
5 Supplier 5 26529994.08 3.03%
Total -- 178656347.17 20.40%
Other information of major suppliers
□ Applicable □ Not applicable
3. Expenses
Unit: RMB
42ZKTeco 2022 Annual Report
Note of significant
2022 2021 YoY Change
change
Mainly due to the
growth of overseas
sales business an
increase in employee
compensation due to
the increase in
personnel in
Selling expenses 361264181.17 302351568.76 19.48%
international business
groups as well as an
increase in share-based
payment fees and
overseas market
promotion fees for the
current period
Administrative
106748932.32 104011332.16 2.63% No major change
expenses
Mainly due to
exchange rate
fluctuations leading to
an increase in
Financial expenses -40928834.96 14758616.81 -377.32%
exchange earnings and
an increase in interest
income from capital
deposits
Mainly due to a
decrease in investment
in R&D materials in
current period (due to
chip supply shortages
in the previous year
R&D expenses 187983847.42 196786694.35 -4.47%
the Company switched
to some product
material plans
resulting in a higher
investment in R&D
materials)
4. R&D Investment
□Applicable □ Not applicable
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
With the rapid development 1. Implement the construction and training 1. Improving the core
of computer vision and of a multimodal vision large model competitiveness of the Company's
BioCV natural language combined with image and text products in the field of computer
VLM processing multimodal information to achieve high-precision and vision and natural language
Multimodal vision large model has In the efficient information recognition and processing and providing
Computer gradually become a popular research understanding; customers with more intelligent
Vision research direction. The stage 2. Track the latest development of and efficient solutions;
Large multimodal vision large multimodal vision large model 2. Promoting the Company's
Model model combines computer technology and continuously optimize innovation and development in the
vision and natural language and improve BioCV VLM 2.0 ensuring field of AI and providing technical
processing and can process that the Company maintains a leading support for the Company's long-
43ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
images videos and text position in this field; term strategic goals;
information to achieve more 3. Based on this large model improve the 3. Greatly accelerating the
efficient and intelligent accuracy of facial recognition algorithms Company's algorithm development
image and video participate in international authoritative and iteration speed in the field of
recognition and competitions and obtain good rankings; computer vision;
understanding. The Project 4. Based on this large model improve the 4. Having improved the Company's
aims to develop a large accuracy of palm recognition algorithms ability to apply computer vision
model training technology and promote their commercialization; algorithms in various scenarios;
with advanced multimodal 5. Based on this large model improve 5. By participating in international
visual representation other biometrics algorithms and computer competitions it can enhance the
capabilities and train a vision algorithms; Company's influence and visibility
universal base large model. 6. Explore the application of multimodal in the international market laying
Based on this base large vision large models in various fields such a solid foundation for expanding
model it aims to improve as security monitoring smart home office its business in the global market.the accuracy of current automation etc. to provide technical
computer vision algorithms support for the Company to expand into
and biometric technology. new business areas.Continuous
In the era of the Internet of
Capacity Continue to build capabilities based on the
Continuously build IoT Everything (IoE) providing
Building of IoT platform including device
platforms in accordance Complete infrastructure support for building
the IoT connectivity payment subscription and
with the Company's d a cloud/edge/end ecosystem and
Platform video based multimodal processing
end/edge/cloud strategy. enhancing the competitiveness of
(Minerva capabilities.IoT capabilities.Platform)
Armatura
Lay out in digital credential
Credential Using mobile phones as a Complete Digital credential solutions; provide
scenarios to enhance product
managemen digital credential solution. d secure efficient and convenient solutions.competitiveness.t system
Based on the Company's 1. Assisting the Company in
core business of "smart leveraging its customer base in the
office smart entrance and long tail market and creating a
1. Based on the base capacity of
exit and smart identity new performance growth model
MinervaIoT PaaS Platform and focusing
recognition" focusing on focusing on the needs of small and
on the terminal needs of IoT scenario
the SMB small and medium-sized enterprise customer
solutions and SME digital and reality
medium-sized enterprise base based on cloud service
integration serve as the SME cloud
customer group serve the scenarios and the digital and reality
scenario linker;
long tail market leverage integration;
2. Through ZKTECO Interconnection (for
the comprehensive three- 2. By utilizing a digital and
Zlink small and medium-sized enterprise users)
dimensional advantages of intelligent scenario solution of
(domestic and ZKTECO Cloud Commerce (for
ZKTECO frontend In the software+hardware+cloud
version: intermediate service provider users)
intelligent research services laying out a new track in
ZKTECO jointly establish a comprehensive
hardware+backend offline stage advance to meet the needs of the
Interconnect operation system for IoT product research
smart account service post-90s and post-00s for
ion) sales operation and service through end-
system+Minerva Cloud enterprise management and
edge-management-cloud-use-service-
Platform PaaS+SaaS business management;
operation;
application provide a 3. Driving the sales of hardware or
3. Based on the precipitation of user
"business premises scenario solutions through cloud
scenario data provide a market soil for
management services and bringing about
commercial verification of customer
scenario+business changes in business models such as
foundation and operational transformation
management operational model validation
for SaaS subscription services.scenario+service scenario" through cloud service subscription
solution for the small and models;
medium-sized enterprise 4. Through the precipitation of user
44ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
customer group accompany data and scenario data providing
small and medium-sized rich product R&D support for
enterprises in the growth commercial transformation
and provide multiple digital models.and intelligent "assistants"
for enterprises from "rough"
to "refined" management.ZKTECO Cloud Commerce
focuses on creating
industrial internet
community platform tools
such as product stores
solution stores application
1. Establish the above data lake to lay the 1. Through the online use of
stores knowledge stores
foundation for digital marketing value- marketing tools the efficiency of
and service stores serving
added through the precipitation of user marketing promotion can be
millions of B2B
data equipment data application data and improved for the intermediate
practitioners and end users.scenario data. Build a private domain service provider group and the
It helps partner enterprises
ecosystem based on IoT scenarios efficiency of the internal sales
continuously evolve
establish operational strategies for both system in marketing management
throughout the entire chain
Zlink public and private domain traffic connect can be improved to save marketing
of marketing customer
Partner the entire chain of customer acquisition costs;
expansion operational
Portal retention transformation repurchase and 2. Through the construction of
monetization and online In the
(domestic fission build a bridge for the digital digital marketing channels that
services strengthens research
version: marketing system connect users service integrate online and offline
industrial collaborative stage
ZKTECO providers ZKTECO and ecological channels the comprehensive
growth and achieves
Cloud platforms and build new commercial layout of ZKTECO in the
resource optimization and
Commerce) competitiveness; marketing network can be
allocation. It is committed
2. Construct an online ZKTECO Cloud expanded the business coverage
to becoming a trusted one-
Commerce marketing and service system and localized service accessibility
stop high-quality product
and expand offline smart account can be improved and the
and service provider for
marketing service experience center recognition of ZKTECO brand
users collaborating with
stores to build a scenario based marketing loyalty by end users in terms of
service providers to develop
empowerment system of comprehensive competitiveness
from traditional operations
"scenario+service+user+data". can be enhanced.to digital operations and
providing customers with
high-quality products and
services through a one-stop
digital marketing service
platform.A SaaS based enterprise Integrate workday synerion prime point Actively promoting cloud services
Complete
CirrusDCS level time management 3M etc. to provide enterprise level time and operations and enhancing
d
solution for the US market. management solutions for SaaS. product digitization capabilities
Relying on computer vision Focusing on the actual needs of 1. Relying on the accumulation and
technology+hybrid intelligence and scenario based on the sedimentation of existing
biometric technology as the technology of behavior analysis character technology it can quickly respond
core implement security analysis vehicle recognition intelligent to market demand;
ZKBio In the
supervision linkage and scene algorithm etc. implement the 2. It can increase the share of
CVSecurity research
joint defense and intelligent platform's intelligent analysis and security products in enterprises parks
V1 stage
video analysis management management and control to meet the needs shopping malls hospitals
and build a reliable and of diversified and fragmentation factories construction sites and
stable security integration application scenarios of users. Build an other scenes integrate intelligent
and visualization platform intelligent security comprehensive perception to improve precision
45ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
and solution by utilizing management platform with intelligent management and control
intelligent video analysis security collaborative efficiency and capabilities and help the industry
technology based on facial scenario application and enhance digital transformation;
recognition vehicle customers' intelligent perception and 3. It helps the Company further
recognition emergency precise control capabilities in enterprises expand and consolidate its market
alarm perimeter defense parks shopping malls hospitals factories position bringing greater profits.etc. combined with construction sites and other venues.multiple business
subsystems such as
personnel attendance
access control visitor
consumption patrol
elevator control passage
storage cabinet intrusion
alarm epidemic prevention
monitoring center wide
access and system
management.ZKTECO Zhilian is
positioned to provide a 1. Relying on the Company's core
digital light scene SaaS technology creating a digital
platform for K12 focusing solution for the SaaS vertical
on the education industry Focusing on the ability of ZKTECO AIoT industry and targeting the huge
exploring industry pain platform for access control at the entrance market stock of K12 which is a
points and refining industry and exit go deep into the K12 education considerable market;
specific functions such as industry and create a small scene industry 2. Collaborating with Tencent
ZKTECO access control attendance solution use it in the student news push Wiki to deepen cooperation and
Zhilian visitor dormitory for parents when students get in and out of ensuring a good product
Complete
Education management and venue the school dormitory check campus place experience high market
d
Version appointment; realize the appointment and other fragmentation recognition and high
V1.0 commercialization and scene applications realize the digital SaaS competitiveness;
monetization of sustainable software subscription charging mode 3. Helping the Company to further
paid subscriptions through a purchase on demand and pay on demand explore and cultivate the SaaS
refined cloud service through the way of application service industry and serving as a
subscription model; provide subscription charging. benchmark and vanguard for the
intelligent education S Company's value-added billing to
(sales service operation) SaaS which is of great reference
online integrated solutions significance.for the Chinese region.
1. The Project will directly launch
Improve the anti-counterfeiting and
palm recognition products joining
recognition accuracy of the palm on
the ranks of numerous biometrics
multiple platforms mainly through the
products. However palm
The Project aims to improve integration of cross domain training
recognition has non-contact and
ZAM210 the performance and technology optimize algorithm
high safety characteristics making
Palm Anti- accuracy of the existing performance improve recognition speed
it a very promising product;
counterfeiti palm anti-counterfeiting and Complete and accuracy reduce misjudgments and
2. As a non-contact privacy
ng and recognition algorithms on d make the algorithm suitable for multi skin
insensitive and high-precision
Recognition the ZAM210 platform and color people in indoor semi outdoor and
recognition technology it provides
SDK V2.0 promote the implementation outdoor application scenarios by
a vast technological space for the
of algorithm products separately processing palm live detection
Company's future sustainable
and palm recognition algorithms when
development;
wide dynamic images are opened and
3. As the first manufacturer of
closed.product-based visible light palm
46ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
recognition algorithms in the
industry it has led a new direction
of industry development.
1. Most of the reader products on
the market cannot support
Bluetooth functionality and the
Company's existing reader
products also do not have
The Palmprint QR Code
Bluetooth functionality. Through
Recognition Reader Achieve the transplantation of QR code
Palmprint the R&D of the Project the
EP40CPQV RD Ver 15 is a image recognition algorithms that support
QR Code function of supporting mobile
multimodal authentication camera acquisition mainly through
Recognition Complete Bluetooth cards is achieved
terminal that is compatible research on palmprint recognition
Reader d improving the competitiveness of
with multiple verification algorithms that support multi scene use
EP40CPQV the product;
methods and can be used in and complete the application on Bluetooth
RD Ver 15 2. The readers supported by the
complex outdoor readers.Company's QR code function all
environments.adopt an integrated QR code
module which requires a high
cost. The Project is implemented
through algorithm R&D which
can reduce the cost of the readers.For traditional contact 1. Enhancing the Company's
fingerprint recognition technical strength and market
products non-contact competitiveness in the field of
Make non-contact fingerprints
fingerprint recognition biometrics and providing
interconnect and integrate with contact
products have many customers with more efficient and
fingerprints in the same recognition
advantages such as high secure fingerprint recognition
system mainly through research and
Recognition imaging quality hygiene solutions;
implementation of the integration of non-
SDK Based and health and high 2. Assisting the Company in
contact and contact fingerprint recognition
on Non- recognition rate. Through expanding its wider application
In the technologies and develop a fingerprint
contact and non-contact and contact scenarios such as security
research recognition SDK that is easy to integrate
Contact fingerprint matching and monitoring intelligent access
stage to ensure its support for various
Fingerprint recognition technology two control mobile payment etc. and
mainstream operating systems and
Matching modes of compatible promoting the diversified
platforms and reduce customer integration
(1.0) recognition can be development of the Company's
costs. Meanwhile optimize algorithm
achieved providing business;
performance to ensure stability and
customers with more 3. Accumulating technical
robustness in various scenarios meeting
efficient and secure experience in the field of
the needs of different customers.fingerprint recognition biometrics laying a solid
solutions and improving foundation for the Company's
the user experience. future development in this field.R&D of The Project plans to 1. Meeting the general trend of the
The Project aims to implement terminal
Technology develop an identity construction of a digital China;
device equipment based on authentication
and Device authentication terminal 2. Improving the technical gap of
and verification methods such as CTID
for device based on the CTID digital identity card identification
authentication certificate and physical
Authenticati authentication certificate and information security
In the identity card; this recognition device
on recognition technology transmission;
research supports both physical and electronic
Application which can identify the 3. Improving the basic ability of
stage identity cards which not only ensures the
Based on information encrypted by digital identity card application
convenience of physical identity cards but
CTID the CTID digital identity technology and laying a
also solves the problems of network data
Digital card and complete the foundation for the subsequent
transmission security and personal privacy
Identity corresponding scenario development of digital identity
of identity card information.Card applications. The card products;
47ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
identification device 4. Giving the Company a leading
supports both the physical edge in the field of digital identity
ID card and the electronic cards.identity card which can
effectively guarantee the
network data transmission
security of the identity card
information.
1. Leading the industry to
gradually promote the application
The Project aims to develop 1. Based on the Company's ability to of new biometrics in smart access
R&D of a non-contact palm develop palm recognition technology and control smart attendance smart
Non-contact recognition system based on guided by market demand launch non- channels and other industries
Palm multi-spectral imaging contact and high security palm recognition through the update of palm
Recognition technology which can products to meet the different needs of technology;
Technology achieve multi-angle long- enterprises/customers in different 2. Enriching the product line and
Complete
Based on distance high-precision scenarios; usage scenarios of biometrics panel
d
Multi- palm recognition and cross- 2. By combining multi-spectral technology machines and improving the core
spectral platform palm registration with palm recognition algorithms output competitiveness of the products;
Biometric functions. It is mainly used different hardware intelligent solutions to 3. Responding to the Company's
Image for non-contact identity address user height compatibility twin strategic plan and launching a
Acquisition recognition in various recognition issues high security and ease strategic deployment of intelligent
entrance and exit scenarios. of use to enhance customer acceptance. recognition terminals that meet
market demand based on new
platforms and technologies.The Project aims to develop
a recognition module based
on face palm and 3D The face anti-counterfeiting covers
R&D of structural anti- and meets the requirements of face
The Project aims to solve the problem of
Structured counterfeiting technology attack risk and UnionPay face live
high security for palms and faces. Face
Light achieving simultaneous detection of GB/T 38427.1-2019
anti-counterfeiting can prevent electronic
Module for recognition of face and issued by the Ministry of Public
image attacks live video attacks synthetic
Face and palm. The 3D live Security in July 2020 and
video attacks 2D laser photo and ordinary
Palm projection system has over In the improves palm anti-counterfeiting
photo attacks hole digging photo attacks
Hybrid 30000 speckle points and research ability effectively enhances the
3D mask attacks injection attacks etc.
Recognition can decode 1 million 3D stage competitiveness of the Company's
Palm anti-counterfeiting can prevent
Based on coordinate point clouds and products enhances economic
electronic image attacks palm video
High complete comprehensive benefits and drives the sound
attacks synthetic video attacks 2D laser
Security and and secure recognition of development of the industry's
photo and ordinary photo attacks 3D palm
High face and palm databases intelligent access control and
attacks injection attacks etc.Accuracy widely used in the attendance industries towards high-
equipment of manufacturers end technology industries.of face and palm
applications.R&D of The Project plans to Taking user demands as the starting point 1. Breaking through BioCV video
Core develop a visual access based on IoT video technology access access control terminal of audio
Technology control core technology controller and NVR technology the and video access control and IoT
Platform platform and device based In the Project develops an access communication access
and Device on IoT video technology research control+video+gateway multi-functional technologies and breaking the
for Access break through industrial stage control device relying on ZKBioCV current situation of on-site access
Controller level IoT communication Security offline software and cloud control and video business
Based on access technology mainly platform achieving multiple door control separation in the industry;
IoT Video based on the IoT platform multiple video channels access control 2. Enriching the array of access
48ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
Technology with BIOCV as the core events alarms and other functions control video products by highly
technology and audio and solving the problem of users' independent integrating video and access
video as the core configuration of access control and video control;
technology especially and providing customers with a new 3. Providing new technological
based on hardware choice. directions for access control video
equipment. Based on products and accumulating core
intelligent video+access technologies for the Company in
controller+gateway a building video access control
multifunctional intelligent capabilities.video access control box
with a combination of
access control and video
linkage and with facial
recognition capture
supported in videos solving
the problem of independent
two-part products in the
current market which
greatly troubles customers
in product selection and
configuration operations
and greatly compresses the
product cost of
video+access
control+gateway; it is
widely used in residential
communities commercial
buildings logistics parks
and other scenarios.The Project plans to
develop intelligent video
access control technology
and smart terminals based
on the wide entrance and 1. Redefining the application form
exit scenario especially the of entrance and exit scenarios;
Through the high integration of intelligent
R&D of hardware product series that 2. Filling the gap of single image
video technology and access control
Intelligent match the characteristics of acquisition equipment in entrance
technology the intelligent video
Video ZKBio intelligent video and exit scenarios and enriching
monitoring system is endowed with access
Access access control. The system the product series of entrance and
control capabilities while the access
Control breaks through the core exit;
control management system is also
Technology technology of video 3. Improving the management
Complete endowed with intelligent video monitoring
and Smart transmission and the entire security and operational
d functions. Through technological
Terminals product framework can convenience of the entrance and
innovation and application more
Based on achieve functions such as exit system;
application scenarios with higher value
Wide voice interaction visual 4. Improving the competitiveness
and security are incubated in the field of
Entrance visitor management and of the product through innovation
entrance and exit equipped with the
and Exit mobile interaction. The and integration and consolidating
application of the ZKBio Intelligent
Scenarios characteristic is the the Company's advantageous
Integrated Management Platform.innovative launch of an position in the field of entrance and
end-edge product series that exit.combines the
comprehensive
characteristics of video and
access control. On the edge
49ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
computing side it provides
the ability to link NVR
storage and access control
based on the embedded
LINUX platform and
provides the ability to
access the third player
software platform through
the ONVIF protocol. It is
mainly used in scenarios
such as smart parks smart
communities and smart
offices.The Project aims to develop
the bimodal facial
recognition technology
based on independent
intellectual property rights.While maintaining the
current global facial
recognition algorithm it
While maintaining the current full
will mix the global mode
color facial recognition algorithm
near-infrared facial
by utilizing independent
recognition algorithm to
intellectual property bimodal facial
achieve double engine
recognition technology a hybrid
hybrid accurate facial
global mode near-infrared facial
recognition comparison
recognition algorithm is used to
suitable for users in Relying on the strengths and advantages of
achieve double engine hybrid
different regions around the independently developed visible light
accurate facial recognition
world. In particular for facial recognition technology and near-
comparison suitable for users with
intelligent recognition infrared facial recognition technology
R&D of multiple skin tones and in different
equipment such as formulate bimodal facial recognition
Bimodal regions. Moreover based on a
attendance access control technology standards bring forth the new
Facial Complete combination of two-level facial
and channel it realizes through the old and achieve innovation in
Recognition d algorithms and recognition
functions such as multi face the use of large capacity and different
Technology thresholds and a secondary
detection multi face regions of users; expand the technical
and Device classification of recognition
tracking face dual mode 2D solution to more application platforms
threshold a dynamic facial self-
live/3D live detection mask provide more solutions to clients and
learning function is implemented
detection multi person improve the expansion of application
based on clustering algorithms.recognition and high- scenarios.The same category of targets are
capacity facial recognition.stored in a pre-built database
It is characterized by dual
achieving a "one person one file"
mode live detection and
dynamic database efficiently
dual mode face hybrid
updating multiple facial samples
recognition two-factor
covering all ages and recognizing
authentication improving
accurately and quickly.recognition security 3D
live security and anti-
counterfeiting and
comprehensively
identifying faces safely. It is
mainly used in high-
capacity facial applications
such as smart office smart
50ZKTeco 2022 Annual Report
Main R&D
Project Expected Impact on the
Project Project Objective Proposed Objective
Progress Company's Future Development
Name
access control and smart
passage.R&D personnel of the Company
2022 2021 Change ratio
Number of R&D staff (ppl) 1125 1131 -0.53%
Proportion of R&D personnel 29.7% 29.5% 0.20%
Education background of R&D personnel
Bachelor's degree 702 642 9.35%
Master's degree 66 56 17.86%
Age composition of R&D personnel
Under 30 years old 620 673 -7.88%
30~40 years old 440 380 15.79%
Amount of R&D investment and its proportion in operating revenue of the Company in the past three years
202220212020
R&D investment amount
187983847.42196786694.35189182531.55
(RMB)
Ratio of R&D investment to
9.80%10.06%10.50%
operating revenue
Amount of R&D expenditure
0.000.000.00
capitalization (RMB)
Ratio of capitalized R&D
expenditure to R&D 0.00% 0.00% 0.00%
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 2022 2021 YoY Change
Subtotal of cash inflows from
2042594811.282119892673.27-3.65%
operating activities
Subtotal of cash outflows from 1918074778.10 2021772231.40 -5.13%
51ZKTeco 2022 Annual Report
operating activities
Net cash flows from operating
124520033.1898120441.8726.91%
activities
Subtotal of cash inflows from
101984070.59623208947.14-83.64%
investing activities
Subtotal of cash outflows from
1118723941.52724202376.3054.48%
investing activities
Net cash flows from operating
-1016739870.93-100993429.16-906.74%
activities
Subtotal of cash inflows from
1496730622.1626185052.535615.97%
financing activities
Subtotal of cash outflows from
61330346.01115603691.70-46.95%
financing activities
Net cash flows from financing
1435400276.15-89418639.171705.26%
activities
Net increase in cash and cash
561319832.34-106617317.17626.48%
equivalents
Main influencing factors for significant year-on-year changes in relevant data
□Applicable □ Not applicable
(1) In 2022 the net cash flow generated from operating activities increased by 26.91% year-on-year mainly due to a decrease in
payment for purchasing materials;
(2) The decrease in the subtotal of cash inflows from investing activities is mainly due to the decrease in redemption of financial
products in the current period;
(3) The increase in the subtotal of cash outflows from investing activities is mainly due to the purchase of fixed-term CDs in the current
period;
(4) The net cash flow generated from investing activities decreased by 906.74% year-on-year mainly due to a decrease in cash received
from redemption of investments such as wealth management and an increase in cash outflow from investment payments due to the
purchase of financial products; the cash inflow from investing activities is smaller than the cash outflow from investing activities
resulting in a decrease in the net cash flow generated from investing activities;
(5) The net cash flow generated by financing activities increased by 1705.26% year-on-year mainly due to the increase in the
Company's initial public offering and listing in August 2022 after the raised funds were received.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 Total Sustainable or
Amount Description of Reason
Profit Not
Mainly due to the gains and
losses generated from the
purchase of financial
Investment income -2429189.18 -1.14% No
products and the mature
delivery of forward foreign
exchange settlement and
52ZKTeco 2022 Annual Report
sales contracts
Mainly due to the gains and
losses generated from the
Profits and losses purchase of financial
from fair value -701013.10 -0.33% products and the mature No
changes delivery of forward foreign
exchange settlement and
sales contracts
Mainly due to the provision
for impairment of current
Asset impairment -6294754.92 -2.95% inventory and provision for No
impairment of contract
assets etc.Mainly due to government
subsidies and other income
received during the
Non-operating income 859519.49 0.40% No
reporting period that are not
related to production and
operation
Mainly due to expenses for
disposal of obsolescence
Non-operating
4134911.75 1.94% materials and disposal of No
expenditure
non-current assets during the
reporting period
Mainly due to other income
generated by government
Other income 17849018.68 8.38% No
subsidies during the
reporting period
Mainly due to the provision
Losses from credit of bad debt reserves for
-10954110.82 -5.14% No
impairment accounts receivable during
the reporting period
Income from asset
88133.35 0.04% No
disposal
VI. Analysis of Assets and Liabilities
1. Material changes of asset items
Unit: RMB '0000
At the end of 2022 At the beginning of 2022 Proportion
Description of
Proportion to Proportion to increase or
Amount Amount major changes
total assets total assets decrease
Due to fundraising
increase for the
Monetary funds 191294.50 52.32% 57240.19 27.48% 24.84% Company's initial
public offering and
listing in 2022
Increase in
overseas business
resulting in
Accounts
40349.79 11.04% 27403.11 13.16% -2.12% accounts receivable
receivable
increase due to the
relatively long
collection cycle of
53ZKTeco 2022 Annual Report
overseas business
Contract assets 30.68 0.01% 70.97 0.03% -0.02% No major change
Mainly raw
materials. The
supply of electronic
raw materials in the
market tends to
stabilize in 2022
and enterprises will
reduce their reserve
and safety
inventory of
Inventories 34828.06 9.53% 42425.40 20.37% -10.84%
electronic raw
materials; the
inventory of goods
has decreased due
to the optimization
of inventory
management
strategies driven by
the domestic
market.Investment real
0.00% 0.00 0.00% 0.00% No major change
estate
Long-term
equity 715.13 0.20% 762.96 0.37% -0.17% No major change
investment
Fixed assets 44685.75 12.22% 24322.80 11.68% 0.54% No major change
Due to transfer to
fixed assets for the
current period by
the Hybrid
Construction in Biometrics IoT
5704.131.56%20373.269.78%-8.22%
progress Intelligent
Industrial Base
Project and Xiamen
Software Park
Project
Right-of-use
5064.07 1.39% 4409.28 2.12% -0.73% No major change
asset
Short-term loan 985.50 0.27% 0.00 0.00% 0.27% No major change
Contract
5883.88 1.61% 6076.55 2.92% -1.31% No major change
liabilities
Long-term loan 14.18 0.00% 22.62 0.01% -0.01% No major change
Lease liabilities 2825.67 0.77% 2267.86 1.09% -0.32% No major change
Mainly due to the
Trading
20431.84 5.59% 2844.47 1.37% 4.22% increase in
financial asset
financial products
High proportion of overseas assets
□Applicable □ Not applicable
Specific Control Proportion Is there a
Cause of Operation
content of Asset size Location measures to Income of overseas significant
formation mode
assets ensure assets to impairment
54ZKTeco 2022 Annual Report
asset the risk
security Company's
net assets
ZK
Controlling Overseas Control by
TECHNOL 7308.70 America 4088.86 2.36% No
subsidiary sales subsidiary
OGY LLC
ZKTECO Wholly-
Overseas Control by
CO. owned 37886.25 Hong Kong 2144.42 12.22% No
sales subsidiary
LIMITED subsidiary
ZKTECO Wholly-
Overseas Control by
SECURIT owned 8218.34 Dubai 1523.04 2.65% No
sales subsidiary
Y L.L.C subsidiary
Armatura Wholly-
Overseas Control by
Tech Co. owned 9199.10 Thailand 844.91 2.97% No
sales subsidiary
Ltd. subsidiary
ZKTECO Controlling Overseas Control by
4140.45 America 593.25 1.34% No
USA LLC subsidiary sales subsidiary
ZKTECO
Controlling Overseas Control by
PANAMA 3244.08 Panama 509.67 1.05% No
subsidiary sales subsidiary
S.A.ZK
INTELLIG
Wholly-
ENT South Overseas Control by
owned 1883.74 602.66 0.61% No
SOLUTIO Africa sales subsidiary
subsidiary
NS (PTY)
LTD
ZKTECO
BIOMETR
Controlling Overseas Control by
ICS INDIA 4009.90 India 359.14 1.29% No
subsidiary sales subsidiary
PRIVATE
LIMITED
ZKTECO
Controlling Overseas Control by
EUROPE 7841.31 Europe 200.04 2.53% No
subsidiary sales subsidiary
SL
Other
The overseas assets are RMB 879891425.45 (currency: RMB) accounting for 24.07% of the total assets.explanation
The "Income Status" in the above table is a net profit indicator.s
2. Assets and liabilities measured at fair value
□Applicable □ Not applicable
Unit: RMB
Cumulativ Impair
Profits and
e changes ment Purchase Sales
losses from fair
Beginning in fair accrued amount in amount in Other Ending
Item value changes
balance value in the the current current changes balance
in the current
recognize current period period
period
d in equity period
Financial assets
1. Trading
financial
27642367.2137560236507467.2043184
assets 101302.07 -673817.87
441.500906.05
(excluding
derivative
55ZKTeco 2022 Annual Report
financial
assets)
2.
Derivative
802315.17-802315.17
financial
assets
Subtotal of
28444682.2137560236507467.2043184
financial -701013.10 -673817.87
611.500906.05
assets
28444682.2137560236507467.2043184
Total -701013.10 -673817.87
611.500906.05
Financial
0.000.000.000.000.000.00
liabilities
Other changes
Trading financial assets (excluding derivative financial assets) Other changes are mainly due to changes in funds on the e-commerce
platform Yu E Bao.Has there been any significant 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 57. Assets with Restricted Ownership or
Use Rights" in this report for details
VII. Investment Analysis
1. Overall
□Applicable □ Not applicable
Investment in 2022 (RMB) Investment in 2021 (RMB) YoY
468954619.82855542445.03-45.19%
2. Significant equity investments obtained during the reporting period
□ Applicable □ Not applicable
3. Significant non-equity investments during the reporting period
□Applicable □ Not applicable
Unit: RMB
Invest Accum Accum Reaso
ment ulated ulated ns for
Fixed Invest Disclo Disclo
Amou Actual Expect Realiz Not
Invest Asset ment Source Project sure sure
Project nt Invest ed ed Achiev
ment Assess Project of Progre Date Index
Name During ment Incom Incom ing
Mode ment Industr Funds ss (if (if
the Amou e e As of Planne
or Not y any) any)
Report nt As the d
ing of the End of Progre
56ZKTeco 2022 Annual Report
Period End of the ss and
the Report Expect
Report ing ed
ing Period Benefi
Period ts
Hybrid
Biome
Own
trics Plant
funds
IoT and
34941 20826 bank Under Not Not Not
Intellig Self- suppor
Yes 582.5 6664. loans constr applica applica applica
ent built ting
0 30 and uction ble ble ble
Industr faciliti
raised
ial es
funds
Base
Project
Xiame
n
Softwa
re Park
Phase
III Office
D09 buildin
Buildi g and 10672 Not Not Not
17565 Own Compl
ng 3 Others Yes suppor 4107. applica applica applica
5.82 funds eted
and ting 18 ble ble ble
Joint faciliti
Under es
ground
Garage
/Parkin
g Lot
Project
35117 31499 Not Not
Total -- -- -- 238.3 0771. -- -- applica applica -- -- --
2 48 ble ble
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 '0000
Types of Initial Profits and Cumulative Purchase Sales amount Closing Ratio of
derivative investment losses from changes in amount during the amount ending
57ZKTeco 2022 Annual Report
investments amount fair value fair value during the reporting investment
changes in recognized in reporting period amount to
the current equity period the
period Company's
net assets at
the end of the
reporting
period
Forward 20230.80 31923.76
foreign
exchange 11692.96 -80.23 0 0 0.00%
settlement
and sales
Total 11692.96 -80.23 0 20230.80 31923.76 0 0.00%
Accounting
policies and
specific
accounting
principles for
hedging
business
during the
reporting
period as
well as No significant change
description
on whether
there have
been
significant
changes
compared to
the previous
reporting
period
Description
of actual
profit and
During the reporting period the actual loss of forward exchange settlement was RMB 6.4884 million.loss during
the reporting
period
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
Description
business related to daily operation needs according to specific circumstances to reduce the risk of exchange rate
of hedging
or interest rate fluctuations that the Company continues to face. The Company's forward foreign exchange
effect
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
Risk analysis I. Risk analysis of the Company's hedging business
and control Forward foreign exchange settlement and sales business can reduce the impact of exchange rate fluctuations on
measures of the Company's production and operation in the event of significant fluctuations in exchange rates but there are
derivatives still certain risks in conducting forward foreign exchange settlement and sales transactions:
positions 1. Exchange rate fluctuation risk: In cases of significant fluctuations in exchange rate courses exchange losses
58ZKTeco 2022 Annual Report
during the may occur when the exchange rate of the forward foreign exchange settlement and sales agreed in the
reporting confirmation letter for the forward foreign exchange settlement and sales is lower than the real-time exchange
period rate.(including 2. Risk of payment collection prediction: Business departments make payment prediction based on customer
but not orders and expected orders. During the actual execution process customers may adjust their own orders and
limited to predictions resulting in inaccurate company payment prediction and the risk of delayed delivery of forward
market risk exchange settlement.liquidity risk 3. Internal control risk: Forward foreign exchange settlement and sales transactions are highly specialized and
credit risk complex which may result in risks due to imperfect internal control systems.operational 4. Customer default risk: If the customer's accounts receivable are overdue and the payment cannot be collected
risk legal within the predicted payment period it will cause a delay in forward exchange settlement and result in losses to
risk etc.) the Company.II. Preparation work and risk control measures for hedging by the Company
The Company follows the principle of hedging when conducting forward foreign exchange settlement and sales
transactions and does not engage in speculative arbitrage transactions. The main risk control measures are as
follows:
1. When signing forward foreign exchange settlement and sales contracts transactions are carried out in strict
accordance with the Company's predicted collection amount and all forward foreign exchange settlement and
sales businesses have a true trade background.
2. The Company has formulated the "Management System for Forward Foreign Exchange Settlement and Sales
of ZKTECO CO. LTD." which clearly stipulates the amount variety approval authority internal audit process
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.Changes in
market price
or fair value
of products
during the
reporting
period of the
invested
derivatives.The Company's accounting for the fair value of derivatives mainly focuses on the unexpired contracts for forward
The analysis
foreign exchange settlement and sales transactions signed between the Company and banks during the reporting
of the fair
period. Trading financial assets or trading financial liabilities are recognized based on the difference between the
value of
quoted price of the unexpired forward foreign exchange settlement and sales contract at the end of the period and
derivatives
the forward foreign exchange price.shall disclose
the specific
methods used
and the
setting of
relevant
assumptions
and
parameters
Litigation
situation (if None
applicable)
Special Conducting forward foreign exchange settlement and sales can to some extent avoid risks in the foreign
opinions of exchange market reduce the impact of exchange rate fluctuations on the Company's operating performance and
59ZKTeco 2022 Annual Report
independent benefit all shareholders of the Company.directors on
the
Company's
derivative
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
(1) Overall use of raised funds
□Applicable □ Not applicable
Unit: RMB '0000
Total Proporti
The
amount Accumul on of
purpose
Total Accumul of raised ated accumul Amount
Total and
amount ated funds total ated of raised
Total amount destinati
Year of Fundrais of raised total with amount total funds
amount of on of the
fundraisi ing funds amount changed of raised amount idle for
of raised unused raised
ng method used in of raised purposes funds of raised more
funds raised funds
this funds during with funds than two
funds that have
period used the changed with years
not been
reporting purposes change
used yet
period purposes
Stored in
the
bank's
special
Initial
account
public 145729. 109238.
2022 37798.3 37798.3 3347.7 3347.7 2.30% for 0
offering 84 26
fundraisi
of stocks
ng and
wealth
manage
ment
145729.109238.
Total -- 37798.3 37798.3 3347.7 3347.7 2.30% -- 0
8426
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 37123013 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 1608168923.16. After deducting the issuance expenses (excluding value-added tax) of RMB 150870545.46 the actual
net amount of raised funds is RMB 1457298377.70. 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
60ZKTeco 2022 Annual Report
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 2022 the Company has invested a total of RMB 377.983 million in raised funds with a total of RMB
1.0923826 billion in unused raised funds (including related interest income after deducting handling fees).
(2) Committed projects with raised funds
□Applicable □ Not applicable
Unit: RMB '0000
Commi
tted Date Has
Has the Accum Accum
investm Commi Investm Investm when Benefit there
project ulated ulated Have
ent tted ent ent the s been a
been investm benefits the
projects total Amoun progres project achieve signific
change Adjuste ent achieve expecte
and the investm t s as of reaches d ant
d d total amount d as of d
investm ent During the end its during change
(includi investm as of the end benefits
ent amount the of the expecte this in the
ng ent (1) the end of the been
directio of Reporti period d reportin feasibili
partial of the reportin achieve
n of raised ng (3)=(2)/ conditi g ty of
changes period g d
over- funds Period (1) ons for period the
) (2) period
raised use project
funds
Committed investment projects
1.
Tangxi
a
Product August Not Not Not
24841.24841.
ion No 31 applica applica applica No
1818
Base 2024 ble ble ble
Constru
ction
Project
2.
Hybrid
Biomet
rics IoT August Not Not Not
43689.43689.23421.23421.
Intellig No 53.61% 31 applica applica applica No
94942727
ent 2024 ble ble ble
Industri
al Base
Project
3.
Americ
an
Manufa August Not Not Not
17392.14044.
cturing Yes 97.54 97.54 0.69% 31 applica applica applica No
2151
Factory 2026 ble ble ble
Constru
ction
Project
4. R&D
August Not Not Not
Center 18240. 18240. 9021.0 9021.0
No 49.46% 31 applica applica applica No
Constru 58 58 5 5
2024 ble ble ble
ction
61ZKTeco 2022 Annual Report
Project
5.
Global
Marketi
ng
August Not Not Not
Service 26802. 26802. 5258.4 5258.4
No 19.62% 31 applica applica applica No
Networ 01 01 4 4
2025 ble ble ble
k
Constru
ction
Project
6.
Remain
ing
funds
after
the
previou
s
Not Not Not
change
Yes 3347.7 applica applica applica No
in the
ble ble ble
Americ
an
Manufa
cturing
Factory
Constru
ction
Project
Subtota
l of
commit Not
13096513096537798.37798.
ted -- -- -- applica -- --.92.9233
investm ble
ent
projects
Direction of over-raised fund investment direction
Undeter
14763.14763.
mined No
9292
funds
Subtota Not
l of applica
over- ble
raised
14763.14763.
fund -- -- -- -- --
9292
investm
ent
directio
n
Not
14572914572937798.37798.
Total -- -- -- applica -- --.84.8433
ble
Describ The planned investment for the "Tangxia Production Base Construction Project" is RMB 248.4118 million with a
e the construction period of 2 years. The Project plans to build a production base in Tangxia Town Dongguan City to meet
situatio the Company's future business development needs including the expansion of production capacity for access control
n and products biometrics module products and card products as well as the need for supporting production office and
62ZKTeco 2022 Annual Report
reasons living facilities. As of December 31 2022 the Project has not yet started investment and the difference between the
why the actual use of the raised funds in the year of the investment project and the estimated use amount of the raised funds
planned disclosed last time exceeds 30%.progres
s and On January 18 2023 the Company held the 23rd Session of the Second Board Meeting and the 17th Session of the
expecte Second Supervisory Board Meeting. On February 6 2023 the Company held the Second Extraordinary General
d Meeting of 2023 and deliberated and approved the "Proposal on Changing the Investment Projects of Raised Funds
benefits Changing the Special Account for Raised Funds Increasing Capital and Providing Loans to Subsidiaries to Implement
have Investment Projects". This matter does not constitute a related party transaction. In order to further promote the
not development of the Company's business accelerate production capacity planning and industrial layout and improve
been the efficiency of the use of raised funds the original investment project "Tangxia Production Base Construction
achieve Project" (hereinafter referred to as "the original investment project") has been changed to "ZKTECO Multimodal
d by Biometrics Digitalization Industrial Base Construction Project" (hereinafter referred to as "the new investment
projects project") and the original investment project will no longer be constructed. The original investment project was
(includi constructed by the Company as the main entity while the new investment project was constructed by Guangdong
ng the ZKTECO a wholly-owned subsidiary of the Company as the implementation entity. The total investment amount of
reason the new investment project is RMB 431.8689 million. The new investment project uses the unused raised funds and
for over-raised funds of the original investment project as well as the corresponding fund returns. Among them the raised
selectin funds of the original investment project are RMB 248.4118 million and the over-raised funds are RMB 147.6392
g "not million. The actual income of the funds corresponding to these two parts shall be based on the net income of the funds
applica corresponding to the transfer of relevant funds to the special account for the new investment project after approval by
ble" for the shareholders' meeting. The insufficient part will be invested by Guangdong Zkteco with its own funds."wheth
er the The specific reasons for the change are as follows:
expecte * At present the Company's production sites are scattered. According to the overall plan of the Company at this stage
d Guangdong Zkteco will mainly undertake the Company's manufacturing functions and will transfer the investment
benefits projects of production nature to Guangdong Zkteco for implementation facilitating the Company's centralized
have production management saving management costs and improving production efficiency.been * Due to Guangdong Zkteco's limited equipment and site scale after it mainly undertakes the Company's
achieve manufacturing functions the small production scale and the insufficient production capacity of injection molding
d") CNC powder spraying milling chamfering and oil injection processes they shall be provided by other branches and
subsidiaries and outsourcing manufacturers of the Company. 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. The change of investment projects helps to enhance the Company's
production capacity and technological process level thereby improving product quality production efficiency and
market competitiveness.* 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 new investment projects; 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.Descrip
tion of
signific
Not applicable.ant
changes
in
63ZKTeco 2022 Annual Report
project
feasibili
ty
Applicable
The amount of over-raised funds from the Company's initial public offering of stocks was RMB 147.6392 million.The On September 29 2022 the Company held the 19th Session of the Second Board Meeting and the 13th Session of the
amount Second Supervisory Board Meeting. On October 17 2022 the Company held the Second Extraordinary General
purpose Meeting of 2022 and deliberated and approved the "Proposal on Using Part of the Temporarily Idle Raised Funds for
and Cash Management". The Company and its subsidiaries plan to use a portion of the temporarily idle raised funds that
progres does not exceed RMB 1 billion (including) for cash management for the appropriate purchase of products with high
s of the safety and good liquidity with an investment period of not more than 12 months. The above idle fund limit shall be
over- valid for a period of 12 months from the date of approval by the shareholders' meeting and the fund shall be used in a
raised rolling manner within the above limit.funds As of December 31 2022 the over-raised funds amounted to RMB 147.6392 million of which RMB 147.6 million
had been used to purchase structured deposits. The remaining over-raised funds were deposited in a special regulatory
account opened by the Company for management.Change Applicable
s in the Occurred during the reporting period
implem
entation The Company held the 17th Session of the Second Board Meeting and the 11th Session of the Second Supervisory
location Board Meeting on August 29 2022 and deliberated and approved the "Proposal on Changing the Implementation
of Location and Total Investment Amount of Partial Raised Fund Investment Projects". The Company held the First
projects Extraordinary General Meeting of 2022 on September 15 2022 and deliberated and approved the "Proposal on
investe Changing the Implementation Location and Total Investment Amount of Partial Raised Fund Investment Projects". The
d with Company plans to adjust the implementation location of the "American Manufacturing Factory Construction Project"
raised from "1600 Union Hill Rd Alpharetta GA 30005" to "6775 Meadow Ln Alpharetta GA 30005".funds
Adjust Applicable
ment of Occurred during the reporting period
implem The Company held the 17th Session of the Second Board Meeting and the 11th Session of the Second Supervisory
entation Board Meeting on August 29 2022 and deliberated and approved the "Proposal on Changing the Implementation
method Location and Total Investment Amount of Partial Raised Fund Investment Projects". The Company held the First
s for Extraordinary General Meeting of 2022 on September 15 2022 and deliberated and approved the "Proposal on
projects Changing the Implementation Location and Total Investment Amount of Partial Raised Fund Investment Projects". The
investe Company plans to adjust the implementation location of the "American Manufacturing Factory Construction Project"
d with from "1600 Union Hill Rd Alpharetta GA 30005" to "6775 Meadow Ln Alpharetta GA 30005". The project
raised implementation method has been adjusted from self building on the old site to purchasing existing houses and
funds buildings and renovating them on the new site.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 agreeed that the
Advanc
Company will use the raised funds to replace the self raised funds of RMB 358.6078 million invested in the raised
e
investment project and paid issuance expenses as of August 21 2022 as well as the pre-paid issuance fees of RMB
investm
13.8425 million (excluding value-added tax) with the self raised funds.
ent and
replace
The Company held the 18th Session of the Second Board Meeting and the 12th Session of the Second Supervisory
ment of
Board Meeting on September 16 2022 and deliberated and approved the "Proposal on Using Its Own Funds and
raised
Foreign Exchange to Pay for Part of the Funds Raised for Investment Projects and Exchanging Them with the Raised
funds
Funds in Equal Amounts". During the implementation of the investment project "Tangxia Production Base
for
Construction Project" "Hybrid Biometrics IoT Intelligent Industrial Base Project" "R&D Center Construction
investm
Project" and "Global Marketing Service Network Construction Project" involving salaries social insurance premiums
ent
housing provident fund utility bills and other expenses of domestic personnel the Company shall pay the above
projects
expenses with its own funds. The Company will collect and calculate the above advance expenses incurred in each
investment project on a monthly basis and then transfer an equal amount of funds from the special account for raised
funds to the fund account of the Company or the subsidiary that implements the investment project. The
implementation location of the Company's investment project "American Manufacturing Factory Construction Project"
64ZKTeco 2022 Annual Report
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 2022 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 1.5223 million.Tempor
ary
replenis
hment
of
workin
Not applicable
g
capital
with
idle
raised
funds
The
amount
and
reasons
for the
surplus
of Not applicable
raised
funds
during
project
implem
entation
The
purpose
and
destinat
ion of
As of December 31 2022 the balance of the Company's unused IPO raised funds is RMB 1.0923826 billion (including
the
interest income and deducting handling fees) including RMB 404.1808 million of demand deposit deposited in the
raised
special account for raised funds RMB 147.6 million of structured deposit purchased and RMB 540.6018 million of
funds
time deposit. The above financial products have high safety meet the requirements of capital preservation and have
that
good liquidity which does not affect the normal operation of the investment plan for raised funds.have
not
been
used
yet
Proble
ms or
other
situatio None
ns in
the use
and
65ZKTeco 2022 Annual Report
disclos
ure of
raised
funds
(3) Change in the use of raised funds
□Applicable □ Not applicable
Unit: RMB '0000
The total
Has there
amount of
Actual Investme Date been a
raised Actual
accumulat nt when the Benefits significan
Correspo funds to investmen Have the
ed progress project achieved t change
nding be t amount expected
Changed investmen as of the reaches during in the
original invested during benefits
project t amount end of the its this feasibility
committe in the this been
as of the period expected reporting of the
d projects project reporting achieved
end of the (3)=(2)/(1 condition period project
after the period
period (2) ) s for use after the
change
change
(1)
American American
Manufact Manufact
uring uring
August Not Not
Factory Factory 14044.51 97.54 97.54 0.69% No
31 2026 applicable applicable
Construct Construct
ion ion
Project Project
Total -- 14044.51 97.54 97.54 -- -- - -- --
The Company held the 17th Session of the Second Board Meeting and the 11th Session of
the Second Supervisory Board Meeting on August 29 2022 and deliberated and approved
the "Proposal on Changing the Implementation Location and Total Investment Amount of
Partial Raised Fund Investment Projects". The Company held the First Extraordinary
General Meeting of 2022 on September 15 2022 and deliberated and approved the
"Proposal on Changing the Implementation Location and Total Investment Amount of
Partial Raised Fund Investment Projects". The Company plans to adjust the
implementation location of the "American Manufacturing Factory Construction Project"
from "1600 Union Hill Rd Alpharetta GA 30005" to "6775 Meadow Ln Alpharetta GA
30005". Due to the Company's use of purchased existing buildings and renovation at a
new location the total investment of the Project has been reduced by RMB 33.477 million
after adjustment. The total investment of the Project has decreased from RMB 173.9221
Description of reasons for changes
million to RMB 140.4451 million.decision-making procedures and
information disclosure (by specific
Reason for change: The reason for the change in implementation location and total
project)
investment of the American Manufacturing Factory Construction Project is the increase in
construction and labor costs in the United States. After careful evaluation and
investigation by the Company implementing the investment plan at the new location can
reduce cost investment while shortening the construction cycle and accelerating the
construction of the investment project without affecting the original planned production
capacity of the Project.For details please refer to the "Announcement on Changing the Implementation Location
and Total Investment Amount of Partial Raised Fund Investment Projects"
(Announcement No. 2022-007) and the "Announcement on the Resolution of the First
Extraordinary General Meeting of 2022" (Announcement No. 2022-010) published by the
Company on CNINFO.
66ZKTeco 2022 Annual Report
The situation and reasons for not
achieving the planned progress or
Not applicable
expected benefits (by specific
project)
Description of significant changes in
Not applicable
project 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 artially-owned companies with an impact on the Company's net profit of over 10%
Unit: RMB
Company Company Main Registered Operating Operating
Total assets Net assets Net profit
Name type business Capital revenue profit
ZKTECO
Subsidiarie Sales of 10446900 37886253 20724775 41226592 25161850. 21444241.CO.s goods 0.00 5.78 6.21 4.65 67 36
LIMITED
ZK
Subsidiarie Sales of 2716194.0 73086965. 43924874. 10062994 40888571. 40888570.TECHNOL
s goods 0 17 09 1.88 52 39
OGY LLC
R&D
ZKTECO production
(GUANGD Subsidiarie and sales of 43600000 73978091 47779034 39403232 22984118. 23585565.ONG) CO. s products 0.00 3.65 2.77 4.30 64 21
LTD and
software
R&D
production
XIAMEN
Subsidiarie and sales of 10000000 16715137 14913612 12059067 28111118. 26872094.ZKTECO
s products 0.00 8.78 8.39 6.29 90 31
CO. LTD.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 and performance
reporting period
New establishment with no significant
ZKTECO VIETNAM TECHNOLOGY
New establishment impact on the overall production operation
COMPANY LIMITED
and performance of the Company
67ZKTeco 2022 Annual Report
New establishment with no significant
ZKTECO ROMANIA S.R.L New establishment impact on the overall production operation
and performance of the Company
Description of the main controlling and participating companies
Please refer to the relevant content of "Section X Financial Report - IX. 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 exit
management smart identity verification and smart office using multimodal "Computer Vision and Biometrics" (BioCV) as the core
technology.The application and trends of biometric technology in three main 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 and facial 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.The size of China's access control market has increased from RMB 8.4 billion in 2015 to RMB 13.3 billion in 2019 with a
compound annual growth rate of 12.2%. With the continuous development of the construction industry especially the rapid
development of 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%.
68ZKTeco 2022 Annual Report
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 hybrid biometrics 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 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 has
increased from RMB 1.8 billion in 2015 to RMB 3.2 billion in 2019 and 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 &
69ZKTeco 2022 Annual Report
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 vein recognition have gradually entered the attendance 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.
(II) The Company's future development strategy and specific plans
1. Overall development strategy 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 and solutions. The Company is mainly committed to integrating core biometric technologies such as fingerprints facial
features veins and iris with computer vision radio frequency IoT and other technologies. It provides smart terminals industry
application software and platforms with identity recognition and verification functions to multiple fields such as commerce
transportation finance education healthcare and government affairs.
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 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 in 2023.* 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.
70ZKTeco 2022 Annual Report
* 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 the digital transformation and comprehensively promote the construction of information system. In
2023 the Company will steadily promote the construction of SAP system help the digital upgrading of enterprise operation and
management build a strong ecosystem of digital transformation community and effectively integrate enterprise management
information system and process control system to realize the automation and standardization of business processes and further improve
the Company's management ability and work efficiency.(III) Possible risks 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 and smart office applications including technological and R&D strength
production capacity brand influence and marketing service network. However in recent years China's entrance and exit control and
management identity authentication and office industries have formed a diversified and market-oriented competition pattern with a
large number of enterprises. The Company's main business products are facing competition pressure from various aspects such as
quality price and brand. In response to market competition the Company has continuously increased its R&D investment in recent
71ZKTeco 2022 Annual Report
years insisting on developing and optimizing single and multimodal hybrid biometric technologies continuously expanding and
enriching the types of biometric products and services and paying more attention to the overall linkage design of product software and
hardware 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 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 2022 the Company's overseas sales revenue from countries and regions was RMB 1.1986693 billion accounting for 62.64%
of the Company's main business income. The Company's international business income accounted for a relatively large proportion.Since 2017 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 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 the first phase of the economic and trade agreement has been reached between China
and the United States 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 political financial and economic systems of relevant countries are currently relatively stable their infrastructure is
relatively weak and government efficiency is relatively inefficient compared to developed countries which poses potential social
instability factors. If significant changes occur in its political environment economic prosperity 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 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 2022 the Company has a total of 40 overseas 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 significant 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
72ZKTeco 2022 Annual Report
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 natural persons 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 hybrid 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 2022 the Company's R&D expenses were RMB 187.9838 million accounting for 9.8% of operating revenue.As of December 31 2022 the Company has 736 patents including 106 invention patents; 629 computer software copyrights and 59
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 2022 the Company achieved a revenue of RMB 1.2849405 billion through the
distribution model accounting for 67.15% of the Company's main business income in 2022.
73ZKTeco 2022 Annual Report
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 431.6037 million accounting
for 22.50% 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 348.2806 million accounting for 11.76% 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 impairment. At the end of the reporting period the provision ratio for
inventory impairment was 4.07%. 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 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 cause corresponding exchange gains and losses to the Company. If the
RMB continues to appreciate 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 mainstream 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
74ZKTeco 2022 Annual Report
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 significant 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
75ZKTeco 2022 Annual Report
The main content of the
Reception Reception Index of basic information of
Reception time Reception location Reception object discussion and the materials
methods object type research
provided
CNINFO
Quanjing "Investor http://www.cninfo.com.cn
Relations Investors participating in the 2022 Announcement date: September
September 22 See CNINFO
Interactive Others Others Guangdong listed company investor online 23 2022 Investor Relations
2022 (http://www.cninfo.com.cn)
Platform" collective reception day event Activity Record Form of
(https://ir.p5w.net) ZKTECO CO. LTD. (No. 2022-
001)
Guo Lei and Wang Zhuoli from Yinhua Fund
Management Co. Ltd.; Li Muhua Li
Xuewei and Qi Jiahong from Guotai Junan
Securities Co. Ltd.; Gao Weixuan from CNINFO
Xinghua Fund Management Co. Ltd.; Zhu http://www.cninfo.com.cn
Zhanyu from China Post Life Insurance Announcement date: September
September 19 See CNINFO
Web conference Others Institution Company Limited; Guo Liangliang from 23 2022 Investor Relations
2022 (http://www.cninfo.com.cn)
Furong Fund Management Co. Ltd.; Qian Activity Record Form of
Jinyu and Wang Xinyang from Huafu ZKTECO CO. LTD. (No. 2022-
Securities Co. Ltd.; Wu Tong from China 002)
Merchants Securities Asset Management Co.Ltd.; Thompson Wu and Kayla Cai from
UBS Securities Co. Ltd.Zhang Yulong and Qiu Ji from China
Securities Co. Ltd.; Liu Chunmao from
Shanghai Binghe Asset Management Co.Ltd.; Meng Can from Shanghai Investment
Consulting Branch of Guojin Securities Co.CNINFO
Ltd.; Zhang Chuchen from Golden Sun
http://www.cninfo.com.cn
Securities Co. Ltd.; Sun Bo and Wei Linyi
See CNINFO Announcement date: October 19
October 14 2022 Web conference Others Institution from Huatai United Securities Co. Ltd.; Xu
(http://www.cninfo.com.cn) 2022 Investor Relations Activity
Junfeng from TF Securities Co. Ltd.; Wu
Record Form of ZKTECO CO.Donghao from Congrong Investment
LTD. (No. 2022-003)
Management Co. Ltd. Shanghai; Liu
Zhengke from Shanghai Haihan Investment
(Group) Co. Ltd.; Zhang Yiman from
Shanghai Harmony Huiyi Asset Management
Co. Ltd.November 2 Company Meeting Field Institution Institutional investors: Li Junhui from See CNINFO CNINFO
76ZKTeco 2022 Annual Report
2022 Room research Shenwan Hongyuan Securities Chen Xinli (http://www.cninfo.com.cn) http://www.cninfo.com.cn
from Hansong Asset Yang Hui from Saishuo Announcement date: November
Fund Song Bingbing from Rongmai Asset 3 2022 Investor Relations
Tong Jin from Huaxia Jiashi Asset and Liang Activity Record Form of
Xing from Xiaozhong Capital ZKTECO CO. LTD. (No. 2022-
Individual investor: Zhang Lei 004)
77ZKTeco 2022 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.
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.
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 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 Company's Board of Directors consists of four specialized committees: the Audit Committee the Strategy
and Development Committee the Salary and Assessment Committee and the Nomination Committee and has formulated
corresponding rules of procedure.
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.
78ZKTeco 2022 Annual Report
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 secretary of the Board of Directors of the Company is designated to be responsible for information disclosure and investor
relationship management and to receive shareholders and answer investor questions; and the Securities Times China Securities Journal
Securities Daily Shanghai Securities News and CNINFO (www.cninfo.com.cn) are designated as the newspapers and websites
for company information disclosure ensuring that all shareholders of the Company have equal access to information.
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
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 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
79ZKTeco 2022 Annual Report
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
IV. Annual General Meeting and Extraordinary General Meetings Convened During the
Reporting Period
1. General Meetings Convened during this reporting period
Proportion
Meeting of Convened Disclosure
Meeting Resolution of the Meeting
Type participating Date Date
investors
The following proposals were deliberated and
approved:
(I) "Proposal on the Work Report of the Board of
Directors for 2021";
(II) "Proposal on the 2021 Work Report of the
Board of Supervisors";
(III) "Proposal on the Financial Settlement Report
for 2021";
(IV) "Proposal on the 2021 Profit Distribution
Annual Plan";
Annual
General (V) "Proposal on the Remuneration of Directors and
General 100.00% June 22 2022
Meeting Senior Managers for 2022";
Meeting
of 2021 (VI) "Proposal on the Compensation of Supervisors
for the Year 2022";
(VII) "Proposal on Applying for Comprehensive
Credit Line from Banks and Handling Bank Loans";
(VIII) "Proposal on Confirmation of Daily Related
Party Transactions in 2021";
(IX) "Proposal on Using Idle Self-owned Funds to
Purchase Financial Products";
(X) "Proposal on Carrying out Forward Foreign
Exchange Settlement and Sales in 2022".The 1st
Extraordi Extraordin See CNINFO (www.cninfo.com.cn)
nary ary September September 15 "Announcement on the Resolution of the First
73.66%
General General 15 2022 2022 Extraordinary General Meeting of 2022"
Meeting Meeting Announcement No.: 2022-010
of
80ZKTeco 2022 Annual Report
Proportion
Meeting of Convened Disclosure
Meeting Resolution of the Meeting
Type participating Date Date
investors
Sharehold
ers in
2022
The 2nd
Extraordi
nary
Extraordin See CNINFO (www.cninfo.com.cn)
General
ary October 17 October 17 "Announcement on the Resolution of the Second
Meeting 73.70%
General 2022 2022 Extraordinary General Meeting of 2022"
of
Meeting Announcement No.: 2022-026
Sharehold
ers in
2022
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
81ZKTeco 2022 Annual Report
Other
Shares held Shares Shares
Termination changes in Shares held at Reasons for Commencem at the increased decreased
Tenure Gende increase the end of the changes in
Name Position Age ent of term of of term of beginning of during the during the
status r or period share increase
office office the period period period decrease (shares) or decrease
(shares) (shares) (shares)
(shares)
Che
Incum December 14
Quanho Chairman Male 54 April 6 2026 26171000 0 0 0 26171000
bent 2007
ng
Jin Director and Incum April 11
Male 41 April 6 2026 0 0 0 0 0
Hairong General Manager bent 2020
Director and
Ma Incum
Deputy General Male 40 June 28 2016 April 6 2026 0 0 0 0 0
Wentao bent
Manager
Fu Incum
Director Male 39 June 28 2016 April 6 2026 0 0 0 0 0
Zhiqian bent
Dong Independent Incum Femal
51 June 3 2020 April 6 2026 0 0 0 0 0
Xiuqin director bent e
Zhuo Independent Incum Femal April 11
42 April 6 2026 0 0 0 0 0
Shuyan director bent e 2020
Pang Independent Incum January 12
Male 52 April 6 2026 0 0 0 0 0
Chunlin director bent 2021
Employee
Representative
Jiang Supervisor Incum Femal
40 June 28 2016 April 6 2026 0 0 0 0 0
Wenna Chairman of the bent e
Board of
Supervisors
Wu Resign April 11
Supervisor Male 41 April 7 2023 0 0 0 0 0
Xinke ed 2020
Liu Resign Femal
Supervisor 39 June 28 2016 April 7 2023 0 0 0 0 0
Jiajia ed e
Technical
Li Director and Incum
Male 50 June 28 2016 April 6 2026 0 0 0 0 0
Zhinong Deputy General bent
Manager
Secretary of the
Guo Incum Femal April 15
Board of 42 April 6 2026 0 0 0 0 0
Yanbo bent e 2020
Directors and
82ZKTeco 2022 Annual Report
Deputy General
Manager
Wang Incum April 15
CFO Male 57 April 6 2026 0 0 0 0 0
Youwu bent 2020
Mu Deputy General Incum Femal September
36 April 6 2026 0 0 0 0 0
Wenting Manager bent e 16 2022
Wang Incum
Supervisor Male 35 April 7 2023 April 6 2026 0 0 0 0 0
Huineng bent
Yang
Incum
Xianfen Supervisor Male 38 April 7 2023 April 6 2026 0 0 0 0 0
bent
g
Total -- -- -- -- -- -- 26171000 0 0 0 26171000 --
83ZKTeco 2022 Annual Report
Any resignation of directors or supervisors and dismissals of senior management personnel 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
Deputy General
Mu Wenting Appointment September 16 2022 New Appointment
Manager
Resignation upon
Liu Jiajia Supervisor Resignation April 7 2023
expiration of term
Resignation upon
Wu Xinke Supervisor Resignation April 7 2023
expiration of term
Newly appointed
Wang Huineng Supervisor Elected April 7 2023
supervisor
Newly appointed
Yang Xianfeng Supervisor Elected April 7 2023
supervisor
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
84ZKTeco 2022 Annual Report
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 Zizi 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 present 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 present she has served as an independent director of 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 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 General Manager Legal
Representative and Executive Director of Chelian Innovation (Beijing) Science and Technology Center. From June 2018 to present
he has been serving as the Executive Director of Open Unmanned Farm Engineering Technology (Jiangsu) Co. Ltd. From 2010 to
present he has been serving as the Secretary General of the Telematics Industry Application Alliance. From December 2016 to present
he has been serving as the Secretary General of the Zhongguancun Telematics Industry Application Alliance. 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 present 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.
(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.
85ZKTeco 2022 Annual Report
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 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.").
86ZKTeco 2022 Annual Report
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
Name Name of other entities allowance from
other entities of the term the term
the other entities
ZK TIMES CO. LIMITED Director December 30 2016 March 3 2023 No
Che
Fujian Zhongkong Mining Co.Quanhong Supervisor March 26 2008 No
Ltd.School of Economics Shenzhen
Teacher August 1 1996 Yes
University
Shenzhen Jingquanhua Independent
January 10 2019 Yes
Technology Co. Ltd. director
Shenzhen Longood Intelligent Independent
Dong Xiuqin October 12 2018 Yes
Electric Co. Ltd. director
Independent
Colorlight Cloud Tech Ltd. February 3 2021 Yes
director
Shenzhen Riland Industry Co. Independent
July 13 2021 Yes
Ltd. director
Shanghai GF Law Firm
Partner Lawyer July 1 2015 Yes
(Shenzhen Branch)
Zhuo Shuyan Guangzhou Aiji Food Co. Ltd. Supervisor October 1 2013 No
Zizi Zhongxing Health Culture
Supervisor May 1 2019 No
(Shenzhen) Co. Ltd.Qingyi Photomask Limited Director May 12 2022 Yes
General
Manager Legal
Chelian Innovation (Beijing)
Representative February 1 2015 No
Science and Technology Center
Executive
Director
Telematics Industry Application Secretary
January 1 2010 Yes
Alliance General
Open Unmanned Farm Executive
Pang Chunlin
Engineering Technology Director Legal June 1 2018 No
(Jiangsu) Co. Ltd. Representative
Whole Process Unmanned
Executive
Operation Technology Promotion November 5 2021 No
Director
(Jiangsu) Co. Ltd.Shanghai Pateo Electronic
Equipment Manufacturing Co. Director December 2 2021 Yes
Ltd.Qiaosuan Information Executive February 15 2023 No
87ZKTeco 2022 Annual Report
Technology (Beijing) Co. Ltd. Director
Xinhuaxin (Xi'an) Information
Guo Yanbo Supervisor February 1 2018 October 1 2022 No
Technology Co. Ltd.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
□ Applicable □ Not applicable
3. Remuneration of 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 120000 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 6.0786 million.Remuneration of directors supervisors and senior managers during the reporting period of the Company
Unit: RMB '0000
Whether
Total pre-tax receiving
compensation remuneration
Name Positions Gender Age Tenure status
received from from related
the Company parties of the
Company
Che
Chairman Male 54 Incumbent 99.27 No
Quanhong
Director and Incumbent
Jin Hairong Male 41 49.47 No
General Manager
Director and Incumbent
Ma Wentao Deputy General Male 40 48.93 No
Manager
Fu Zhiqian Director Male 39 Incumbent 35.35 No
Dong Independent Incumbent
Female 51 12 No
Xiuqin director
Zhuo Independent Incumbent
Female 42 12 No
Shuyan director
Pang Independent Incumbent
Male 52 12 No
Chunlin director
Employee Incumbent
Jiang Representative
Female 40 16.68 No
Wenna Supervisor
Chairman of the
88ZKTeco 2022 Annual Report
Board of
Supervisors
Wu Xinke Supervisor Male 41 Resigned 67.80 No
Liu Jiajia Supervisor Female 39 Resigned 42.65 No
Technical Director Incumbent
Li Zhinong and Deputy Male 50 63.1 No
General Manager
Secretary of the Incumbent
Board of Directors
Guo Yanbo Female 42 46.96 No
and Deputy
General Manager
Wang Incumbent
CFO Male 57 55.26 No
Youwu
Mu Deputy General Incumbent
Female 36 46.39 No
Wenting Manager
Total -- -- -- -- 607.86 --
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 13th Deliberation and approval of the "Proposal on the Participation of
Session of the Some Senior Managers and Core Employees in the Strategic
February 11 2022
Second Board Placement of the Company's Initial Public Offering and Listing on
Meeting the ChiNext"
Deliberation and approval of the "Proposal on the Financial Report
of the Company from 2019 to 2021" the "Proposal on the Self
Evaluation Report on the Effectiveness of Internal Control of the
The 14th
Company" the "Proposal on Increasing Capital to Subsidiaries" the
Session of the
March 28 2022 "Proposal on Adjusting the Proposal on Some Senior Managers and
Second Board
Core Employees Participating in the Strategic Placement of the
Meeting
Company's Initial Public Offering and Listing on the ChiNext" and
the "Proposal on the Management Measures for Year-End Benefit
Awards of ZKTECO".Deliberation and approval of the "Proposal on the Work Report of
the General Manager for 2021" "Proposal on the Work Report of
the Board of Directors for 2021" "Proposal on the Financial
Settlement Report for 2021" "Proposal on the 2021 Profit
Distribution Plan" "Proposal on the Remuneration of Directors and
The 15th
Senior Managers for 2022" "Proposal on Applying for
Session of the
June 2 2022 Comprehensive Credit Line from Banks and Handling Bank
Second Board
Loans" "Proposal on Using Idle Self-owned Funds to Purchase
Meeting
Financial Products" "Proposal on Carrying out Forward Foreign
Exchange Settlement and Sales in 2022" "Proposal on
Confirmation of Daily Related Party Transactions in 2021"
"Proposal on Appointing Representative on Securities Matters" and
"Proposal on Convening the 2021 Annual General Meeting"
The 16th Deliberation and approval of the "Proposal on Opening a Special
Session of the Account for Raised Funds and Signing a Supervision Agreement
August 11 2022
Second Board for Raised Funds" as well as the "Proposal on Revising the
Meeting Relevant Governance System of the Company"
The 17th See CNINFO "Announcement on the Resolutions of the 17th
Session of the August 29 2022 August 30 2022 Session of the Second Board Meeting" (Announcement No. 2022-
Second Board 003)
89ZKTeco 2022 Annual Report
Session Convening Date Disclosure Date Resolution of the Meeting
Meeting
The 18th
See CNINFO "Announcement on the Resolutions of the 18th
Session of the September 16 September 19
Session of the Second Board Meeting" (Announcement No. 2022-
Second Board 2022 2022
011)
Meeting
The 19th
See CNINFO "Announcement on the Resolutions of the 19th
Session of the September 29 September 30
Session of the Second Board Meeting" (Announcement No. 2022-
Second Board 2022 2022
018)
Meeting
The 20th
Session of the Deliberation and approval of the "Proposal on the Third Quarter
October 27 2022
Second Board Report of the Company in 2022"
Meeting
The 21st
See CNINFO "Announcement on the Resolutions of the 21st
Session of the November 16 November 17
Session of the Second Board Meeting" (Announcement No. 2022-
Second Board 2022 2022
030)
Meeting
The 22nd
See CNINFO "Announcement on the Resolutions of the 22nd
Session of the December 30 December 31
Session of the Second Board Meeting" (Announcement No. 2022-
Second Board 2022 2022
035)
Meeting
2. Attendance of directors in Board Meetings and General meetings
Attendance of directors in board meetings and general meetings
Board meeting Board Board meeting Board meeting
Board meeting Board Presence at
presence meeting presence by not attend in
Name of
required in the Presence
meeting shareholder
presence telecom- person for two
director through a absence s' meetings reporting on site communication
proxy (times) (times)
consecutive (times)
period (times) (times) (times) times
Che Quanhong 10 4 6 0 0 N 2
Jin Hairong 10 9 1 0 0 N 3
Ma Wentao 10 10 0 0 0 N 3
Fu Zhiqian 10 9 1 0 0 N 3
Dong Xiuqin 10 4 6 0 0 N 3
Zhuo Shuyan 10 1 9 0 0 N 3
Pang Chunlin 10 0 10 0 0 N 3
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 regarding the Company have been adopted
□Yes □ No
90ZKTeco 2022 Annual Report
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
Other
Number of Specifics of
Committee Convening Important Opinions and Performan
Members Meetings Meeting Content Objection
Name Date Suggestions Proposed ce of
Held (if any)
Duties
The Audit Committee
carries out work in strict
accordance with the
Deliberation and "Company Law" the
approval of the regulatory rules of the
"Proposal on the CSRC the "Articles of
Zhuo
Financial Report of the Association" the "Rules
Audit Shuyan
Company from 2019 to of Procedure of the Board
Committee Dong March 28
5 2021" and the of Directors" and the None None
of the Board Xiuqin 2022
"Proposal on the Self "Implementation Rules of
of Directors Fu
Evaluation Report on the Audit Committee of
Zhiqian
the Effectiveness of the Board of Directors". It
Internal Control of the is diligent and responsible
Company" and after sufficient
communication and
discussion unanimously
adopts relevant proposals
Deliberation and
approval of the
"Proposal on the
Financial Settlement
The Audit Committee
Report for 2021" the
carries out work in strict
"Proposal on the 2021
accordance with the
Profit Distribution
"Company Law" the
Plan" the "Proposal on
regulatory rules of the
Applying for
CSRC the "Articles of
Zhuo Comprehensive Credit
Association" the "Rules
Audit Shuyan Line from Banks and
of Procedure of the Board
Committee Dong May 23 Handling Bank Loans"
5 of Directors" and the None None
of the Board Xiuqin 2022 the "Proposal on Using
"Implementation Rules of
of Directors Fu Idle Self-owned Funds
the Audit Committee of
Zhiqian to Purchase Financial
the Board of Directors". It
Products" the
is diligent and responsible
"Proposal on Carrying
and after sufficient
out Forward Foreign
communication and
Exchange Settlement
discussion unanimously
and Sales in 2022" and
adopts relevant proposals
the "Proposal on
Confirmation of Daily
Related Party
Transactions in 2021"
Audit Zhuo August 29 Deliberation and The Audit Committee
5 None None
Committee Shuyan 2022 approval of the carries out work in strict
91ZKTeco 2022 Annual Report
Other
Number of Specifics of
Committee Convening Important Opinions and Performan
Members Meetings Meeting Content Objection
Name Date Suggestions Proposed ce of
Held (if any)
Duties
of the Board Dong "Proposal on the 2022 accordance with the
of Directors Xiuqin Semiannual Report and "Company Law" the
Fu Abstract" regulatory rules of the
Zhiqian CSRC the "Articles of
Association" the "Rules
of Procedure of the 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
Zhuo
Deliberation and Association" the "Rules
Audit Shuyan
approval of the of Procedure of the Board
Committee Dong October 27
5 "Proposal on the Third of Directors" and the None None
of the Board Xiuqin 2022
Quarter Report of the "Implementation Rules of
of Directors Fu
Company in 2022" the Audit Committee of
Zhiqian
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
Zhuo
Deliberation and Association" the "Rules
Audit Shuyan
approval of the of Procedure of the Board
Committee Dong December
5 "Proposal on Renewing of Directors" and the None None
of the Board Xiuqin 23 2022
the Appointment of "Implementation Rules of
of Directors Fu
Accounting Firms" the Audit Committee of
Zhiqian
the Board of Directors". It
is diligent and responsible
and after sufficient
communication and
discussion unanimously
adopts relevant proposals
Salary and Jin Deliberation and The Salary and
Assessment Hairong March 28 approval of the Assessment Committee
4 None None
Committee Pang 2022 "Proposal on the carries out work in strict
of the Board Chunlin Management Measures accordance with the
92ZKTeco 2022 Annual Report
Other
Number of Specifics of
Committee Convening Important Opinions and Performan
Members Meetings Meeting Content Objection
Name Date Suggestions Proposed ce of
Held (if any)
Duties
of Directors Zhuo for Year-End Benefit "Company Law" the
Shuyan Awards of ZKTECO" regulatory rules of the
CSRC the "Articles of
Association" the "Rules
of Procedure of the Board
of Directors" and the
"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.The Salary and
Assessment Committee
carries out work in strict
accordance with the
"Company Law" the
regulatory rules of the
CSRC the "Articles of
Association" the "Rules
Jin Deliberation and
Salary and of Procedure of the Board
Hairong approval of the
Assessment of Directors" and the
Pang May 23 "Proposal on the
Committee 4 "Implementation Rules of None None
Chunlin 2022 Remuneration of
of the Board the Salary and Assessment
Zhuo Directors and Senior
of Directors Committee of the Board of
Shuyan Managers for 2022"
Directors". It is diligent
and responsible and after
sufficient communication
and discussion
unanimously adopts all
proposals according to the
actual situation of the
Company.The Salary and
Deliberation and
Assessment Committee
approval of the
carries out work in strict
"Proposal on the
accordance with the
Company's Restricted
"Company Law" the
Jin Stock Incentive Plan
Salary and regulatory rules of the
Hairong 2022 (Draft) and its
Assessment CSRC the "Articles of
Pang September Abstract" and the
Committee 4 Association" the "Rules None None
Chunlin 29 2022 "Proposal on the
of the Board of Procedure of the Board
Zhuo Company's Restricted
of Directors of Directors" and the
Shuyan Stock Incentive Plan
"Implementation Rules of
Implementation
the Salary and Assessment
Assessment
Committee of the Board of
Management Measures
Directors". It is diligent
2022"
and responsible and after
93ZKTeco 2022 Annual Report
Other
Number of Specifics of
Committee Convening Important Opinions and Performan
Members Meetings Meeting Content Objection
Name Date Suggestions Proposed ce of
Held (if any)
Duties
sufficient communication
and discussion
unanimously adopts all
proposals according to the
actual situation of the
Company.The Salary and
Assessment Committee
carries out work in strict
accordance with the
"Company Law" the
regulatory rules of the
Deliberation and CSRC the "Articles of
approval of the Association" the "Rules
Jin
Salary and "Proposal on Providing of Procedure of the Board
Hairong
Assessment Housing Borrowings of Directors" and the
Pang December
Committee 4 for Employees and "Implementation Rules of None None
Chunlin 23 2022
of the Board Developing the the Salary and Assessment
Zhuo
of Directors Management Measures Committee of the Board of
Shuyan
for Employee Housing Directors". It is diligent
Borrowings" and responsible and after
sufficient communication
and discussion
unanimously adopts all
proposals according to the
actual situation of the
Company.The Nomination
Che
Nomination Committee carefully
Quanhon
Committee "Proposal on the reviewed the
g Pang September
of the 1 Appointment of Senior qualifications of the None None
Chunlin 16 2022
Board of Managers" proposed senior managers
Zhuo
Directors and expressed unanimous
Shuyan
agreement.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 Educational Background of employees
Number of in-service employees of the parent company at the
1959
end of the reporting period
Number of in-service employees of the major subsidiaries at
1829
the end of the reporting period
94ZKTeco 2022 Annual Report
Total number of in-service employees at the end of the
3788
reporting period
Total number of employees receiving salaries in current period 3788
Number of retired employees requiring the parent Company
18
and its subsidiaries to bear costs
Professional structure
Type of professions Number of employees
Production personnel 941
Sales personnel 1305
Technical personnel 1125
Financial personnel 126
Administrative personnel 291
Total 3788
Education background
Education background Number of employees
PhD candidate 2
Master's degree 131
Bachelor degree 1648
Other 2007
Total 3788
2. Remuneration policy
In order to accelerate the adaptation to the changes in the environment after going public the Company has carried out a series
of salary and performance management reforms. By using management accounting and management concepts as key measurement
indicators internal strategic goal decomposition and organizational performance acceptance as work requirements the Company has
achieved precise and efficient salary and performance management combining human resource policies with financial management
plans.In 2022 each organizational unit of the Company has completed the update and implementation of salary and performance
management plans deepened the R&D of job level salary system promoted talent skills improvement through job qualification
sequence and further stimulated the vitality of the organization and employees. The organizational units have improved the granularity
of marketing system and market strategy clarified the dual goals of the team and market implemented a tiered salary management
strategy coordinated operations and built an ecological win-win situation. The Company is continuously committed to the goal of
improving human efficiency innovating and transforming in comprehensive budget management special incentive plans performance
accounting automation and salary management system introduction leveraging the value of salary performance management and
building a goal management oriented atmosphere that prioritizes value creators.
3. Training plan
In 2022 with the Company going public ZKTECO continued to strengthen internal talent training and development efforts
improved talent development mechanisms consolidated training platforms developed multi scenario talent training plans strengthened
the reserve of management and professional technical talents and implemented talent protection for the Company's strategic realization
and sustainable development.In 2022 the Company conducted a total of 1153 special training sessions and the total annual training hours increased by 28.97%
quarter on quarter. The Company continued to deepen the business implementation of new training camps such as the "Red Heart
95ZKTeco 2022 Annual Report
Class" accelerated the integration of fresh blood and improved human efficiency and achieved rapid integration of new employees
through comprehensive mentor management growth paths. Moreover the Company has successively carried out special projects such
as agile change training for middle and senior managers information training and project-based skill training systematically improving
the modern enterprise management concept of middle and senior managers and flexibly using business management tools to achieve
internal development and transformation. The Company accelerated its information transformation and resource investment and
accelerated organizational change and efficient operation of value processes through information system tools and talent training
incubation. In terms of grassroots employees the Company fully mobilized internal and external resources taking project-based skill
training as the anchor point combining with actual business needs and systematically improved employees' professional and technical
abilities from multiple dimensions structures and levels thus achieving dual goals of talent development and value achievement.
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
The Company's profit distribution policies stipulated in the "Articles of Association" are as follows:
(I) Argumentation procedure and decision mechanism of profit distribution policies
1. Research and demonstration procedure for profit distribution policies
When the Company formulates a profit distribution policy or needs to modify it due to significant changes in the external business
environment or its own operating conditions it shall take the interests of shareholders as the starting point pay attention to protecting
the interests of investors and provide stable returns to investors. The Board of Directors shall fully demonstrate and listen to the
opinions of independent directors supervisors senior managers of the Company and public investors. For the modification of profit
distribution policies the reasons and rationality shall also be demonstrated in detail. In the process of researching and demonstrating
the adjustment of profit distribution policies the Company's Board of Directors can communicate and exchange with independent
directors and small and medium-sized shareholders through telephone fax letter email and the investor relationship interaction
platform on the Company's website fully listening to the opinions and demands of independent directors and small and medium-sized
shareholders and promptly responding to the concerns of small and medium-sized shareholders.
2. Profit distribution policy decision-making mechanism
The Board of Directors shall make a plan for formulating or modifying profit distribution policies which shall be approved by a
majority vote of all directors and by more than half of independent directors. Independent directors shall express independent opinions
on the formulation or modification of profit distribution policies. For the modification of profit distribution policies the Board of
Directors shall also provide detailed arguments and explanations in relevant proposals.The Board of Supervisors of the Company shall review and revise the profit distribution policies formulated and modified by the
Board of Directors which shall be approved by a vote of more than half of the supervisors. If the Company has external supervisors
(supervisors who do not hold positions in the Company) they shall be approved by a vote of the external supervisors and the external
supervisors shall express their opinions.When the formulation or modification of profit distribution policies is deliberated at the shareholders' meeting it must be approved
by more than two-thirds of the voting rights held by shareholders (including shareholder proxies) attending the meeting and the relevant
96ZKTeco 2022 Annual Report
shareholders' meeting shall provide convenience for public investors to participate in the formulation or modification of profit
distribution policies by a combination of on-site voting and online voting.(II) Profit distribution policies of the Company
1. The profit distribution principle of the Company: The Company implements an active profit distribution policy and attaches
importance to reasonable investment returns for investors. The Company shall maintain the continuity and stability of its profit
distribution policy while taking into account the long-term interests of the Company the overall interests of all shareholders and the
sustainable development of the Company. Profit distribution shall not exceed the scope of cumulative distributable profits and shall
not harm the Company's ability to continue operating. The Board of Directors Board of Supervisors and board of shareholders of the
Company shall fully consider the opinions of independent directors and public investors in the decision-making and argumentation
process of profit distribution policies.
2. The form of profit distribution of the Company: The Company can distribute profits through cash stocks a combination of
cash and stocks or other methods permitted by laws and regulations with priority given to cash dividends.
3. The specific conditions and proportions for the Company's cash dividend distribution:
(1) The conditions for cash dividends are:
* The distributable profits realized by the Company in the current year (i.e. the remaining after tax profits after the Company
makes up for losses and withdraws provident fund) are positive and the cash flow is abundant. The implementation of cash dividends
will not affect the Company's subsequent continuous operation;
* The cumulative distributable profits of the Company are positive;
* The audit institution shall issue a standard unqualified opinion audit report on the Company's financial report for that year;
* The Company does not have any major investment plans or significant cash expenditures (except for fundraising projects).A major investment plan or major cash expenditure refers to: the cumulative expenditure of the Company's planned external
investment acquisition of assets or purchase of equipment in the next twelve months which reaches or exceeds 30% of the Company's
latest audited total assets or the cumulative expenditure of a Company's planned external investment acquisition of assets or purchase
of equipment in the next twelve months which reaches or exceeds 50% of the Company's latest audited net assets and exceeds RMB
50 million.
(2) Proportion and timing of cash dividends:
In principle the Company implements a profit distribution once a year and prioritizes the distribution of dividends in cash. The
profits distributed in cash shall not be less than 10% of the distributable profits realized in the current year. The Board of Directors of
the Company shall comprehensively consider factors such as industry characteristics development stage own business model
profitability level and whether there are significant capital expenditure arrangements distinguish the following situations and propose
differentiated cash dividend policies in accordance with the procedures stipulated in the Company's Articles of Association:
* If the Company is in a mature stage of development and there are no significant capital expenditure arrangements the minimum
proportion of cash dividends in this profit distribution shall reach 80%;
* If the Company is in a mature stage of development and there are significant capital expenditure arrangements the minimum
proportion of cash dividends in this profit distribution shall reach 40%;
* 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%;
If the development stage of the Company is difficult to distinguish but there are significant capital expenditure arrangements they
can be handled in accordance with the provisions of the preceding paragraph.
4. Conditions for distribution of stock dividends
When the Company is operating well and the Board of Directors believes that distributing stock dividends is beneficial to the
overall interests of all shareholders of the Company a stock dividend distribution plan can be proposed on the premise of ensuring
sufficient cash dividend distribution. If the Company uses stock dividends for profit distribution it shall fully consider whether the
total share capital after the distribution of stock dividends is suitable for the Company's current business scale profit growth rate and
97ZKTeco 2022 Annual Report
dilution of net assets per share to ensure that the profit distribution plan is in line with the overall and long-term interests of all
shareholders.
5. The interval between profit distribution periods: On the premise that the Company is profitable in the current year and the
accumulated undistributed profits are positive the Company shall make profit distribution at least once a year. The Company can make
mid-term cash dividends based on actual operating conditions.
6. The review procedures to be followed for profit distribution:
The Board of Directors of the Company proposes and drafts the profit distribution plan of the Company in combination with the
provisions of the Articles of Association the Company's profitability and the supply and demand of funds. The Board of Supervisors
of the Company reviews the profit distribution plan and issues written opinions. After the independent directors of the Company express
their independent opinions they submit it to the shareholders' meeting for deliberation. The Board of Directors Board of Supervisors
and board of shareholders of the Company shall fully listen to and consider the opinions of shareholders (especially small and medium-
sized shareholders) independent directors and supervisors in the research and decision-making process of the Company's profit
distribution plan.When the profit distribution plan is deliberated at the shareholders' meeting the Company shall provide online voting methods
for shareholders actively communicate and exchange with shareholders especially small and medium-sized shareholders through
various channels fully listen to the opinions and demands of small and medium-sized shareholders and promptly respond to the
concerns of small and medium-sized shareholders. After the shareholders' meeting of the Company makes a resolution on the profit
distribution plan the Board of Directors of the Company must complete the distribution of dividends (or shares) within 2 months after
the shareholders' meeting is held.If the Company does not conduct cash dividends due to the aforementioned special circumstances or if the Company meets the
conditions for cash dividends in the current year but the Board of Directors does not submit a profit distribution plan to the shareholders'
meeting in accordance with the established profit distribution policies the Board of Directors shall provide a special explanation on
the specific reasons for not conducting cash dividends the purpose of retaining funds not used for dividends in the Company and the
use plan. After the independent directors express their opinions they shall submit it to the shareholders' meeting for review and disclose
it on the media designated by the Company.If a shareholder illegally occupies the funds of a listed company the Company shall deduct the cash dividends distributed by the
shareholder to repay the funds occupied.
7. Change in profit distribution policies: The Company shall strictly implement the cash dividend policy determined in the
Company's Articles of Association and the specific cash dividend plan approved by the shareholders' meeting. The Company shall
review the shareholder dividend return plan at least every three (3) years.The Company's profit distribution policy is an important decision-making matter of the Board of Directors and board of
shareholders and cannot be adjusted arbitrarily. If it is necessary to adjust the profit distribution policy due to significant changes in
the external business environment or its own operating conditions the Company shall take protecting the rights and interests of
shareholders as the starting point and the Board of Directors shall conduct a special discussion detailed argumentation and explanation
of the reasons fully listen to the opinions and demands of small and medium-sized shareholders and submit a written argumentation
report to the shareholders' meeting for special resolution approval after obtaining the consent of independent directors. When the
shareholders' meeting considers changes in profit distribution policies the Company shall provide shareholders with a voting platform
in online form.
8. Disclosure of profit distribution policies
The Company shall disclose in detail the development and implementation of profit policies in regular reports indicating whether
they comply with the provisions of the Company's Articles of Association or the requirements of the shareholders' meeting resolution
whether the cash dividend standards and ratios are clear whether the relevant decision-making procedures and mechanisms are
complete whether independent directors have fulfilled their duties and played their due role and whether small and medium-sized
shareholders have the opportunity to fully express their opinions and demands and whether the legitimate rights and interests of small
98ZKTeco 2022 Annual Report
and medium-sized shareholders have been fully protected. If adjustments or changes are made to profit distribution policies it is
necessary to provide a detailed explanation of whether the conditions and procedures for the adjustments or changes are compliant and
transparent.Special explanation of cash dividend policy
Whether it complies with the provisions of the Company’s
Articles of Association or the requirements of the shareholders' Yes
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:
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 plan 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 plan 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) 3.5
Additional shares converted from capital reserves
3
per 10 shares (share)
Total capital shares as the basis for the distribution
148492051
proposal (share)
Cash dividend amount (RMB) (tax inclusive) 51972217.85
Cash dividend amount in other ways (such as repurchase of
0.00
shares) (RMB)
Total cash dividends (including other ways) (RMB) 51972217.85
Distributable profit (RMB) 478054103.62
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%
Detailed of profit distribution or plan for converting capital reserve into share capital
After the audit by Baker Tilly China Certified Public Accountants (Special General Partnership) the net profit attributable to the
owners of the parent company in the 2022 consolidated statements of the Company was RMB 192239793.75 and the net profit
realized by the parent company in 2022 was RMB 113932324.04. According to the provisions of the "Company Law" and the
"Articles of Association" after withdrawing the statutory surplus reserve fund of RMB 11393232.40 from 10% of the parent
company's net profit the net profit available for distribution for the parent company in 2022 is RMB 102539091.64. As of the
end of 2022 the accumulated undistributed profit of the Company's consolidated statements was RMB 788571917.98 while the
accumulated undistributed profit of the parent company was RMB 478054103.62. 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
99ZKTeco 2022 Annual Report
for distribution to shareholders in 2022 is RMB 478054103.62.According to the guidance of the CSRC on encouraging cash dividends for listed companies the Company has formulated a profit
distribution plan for 2022 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
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.": 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 148492051 shares as of December 31 2022 with the total cash dividend distribution of
RMB 51972217.85 (including tax); at the same time to convert capital reserves to share capital and convert 3 shares per 10
shares to all shareholders with a total of 148492051 shares with the total conversion of 44547615 shares. After the conversion
the total share capital of the Company will increase to 193039666 shares; no bonus shares will be given.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 plan 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 Stock Incentive Plan 2022 (Draft) and its Abstract" the "Proposal on the
Company's Restricted Stock 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 Stock in 2022".According to the "Proposal on the Company's Restricted Stock 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 Stock Incentive Plan in 2022 and the Number of Granted Objects" and the "Proposal on
Granting Restricted Stock to Incentive Objects of 2022 Restricted Stock Incentive Plan for the First Time".The independent directors gave their independent opinions on the above equity incentive plan adjustment and grant and the
Board of Supervisors verified the list of incentive objects granted with restricted stock.Equity incentives obtained by the directors and senior managers
□Applicable □ Not applicable
Unit: share
Numb Numb Exerci Numb Exerci Numb Marke Numb Numb Numb Grant Numb
Name Post er of er of sable er of se er of t price er of er of er of price er of
stock new shares exerci price stock at the limite unloc newly of limite
100ZKTeco 2022 Annual Report
option stock during sed of option end of d ked grante restric d
s held option the shares exerci s held the shares shares d ted shares
at the s report during sed at the report held in this restric stock held
begin grante ing the shares end of ing at the period ted (RMB at the
ning d period report during the period begin stocks /share end of
of the during ing the period (RMB ning in the ) the
year the period report /share of the report period
report ing ) period ing
ing period period
period (RMB
/share
)
Direct
or and
Jin Gener 1200 1200
00000000018.7
Hairong al 0 0
Mana
ger
Fu Direct 1100 1100
00000000018.7
Zhiqian or 0 0
Deput
y
Mu
Gener 1800 1800
Wentin 0 0 0 0 0 0 0 0 0 18.7
al 0 0
g
Mana
ger
41004100
Total -- 0 0 0 0 -- 0 -- 0 0 --
00
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 plan
□ Applicable □ Not applicable
101ZKTeco 2022 Annual Report
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 2022 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
XV. Management and Control of Subsidiaries During the Reporting Period of the Company
Company Integration Problems in Solutions Resolution Subsequent
Integration Plan
Name Progress Integration Taken Progress Resolution Plan
Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable
During the reporting period the Company established Vietnam Subsidiary and Romania Subsidiary in a newly established form
but did not add new subsidiaries through purchase.As of December 31 2022 the Company has 14 controlling subsidiaries domestically and 40 controlling subsidiaries overseas.Under the framework of the "Company Law" "Securities Law" and "Articles of Association" the Company has formulated internal
management systems such as the "Subsidiary Management System of ZKTECO CO. LTD." and "Major Information Internal Reporting
System" based on the actual situation of the Company to ensure that the subsidiaries operate independently manage independently
and conduct business in compliance with the requirements of the location/country under the overall plan of the Company. Meanwhile
the internal control management system of the Company has been implemented without affecting the independent operation and
management of the subsidiaries to ensure that the subsidiaries timely truthfully accurately and completely report relevant major
matters to the Company in strict accordance with laws and company regulations. There is no significant information that shall be
disclosed but has not been disclosed and there is no such situation where the subsidiaries lose control.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 28 2023
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 100.00%
102ZKTeco 2022 Annual Report
unit included in the evaluation scope to
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
Company's Audit Committee and Significant deficiencies: violation against
internal audit institutions is ineffective; national laws regulations or normative
discovering significant fraud by documents; lack of decision-making
directors supervisors and senior procedures or unscientific decision-
managers; the Company has made making procedures leading to significant
significant corrections to the published errors; lack of institutional control or
financial statements; significant systematic failure of important
deficiencies that have been identified and businesses; the results of internal control
reported to management have not been evaluation especially significant or
corrected within a reasonable time frame; important deficiencies have not been
other deficiencies that may affect the rectified; other situations that have a
correct judgment of report users. significant impact on the Company.Qualitative Criteria Important deficiencies: failure to select Important deficiencies: deficiencies in
and apply accounting policies in important business institutions or
accordance with generally accepted systems; important deficiencies in the
accounting standards; invalid anti-fraud results of internal control evaluation are
procedures and control measures; one or not promptly rectified; other situations
more deficiencies in the control of the that have a significant negative impact
final financial reporting process. on the Company with a severity lower
Although the significant deficiency than significant deficiencies but may
criteria have not been met there is no still lead to the Company deviating from
reasonable guarantee that the financial its control objectives.statements prepared will achieve true and General deficiencies: refer to internal
accurate objectives. control deficiencies that do not constitute
General deficiencies: refer to other significant or important deficiencies.control deficiencies besides the
significant and important deficiencies
mentioned above.Significant deficiencies: misstated
amount ≥ 5% of total operating revenue; Significant deficiencies: loss amount >
important deficiencies: 2% of total RMB 10 million; important deficiencies:
Quantitative Criteria operating revenue ≤ misstated amount RMB 1 million＜ loss amount ≤ RMB
<5% of total operating revenue; general 10 million; general deficiencies: loss
deficiencies: misstated amount <2% of amount ≤ RMB 1 million
total operating revenue
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
103ZKTeco 2022 Annual Report
2. Internal control Audit Report
Not applicable
XVII. Special Rectification Actions for Self-inspected Problems of Listed Companies
Not applicable.
104ZKTeco 2022 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 enterprises 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
(I) Investor Protection
The Company has formed a modern corporate governance structure that separates supports and balances the board of
shareholders Board of Directors Board of Supervisors and management in strict accordance with the requirements of laws and
regulations such as the "Company Law" the "Securities Law" the "Code of Corporate Governance for Listed Companies" the "Rules
Governing the Listing of Shares on the ChiNext Market of Shenzhen Stock Exchange" and the "Shenzhen Stock Exchange Guideline
No. 2 on Self Regulation of Listed Companies - Normative Operation of Listed Companies on the Growth Enterprise Board" and
established an internal control system based on the Company's "Articles of Association" with core structures such as the "Rules of
105ZKTeco 2022 Annual Report
Procedure for Shareholders' Meeting" the "Rules of Procedure of the Board of Directors" and the "Rules of Procedure for the Board
of Supervisors".The Company attaches great importance to the protection of investors' rights and interests strictly fulfills its information
disclosure obligations in accordance with regulatory requirements and communicates with investors through various means such as
on-site research investor phone calls and investor relationship interaction platforms to improve the Company's transparency and
effectively protect the legitimate rights and interests of investors especially small and medium-sized investors.During the reporting period the Company held one annual general meeting and two extraordinary general meetings. The two
extraordinary general meetings were held after the Company went public. The convening and voting procedures of the shareholders'
meeting strictly follow the provisions of laws regulations and the Company's Articles of Association. After the listing a combination
of on-site voting and online voting is adopted at the shareholders' meeting providing convenient conditions for investors to fully
participate in the shareholders' meeting and ensuring shareholders' right to know participate and vote on major matters of the Company.When the major matters that affect the interests of small and medium-sized investors are deliberated at the shareholders' meeting
separate counting of votes for small and medium-sized investors shall be carried out and timely public disclosure shall be made in the
resolutions of the shareholders' meeting to fully protect the rights and interests of small and medium-sized investors.(II) Protection of employee rights and interests
The Company always adheres to the "people-oriented" talent concept strictly implements various laws and regulations such as
the "Labor Law" plays the role of trade unions respects and protects the legitimate rights and interests of employees and effectively
guarantees their occupational health and safety.For new employees the Company actively cultivates and promotes the corporate culture spirit of responsibility integrity
practicality and excellence. Through the 1700 ㎡ corporate development and cultural exhibition hall visit and learning the Company
strengthens employees' sense of organizational responsibility and enhances employees' sense of honor and pride.The Company attaches great importance to employee skill training to improve their skill quality. The Company makes efforts to
promote employee education and training improve the treatment of skilled workers and focuses on recognition and rewards towards
the frontline. The Company establishes a talent training mechanism including on-the-job training job rotation communication
mentorship internal trainers and professional technical training to accelerate employee career growth and broaden employee
development channels. In 2022 the Company collaborated with vocational colleges to carry out vocational skill level recognition
training for electronic assembly workers and computer programmers in broadcasting and communication equipment as well as
vocational skill training for e-commerce live streaming+short video production and MOS office software. About 700 people
participated in the training and there were 42 new technicians.The Company listens to the voices of its employees and effectively solves their difficulties. The Company innovatively carries
out the "ZKTECO Tree Hole" activity to collect employee opinions continues to provide traditional holiday condolences improves
employee accommodation environment and provides multiple services such as child-care centers libraries medical and health
promotion and annual physical examinations for employees. The Company regularly holds employee birthday parties sports events
outdoor activities employee interest clubs cultural salons and other forms of activities. Moreover the Company establishes employee
assistance funds to effectively safeguard and ensure the interests of employees which has won the trust and support of the majority of
employees.(III) Protection of the rights and interests of suppliers customers and consumers
The cooperation between the Company and suppliers is based on the principles of fairness justice mutual benefit and win-win
cooperation. The mutual trust conventions and contracts established by both parties in the cooperation are the foundation of business
cooperation and improving efficiency and common development are the common goals of both parties. The supply chain has always
adhered to the principles of "sunshine purchase honesty and trustworthiness integrity and self-discipline" requiring suppliers to also
bear relevant responsibilities for social responsibility and environmental impact. By formulating complete procurement management
agreements including the "Integrity Agreement" "Procurement Framework Agreement" and "CSR Agreement" and continuously
improving the procurement process the Company ensures that the source of materials is legal and compliant. The Company attaches
106ZKTeco 2022 Annual Report
great importance to the quality and safety of its products and has established quality management systems such as the "Supply Quality
Agreement" with suppliers to further standardize supplier management improve efficiency and service quality and work together with
supply chain partners to create better products for customers.Starting from customer needs and experiences the Company continuously improves organizational construction institutional
management financial supervision process control and comprehensive audit of budget and final accounts. While providing high-
quality products and services to customers and creating greater value for society partners and customers the Company continuously
enhances its own value and works hand in hand with suppliers partners and customers to jointly create a healthy long-term stable
and win-win cooperation ecosystem assisting in the sustainable development of the industry.The Company adheres to the value concept of "working together to achieve win-win cooperation". With the aim of achieving
multiple wins with partners and customers and with integrity and reputation as the foundation of business the Company constantly
listens to the opinions of partners and customers strives to improve product quality and actively implements the cooperation openness
and win-win policy.Moreover the Company also attaches great importance to product quality and safety protects the interests of partners and
customers and effectively fulfills the Company's social responsibility to suppliers partners and customers. The Company adheres to
business rules and operates with integrity as the foundation. It promises to strictly abide by applicable laws and regulations respect the
rights and interests of suppliers partners and customers and keep trade secrets confidential.(IV) Environmental protection and sustainable development
The Company adheres to the code of ethics and conscientiously implements relevant national laws and regulations in ecological
environment protection energy consumption and work safety. For many years it has been committed to protecting and improving the
natural environment and adhering to people orientation energy conservation and work safety.The Company strives to achieve energy conservation emission reduction and sustainable development in the production and
operation process committed to reducing resource and energy consumption and environmental costs during production and operation
and improving resource utilization efficiency. In 2022 the Company sorted out the general industrial solid waste generated in the
production process from the source classified collected and treated the waste to achieve more efficient resource utilization and less
pollutant emissions simultaneously increased investment in the environmental protection field strengthened the management of
hazardous waste warehouses and gradually improved environmental supporting facilities. Guangdong Zkteco hired environmental
stewards to classify collect and treat waste achieve more efficient resource utilization and less pollutant emissions simultaneously
increased investment in the environmental protection field added one hazardous waste warehouse and gradually improved
environmental supporting facilities. To scientifically and efficiently carry out environmental pollution prevention and control work
the Company actively identified potential environmental pollution hazards and formulated pollution prevention and control measures
from the source. Meanwhile it actively responded to various environmental protection measures issued by the Environmental
Protection Bureau actively cooperated with the work instructed by the Municipal Environmental Protection Bureau enhancing
employees' environmental awareness; carried out promotional activities strengthened supervision and inspection and promoted the
progress of environmental protection matters playing a good leading role in environmental protection and fulfilling social
responsibilities. The Company was successfully awarded the second batch of environmental management demonstration enterprises in
Dongguan City in 2022. The Company has no record of receiving significant administrative penalties for violating laws and regulations
related to environmental protection and pollution prevention throughout the year.In 2022 the Company actively built a safe enterprise strengthened internal security prevention and control strengthened work
safety rules and regulations investigated and treated accident hazards conducted safety education and training carried out accident
prevention and emergency management built a safe culture and managed occupational health according to regulations. It was
successfully awarded the titles of "Dongguan Safe Enterprise" and "Dongguan Safe Creation Standard Enterprise". The Company and
Guangdong Zkteco were awarded the 2022 Dongguan Safe Creation Standard Enterprise.(V) Public relations and social welfare undertakings
107ZKTeco 2022 Annual Report
During the reporting period the Company actively fulfilled its social responsibilities and duties and participated in the
construction of more than ten local cabin hospitals in Jilin Anhui Heilongjiang Guangxi and other regions. In July the Company
donated medical masks disinfectants and other epidemic prevention materials to Lanzhou University to assist in its epidemic prevention
work. Moreover the Company and its subsidiaries actively organized employees to participate in community epidemic prevention
work as volunteers.The Company continued to deepen the role of the labor union organized employees to participate in various large-scale activities
organized by the city/town federation of labor unions such as "Civilized City Co-creation" "Epidemic Prevention Defenders" "Anti-
fraud Propaganda" and "Employee Library Construction". Meanwhile by giving movie tickets health and epidemic prevention bags
and consumption vouchers to employees the Company allowed them to widely participate in corporate social responsibility and public
welfare undertakings continuously enriching their leisure lives.In addition the Company also provided pedestrian and vehicle transportation solutions for the 2022 Winter Olympics service
guarantee areas such as the Taizicheng Snow Town in Chongli and actively assisted in the Smart Winter Olympics to create safe
convenient and efficient travel experience.III. Efforts Regarding of Poverty Alleviation and Rural Revitalization
In the 2022 "Guangdong Poverty Alleviation Day and Dongguan Charity Day" activity the Company and Guangdong Zkteco
respectively launched the donation of charity funds to "Dongguan Tangxia Charity Foundation" and "Dongguan Zhangmutou Charity
Foundation" to help the rural revitalization of Guangdong Province consolidated the achievements of poverty alleviation promoted
common prosperity and contributed to the deep integration and symbiosis and common prosperity of tens of millions of people in
Dongguan and the city.
108ZKTeco 2022 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
109ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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 that
day is not a trading day it is the first trading day after that day) (if ex-right or ex-dividend is
IPO-related ZKTeco Stock August 17 February 16 Strict
carried out due to reasons such as cash dividends distribution stock dividends conversion to share
commitments Times lockup 2022 2026 performance
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 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 regarding 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
consecutive trading days (if ex-right or ex-dividend is carried out due to reasons such as cash
IPO-related Che Stock dividend distribution stock dividend conversion to share capital or issuance of new shares August 17 February 16 Strict
commitments Quanhong lockup corresponding adjustments must be made in accordance with the relevant regulations of the CSRC 2022 2026 performance
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 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
110ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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 regarding 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
LX responsibilities. If I fail to fulfill the obligations and responsibilities conferred by this commitment
IPO-related Stock August 17 August 16 Strict
Investmen the enterprise will bear any losses suffered by ZKTECO other shareholders or stakeholders of
commitments lockup 2022 2025 performance
t 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 regarding 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
IPO-related JYSJ and Stock August 17 February 17 Strict
unlocked the enterprise will not transfer or entrust others to manage the shares already issued by
commitments JYHY lockup 2022 2027 performance
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 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 aforementioned capital
111ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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 regarding 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 shares by
ZKTECO the enterprise will not transfer or entrust others to manage the newly added shares held
IPO-related JYLX and Stock August 17 February 17 Strict
by the enterprise nor will ZKTECO repurchase such shares within three years from the date of
commitments JYQL lockup 2022 2027 performance
completing the industrial and commercial registration procedures for the 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 regarding 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 Stock 1. If the period from the date of participating in the capital increase subscription of ZKTECO and August 17 August 16 Strict
IPO-related
Walden lockup completing the relevant industrial and commercial changes to the filing date of ZKTECO's initial 2022 2023 performance
112ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
commitments Fuhai public offering of stocks is less than 6 months then within three years from the date of completing
Juanyong the industrial and commercial change registration procedures for the aforementioned capital
and Yiwu increase the enterprise shall not transfer or entrust others to manage the abovementioned shares
Walden 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 regarding 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
Jin ZKTECO repurchase such shares;
Hairong 2. During my tenure as a director/supervisor and/or senior manager of ZKTECO the number of
Ma ZKTECO shares transferred annually shall not exceed 25% of the total number of ZKTECO shares
Wentao held directly or indirectly by me. Within six months after my resignation I will not transfer the
Fu ZKTECO shares held directly or indirectly by me. If I declare my resignation within six months
Zhiqian from the date of the initial public offering of ZKTECO I will not transfer the shares of ZKTECO
Jiang that I directly or indirectly hold within eighteen months from the date of my resignation. If I
IPO-related Wenna Stock declare the resignation between the seventh and twelfth months from the date of the initial public August 17 Strict
Long term
commitments Wu lockup offering of ZKTECO I will not transfer the ZKTECO shares directly or indirectly held by me 2022 performance
Xinke Liu within twelve months from the date of declaration for resignation.Jiajia 3. If I reduce my holdings of ZKTECO stocks within two years after the expiration of the lockup
Wang 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 dividends conversion into capital stock or issuance of new shares after this issuance
and Guo corresponding adjustments shall be made in accordance with the relevant regulations of the CSRC
Yanbo 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
113ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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 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 regarding 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
Commitm
future.ent to
2. If due to changes in national laws policies or other unavoidable reasons the Company and/or
IPO-related ZKTECO avoid August 17 Strict
enterprises controlled by the Company jointly controlled with others or with significant influence Long term
commitments Times horizontal 2022 performance
constitute or may constitute horizontal competition with ZKTECO the Company will cease the
competitio
business and activities that exist in horizontal competition or the entrusted management
n
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. 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.
114ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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.
1. I and/or the enterprise controlled by me 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. I and/or enterprises
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
Commitm
constitute horizontal competition with ZKTECO I will cease the business and activities that exist
ent to
in horizontal competition or the entrusted management contracted operation or acquisition of
IPO-related Che avoid August 17 Strict
such business that constitutes horizontal competition and ZKTECO will enjoy priority under equal Long term
commitments Quanhong horizontal 2022 performance
conditions.competitio
3. If ZKTECO expands into new business areas in the future ZKTECO enjoys priority. I and other
n
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
Commitm with significant influence will make every effort to reduce related party transactions with
ent to ZKTECO and other enterprises under its control.standardiz 2. For necessary and unavoidable related party transactions the Company guarantees that the
e and related party transactions will be conducted under normal commercial conditions and does not
IPO-related ZKTECO August 17 Strict
reduce require ZKTECO and enterprises under its control to provide any conditions superior to those Long term
commitments Times 2022 performance
related given to third parties in fair market transactions. The related party transactions involved will
party comply with relevant laws and regulations the "Articles of Association" and the "Related Party
transactio Transaction Management System" and other relevant provisions of the relevant documents. The
ns 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;
115ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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.
1. U and/or enterprises controlled by me 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 I guarantee that the related party
Commitm
transactions will be conducted under normal commercial conditions and do not require ZKTECO
ent to
and enterprises under its control to provide any conditions superior to those given to third parties
standardiz
in fair market transactions. The related party transactions involved will comply with relevant laws
e and
IPO-related Che and regulations the "Articles of Association" and the "Related Party Transaction Management August 17 Strict
reduce Long term
commitments Quanhong System" and other relevant provisions of the relevant documents. The Company will timely 2022 performance
related
disclose information to ensure that the legitimate rights and interests of ZKTECO and other
party
shareholders are not harmed through related party transactions;
transactio
3. During the period when I serve as the actual controller of ZKTECO the Company will faithfully
ns
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.Che 1. I and my immediate family members/other enterprises controlled by me and my immediate
Quanhong family members will make every effort to reduce related party transactions with ZKTECO and
Jin other enterprises under its control.Hairong Commitm 2. For necessary and unavoidable related party transactions I guarantee that the related party
Ma ent to transactions will be conducted under normal commercial conditions and do not require ZKTECO
Wentao standardiz and enterprises under its control to provide any conditions superior to those given to third parties
Fu e and in fair market transactions. The related party transactions involved will comply with relevant laws
IPO-related August 17 Strict
Zhiqian reduce and regulations the "Articles of Association" and the "Related Party Transaction Management Long term
commitments 2022 performance
Dong related System" and other relevant provisions of the relevant documents. The Company will timely
Xiuqin party disclose information to ensure that the legitimate rights and interests of ZKTECO and other
Pang transactio shareholders are not harmed through related party transactions;
Chunlin ns 3. I will faithfully fulfill the above commitments and bear corresponding legal responsibilities. If
Zhuo the violation of the above commitments by me and other enterprises controlled by me results in
Shuyan damage to the interests of ZKTECO or the legitimate interests of other shareholders I will bear
Jiang corresponding compensation responsibilities in accordance with the law.
116ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
Wenna
Wu
Xinke Liu
Jiajia
Wang
Youwu Li
Zhinong
and Guo
Yanbo
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 reduce
our holdings of ZKTECO shares during the lockup period.
2. Within two years after the expiration of the lockup period promised by the Company/me if the
Company/I plan(s) to reduce our holdings of ZKTECO shares the reduction price will not be
lower than the issuance price at the time of the initial public offering of the shares (if ZKTECO
Sharehold experiences dividends stock dividends or capital gains during this period)
ZKTeco
ing and For matters such as the conversion of the reserve into shares and other ex-right and ex-dividend
IPO-related Times and August 17 Strict
intention matters the issuance price shall be adjusted accordingly. Long term
commitments Che 2022 performance
to reduce 3. After the expiration of the lockup period promised by the Company/me the Company/I will
Quanhong
holdings 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
JYSJ Sharehold accordance with the commitments issued by the enterprise regarding the circulation restrictions
JYHY and ing and and voluntary lockup of its holdings of ZKTECO shares and with the relevant provisions of laws
IPO-related August 17 Strict
LX intention regulations and normative documents. Long term
commitments 2022 performance
Investmen to reduce 2.t holdings After the expiration of the lockup period promised by the enterprise if the enterprise plans to
reduce its holdings it will notify ZKTECO of the reduction in accordance with the regulations of
the CSRC and the Shenzhen Stock Exchange and after the reduction is announced it will reduce
117ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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
Commitm stock price plan. The Company shall convene a board meeting within 10 trading days to review
ent to specific plans for stabilizing the Company's stock price clarify the implementation period of such
IPO-related August 17 August 16 Strict
ZKTECO stabilizing specific plans and initiate the implementation of specific plans for stabilizing the stock price
commitments 2022 2025 performance
stock within 5 trading days after the approval of such plans by the shareholders' meeting.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:
* Company repurchase;
* Increase in holdings by controlling shareholders;
* Directors (excluding independent directors) and senior managers increase their holdings. Until
the stopping conditions of the stable stock price plan are met.ZKTeco
Times
Che
Quanhong
Jin
Hairong Commitm
When the Company initiates a stock price stablizing plan in accordance with the "Plan for
Ma ent to
IPO-related Stabilizing the Stock Price within Three Years after Listing" it will fulfill corresponding August 17 August 16 Strict
Wentao stabilizing
commitments obligations in accordance with the law in strict accordance with the requirements of the stock price 2022 2025 performance
Fu stock
stablizing plan.Zhiqian prices
Wang
Youwu Li
Zhinong
and Guo
Yanbo
118ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
Commitm
When the Company initiates a stock price stablizing plan in accordance with the "Plan for
ent to
IPO-related Mu Stabilizing the Stock Price within Three Years after Listing" it will fulfill corresponding September 16 August 16 Strict
stabilizing
commitments Wenting obligations in accordance with the law in strict accordance with the requirements of the stock price 2022 2025 performance
stock
stablizing plan.prices
Commitm
There are no false records misleading statements or significant omissions in the prospectus and
ent letter
other information disclosure materials of the Company's initial public offering of stocks and listing
regarding
on the ChiNext.the
If it is determined by the CSRC Shenzhen Stock Exchange or other competent departments that
absence of
there are false records misleading statements or significant omissions in the prospectus and other
false
information disclosure materials of the Company's initial public offering of stocks and listing on
records
the ChiNext which constitutes a significant and substantial impact on determining whether the
misleadin
Company meets the issuance conditions stipulated by law: Within 10 trading days from the date
g
when the Shenzhen Stock Exchange or other competent departments determine that the Company
IPO-related statements August 17 Strict
ZKTECO has the aforementioned situation the Company will convene a board meeting and propose to Long term
commitments or 2022 performance
convene a shareholders' meeting to review the proposal to repurchase all shares issued for the
significant
initial public offering. The repurchase price will be determined based on the issuance price and
omissions
with reference to relevant market factors.in the
If it is determined by the CSRC Shenzhen Stock Exchange or other competent departments that
prospectus
there are false records misleading statements or significant omissions in the prospectus and other
and other
information disclosure materials of the Company's initial public offering of stocks and listing on
informatio
the ChiNext resulting in losses to investors in securities trading the Company will compensate
n
investors for losses in accordance with the law according to the relevant decisions of the CSRC
disclosure
Shenzhen Stock Exchange or other competent departments.materials
Commitm The prospectus and other information disclosure materials of ZKTECO's initial public offering of
ent letter stocks and listing on the ChiNext are true accurate and complete without any false records
regarding misleading statements or significant omissions.the If it is determined by the CSRC Shenzhen Stock Exchange or other competent departments that
ZKTeco absence of ZKTECO has false records misleading statements or significant omissions in the prospectus and
IPO-related Times and false other information disclosure materials of its initial public offering of stocks and listing on the August 17 Strict
Long term
commitments Che records ChiNext resulting in losses to investors in securities issuance and trading the Company/I will 2022 performance
Quanhong misleadin compensate investors for losses in accordance with the law according to the provisions of the
g relevant decisions of the CSRC Shenzhen Stock Exchange or other authorized departments.statements If it is determined by the CSRC Shenzhen Stock Exchange or other competent departments that
or there are false records misleading statements or significant omissions in the prospectus and other
significant information disclosure materials of ZKTECO's initial public offering of stocks and its listing on
119ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
omissions the ChiNext which constitutes a significant and substantial impact on determining whether
in the ZKTECO meets the issuance conditions stipulated by law the Company/I will urge ZKTECO to
prospectus repurchase all new shares issued in the initial public offering in accordance with the law and at the
and other same time the Company/I will repurchase the original restricted shares that have been transferred
informatio at the price in the secondary market in accordance with the law. When the Company/I
n repurchase(s) stocks we will comply with the relevant provisions of the "Company Law"
disclosure "Securities Law" CSRC and Shenzhen Stock Exchange as well as the "Articles of Association".materials
Che
Quanhong
Jin Commitm
Hairong ent letter
Ma regarding
Wentao the
There are no false records misleading statements or significant omissions in the prospectus and
Fu absence of
other information disclosure materials of the Company's initial public offering of stocks and listing
Zhiqian false
on the ChiNext.Dong records
If there are false records misleading statements or significant omissions in the Company's
Xiuqin misleadin
prospectus and other information disclosure materials resulting in losses to investors in securities
Pang g
issuance and trading I will compensate the investors for the losses in accordance with the law.IPO-related Chunlin statements August 17 Strict
If I fail to fulfill the above commitments I will publicly explain the specific reasons for my failure Long term
commitments Zhuo or 2022 performance
in the Company's shareholders' meeting and newspapers and magazines designated by the CSRC
Shuyan significant
apologize to the Company's shareholders and public investors and cease receiving salary
Jiang omissions
allowances and shareholder dividends from the Company from the date of violating the above
Wenna in the
commitments. Meanwhile my shares directly or indirectly held in the Company will not be
Wu prospectus
transferred until I take corresponding compensation measures according to the above
Xinke Liu and other
commitments and implement them completely.Jiajia informatio
Wang n
Youwu Li disclosure
Zhinong materials
and Guo
Yanbo
Commitm (1) Do not interfere with the Company's management activities beyond my authority and do not
ZKTeco
ent to fill encroach on the Company's interests.IPO-related Times and August 17 Strict
in diluted (2) From the date of issuance of this commitment letter to the completion of the Company's public Long term
commitments Che 2022 performance
immediate offering of stocks if the CSRC makes other new regulatory provisions on filling in return
Quanhong
returns measures and commitments and the above commitments cannot meet the requirements of the
120ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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 regarding 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."In order to ensure the effective implementation of the Company's compensation measures the
Company directors and senior managers make the following commitments:
ZKTECO
(1) They will not transfer benefits to other units or individuals free of charge or under unfair
Che
conditions nor will they damage the interests of the Company in other ways;
Quanhong
(2) They will constrain duty consumption behavior;
Jin
(3) They will not use company assets to engage in investment or consumption activities unrelated
Hairong
to their performance of duties;
Ma
Commitm (4) They will actively promote the further improvement of the Company's compensation system
Wentao
ent on and fully support the linkage between the compensation system formulated by the Company's
Fu
guarantee Board of Directors or compensation committee and the implementation of the Company's
Zhiqian
measures compensation measures;
IPO-related Dong August 17 Strict
for filling (5) If the Company launches an equity incentive plan in the future I promise to make every effort Long term
commitments Xiuqin 2022 performance
in the within my own responsibilities and authority to link the exercise conditions of the equity incentive
Pang
diluted that the Company intends to announce with the implementation of the Company's compensation
Chunlin
immediate and return measures;
Zhuo
return (6) From the date of issuance of this commitment letter to the completion of the Company's public
Shuyan
offering of stocks if the CSRC makes other new regulatory provisions on filling in return
Wang
measures and commitments and the above commitments cannot meet the requirements of the
Youwu Li
CSRC the commitment will be issued in accordance with the latest regulations of the CSRC.Zhinong
I promise to effectively fulfill relevant measures for filling in returns in the Company's system and
and Guo
any commitments made regarding these measures. If I violate these commitments and cause losses
Yanbo
to the Company or investors I will be liable for compensation for the Company or investors in
accordance with the law."
Commitm If the Company fails to fulfill the commitments disclosed in the prospectus the specific reasons for
ent on the failure will be disclosed through the Company's shareholders' meeting securities regulatory
relevant authority or designated channels of the Shenzhen Stock Exchange as appropriate and
binding supplementary or alternative commitments will be proposed to the Company's investors to protect
IPO-related August 17 Strict
ZKTECO measures their rights and interests as much as possible. Long term
commitments 2022 performance
in case of If investors suffer losses in securities trading due to the Company's failure to fulfill relevant
failure to commitments the Company will compensate the investors for the relevant losses in accordance
fulfill with the law. Within 10 days after the securities regulatory authority or other competent
commitme departments determine that the Company has the aforementioned situation the Company will
121ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
nts initiate relevant work to compensate investors for losses. Investor losses are determined based on
the amount determined through consultation with investors or based on methods or amounts
recognized by securities regulatory authorities or judicial authorities.
1. If the Company fails 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
Commitm
alternative commitments will be proposed to ZKTECO's investors to protect their rights and
ent on
interests as much as possible.relevant
2. If investors suffer losses in securities trading due to the Company's failure to fulfill relevant
binding
commitments the Company will compensate the investors for the relevant losses in accordance
IPO-related ZKTeco measures August 17 Strict
with the law. Long term
commitments Times in case of 2022 performance
3. If the Company fails to bear the aforementioned compensation liability the shares of ZKTECO
failure to
held by the Company shall not be transferred until the Company has fulfilled the aforementioned
fulfill
compensation liability and ZKTECO has the right to deduct the cash dividends distributed to the
commitme
Company for bearing the aforementioned compensation liability.nts
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
Commitm designated channels of the Stock Exchange as appropriate and supplementary or alternative
ent on commitments will be proposed to ZKTECO's investors to protect their rights and interests as much
relevant as possible.binding 2. If investors suffer losses in securities trading due to my failure to fulfill relevant commitments I
IPO-related Che measures will compensate the investors for the relevant losses in accordance with the law. August 17 Strict
Long term
commitments Quanhong in case of 3. If I fail to bear the aforementioned compensation liability the shares of ZKTECO held by me 2022 performance
failure to 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
commitme aforementioned compensation liability.nts 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 Commitm 1. If I fail to fulfill the public commitments made by myself in the prospectus of ZKTECO's initial
Quanhong ent on public offering and listing on the ChiNext:
IPO-related August 17 Strict
Jin relevant (1) I will publicly explain the specific reasons for not fulfilling my commitments in the Company's Long term
commitments 2022 performance
Hairong binding shareholders' meeting and newspapers and magazines designated by the CSRC and apologize to
Ma measures the Company's shareholders and public investors.
122ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
Wentao in case of (2) I will stop receiving my salary within 10 trading days from the date of the aforementioned
Fu failure to event and my shares directly or indirectly held in the Company (if any) shall not be transferred
Zhiqian fulfill until I fulfill the relevant commitments.Dong commitme 2. If I fail to fulfill the relevant commitments I will be liable for compensation to the Company or
Xiuqin nts investors in accordance with the law.Pang
Chunlin
Zhuo
Shuyan
Jiang
Wenna
Wu
Xinke Liu
Jiajia
Wang
Youwu Li
Zhinong
and Guo
Yanbo
(1) The Company guarantees that there will be no fraudulent issuance of shares in this public
Commitm
offering and listing on the ChiNext.ent to
(2) If the securities regulatory authorities stock exchanges or judicial authorities determine that
repurchas
the Company has engaged in fraudulent issuance behavior which has a significant substantive
IPO-related e shares August 17 Strict
ZKTECO impact on determining whether the Company meets the issuance conditions stipulated by law the Long term
commitments for 2022 performance
Company will initiate the share repurchase procedure in accordance with relevant laws and
fraudulent
regulations and the Company's Articles of Association within 5 working days after final
issuance
determination by the securities regulatory authorities stock exchanges or judicial authorities to
and listing
repurchase all new shares issued by the Company in this public offering.Commitm
(1) Guarantee that there will be no fraudulent issuance of shares in ZKTECO's public offering and
ent to
listing on the ChiNext.ZKTECO repurchas
(2) If the securities regulatory authorities stock exchanges or judicial authorities determine that
IPO-related Times and e shares August 17 Strict
ZKTECO has engaged in fraudulent issuance the Company/I will initiate a share repurchase Long term
commitments Che for 2022 performance
procedure within 5 working days after confirmation by the securities regulatory authorities stock
Quanhong fraudulent
exchanges or judicial authorities to repurchase all original restricted shares transferred by the
issuance
Company/me.and listing
123ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
Che
Quanhong
Jin
Hairong
Ma
Wentao (1) I guarantee that there is no fraudulent issuance of ZKTECO's initial public offering and listing
Fu on the ChiNext.Zhiqian (2) If the securities regulatory authorities stock exchanges or judicial authorities determine that
Dong Commitm ZKTECO has engaged in fraudulent issuance behavior causing investors to suffer losses in
Xiuqin ent to securities issuance and trading I will compensate investors for their losses in accordance with the
Pang repurchas law after the securities regulatory authorities stock exchanges or judicial authorities determine the
IPO-related Chunlin e shares compensation liability. August 17 Strict
Long term
commitments Zhuo for (3) If I violate the above commitments I will publicly explain the specific reasons for my failure to 2022 performance
Shuyan fraudulent fulfill them in the shareholders' meeting of ZKTECO and newspapers and magazines designated
Jiang issuance by the CSRC and apologize to shareholders and public investors. Within 5 working days from the
Wenna and listing date of the violation of the above commitments I will stop receiving salary or allowances and
Wu shareholder dividends from ZKTECO and my shares in ZKTECO will not be transferred until I
Xinke Liu take corresponding compensation measures according to the above commitments and implement
Jiajia them completely.Wang
Youwu Li
Zhinong
and Guo
Yanbo
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
commitme
partnership jointly held by Che Quanhong and his father Che Jun and natural person De Wang
nt on
and JYSJ JYHY JYLX and JYQL are the employee stock holding platform of the Company and
IPO-related sharehold August 17 Strict
ZKTECO Fuhai Juanyong Yiwu Walden and Qingdao Walden are investors introduced by the Company. Long term
commitments er 2022 performance
Fuhai Juanyong Yiwu Walden and Qingdao Walden are private investment funds registered with
informatio
the Asset Management Association of China (AMAC). The aforementioned entities all have the
n
qualification to hold shares in the Company and there is no situation where entities prohibited by
disclosure
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
not directly or indirectly hold any shares or other interests of the Company. There is no situation
124ZKTeco 2022 Annual Report
Causes of Undertaki Commitm Date of Term of
Commitment Content Performance
Commitment ng Party ent Type commitments commitments
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.ZKTeco If a lawsuit arbitration dispute or administrative penalty occurs due to the Company's
Other
IPO-related Times and involvement in the installation and use of unauthorized software we voluntarily and jointly bear August 17 Strict
commitme Long term
commitments Che all economic consequences and losses for the Company and will not seek compensation from the 2022 performance
nts
Quanhong 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
ZKTeco subsidiaries do not suffer any economic losses due to such matters.Other
IPO-related Times and 2. If ZKTECO (including its predecessor) and its controlling subsidiaries use labor employment August 17 Strict
commitme Long term
commitments Che methods in certain positions causing ZKTECO and/or its controlling subsidiaries to suffer any 2022 performance
nts
Quanhong 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.ZKTeco If the Company is unable to continue using the defective property due to defects or if the relevant
Other
IPO-related Times and government authorities require the demolition of the relevant property or impose penalties on the August 17 Strict
commitme Long term
commitments Che Company in the future they will unconditionally bear all losses costs and expenses incurred by 2022 performance
nts
Quanhong the Company arising therefrom.Whether the
commitment is
Yes
fulfilled on
time
125ZKTeco 2022 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.II. 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 regarding 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) regarding the "Non-standard Audit Report" Issued by the CPA Firm for
the Current Reporting Period
□ Applicable □ Not applicable
VI. Explanation 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 for Changes in the Scope of Consolidated Financial Statements as
Compared to the Financial Report for the Previous Year
□Applicable □ Not applicable
During the reporting period the Company added two new subsidiaries within the consolidation scope namely ZKTECO VIETNAM
TECHNOLOGY COMPANY LIMITED the Vietnam Subsidiary established on January 21 2022 with a registered capital of VND
4550000000.00; ZKTECO ROMANIA S.R.L the Romania Subsidiary established on September 8 2022 with a registered capital
of 250lei.VIII. Appointment and Dismissal of Accounting Firms
Accounting firm currently employed
126ZKTeco 2022 Annual Report
Baker Tilly China Certified Public Accountants (Special
Name of domestic accounting firms
General Partnership)
Remuneration of domestic accounting firms (RMB '0000) 130
Continuous years of audit services of domestic accounting
7
firms
Name of certified public accountant (CPA) of domestic
Li Ming Han Dongxi and Wang Heli
accounting firms
Continuous years of audit services provided by certified public
7 years for Li Ming; 1 year for Han Dongxi and Wang Heli
accountant (CPA) of domestic accounting firms
Whether the accounting firm was changed in the reporting period
□ Yes □ No
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
Basic Amount Is there an Execution of
Progress of Litigation
information involved estimated litigation Disclosur Disclosure
litigation (arbitration) trial
of litigation (RMB liability (arbitration) e Date Index
(arbitration) results and effects
(arbitration) '0000) formed judgments
Patent
In the first
dispute filed
instance trial of CNINFO
by Hanwang
the court the (http://www.Technology In the first In the first
other party cninfo.com.c
Co. Ltd. instance trial of instance trial of
applied for August n) "2022
against the 11048.6 No the court no the court no
withdrawal of the 30 2022 Semiannual
Company judgment has judgment has
case No. 1674 Report of
and its been made yet been made yet
and the court has ZKTECO
subsidiary
issued a CO. LTD."
XIAMEN
withdrawal ruling
ZKTECO
The Company
The second
Unfair and Shenzhen CNINFO
instance judgment Zokon Industry
competition ZKTECO (http://www.of the Guangdong compensated the
dispute filed submitted an cninfo.com.c
Higher People's Company and
by the "Application for August n) "2022
200 No Court rejected the Shenzhen
Company Execution" to 30 2022 Semiannual
appeal request of ZKTECO for the
against the Shenzhen Report of
Zokon Industry loss of RMB 2
Zokon Intermediate ZKTECO
and upheld the million
Industry People's Court CO. LTD."
original judgment.and was
127ZKTeco 2022 Annual Report
Basic Amount Is there an Execution of
Progress of Litigation
information involved estimated litigation Disclosur Disclosure
litigation (arbitration) trial
of litigation (RMB liability (arbitration) e Date Index
(arbitration) results and effects
(arbitration) '0000) formed judgments
accepted by the
Shenzhen
Intermediate
People's Court.Currently the
Company and
Shenzhen
ZKTECO have
not received
compensation
from the other
party
The court ruled in
the first instance
that the Company
and Shenzhen
Xinjiacheng
Intelligent
Technology Co.Ltd. shall cease
using "ZKTECO"
on relevant
platforms and the
Disputes The Shenzhen Company shall
filed by Intermediate pay RMB
Zokon People's Court 500000 for
Industry Guangdong economic losses
over Province has and reasonable
infringemen issued a civil right protection
CNINFO
t of judgment (2021) expenses to the
Yes (of The Company (http://www.trademark Y03 MC No. other party. The
which RMB filed an appeal cninfo.com.c
rights and 5383; the Company and
600000 but the first August n) "2022
unfair 500 Company and Shenzhen
forms instance 30 2022 Semiannual
competition Shenzhen Xinjiacheng
estimated judgment did not Report of
against the Xinjiacheng Intelligent
liabilities) take effect ZKTECO
Company Intelligent Technology Co.CO. LTD."
and Technology Co. Ltd. shall pay
Shenzhen Ltd. filed an RMB 100000 for
Xinjiacheng appeal to the economic losses
Intelligent Guangdong and reasonable
Technology Higher People's right protection
Co. Ltd. Court expenses to the
other party. The
Company shall
publish a
statement on its
official website to
eliminate any
adverse effects
caused to the
other party. Due
to the Company's
appeal the first
128ZKTeco 2022 Annual Report
Basic Amount Is there an Execution of
Progress of Litigation
information involved estimated litigation Disclosur Disclosure
litigation (arbitration) trial
of litigation (RMB liability (arbitration) e Date Index
(arbitration) results and effects
(arbitration) '0000) formed judgments
instance
judgment did not
take effect
The court ruled
that Shenzhen
MiCoin
Electronic
Technology
Limited shall
immediately stop
infringing on the
Company's
relevant
Trademark
registered
infringemen
trademark
t and unfair
exclusive rights.competition CNINFO
Shenzhen MiCoin
filed by the (http://www.Electronic
Company People's Court of cninfo.com.c
Technology The other party
against Luohu District August n) "2022
300 No Limited shall has fulfilled the
Shenzhen Shenzhen issued a 30 2022 Semiannual
compensate the court judgment
MiCoin civil judgment Report of
Company for
Electronic ZKTECO
economic losses
Technology CO. LTD."
and reasonable
Limited and
expenses of RMB
Wen
100000 and
Xiaoxia
Wen Xiaoxia
shall be jointly
and severally
liable for the
above-mentioned
debts of
Shenzhen MiCoin
Electronic
Technology
Limited.Other
lawsuits/arb
itrations
where the
Company
(including
subsidiary
The Company The Company
companies
strictly follows No significant strictly follows
in the 1201 No
the progress of impact the progress of
consolidated
each case each case
financial
statements)
as the
plaintiff
fails to meet
the
disclosure
129ZKTeco 2022 Annual Report
Basic Amount Is there an Execution of
Progress of Litigation
information involved estimated litigation Disclosur Disclosure
litigation (arbitration) trial
of litigation (RMB liability (arbitration) e Date Index
(arbitration) results and effects
(arbitration) '0000) formed judgments
standards
for major
lawsuits
Other
lawsuits/arb
itrations
where the
Company
(including
subsidiary
companies
in the The Company The Company
consolidated strictly follows No significant strictly follows
81.92 No
financial the progress of impact the progress of
statements) each case each case
as the
defendant
fails to meet
the
disclosure
standards
for major
lawsuits
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.
130ZKTeco 2022 Annual Report
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 significant 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.
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
Description of leasing
131ZKTeco 2022 Annual Report
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 '0000
External guarantees provided by the Company and its subsidiaries (excluding guarantees provided to subsidiaries)
Whether
Disclosure date Whether to
Actual Actual Counter
Name of of guarantee Guarantee Type of Collateral Guarantee it has guarantee
occurrence guarantee guarantee
guarantee object limit related amount guarantee (if any) period been for
date amount (if any)
announcements fulfilled related
parties
Total actual amount
Total approved external guarantee
of external guarantees
amount during the reporting period
incurred during the
(A1)
reporting period (A2)
Total actual external
Total approved external guarantee
guarantee balance at
amount at the end of the reporting
the end of the
period (A3)
reporting period (A4)
Guarantee of the Company to its subsidiaries
Whether
Disclosure date Whether to
Actual Actual Counter
Name of of guarantee Guarantee Type of Collateral Guarantee it has guarantee
occurrence guarantee guarantee
guarantee object limit related amount guarantee (if any) period been for
date amount (if any)
announcements fulfilled related
parties
Joint and
ZKTECO
December several
(GUANGDONG) 25000.00 0.00 15 years No No
16 2019 liability
CO. LTD
guarantee
Total actual amount
Total approved guarantee amount of guarantee for
for subsidiaries during the reporting 100000.00 subsidiaries during 0.00
period (B1) the reporting period
(B2)
Total actual guarantee
Total approved guarantee amount balance for
for subsidiaries at the end of the 100000.00 subsidiaries at the end 0.00
reporting period (B3) of the reporting
period (B4)
Guarantee provided by subsidiaries to subsidiaries
Disclosure date Whether Whether
Actual Actual Counter
Name of of guarantee Guarantee Type of Collateral Guarantee it has to
occurrence guarantee guarantee
guarantee object limit related amount guarantee (if any) period been guarantee
date amount (if any)
announcements fulfilled for
132ZKTeco 2022 Annual Report
related
parties
Total actual amount
Total approved guarantee amount of guarantee for
for subsidiaries during the reporting subsidiaries during
period (C1) the reporting period
(C2)
Total actual guarantee
Total approved guarantee amount balance for
for subsidiaries at the end of the subsidiaries at the end
reporting period (C3) of the reporting
period (C4)
Total amount of company guarantee (i.e. the total of the first three major items)
Total actual amount
Total approved guarantee amount
of guarantees incurred
during the reporting period 100000.00 0.00
during the reporting
(A1+B1+C1)
period (A2+B2+C2)
Total actual guarantee
Total approved guarantee amount at
balance at the end of
the end of the reporting period 100000.00 0.00
the reporting period
(A3+B3+C3)
(A4+B4+C4)
Proportion of actual total guarantee amount (i.e. A4+B4+C4)
0.00%
to the Company's net assets
Including:
Balance of guarantees provided to shareholders actual
0.00
controllers and their related parties (D)
Balance of debt guarantee provided directly or indirectly for
guaranteed objects with an asset liability ratio exceeding 70% 0.00
(E)
Amount of the total guarantee exceeding 50% of net assets (F) 0.00
Total amount of the above three guarantees (D+E+F) 0.00
Explanation of situations where there is a guarantee liability or
evidence indicating the possibility of assuming joint and
Not applicable
several liability for the unexpired guarantee contract during the
reporting period (if any)
Explanation of providing external guarantees in violation of
Not applicable
prescribed procedures (if any)
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 '0000
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 14760.00 14762.18 0.00
Fundraising 0.00
products
Bank financial Own funds 5571.68 5593.22 0.00 0.00
133ZKTeco 2022 Annual Report
products
Bank financial 0.00 0.00
Own funds 800.00 0.00
products
Bank financial Own funds 42.38 42.38 0.00 0.00
products
Other financial Own funds 101.44 34.06 0.00 0.00
products
Total 21275.50 20431.84 0.00 0.00
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.
4. Other Significant contracts
□ Applicable □ Not applicable
There were no other major 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. Significan Events of the Company's Subsidiaries
□ Applicable □ Not applicable
134ZKTeco 2022 Annual Report
Section VII Changes in Shares and Information about Shareholders
I. Changes in Shares
1. Changes in shares
Unit: share
Before the change Increase or decrease in this change (+ -) After the change
Share
Proporti Issue new transferred
Quantity Bonus Others Subtotal Quantity Proportion
on shares from capital
reserve
I. Restricted 100.00
1113690383870338387033811523937677.61%
shares %
1. Shares
held by
State
2. Shares
held by
state-owned 6996 6996 6996 0.00%
legal
persons
3. Shares
held by
100.00
other 111369038 3858100 3858100 115227138 77.60%
%
domestic
enterprises
Including:
shares held
by domestic 85198038 76.50% 3853855 3853855 89051893 59.97%
legal
persons
Shares held
by domestic
2617100023.50%424542452617524517.63%
natural
persons
4. Foreign
shareholdin 5242 5242 5242 0.00%
g
Including:
shares held
by overseas 5158 5158 5158 0.00%
legal
persons
Shares held
by overseas
8484840.00%
natural
person
II. Shares 3325267 3325267 33252675 22.39%
135ZKTeco 2022 Annual Report
without 5 5
trading
restrictions
1. RMB
denominate 3325267 3325267
3325267522.39%
d ordinary 5 5
shares
2. Domestic
listed
foreign
shares
3. Overseas
listed
foreign
shares
4. Others
III. Total 3712301 3712301
111369038100%148492051100.00%
shares 3 3
Reasons for changes in shares
□Applicable □ Not applicable
Approved by the CSRC's "Reply to Approval for the Registration of Initial Public Offering of Stocks of ZKTECO CO. LTD." (ZJXK
[2022] No. 926) to be registered and approved by the CSRC's "Notice on Listing of RMB Denominated Ordinary Shares of ZKTECO
CO. LTD. on the ChiNext" (SZS [2022] No. 796) the Company issued 37123013 RMB denominated ordinary shares (A shares) to
the public for the first time and was listed for trading on the Shenzhen Stock Exchange starting from August 17 2022. After this
issuance the total share capital of the Company has increased from 111369038 shares to 148492051 shares.Approval of changes in shares
□Applicable □ Not applicable
The share change has been approved by the "Reply of CSRC to Approval for the Registration of Initial Public Offering of Stocks of
ZKTECO CO. LTD." (ZJXK [2022] No. 926) to be registered and approved by the CSRC's "Notice on Listing of RMB Denominated
Ordinary Shares of ZKTECO CO. LTD. on the ChiNext" (SZS [2022] No. 796).Transfer of changes in shares
□Applicable □ Not applicable
The initial registration of new shares was completed for the Company's initial public offering on August 15 2022 at the Shenzhen
Branch of China Securities Depository and Clearing Co. Ltd. and the "Initial Registration Confirmation of Securities" was obtained.The number of registered shares was 148492051 including 33252675 shares without trading restrictions and 115239376 shares
with trading restrictions.The impact of share changes on financial indicators such as basic earnings per share and diluted earnings per share for the most recent
year and period and net assets per share attributable to ordinary shareholders of the Company
□Applicable □ Not applicable
For financial indicators such as basic earnings per share and diluted earnings per share for 2022 please refer to "V. Main Accounting
Data and Financial Indicators" in "Section II Company Profile and Key Financial Indicators".
136ZKTeco 2022 Annual 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 Increase in shares
Number of
restricted restricted released
Name of restricted shares Reason for Date of releasing from
shares at the shares from trading
shareholder at the end of the restrictions trading restrictions
beginning of during the restrictions
period
the period period in this
period
Shenzhen
Restricted
ZKTeco Times
45000000 0 0 45000000 shares before February 17 2026
Investment Co.IPO
Ltd.Restricted
Che Quanhong 26171000 0 0 26171000 shares before February 17 2026
IPO
One quarter of the
Shenzhen JYSJ
shares will be
Investment Restricted
unlocked from August
Enterprise 10852000 0 0 10852000 shares before
17 2023 until all
(Limited IPO
shares are unlocked on
Partnership)
August 17 2026
Shenzhen One quarter of the
JYHY shares will be
Restricted
Investment unlocked from August
10708500 0 0 10708500 shares before
Enterprise 17 2023 until all
IPO
(Limited shares are unlocked on
Partnership) August 17 2026
Dongguan LX
Investment
Restricted
Partnership
7600000 0 0 7600000 shares before August 17 2025
Enterprise
IPO
(Limited
Partnership)
Shenzhen One quarter of the
JYLX shares will be
Restricted
Consulting unlocked from August
3652600 0 0 3652600 shares before
Enterprise 17 2023 until all
IPO
(Limited shares are unlocked on
Partnership) August 17 2026
Shenzhen Fuhai
Juanyong I
Restricted
Venture
2009646 0 0 2009646 shares before August 17 2023
Investment
IPO
Fund (Limited
Partnership)
Huaxin
Restricted
Yuanchuang(Qi
1406752 0 0 1406752 shares before August 17 2023
ngdao)Investme
IPO
nt Management
137ZKTeco 2022 Annual Report
Number of
Number of Increase in shares
Number of
restricted restricted released
Name of restricted shares Reason for Date of releasing from
shares at the shares from trading
shareholder at the end of the restrictions trading restrictions
beginning of during the restrictions
period
the period period in this
period
Co. Ltd. -
Yiwu Walden
Yuanjing
Venture Capital
Center (Limited
Partnership)
Huaxin
Yuanchuang(Qi
ngdao)Investme
nt Management
Co. Ltd. -
Restricted
Qingdao
2612540 0 0 2612540 shares before August 17 2023
Walden
IPO
Zhongxiang
Equity
Investment
Center (Limited
Partnership)
Shenzhen
One quarter of the
JYQL
shares will be
Investment Restricted
unlocked from August
Consulting 1356000 0 0 1356000 shares before
17 2023 until all
Enterprise IPO
shares are unlocked on
(Limited
August 17 2026
Partnership)
Changjiang
Wealth Asset
Management -
Bank of
Nanjing -
Changjiang
Wealth -
Restricted
ZKTECO 0 1733148 0 1733148 August 17 2023
shares after IPO
Employee
Strategic
Placement No.1
Collective
Asset
Management
Plan
Changjiang
Wealth Asset
Management -
Bank of
Nanjing - Restricted
0 272022 0 272022 August 17 2023
Changjiang shares after IPO
Wealth -
ZKTECO
Employee
Strategic
138ZKTeco 2022 Annual Report
Number of
Number of Increase in shares
Number of
restricted restricted released
Name of restricted shares Reason for Date of releasing from
shares at the shares from trading
shareholder at the end of the restrictions trading restrictions
beginning of during the restrictions
period
the period period in this
period
Placement No.2
Collective
Asset
Management
Plan
Offline
issuance Restricted
0 1865168 0 1865168 February 17 2023
restricted shares after IPO
shares
Total 111369038 3870338 0 115239376 -- --
II. Issuance and Listing of Securities
1. Securities issuance (excluding preferred shares) during the reporting period
□Applicable □ Not applicable
Type of stocks Issue Price Listing Transaction
Number of Listing Disclosure Disclosure
and derivative Issue Date (or Interest approved Terminatio
Issues Date Index Date
securities Rate) amount (share) n Date
Stock Category
CNINFO
(http://ww
w.cninfo.co
m.cn) "
RMB August Announce
August 8 August 16
denominated 43.32 37123013 17 37123013 ment of
20222022
ordinary shares 2022 IPO and
Listing of a
Stock on
the
ChiNext"
Description of securities issuance (excluding preferred shares) during the reporting period
Approved by the CSRC's "Reply to Approval for the Registration of Initial Public Offering of Stocks of ZKTECO CO. LTD." (ZJXK
[2022] No. 926) to be registered and approved by the CSRC's "Notice on Listing of RMB Denominated Ordinary Shares of ZKTECO
CO. LTD. on the ChiNext" (SZS [2022] No. 796) the Company issued 37123013 RMB denominated ordinary shares (A shares) to
the public for the first time and was listed for trading on the Shenzhen Stock Exchange starting from August 17 2022.
2. Explanation on Changes in Total Share Capital the Structure of Shareholders and the Structure of
Assets and Liabilities of the Company
□Applicable □ Not applicable
139ZKTeco 2022 Annual Report
During the reporting period the Company was approved to issue 37123013 RMB denominated ordinary shares for the first time. After
the issuance the total share capital of the Company increased from 111369038 shares to 148492051 shares.At the beginning of the reporting period the total assets of the Company were RMB 2.082923 billion with liabilities of RMB 674.2179
million and an asset liability ratio of 32.37%. At the end of the reporting period the total assets of the Company were RMB 3.6559605
billion and the total liabilities were RMB 555.4681 million with an asset liability ratio of 15.19%.
3. Internal employee shares
□ Applicable □ Not applicable
III. Shareholders and Actual Controllers
1. Number of shareholders of the Company and shareholding
Unit: share
Total Total
number number of
of Total preferred
ordinary number of sharehold
Total
sharehol preferred ers with
number
ders at shareholders restored
Total number of
the end with voting
of ordinary sharehol
of the restored rights at
shareholders ders
26367 previous 17418 voting rights 0 the end of 0 0
at the end of holding
month at the end of last month
the reporting special
before the before the
period voting
the reporting disclosure
shares
disclosur period (if date of the
(if any)
e date of any) (see annual
the Note 9) report (if
annual any) (see
report Note 9)
Shareholding of shareholders holding more than 5% or the top 10 shareholders
Changes in Number Pledge marking or freezing
Number of
Nature increase and Number of of shares
Percenta shares held at
Name of of decrease shares with without
ge of the end of the
shareholder sharehol during the trading trading
Shares reporting Share status Quantity
der reporting restrictions restriction
period
period s
Domesti
Shenzhen
c non
ZKTeco
state-
Times 30.30% 45000000 45000000
owned
Investment
legal
Co. Ltd.persons
Domesti
Che
c natural 17.62% 26171000 26171000
Quanhong
persons
Shenzhen Domesti
JYSJ c non
Investment state- 7.31% 10852000 10852000
Enterprise owned
(Limited legal
140ZKTeco 2022 Annual Report
Partnership) persons
Shenzhen Domesti
JYHY c non
Investment state-
7.21%1070850010708500
Enterprise owned
(Limited legal
Partnership) persons
Dongguan
Domesti
LX
c non
Investment
state-
Partnership 5.12% 7600000 7600000
owned
Enterprise
legal
(Limited
persons
Partnership)
Shenzhen Domesti
JYLX c non
Consulting state-
2.46%36526003652600
Enterprise owned
(Limited legal
Partnership) persons
Huaxin
Yuanchuang(
Qingdao)Inv
estment
Management
Co. Ltd. -
Qingdao
Others 1.76% 2612540 2612540
Walden
Zhongxiang
Equity
Investment
Center
(Limited
Partnership)
Shenzhen
Fuhai Domesti
Juanyong I c non
Venture state-
1.35%20096462009646
Investment owned
Fund legal
(Limited persons
Partnership)
Changjiang
Wealth Asset
Management
- Bank of
Nanjing -
Changjiang
Wealth -
ZKTECO
Others 1.17% 1733148 1733148 1733148
Employee
Strategic
Placement
No.1
Collective
Asset
Management
Plan
141ZKTeco 2022 Annual Report
Huaxin
Yuanchuang(
Qingdao)Inv
estment
Management
Co. Ltd. -
Yiwu
Others 0.95% 1406752 1406752
Walden
Yuanjing
Venture
Capital
Center
(Limited
Partnership)
Strategic investors or
Changjiang Wealth Asset Management - Bank of Nanjing - Changjiang Wealth - ZKTECO Employee
general legal persons
Strategic Placement No.1 Collective Asset Management Plan is a strategic placement plan established by
become the top 10
the executives and core employees of ZKTECO CO. LTD. The restricted share trade period of this part of
shareholders due to the
the shares is one year after the Company goes public and will be released from trading restrictions from
placement of new shares
August 17 2023
(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.The shareholder Che Quanhong holds 76.02% of the equity of ZKTeco Times being the controlling
shareholder of ZKTeco Times. Meanwhile Che Quanhong holds 1.18% of the property share of
Description of the above shareholder LX Investment.shareholder's association Che Quanzhong the younger brother of shareholder Che Quanhong holds a 23.98% stake in ZKTeco
or concerted action Times.Che Jun the father of shareholder Che Quanhong holds 98.68% of the property share of LX Investment.The fund managers of shareholders Qingdao Walden and Yiwu Walden are both Huaxin
Yuanchuang(Qingdao)Investment Management Co. Ltd.In addition there is no affiliated relationship between the other shareholders of the Company.Description of the above
shareholders'
involvement in
Not involved
entrusting/entrusted
voting rights and waiver
of voting rights
Special description of the
existence of special
repurchase accounts
Non-existent
among the top 10
shareholders (if any) (see
Note 10)
Shareholding of the top 10 shareholders without trading restrictions
Number of shares without trading restrictions held at the end of the Types of shares
Name of shareholder
reporting period Types of shares Quantity
RMB
Zhang Jiayue 400081 denominated 400081
ordinary shares
Bank of Communications
Co. Ltd. - Cinda Core RMB
Technology Hybrid 262100 denominated 262100
Securities Investment ordinary shares
Fund
Zhu Qizhong 234149 RMB 234149
142ZKTeco 2022 Annual Report
denominated
ordinary shares
RMB
Zhong Song 186200 denominated 186200
ordinary shares
RMB
Hu Shidao 132900 denominated 132900
ordinary shares
RMB
Wang Chang 131300 denominated 131300
ordinary shares
RMB
Zheng Liang 114000 denominated 114000
ordinary shares
RMB
Che Junchuan 110474 denominated 110474
ordinary shares
RMB
Ji Wei 109500 denominated 109500
ordinary shares
RMB
Zhu Xianmin 101000 denominated 101000
ordinary shares
Description of the
association or concerted
action between the top 10
shareholders of
outstanding shares
without trading The Company does not know whether there is a related relationship between the top 10 shareholders of
restrictions as well as shares without trading restrictions as well as between the top 10 shareholders outstanding shares without
between the top 10 trading restrictions and the top 10 shareholders or whether they belong to persons acting in concert.shareholders of
outstanding shares
without trading
restrictions and the top
10 shareholders
Among the top 10 shareholders of shares without trading restrictions Zhu Qizhong held a total of 234149
shares of the Company at the end of the reporting period including 0 share held through ordinary
Description of
securities accounts and 234149 shares held through a margin accounts of Zheshang Securities Co. Ltd.shareholders
Hu Shidao held a total of 132900 shares of the Company at the end of the reporting period including 0
participating in margin
share held through the ordinary securities accounts and 132900 shares held through a margin accounts of
trading (if any) (see Note
CITIC Securities Co. Ltd. Zhu Xianmin held a total of 101000 shares of the Company at the end of the
5)
reporting period including 20800 shares held through the ordinary securities accounts and 80200 shares
held through a margin account of CITIC Securities Co. Ltd.Does the Company have voting right difference arrangements
□ Applicable □ Not applicable
Did the top 10 ordinary shareholders and the top 10 shareholders of ordinary shares without trading restrictions engage in agreed
repurchase transactions during the reporting period
□ Yes □ No
The top 10 ordinary shareholders and the top 10 shareholders of ordinary shares without trading restrictions did not engage in any
agreed repurchase transactions during the reporting period.
143ZKTeco 2022 Annual Report
2. Controlling shareholder of the Company
Nature of controlling shareholder: controlled by natural person
Type of controlling shareholder: legal person
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.
3. Particulars about the Company’s Actual Controller & Concerted Parties
Nature of actual controller: domestic natural person
Type of actual controller: natural person
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
144ZKTeco 2022 Annual Report
Che Quanhong
Shenzhen
ZKTeco
Times
Investment
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
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
Progress in implementing centralized bidding trading to reduce holdings and repurchase shares
□ Applicable □ Not applicable
145ZKTeco 2022 Annual Report
Section VIII Information of Preferred Shares
□ Applicable □ Not applicable
There is no preferred share in the Company during the reporting period.
146ZKTeco 2022 Annual Report
Section IX Bonds
□ Applicable □ Not applicable
147ZKTeco 2022 Annual Report
Section X Financial Report
I. Audit Report
Audit opinion Standard unqualified opinions
Audit report signing date April 26 2023
Baker Tilly China Certified Public Accountants (Special
Audit institution name
General Partnership)
Audit Report No. TZYZ [2023] No. 16207
Name of CPA Li Ming Wang Heli Han Dongxi
Audit Report Text
I. 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 2022 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 2022.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 2022 as well as the consolidated and parent company's operating results and cash flows as of 2022.II. Basis of 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.III. 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.Key Audit Matters How was this matter addressed in the audit
1. Revenue recognition
148ZKTeco 2022 Annual Report
Key Audit Matters How was this matter addressed in the audit
Our main audit procedures for revenue recognition
include but are not limited to:
1. Understand evaluate and test the effectiveness of
internal control design and operation related to sales and
collection of ZKTECO;
ZKTECO is mainly engaged in the R&D
2. Understand revenue recognition policies through
design production sales and service of biometric
interviews with management examine relevant clauses of
technology and related products. The operating
major customer contracts analyze and evaluate whether the
revenue of ZKTECO in 2022 was RMB
actual revenue recognition policies are appropriate and review
1.9185592 billion. Due to the fact that operating
whether relevant accounting policies have been consistently
revenue is a key performance indicator of
applied;
ZKTECO and its significant amount the
3. Implement analysis procedures for operating revenue
authenticity of revenue and whether revenue is
analyze the rationality of changes in the sales structure of major
included in the appropriate accounting period have
products compare with the gross profit margin of the same
a significant impact on ZKTECO's operating
industry in the same period of history analyze the changes in
results and there may be potential misstatements.gross profit margin of major products and major customers
Therefore we consider the recognition of
and review the rationality of sales revenue;
operating revenue of ZKTECO as a key audit
4. Confirm the sales revenue of major customers
matter.combined with the audit of accounts receivable and perform
Please refer to the accounting policies
substitution test on customers who have not responded to the
described in "(XXXII) Revenue" of "III.letter;
Important Accounting Policies and Estimates" in
5. Check the major customer contracts sales outbound
the notes to the financial statements and
orders acceptance certificates logistics documents customs
"(XXXVIII) Operating Revenue and Operating
declarations invoices and statements of accounts to verify the
Costs" of "VI. Notes to Main Items in the
authenticity of ZKTECO's revenue confirmation;
Consolidated Financial Statements".
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.IV. Responsibilities of Management and Those Charged with Governance for the Financial Statements
The management 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.
149ZKTeco 2022 Annual Report
In preparing the statements management 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 ZKTECO either intends to liquidate 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.V. 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 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 regarding 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 regarding 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 the those charged with governance that we have complied with ethical requirements related to
independence and communicate with those charged with governance on all relationships and other matters that may reasonably be
considered to affect our independence as well as related precautions.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.
150ZKTeco 2022 Annual Report
II. Financial Statements
1. Consolidated Balance Sheet
Prepared by: ZKTECO CO. LTD.December 31 2022
Unit: RMB
Item December 31 2022 January 1 2022
Current assets:
Monetary funds 1912945031.97 572401913.99
Deposit reservation for balance 0.00
Lendings to banks and other financial
0.00
institutions
Trading financial asset 204318406.05 28444682.61
Derivative financial assets 0.00
Notes receivable 0.00
Accounts receivable 403497924.27 274031114.44
Receivable financing 0.00
Prepayment 30954685.58 52250223.47
Premiums receivable 0.00
Reinsurance accounts receivable 0.00
Reserves for reinsurance contract
0.00
receivable
Other receivables 34207287.53 29330524.65
Including: interest receivable
Dividends receivable
Buying back the sale of financial
0.00
assets
Inventories 348280641.59 424253953.16
Contract assets 306799.94 709652.57
Held-for-sale assets 0.00
Non-current assets due within one year 10025638.89 0.00
Other current assets 17861354.81 98141690.30
Total current assets 2962397770.63 1479563755.19
Non-current assets:
Loans and advances to customers 0.00 0.00
Debt investment 12331160.29 0.00
Other debt investment 0.00
Long-term receivables 0.00
Long-term equity investment 7151332.70 7629622.56
Other equity instrument investments 0.00
Other non-current financial assets 0.00
Investment real estate 0.00
Fixed assets 446857509.06 243228046.16
151ZKTeco 2022 Annual Report
Construction in progress 57041298.90 203732622.44
Productive biological assets 0.00
Oil and gas assets 0.00
Right-of-use asset 50640675.59 44092782.36
Intangible assets 68110512.79 58818021.44
Development expenditures 0.00
Goodwill 496386.40 454413.86
Long-term deferred expenses 3056310.34 3840570.16
Deferred income tax assets 46749722.28 37494061.22
Other non-current assets 1127777.32 4069141.83
Total non-current assets 693562685.67 603359282.03
Total assets 3655960456.30 2082923037.22
Current liabilities:
Short-term loan 9855000.00 0.00
Borrowings from the Central Bank 0.00
Borrowings from banks and other
0.00
financial institutions
Trading financial liabilities 0.00 0.00
Derivative financial liabilities 0.00
Notes payable 68293818.22 165377838.17
Accounts payable 226000476.96 270784698.99
Advances from customer 0.00
Contract liabilities 58838840.39 60765507.83
Financial assets sold for repurchase 0.00
Deposit from customers and interbank 0.00
Acting trading securities 0.00
Acting underwriting securities 0.00
Payroll payable 58940852.80 40802407.70
Taxes and dues payable 22621805.04 22572377.36
Other payables 31429478.43 30375420.91
Including: interest payable
Dividends payable
Handling charges and commissions
0.00
payable
Reinsurance accounts receivable 0.00
Liabilities held for sale 0.00
Non-current liabilities due within one
23718225.3921577228.14
year
Other current liabilities 21173620.79 35139007.81
Total current liabilities 520872118.02 647394486.91
Non-current liabilities:
Reserves for insurance contracts 0.00 0.00
Long-term loan 141757.54 226216.85
152ZKTeco 2022 Annual Report
Bonds payable 0.00
Including: preferred stock 0.00
Perpetual bonds 0.00
Lease liabilities 28256717.44 22678641.32
Long-term payables 0.00
Long-term payroll payable 0.00
Estimated liabilities 600000.00 80046.11
Deferred income 2039702.49 688138.70
Deferred tax liability 3557844.83 3150369.30
Other non-current liabilities 0.00
Total non-current liabilities 34596022.30 26823412.28
Total liabilities 555468140.32 674217899.19
Owner's equity:
Share capital 148492051.00 111369038.00
Other equity instruments 0.00
Including: preferred stock 0.00
Perpetual bonds 0.00
Capital reserve 2061172912.28 636363658.40
Less: treasury stock 0.00
Other comprehensive income 5255222.65 -25505560.02
Special reserve 0.00
Surplus reserves 53975085.77 42581853.37
General risk reserves 0.00
Undistributed profits 788571917.98 607725356.63
Total owner's equity attributable to the
3057467189.681372534346.38
parent company
Minority interests 43025126.30 36170791.65
Total owner's equity 3100492315.98 1408705138.03
Total liabilities and owner's equity 3655960456.30 2082923037.22
Legal Representative: Jin Hairong Person in charge of accounting work: Wang Youwu Person in charge of accounting organization:
Fang Li
2. Balance Sheet of Parent Company
Unit: RMB
Item December 31 2022 January 1 2022
Current assets:
Monetary funds 1356208501.46 343848536.85
Trading financial asset 147962384.55 3191855.39
Derivative financial assets 0.00 0.00
Notes receivable 0.00 0.00
Accounts receivable 584894333.69 520008670.12
Receivable financing 0.00 0.00
Prepayment 27798174.17 47604302.12
Other receivables 33980555.26 32558510.67
Including: interest receivable 122433.25 23475.57
Dividends receivable
153ZKTeco 2022 Annual Report
Inventories 201604881.25 309661216.83
Contract assets 297021.59 709652.57
Held-for-sale assets 0.00 0.00
Non-current assets due within one year 10025638.89 0.00
Other current assets 4880995.15 76303657.74
Total current assets 2367652486.01 1333886402.29
Non-current assets:
Debt investment 10670541.33 0.00
Other debt investment 0.00 0.00
Long-term receivables 0.00 0.00
Long-term equity investment 781906396.17 400533404.13
Other equity instrument investments 0.00 0.00
Other non-current financial assets 0.00 0.00
Investment real estate 0.00 0.00
Fixed assets 66876094.68 73705386.95
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 14733170.98 6713989.46
Intangible assets 8082316.47 8252055.59
Development expenditures 0.00 0.00
Goodwill 0.00 0.00
Long-term deferred expenses 1312121.13 2002963.06
Deferred income tax assets 27628722.59 21092826.98
Other non-current assets 0.00 1392572.17
Total non-current assets 911209363.35 513693198.34
Total assets 3278861849.36 1847579600.63
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 71337129.13 165173019.04
Accounts payable 268538611.36 343874833.70
Advances from customer 0.00 0.00
Contract liabilities 29070869.80 34667171.33
Payroll payable 31351658.90 25906580.16
Taxes and dues payable 1986839.30 3380837.23
Other payables 86241351.29 55709905.60
Including: interest payable
Dividends payable
Liabilities held for sale 0.00 0.00
Non-current liabilities due within one
7376143.834857294.59
year
154ZKTeco 2022 Annual Report
Other current liabilities 17999117.66 30853864.51
Total current liabilities 513901721.27 664423506.16
Non-current liabilities:
Long-term loan 0.00 0.00
Bonds payable 0.00 0.00
Including: preferred stock
Perpetual bonds
Lease liabilities 7095945.72 1401002.16
Long-term payables 0.00 0.00
Long-term payroll payable
Estimated liabilities 600000.00 80046.11
Deferred income 543212.69 688138.70
Deferred tax liability 3022004.37 3148989.30
Other non-current liabilities 0.00 0.00
Total non-current liabilities 11261162.78 5318176.27
Total liabilities 525162884.05 669741682.43
Owner's equity:
Share capital 148492051.00 111369038.00
Other equity instruments 0.00 0.00
Including: preferred stock
Perpetual bonds
Capital reserve 2073269021.41 648463311.34
Less: treasury stock 0.00 0.00
Other comprehensive income 0.00 0.00
Special reserve
Surplus reserves 53883789.28 42490556.88
Undistributed profits 478054103.62 375515011.98
Total owner's equity 2753698965.31 1177837918.20
Total liabilities and owner's equity 3278861849.36 1847579600.63
3. Consolidated Profit Statement
Unit: RMB
Item 2022 2021
I. Total operating revenue 1918559191.76 1955286516.10
Including: operating revenue 1918559191.76 1955286516.10
Interest income
Premium earned
Revenue from handling
charges and commissions
II. Total operating cost 1699753810.25 1783004977.99
Including: operating cost 1065639119.43 1148296169.29
Interest expense
Expenses from handling
charges and commissions
Surrender value
155ZKTeco 2022 Annual Report
Net payments for insurance
claims
Net provisions for reserves in
insurance liability contracts
Policy dividend expenses
Reinsurance expenses
Taxes and surcharges 19046564.87 16800596.62
Selling expenses 361264181.17 302351568.76
Administrative expenses 106748932.32 104011332.16
R&D expenses 187983847.42 196786694.35
Financial expenses -40928834.96 14758616.81
Including: interest expenses 3101947.12 3011838.38
Interest income 28810088.84 5483270.16
Plus: other income 17849018.68 21736375.49
Investment income ( loss
-2429189.1811897723.96
expressed with "-")
Including: income from
investment in associates and joint 2660914.13 2603284.16
ventures
Gains from
derecognition of financial assets
measured atamortized cost
Gains from foreign exchange
(loss expressed with "-")
Gains from net exposure hedging
(loss expressed with "-")
Gains from changes in fair value
-701013.10881961.80
(loss expressed with "-")
Losses from credit impairment
-10954110.82-6298144.57
(loss expressed with "-")
Losses from impairment of assets
-6294754.92-4051801.08
(loss expressed with "-")
Gains from disposal assets (loss
88133.35116626.39
expressed with "-")
III. Operating profit (loss expressed with
216363465.52196564280.10
"-")
Plus: non-operating revenue 859519.49 1220517.59
Less: non-operating expenditure 4134911.75 2233328.03
IV. Total profit (loss expressed with "-") 213088073.26 195551469.66
Less: income tax expenses 9035711.77 8971478.90
V. Net profit (loss expressed with "-") 204052361.49 186579990.76
(I) Classification by business
continuity
1. Net profit from continuing
204052361.49186579990.76
operations (net loss expressed with "-")
2. Net profit from discontinued
operations (net loss expressed with "-")
(II) Classification by ownership
156ZKTeco 2022 Annual Report
1. Net profits attributable to
192239793.75170923050.93
shareholders of parent company
2. Minority shareholders' profit and
11812567.7415656939.83
loss
VI. Other comprehensive income - after
32584542.52-18782844.09
tax
Net of tax of other comprehensive
income attributable to the owner of the 30760782.67 -14702158.14
parent company
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
30760782.67-14702158.14
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
30760782.67-14702158.14
foreign currency financial statements
7. Others
After-tax net amount of other
comprehensive income attributable to the 1823759.85 -4080685.95
minority shareholders
VII. Total comprehensive income 236636904.01 167797146.67
Total comprehensive income
attributable to owners of the parent 223000576.42 156220892.79
company
Total comprehensive income
13636327.5911576253.88
attributable to minority shareholders
VIII. Earnings per share
(I) Basic earnings per share 1.5027 1.5347
(II) Diluted earnings per share 1.5235 1.5347
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 0.00 and the net profit realized by the combined party in the previous period is RMB 0.00.Legal Representative: Jin Hairong Person in charge of accounting work: Wang Youwu Person in charge of accounting organization:
Fang Li
157ZKTeco 2022 Annual Report
4. Parent Company's Profit Statement
Unit: RMB
Item 2022 2021
I. Operating revenue 1542538719.71 1930289437.03
Less: operating cost 1144810483.95 1498995492.43
Taxes and surcharges 7105264.81 6837708.26
Selling expenses 164958281.03 156009517.23
Administrative expenses 65358679.39 63524734.02
R&D expenses 133296955.01 155106767.10
Financial expenses -45203220.06 5238524.87
Including: interest expenses 447465.80 592018.54
Interest income 25178318.31 5023001.70
Plus: other income 7416424.52 8782357.61
Investment income ( loss
34313370.2747372537.96
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
0.000.00
(loss expressed with "-")
Gains from changes in fair value
-752215.42842493.32
(loss expressed with "-")
Losses from credit impairment
-1228959.32-2778609.03
(loss expressed with "-")
Losses from impairment of assets
-1832657.66-2166023.48
(loss expressed with "-")
Gains from disposal assets (loss
12558.50-13029.02
expressed with "-")
II. Operating profit (loss expressed with
110140796.4796616420.48
"-")
Plus: non-operating revenue 758163.67 1100260.62
Less: non-operating expenditure 3619836.60 1802723.63
III. Total profits (total losses expressed
107279123.5495913957.47
with "-")
Less: income tax expenses -6653200.50 -11625930.01
IV. Net profit (net loss expressed with "-
113932324.04107539887.48
")
(I) Net profit from continuing
113932324.04107539887.48
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
158ZKTeco 2022 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
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
foreign currency financial statements
7. Others
VI. Total comprehensive income 113932324.04 107539887.48
VII. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share
5. Consolidated Cash Flow Statement
Unit: RMB
Item 2022 2021
I. Cash flows from operating activities:
Cash received from sale of goods and
1914391818.502000579616.76
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
159ZKTeco 2022 Annual Report
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 51679360.47 59496855.48
Cash received from other operating
76523632.3159816201.03
activities
Subtotal of cash inflows from operating
2042594811.282119892673.27
activities
Cash paid for purchase of goods and
1122518900.851259355372.39
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 513551759.10 502047514.87
Payments of all types of taxes 80036076.98 58919055.97
Other cash payments relating to
201968041.17201450288.17
operating activities
Subtotal of cash outflows from operating
1918074778.102021772231.40
activities
Net cash flows from operating activities 124520033.18 98120441.87
II. Cash flows from investing activities:
Cash received from disinvestment 100302919.28 611823031.39
Cash received from investment
1111481.3011174641.57
income
Net cash received from disposal of
fixed assets intangible assets and other 569670.01 211274.18
long-term assets
Net cash received from disposal of
0.000.00
subsidiaries and other business units
Cash received from other investing
0.000.00
activities
Subtotal of cash inflows from investing
101984070.59623208947.14
activities
Cash paid to acquire and construct
fixed assets intangible assets and other 77486733.93 124917202.41
long-term assets
Cash paid for investments 1034748807.59 599284851.76
Net increase in pledge loans
Net cash paid to acquire subsidiaries
0.000.00
and other business units
Cash paid for other investing activities 6488400.00 322.13
Subtotal of cash outflows from investing 1118723941.52 724202376.30
160ZKTeco 2022 Annual Report
activities
Net cash flows from operating activities -1016739870.93 -100993429.16
III. Cash flows from financing activities:
Cash received from investors 1486667165.16 0.00
Including: cash received by
subsidiaries from the absorption of 0.00
minority shareholders' investments
Cash received from borrowings 10063457.00 26022352.53
Cash received from other financing
0.00162700.00
activities
Subtotal of cash inflows from financing
1496730622.1626185052.53
activities
Cash paid for debt repayments 467504.08 65908465.24
Cash paid for distribution of dividends
6797610.3622542621.25
and profits or payment of interest
Including: dividends and profits paid
6781992.9420344759.45
to minority shareholders by subsidiaries
Cash paid for other financing activities 54065231.57 27152605.21
Subtotal of cash outflows from financing
61330346.01115603691.70
activities
Net cash flows from financing activities 1435400276.15 -89418639.17
IV. Effect of exchange rate changes on
18139393.94-14325690.71
cash and cash equivalents
V. Net increase in cash and cash
561319832.34-106617317.17
equivalents
Plus: beginning balance of cash and
516288425.76622905742.93
cash equivalents
VI. Closing balance of cash and cash
1077608258.10516288425.76
equivalents
6. Cash Flow Statement of Parent Company
Unit: RMB
Item 2022 2021
I. Cash flows from operating activities:
Cash received from sale of goods and
1588277476.821839264475.58
rendering of services
Refund of taxes and surcharges 46142202.38 47242788.54
Cash received from other operating
266424568.3979676394.78
activities
Subtotal of cash inflows from operating
1900844247.591966183658.90
activities
Cash paid for purchase of goods and
1265144062.651606786553.01
rendering of services
Cash paid to and for employees 245811321.01 294405883.26
Payments of all types of taxes 13005949.72 -5647380.91
Other cash payments relating to
326385829.93189128141.21
operating activities
Subtotal of cash outflows from operating
1850347163.312084673196.57
activities
Net cash flows from operating activities 50497084.28 -118489537.67
II. Cash flows from investing activities:
Cash received from disinvestment 62764651.20 507886558.75
Cash received from investment
17195540.5916653496.86
income
Net cash received from disposal of 2874752.46 135.00
161ZKTeco 2022 Annual Report
fixed assets intangible assets and other
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
82834944.25524540190.61
activities
Cash paid to acquire and construct
fixed assets intangible assets and other 2241859.00 5254264.11
long-term assets
Cash paid for investments 1139688242.70 512980521.67
Net cash paid to acquire subsidiaries
and other business units
Cash paid for other investing activities 6488400.00
Subtotal of cash outflows from investing
1148418501.70518234785.78
activities
Net cash flows from operating activities -1065583557.45 6305404.83
III. Cash flows from financing activities:
Cash received from investors 1486667165.16
Cash received from borrowings
Cash received from other financing
activities
Subtotal of cash inflows from financing
1486667165.16
activities
Cash paid for debt repayments 10556071.01
Cash paid for distribution of dividends
87513.95
and profits or payment of interest
Cash paid for other financing activities 33873386.92 8879090.06
Subtotal of cash outflows from financing
33873386.9219522675.02
activities
Net cash flows from financing activities 1452793778.24 -19522675.02
IV. Effect of exchange rate changes on
3470318.23-3590784.31
cash and cash equivalents
V. Net increase in cash and cash
441177623.30-135297592.17
equivalents
Plus: beginning balance of cash and
290328864.13425626456.30
cash equivalents
VI. Closing balance of cash and cash
731506487.43290328864.13
equivalents
7. Consolidated Statement of Changes in Equity
Amount in current period
Unit: RMB
2022
Equity attributable to owners of the parent company
Other equity Othe Total
instruments r Gene Undi Min
Item Shar Capi Less: Spec Surp own
com ral strib ority
e Perp tal treas ial lus Othe Subt
er's
Prefe preh risk uted
inter
capit equitetual Othe reser ury reser reser rs otal
rred ensiv reser profi
ests
al bond rs ve stock ve ves
y
stock e ves ts
s
inco
162ZKTeco 2022 Annual Report
me
I.Endi
ng -
111636425607137361140
bala 255
369363818725253707870
nce 055
038.658.53.3356.43491.6513
of 60.0
00407636.3858.03
previ 2
ous
year
P
lus:
chan
ges
in
acco
untin
g
polic
ies
C
orrec
tions
of
prior
perio
d
error
s
M
erger
of
enter
prise
unde
r the
same
contr
ol
O
thers
II.Begi
nnin -
111636425607137361140
g 255
369363818725253707870
bala 0.00 0.00 0.00 0.00 055 0.00 0.00 0.00
038.658.53.3356.43491.6513
nce 60.0
00407636.3858.03
of 2
this
year
III.
371142307113180168169
Amo 685
230480607932846493178
unt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 433
13.092582.632.4561.284717
incre 4.65
03.8870353.307.95
ase/d
163ZKTeco 2022 Annual Report
ecrea
se of
the
curre
nt
perio
d
(decr
ease
expr
esse
d
with
"-")
(I)
Total
com 307 192 223 136 236
preh 607 239 000 363 636
ensiv 82.6 793. 576. 27.5 904.e 7 75 42 9 01
inco
me
(II)
Capi
tal
inves
ted 371 142 146 146
and 230 480 193 193
0.000.000.000.000.000.000.000.000.000.00
redu 13.0 925 226 226
ced 0 3.88 6.88 6.88
by
the
own
ers
1.
Com
mon
371142145145
stock
230017729729
contr
13.0536837837
ibute
04.707.707.70
d by
own
ers
2.
Capi
tal
inves
ted
by
hold 0.00 0.00
ers
of
other
equit
y
instr
164ZKTeco 2022 Annual Report
ume
nts
3.
Amo
unt
of
share
-
base
463463463
d
388388388
pay
9.189.189.18
ment
s
reco
gniz
ed in
equit
y
4.
Othe 0.00 0.00
rs
(III)
-
Profi 113 - -
113
t 932 678 678
0.000.000.000.000.000.000.000.000.009320.000.00
distri 32.4 199 199
32.4
butio 0 2.94 2.94
0
n
1.
Surp
-
lus 113
113
reser 932
9320.000.00
ves 32.4
32.4
with 0
0
draw
al
2.
With
draw
al of
gene
0.000.00
ral
risk
prep
arati
on
3.
Distr
ibuti
on to - -
own 678 678
0.00
ers 199 199
(or 2.94 2.94
share
hold
ers)
165ZKTeco 2022 Annual Report
4.
Othe 0.00 0.00
rs
(IV)
Inter
nal
carry
over
0.000.000.000.000.000.000.000.000.000.000.000.000.000.000.00
of
own
er's
equit
y
1.
Capi
tal
surpl
us
trans
fer to 0.00
capit
al (or
equit
y
capit
al)
2.
Surp
lus
reser
ve
trans
fer to 0.00
capit
al (or
equit
y
capit
al)
3.
Surp
lus
reser
ve 0.00
offse
tting
losse
s
4.
Chan
ges
in
0.00
defin
ed
bene
fit
166ZKTeco 2022 Annual Report
plans
carri
ed
forw
ard
to
retai
ned
earni
ngs
5.
Retai
ned
inco
me
carri
ed
forw
ard 0.00
from
other
com
preh
ensiv
e
inco
me
6.
Othe 0.00
rs
(V)
Spec
ial 0.00
reser
ve
1.
With
draw
al in 0.00
this
perio
d
2.
Use
in
the
0.00
curre
nt
perio
d
(VI)
Othe 0.00
rs
IV. 148 206 525 539 788 305 430 310
0.000.000.000.000.000.000.00
Endi 492 117 522 750 571 746 251 049
167ZKTeco 2022 Annual Report
ng 051. 291 2.65 85.7 917. 718 26.3 231
bala 00 2.28 7 98 9.68 0 5.98
nce
of
curre
nt
perio
d
Amount of previous period
Unit: RMB
2021
Equity attributable to owners of the parent company
Other equity Othe
instruments r Total
Gene Undi Min
Item Shar Capi Less: com Spec Surp own
ral strib ority
e tal treas preh ial lus Othe Subt er's Perp
Prefe risk uted
inter
capit etual Othe reser ury ensiv reser reser rs otal
equit
rred reser profi
ests
al bond rs ve stock e ve ves
y
stock ves ts
s inco
me
I.Endi
ng -
111636318447121449126
bala 108
369363278556631330124
nce 034
038.658.64.6294.34564.5651
of 01.8
00402453.5978.16
previ 8
ous
year
Plus:
chan
ges
in
acco
untin
g
polic
ies
C
orrec
tions
of
prior
perio
d
error
s
M
erger
of
enter
prise
unde
r the
168ZKTeco 2022 Annual Report
same
contr
ol
O
thers
II.Begi
nnin -
111636318447121449126
g 108
369363278556631330124
bala 0.00 0.00 0.00 0.00 034 0.00 0.00
038.658.64.6294.34564.5651
nce 01.8
00402453.5978.16
of 8
this
year
III.Amo
unt
incre
ase/d
ecrea
se of
the -
107160156-147
curre 147
539169220876458
nt 0.00 0.00 0.00 0.00 0.00 0.00 021 0.00 0.00 0.00
88.7062.892.227619.
perio 58.1
518792.9287
d 4
(decr
ease
expr
esse
d
with
"-")
(I)
Total
-
com 170 156 115 167
147
preh 923 220 762 797
021
ensiv 050. 892. 53.8 146.
58.1
e 93 79 8 67
4
inco
me
(II)
Capi
tal
inves
ted
and 623 623
0.000.000.000.000.000.000.000.000.000.000.000.000.00
redu 2.65 2.65
ced
by
the
own
ers
1.
258258
Com
8.368.36
mon
169ZKTeco 2022 Annual Report
stock
contr
ibute
d by
own
ers
2.
Capi
tal
inves
ted
by
hold
ers
of
other
equit
y
instr
ume
nts
3.
Amo
unt
of
share
-
base
d
pay
ment
s
reco
gniz
ed in
equit
y
4.
364364
Othe
4.294.29
rs
(III)
---
Profi 107
107203203
t 539
0.000.000.000.000.000.000.000.000.005390.000.00447447
distri 88.7
88.759.459.4
butio 5
555
n
1.
Surp
-
lus 107
107
reser 539
539
ves 88.7
88.7
with 5
5
draw
al
2.
With
170ZKTeco 2022 Annual Report
draw
al of
gene
ral
risk
prep
arati
on
3.
Distr
ibuti
--
on to
203203
own
447447
ers
59.459.4
(or
55
share
hold
ers)
4.
Othe
rs
(IV)
Inter
nal
carry
over
0.000.000.000.000.000.000.000.000.000.000.000.000.000.000.00
of
own
er's
equit
y
1.
Capi
tal
surpl
us
trans
fer to
capit
al (or
equit
y
capit
al)
2.
Surp
lus
reser
ve
trans
fer to
capit
al (or
equit
y
capit
171ZKTeco 2022 Annual Report
al)
3.
Surp
lus
reser
ve
offse
tting
losse
s
4.
Chan
ges
in
defin
ed
bene
fit
plans
carri
ed
forw
ard
to
retai
ned
earni
ngs
5.
Retai
ned
inco
me
carri
ed
forw
ard
from
other
com
preh
ensiv
e
inco
me
6.
Othe
rs
(V)
Spec
ial
reser
ve
1.
With
draw
172ZKTeco 2022 Annual Report
al in
this
perio
d
2.
Use
in
the
curre
nt
perio
d
(VI)
Othe
rs
IV.Endi
ng
-
bala 111 636 425 607 137 361 140
255
nce 369 363 818 725 253 707 870
0.000.000.000.000550.000.00
of 038. 658. 53.3 356. 434 91.6 513
60.0
curre 00 40 7 63 6.38 5 8.03
2
nt
perio
d
8. Statement of Changes in Equity of the Parent Company
Amount in current period
Unit: RMB
2022
Other equity instruments Other
compr Surplu Total
Item Less: Specia UndistShare Preferr Perpet Capital ehensi s owner'treasur l ributed Others
capital ed ual Others reserve ve reserve s y stock reserve profits
stock bonds incom s equity
e
I.Ending
111366484642490375511177
balanc
9038.3311.556.85011.83791
e of
00348988.20
previo
us year
Pl
us:
change
s in
accoun
ting
policie
s
C
orrecti
173ZKTeco 2022 Annual Report
ons of
prior
period
errors
O
thers
II.Beginn
ing 11136 64846 42490 37551 1177
balanc 9038. 3311. 556.8 5011. 83791
e of 00 34 8 98 8.20
this
year
III.Amou
nt
increas
e/decre
ase of
the 37123 1424 11393 10253 1575
current 013.0 80571 232.4 9091. 86104
period 0 0.07 0 64 7.11
(decre
ase
expres
sed
with "-
")
(I)
Total
compr 11393 11393
ehensi 2324. 2324.ve 04 04
incom
e
(II)
Capital
investe
3712314241461
d and
013.0805710.000.0092872
reduce
00.073.07
d by
the
owners
1.
Comm
on
3712314201457
stock
013.01753629837
contrib
04.707.70
uted
by
owners
2.
Capital
investe
d by
174ZKTeco 2022 Annual Report
holder
s of
other
equity
instru
ments
3.
Amou
nt of
share-
based 4630 4630
payme 345.37 345.37
nts
recogn
ized in
equity
4.
Others
(III) -
11393
Profit 11393
232.40.00
distrib 232.4
0
ution 0
1.
Surplu
-
s 11393
11393
reserve 232.4 0.00
232.4
s 0
0
withdr
awal
2.
Distrib
ution
to
owners
(or
shareh
olders)
3.
Others
(IV)
Interna
l
carryo
ver of
owner'
s
equity
1.
Capital
surplus
transfe
r to
capital
(or
equity
175ZKTeco 2022 Annual Report
capital
)
2.
Surplu
s
reserve
transfe
r to
capital
(or
equity
capital
)
3.
Surplu
s
reserve
offsetti
ng
losses
4.
Chang
es in
define
d
benefit
plans
carried
forwar
d to
retaine
d
earnin
gs
5.
Retain
ed
incom
e
carried
forwar
d from
other
compr
ehensi
ve
incom
e
6.
Others
(V)
Specia
l
reserve
1.
176ZKTeco 2022 Annual Report
Withdr
awal in
this
period
2. Use
in the
current
period
(VI)
Others
IV.Ending
14849207353883478052753
balanc
2051.26902789.24103.69896
e of
001.418625.31
current
period
Amount of previous period
Unit: RMB
2021
Other equity instruments Other
compr Surplu Total
Item Less: Specia UndistShare Preferr Perpet Capital ehensi s owner'treasur l ributed Others
capital ed ual Others reserve ve reserve s y stock reserve profits
stock bonds incom s equity
e
I.Ending
111366484631736278721070
balanc
9038.3311.568.19113.29803
e of
00343250.72
previo
us year
Pl
us:
change
s in
accoun
ting
policie
s
C
orrecti
ons of
prior
period
errors
O
thers
II.Beginn
111366484631736278721070
ing
9038.3311.568.19113.29803
balanc
00343250.72
e of
this
177ZKTeco 2022 Annual Report
year
III.Amou
nt
increas
e/decre
ase of
the 10753 96785 10753
current 988.7 898.7 9887.period 5 3 48
(decre
ase
expres
sed
with "-
")
(I)
Total
compr 10753 10753
ehensi 9887. 9887.ve 48 48
incom
e
(II)
Capital
investe
d and
reduce
d by
the
owners
1.
Comm
on
stock
contrib
uted
by
owners
2.
Capital
investe
d by
holder
s of
other
equity
instru
ments
3.
Amou
nt of
share-
based
payme
nts
178ZKTeco 2022 Annual Report
recogn
ized in
equity
4.
Others
(III) -
10753
Profit 10753
988.70.00
distrib 988.7
5
ution 5
1.
Surplu
-
s 10753
10753
reserve 988.7 0.00
988.7
s 5
5
withdr
awal
2.
Distrib
ution
to
owners
(or
shareh
olders)
3.
Others
(IV)
Interna
l
carryo
ver of
owner'
s
equity
1.
Capital
surplus
transfe
r to
capital
(or
equity
capital
)
2.
Surplu
s
reserve
transfe
r to
capital
(or
equity
capital
)
179ZKTeco 2022 Annual Report
3.
Surplu
s
reserve
offsetti
ng
losses
4.
Chang
es in
define
d
benefit
plans
carried
forwar
d to
retaine
d
earnin
gs
5.
Retain
ed
incom
e
carried
forwar
d from
other
compr
ehensi
ve
incom
e
6.
Others
(V)
Specia
l
reserve
1.
Withdr
awal in
this
period
2. Use
in the
current
period
(VI)
Others
IV. 11136 64846 42490 37551 1177
Ending 9038. 3311. 556.8 5011. 83791
balanc 00 34 8 98 8.20
180ZKTeco 2022 Annual Report
e of
current
period
III. Basic Information of the Company
ZKTECO CO. LTD. (hereinafter referred to as "ZKTECO" "the Company" or "Company") was established on December 14
2007 by Che Jun and Che Quanhong with registration number 441900000160222 and registered capital of RMB 5000000.00 at the
time of establishment. The Company obtained the "Business License" with a unified social credit code of 914419006698651618 on
July 14 2016.According to the "Reply of CSRC to Approval for the Registration of Initial Public Offering of Stocks of ZKTECO CO. LTD."
(ZJXK [2022] No. 926) the Company publicly issues 37123013 RMB denominated ordinary shares (A shares) to the public with a
changed capital of RMB 148492051.00.Main business address of the Company: No.32 Pingshan Industrial Road Tangxia Town Dongguan Guangdong China
Main operating activities of the Company: ZKTECO is mainly engaged in the R&D design production sales and service of
biometric technology and related products.The ultimate controller of the Company is Che Quanhong who directly holds 17.62% of the Company's shares and indirectly
controls 30.30% of the Company's shares through the controlling shareholder ZKTECO Times totaling 47.92% of the Company's
shares.This financial statement was approved by the Board of Directors of the Company on April 26 2023.As of December 31 2022 the scope and changes included in the consolidated financial statements are detailed in
"Section X Financial Report VIII. Changes to the Consolidation Scope" and "Section X Financial Report IX. Equity in
Other Entities".IV. Preparation Basis for Financial Statements
1. Basis of preparation
This financial statement is prepared based on the assumption of the Company's going concern and actual transaction events in
accordance with the relevant provisions of the Accounting Standards for Enterprises and based on the accounting policies and estimates
described in "Section X Financial Report V. Important Accounting Policies and Estimates".
2. Going concern
The Company has the ability to continue as a going concern for at least 12 months from the end of the reporting period and there
are no major events affecting the ability to continue as a going concern.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.
181ZKTeco 2022 Annual Report
1. Declaration of compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company based on the above preparation basis comply with the latest Accounting
Standards for Enterprises and their application guidelines interpretations and other relevant regulations (collectively referred to as
"Accounting Standards for Enterprises") issued by the Ministry of Finance and truly and completely reflect the Company's financial
position operating results cash flows and other relevant information.In addition this financial report has been prepared in accordance with the reporting and disclosure requirements of the
"Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 - General Provisions on Financial
Reports (revised in 2014) (hereinafter referred to as No. 15 Document (revised in 2014))" of the CSRC and the "Notice on Matters
Related to the Implementation of the New Accounting Standards for Enterprises by Listed Companies" (Accounting Department Letter
[2018] No. 453).
2. Accounting period
The accounting year of the Company starts from January 1 to December 31 in the Gregorian calendar.
3. Operating cycle
The Company's operating cycle is 12 months.
4. Recording currency
Renminbi is adopted as the recording currency.
5. Accounting treatment methods of business merger under the common control and not under the common
control
1. Accounting treatment methods for merger of enterprise under the same control
The assets and liabilities acquired by the Company through the merger of enterprise under the same control in a single transaction
or through multiple transactions step by step are measured at the book value of the combined party in the ultimate controller's
consolidated financial statements on the merger date. The difference between the book value of the net assets obtained by the Company
and the book value of the merger consideration paid (or the total face value of the issued shares) shall be adjusted to the capital reserve.If the capital reserve is insufficient to offset the retained earnings shall be adjusted.
2. Accounting treatment methods for merger under different control
The difference between the merger cost and the fair value of the identifiable net assets obtained from the acquiree on the date of
acquisition 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.To achieve a merger under different control through multiple transactions step by step the following order shall be followed:
182ZKTeco 2022 Annual Report
(1) Adjust the initial investment cost of long-term equity investments. If the equity held before the date of acquisition is accounted
by the equity method it shall be remeasured according to the fair value of the equity on the date of acquisition and the difference
between the fair value and its book value shall be included in the current investment income; if the equity of the acquiree held before
the acquisition date involves changes in other comprehensive income and other owner's equity accounted by the equity method it shall
be transferred to the current income on the date of acquisition except for other comprehensive income arising from the investee's
remeasurement of the changes in net liabilities or net assets of the defined benefit plan.
(2) Recognize goodwill (or the amount included in current profits and losses). Compare the initial investment cost of the long-
term equity investment after the adjustment in the first step with the fair value share of the identifiable net assets of the subsidiary that
shall be enjoyed on the date of acquisition. If the former is greater than the latter the difference is recognized as goodwill; if the former
is smaller than the latter the difference is included in current profits and losses.The situation where the equity is disposed of step by step through multiple transactions until the loss of control over the subsidiary
(1) The principle of determining whether all transactions in the process from step-by-step disposal of equity to loss of control
over subsidiaries belong to a "package deal"
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.
(2) Accounting treatment methods for transactions in the process from step-by-step disposal of equity to loss of control over
subsidiaries as a "package deal"
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.In the consolidated financial statements 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 values of the remaining equity
minus the shares of the net assets that shall be continuously calculated by the original subsidiary from the date of acquisition calculated
as per the original shareholding ratio shall be included in the current investment income when the control right is lost. Other
comprehensive income related to equity investments in the original subsidiary shall be converted into current investment income when
control is lost.
(3) Accounting treatment methods for transactions in the process from step-by-step disposal of equity to loss of control over
subsidiaries not as a "package deal"
183ZKTeco 2022 Annual Report
If the disposal of an investment in a subsidiary does not result in the loss of control the difference between the disposal price in
the consolidated financial statements and the corresponding share of the subsidiary's net assets enjoyed by the disposal investment is
included in the capital reserve (capital premium or share capital premium). If the capital premium is insufficient to offset the retained
earnings shall be adjusted.If control is lost in the disposal of investments in subsidiaries in the consolidated financial statements 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 values of the remaining equity minus the shares of the net assets that shall be continuously calculated by
the original subsidiary from the acquisition date calculated as per the original shareholding ratio shall be included in the current
investment income when the control right is lost. Other comprehensive income related to equity investments in the original subsidiary
shall be converted into current investment income when control is lost.
6. Preparation method for consolidated financial statements
The Company will include all subsidiaries under its control in the consolidation scope of the consolidated financial statements.The consolidated financial statements are prepared by the Company in accordance with the "Accounting Standards for Enterprises No.
33 - Consolidated Financial Statements" based on the financial statements of the parent company and its subsidiaries according to other
relevant information.
7. Classification of joint-operation arrangement and accountant treatment method of joint operation
1. Recognition and classification of joint venture arrangements
A joint venture arrangement is an arrangement jointly controlled by two or more participants. The joint venture arrangement has
the following characteristics: 1) All participating parties are bound by the arrangement; 2) Two or more participants exercise joint
control over the arrangement. No participant can independently control the arrangement and any participant with joint control over the
arrangement can prevent other participants or a combination of participants from independently controlling the arrangement.Common control refers to the sharing of control over a certain arrangement under related agreements while related activities of
such arrangement must be recognized only with the unanimous consent of the parties involved in the sharing of control.Joint arrangement can be classified into joint operations and joint ventures. 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 venture arrangements
The joint venture participants shall confirm the following items related to their share of interests in the joint venture and conduct
accounting treatment in accordance with the relevant Accounting Standards for Enterprises: 1) Recognize the assets held individually
and the assets held jointly based on their share; 2) Recognize the liabilities undertaken individually and jointly based on their respective
shares; 3) Recognize the revenue generated from the sale of its share of joint operating output; 4) Recognize the revenue generated
from the sale of output in joint operations based on their share; 5) Recognize the expenses incurred individually and the expenses
incurred in joint operations based on their share.
184ZKTeco 2022 Annual Report
The joint venture participants shall conduct accounting treatment on the investment of the joint venture in accordance with the
provisions of the "Accounting Standards for Enterprises No. 2 - Long-term Equity Investments".
8. Recognition criteria for cash and cash equivalents
The cash in the cash flow statement refers to the cash on hand and deposits that can be used for payment at any time. Cash
equivalent refers to the short term and highly liquid investments (generally expired within three months from the date of acquisition)
of the Company that is easily converted to the cash of known amount and subject to an insignificant risk of change in value.
9. Foreign currency transactions and foreign currency statement translation
1. Translation of foreign currency transactions
Foreign currency transactions are initially recognized and converted into RMB using the spot exchange rate on the transaction
date. On the balance sheet date foreign currency monetary items are converted using the spot exchange rate on the balance sheet date.The exchange differences arising from different exchange rates except for the exchange differences related to the purchase and
construction of assets eligible for capitalization are included in current profits and losses. Foreign currency non-monetary items
measured at historical cost are still converted using the spot exchange rate on the transaction date without changing their RMB amount.Foreign currency non-monetary items measured at fair value are converted using the spot exchange rate on the date of fair value
determination and the difference is included in current profits and losses or other comprehensive income.
2. Conversion of foreign currency financial statements
The asset and liability items in the balance sheet are converted using the spot exchange rate on the balance sheet date. The owner's
equity items except for the "undistributed profits" item are converted using the spot exchange rate on the transaction date. The income
and expense items in the income statement are converted using the approximate exchange rate of the spot exchange rate on the
transaction date. The foreign currency financial statement conversion difference generated by the above conversion is presented in
other comprehensive income under the owner's equity item in the balance sheet.
10. Financial instruments
1. Recognition and derecognition of financial instruments
A financial asset or financial liability is recognized when the Company becomes a party to a financial instrument contract.Trading financial assets in conventional ways shall be recognized and derecognized according to the accounting on the trading
day. The conventional method of buying and selling financial assets refers to the collection or delivery of financial assets within the
period specified by regulations or common practices in accordance with the terms of the contract. Trading day refers to the date on
which the Company promises to buy or sell financial assets.If the following conditions are met the recognition of financial assets (or a portion of financial assets or a group of similar
financial assets) shall be terminated and they shall be written off from their accounts and balance sheets:
(1) The right to receive cash flows from financial assets expires;
185ZKTeco 2022 Annual Report
(2) Transferred the right to receive cash flows from financial assets or assumed the obligation to promptly pay the full amount
of the received cash flows to a third party under the "pass-thorough agreement"; and (a) substantially transferred almost all the risks
and rewards of ownership of the financial assets or (b) relinquished control over the financial asset even though substantially neither
transferred nor retained almost all the risks and rewards of ownership of the financial assets.
2. Classification and measurement of financial assets
According to the operation mode of financial assets management and the contract cash flow characteristics of financial assets of
the Company the financial assets of the Company at the initial recognition are classified into: the financial assets measured at the
amortized cost; the financial assets measured at fair value and whose changes are included in other comprehensive income; and the
financial assets measured at fair value and whose changes are included in the current profits and losses. The subsequent measurement
of financial assets depends on their classification.The classification of financial assets by the Company is based on the business model of managing financial assets and the cash
flow characteristics of financial assets.
(1) Financial assets measured at amortized costs
Financial assets that meet the following conditions are classified as financial assets measured at the amortized cost: the business
model of the Company's management of the financial assets is aimed at collecting contractual cash flows. The contractual terms of the
financial asset stipulate that the cash flow generated on a specific date is only the payment of principal and interest based on the
outstanding principal amount. The financial assets are subsequently measured at amortised cost using the effective interest rate method.The gains or losses arising from amortisation or impairment are included in current profits and losses.
(2) Debt instrument investments measured at fair value with changes recognized in other comprehensive income
Financial assets that meet the following conditions are classified as financial assets measured at fair value and whose changes
are included in other comprehensive income: the business model of the Company's management of the financial assets is aimed at
collecting contractual cash flows and the sales of financial assets. The contractual terms of the financial asset stipulate that the cash
flow generated on a specific date is only the payment of principal and interest based on the outstanding principal amount. For such
financial assets the Company adopts fair value for subsequent measurement. The discount or premium is amortized using the effective
interest rate method and recognized as interest income or expense. Except for impairment losses and exchange differences of foreign
currency monetary financial assets recognized as current profit and loss changes in fair value of such financial assets are recognized
as other comprehensive income until the financial asset is derecognized and its cumulative gains or losses are transferred to current
profit and loss. Interest income related to such financial assets is included in current profits and losses.
(3) Equity instrument investments measured at fair value with changes recognized in other comprehensive income
The Company irrevocably chooses to designate some non-trading equity instrument investments as financial assets measured at
fair value and whose changes are included in other comprehensive income. Only relevant dividend income is included in current profits
and losses and changes in fair value are recognized as other comprehensive income until the financial asset is derecognized and its
cumulative gains or losses are transferred to retained earnings.
(4) Financial assets measured at fair value and whose changes are included in the current profits and losses
186ZKTeco 2022 Annual Report
Financial assets other than above financial assets measured at the amortized cost and 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. At the time of initial recognition the Company may designate certain financial assets as
financial assets measured at fair value and whose changes are included in the current profits and losses in order to eliminate or
significantly reduce accounting mismatch. For such financial assets the Company adopts fair value for subsequent measurement and
all changes in fair value are included in current profits and losses.All affected related financial assets are reclassified only when the Company changes its business model of managing financial
assets.For financial assets measured at fair value and whose changes are included in the current profits and losses the related transaction
expense is directly included in current profits and losses. For other types of financial assets related transaction costs are included in
the initial recognition amount.
3. Classification and measurement of financial liabilities
The financial liabilities of the Company are classified at initial recognition as financial liabilities measured at amortized costs
and financial liabilities measured at fair value and whose changes are included in the current profits and losses.Financial liabilities that meet one of the following conditions can be designated as financial liabilities measured at fair value and
whose changes are included in the current profits and losses at initial measurement: (1) This designation can eliminate or significantly
reduce accounting mismatch; (2) Manage and evaluate financial liability portfolios or financial asset and financial liability portfolios
based on fair value in accordance with the group's risk management or investment strategy as stated in formal written documents and
report to key management personnel within the group on this basis; (3) This financial liability includes embedded derivative instruments
that need to be splitted separately.The Company determines the classification of financial liabilities at initial recognition. For financial liabilities measured at fair
value through current profits and losses the related transaction expense is directly recognised in current profits and losses. The related
transaction expense of other financial liabilities is included in the initial recognition amount.The subsequent measurement of financial liabilities depends on their classification:
(1) Financial liabilities measured at amortized costs
The financial liabilities are subsequently measured at amortised cost using the effective interest rate method.
(2) Financial liabilities measured at fair value and whose changes are included in the current profits and losses
Financial liabilities measured at fair value through current profits and losses including financial liabilities (including derivatives
that are financial liabilities) and financial liabilities that are designated at fair value through current profits and losses.
4. Offset of financial instruments
If the following conditions are met simultaneously financial assets and financial liabilities shall be presented in the balance sheet
at the net amount after mutual offset: they have the legal right to offset the recognized amount and such legal right is currently
enforceable; it is planned to settle on a net basis or simultaneously realize the financial asset and settle the financial liability.
187ZKTeco 2022 Annual Report
5. Impairment of financial assets
The Company recognizes loss provisions based on expected credit losses for financial assets measured at the amortized cost debt
instrument investments measured at fair value with changes recognized in other comprehensive income and financial guarantee
contracts. 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.The Company considers all reasonable and evidence-based information including forward-looking information to estimate the
expected credit losses of financial assets measured at the amortized cost and financial assets measured at fair value and whose changes
are included in other comprehensive income (debt instruments) either individually or in combination.
(1) General model of expected credit loss
If the credit risk of the financial instrument has been increased significantly since the initial recognition the Company will
measure its loss provision based on the amount of expected credit loss over the whole duration of the financial instrument; if the credit
risk of the financial instrument has not been significantly increased since the initial recognition the Company will measure its loss
provision based on the amount of expected credit losses for the financial instrument in the next 12 months. The resultant increased or
reversed amount of the loss provision will be included in current profits and losses as impairment loss or gain. The specific assessment
of credit risk by the Company is detailed in Note "IX. Risks Related to Financial Instruments".Normally after 30 days overdue unless there is conclusive evidence indicating that the credit risk of the financial instrument has
not significantly increased since the initial recognition the Company will deem that the credit risk of the financial instrument has
significantly increased.Specifically the Company divides the process of credit impairment of financial instruments that have not experienced credit
impairment at the time of purchase or origin into three stages and there are different accounting treatments for the impairment of
financial instruments at different stages:
Stage 1: Credit risk has not significantly increased since initial recognition
For financial instruments in this stage the enterprise shall measure the provision for losses based on the expected credit losses in
the next 12 months and calculate interest income based on their book balance (i.e. without deducting impairment provisions) and actual
interest rate (if the instrument is a financial asset the same below).Stage 2: Credit risk has significantly increased since initial recognition but credit impairment has not yet occurred
For financial instruments in this stage the enterprise shall measure the provision for losses based on the expected credit losses of
the instrument throughout its lifespan and calculate interest income based on its book balance and actual interest rate.Stage 3: Credit impairment occurs after initial recognition
For financial instruments in this stage the enterprise shall measure the loss provision based on the expected credit loss of the
instrument throughout its lifespan but the calculation of interest income is different from that of financial assets in the first two stages.For financial assets that have undergone credit impairment the enterprise shall calculate interest income based on their amortized cost
(book balance minus impairment provision i.e. book value) and actual interest rate.
188ZKTeco 2022 Annual Report
For financial assets that have experienced credit impairment at the time of purchase or origin the enterprise shall only recognize
the changes in expected credit losses during the entire lifespan after initial recognition as loss reserves and calculate interest income
based on their amortized cost and the actual interest rate adjusted by credit.
(2) The Company chooses not to compare the credit risk of financial instruments with their initial recognition on the balance
sheet date but directly assumes that the credit risk of the instrument has not significantly increased since initial recognition.Where the enterprise 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.
(3) Receivables and lease receivables
The Company adopts a simplified model of expected credit losses for accounts receivable that do not contain significant financing
components (including those that do not consider financing components in contracts that do not exceed one year) according to the
"Accounting Standards for Enterprises No. 14 - Revenues" and always measures its loss provision based on the amount of expected
credit losses throughout the entire lifespan.The Company has made an accounting policy choice to adopt a simplified model of expected credit losses for accounts receivable
that contain significant financing components and lease receivables regulated by the "Accounting Standards for Enterprises No. 21 -
Leases" that is to measure loss reserves at an amount equivalent to expected credit losses throughout the entire lifespan.The Company evaluates the expected credit losses of financial instruments based on individual and combination assessments.The Company has considered the credit risk characteristics of different customers and evaluated the expected credit losses of
commercial acceptance bills accounts receivable and other receivables based on aging portfolio. The comparison table between the
Company's aging portfolio and the expected credit loss rate for the entire duration is as follows:
Accounts receivable aging Expected credit loss rate (%)
Within 1 year (including 1 year) 5
1-2 years (including 2 years) 10
2-3 years (including 3 years) 30
Over 3 years 100
When evaluating expected credit losses the Company considers reasonable and evidence-based information about past events
current conditions and future economic forecasts. When the Company no longer reasonably expects to fully or partially recover the
contractual cash flow of financial assets the Company directly writes down the book balance of the financial assets.
6. Transfer of financial assets
189ZKTeco 2022 Annual Report
If the Company has transferred almost all the risks and rewards of ownership of the financial assets to the transferee the
recognition of the financial assets shall be terminated. If almost all risks and rewards related to the ownership of the financial assets
are retained the recognition of the financial assets will not be terminated.If the Company neither transfers nor retains almost all the risks and rewards related to the ownership of financial assets they
shall be treated as follows: if the Company gives up control over the financial assets the recognition of the financial assets shall be
terminated and the resulting assets and liabilities shall be recognized. If the control over the financial assets has not been relinquished
the relevant financial assets shall be recognized based on their continued involvement in the transferred financial assets and the relevant
liability shall be recognized accordingly.If the Company continues to be involved by providing financial guarantees for the transferred financial assets the assets formed
by the continued involvement shall be recognized based on the lower of the book value of the financial assets and the amount of
financial guarantees. The financial guarantee amount refers to the highest amount of consideration received that will be required to be
repaid.
11. Accounts receivable
The Company adopts a simplified model of expected credit losses for notes receivable accounts receivable other receivables
and financing lease payments that do not include significant financing components (including those that do not consider financing
components in contracts that do not exceed one year) in accordance with the "Accounting Standards for Enterprises No. 14 - Revenues"
that is the loss provision is always measured based on the amount of expected credit losses throughout the entire lifespan and the
increase or reversal of the loss provision resulting therefrom is recognized as an impairment loss or gain is included in current profits
and losses.For accounts receivable containing significant financing components the Company chooses to adopt a simplified model of
expected credit losses which always measures its loss provision based on the amount of expected credit losses throughout the entire
duration.
1. At the end of the period a separate impairment test shall be conducted on accounts receivable that have objective evidence
indicating impairment. Based on the difference between their expected future cash flow present value and their book value impairment
losses shall be recognized and bad debt reserves shall be withdrawn.
2. When the expected credit loss information cannot be assessed through a single financial asset at a reasonable cost the Company
divides accounts receivable portfolios based on credit risk characteristics and calculates expected credit losses on the portfolio basis.Portfolio Name Accrual method
Aging Portfolio This portfolio takes the aging of accounts receivable as the credit
risk characteristics.Related Party Portfolio This portfolio includes accounts receivable from subsidiaries and
other related parties within the consolidation scope.Portfolio of deposits security deposits employee This portfolio features deposits security deposits and employee
loans etc. loans as credit risk characteristics.
(1) Aging portfolio
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Aging Expected credit loss rate of accounts receivable (%)
Within 1 year (including 1 year) 5
1-2 years (including 2 years) 10
2-3 years (including 3 years) 30
Over 3 years 100
(2) Related party portfolio
Related party portfolio: refer to historical credit loss experience combined with the current situation and the forecast of future
economic conditions through default risk exposure and the expected credit loss rate of the entire duration.
12. Receivable financing
Financial assets that meet the following conditions are classified as financial assets measured at fair value and whose changes
are included in other comprehensive income: the business model of the Company's management of the financial assets is aimed at
collecting contractual cash flows and the sales of financial assets. The contractual terms of the financial asset stipulate that the cash
flow generated on a specific date is only the payment of principal and interest based on the outstanding principal amount.The Company transfers its accounts receivable in the form of discounts or endorsements and if this type of business is frequent
and involves a large amount its management business model essentially involves both receiving contract cash flows and selling them.In accordance with the relevant provisions of the financial instrument standards it is classified as financial assets measured at fair value
with changes recognized in other comprehensive income.
13. Other receivables
Determination methods and accounting treatment methods of expected credit losses of other receivables
1. At the end of the period a separate impairment test shall be conducted on other receivables that have objective evidence
indicating impairment. Based on the difference between their expected future cash flow present value and their book value impairment
losses shall be recognized and bad debt reserves shall be withdrawn.
2. When the expected credit loss information cannot be assessed through a single financial asset at a reasonable cost the Company
divides accounts receivable portfolios based on credit risk characteristics and calculates expected credit losses on the portfolio basis.
(1) Aging portfolio
Aging Expected credit loss rate of other receivables (%)
Within 1 year (including 1 year) 5
1-2 years (including 2 years) 10
2-3 years (including 3 years) 30
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Over 3 years 100
(2) Related party portfolio
Related party portfolio: refer to historical credit loss experience combined with the current situation and the forecast of future
economic conditions through default risk exposure and the expected credit loss rate of the entire duration.
(3) Portfolio of deposits security deposits employee loans etc.
Portfolio of deposits security deposits employee loans etc.: refer to historical credit loss experience combined with the current
situation and the forecast of future economic conditions through default risk exposure and the expected credit loss rate of the entire
duration.
14. Inventory
1. Inventory classification
Inventories include 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.
2. Method of valuation for inventory acquisition and delivery
All types of inventory of the Company are valued at actual cost upon receipt and are valued using the weighted average method
upon delivery.
3. Determination basis for net realizable value of inventory and provision method for inventory depreciation reserves
On the balance sheet date inventory is measured at the lower of cost and net realizable value and a provision for inventory
depreciation is made based on the difference between the cost of the inventory category and the net realizable value.The net realizable value of inventory directly used for sale is determined in the normal production and operation process based
on the estimated selling price of the inventory minus the estimated selling expenses and related taxes and fees. The net realizable value
of inventory that needs to be processed in the normal production and operation process is determined by subtracting the estimated cost
to be incurred until completion estimated sales expenses and relevant taxes from the estimated selling price of the finished product
produced. On the balance sheet date if a portion of the same inventory has a contract price agreement and other parts do not have a
contract price their net realizable value shall be determined separately and compared with their corresponding costs to determine the
amount of provision or reversal for inventory depreciation reserves.
4. Inventory taking system
The perpetual inventory system is adopted.
5. Amortization method for low value consumables and packaging materials
Low value consumables and packaging materials are amortized using the one-off amortization method when received.
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15. Contract assets
1. Methods and standards for the recognition of contract assets
The Company lists contract assets or contract liabilities in the balance sheet according to the relationship between
the performance of performance obligations and customer payment. The consideration (excluding accounts receivable)
that the Company is entitled to receive for transferring goods or providing services to customers is listed as contract assets.
2. Determination methods and accounting treatment methods of the expected credit loss of contract assets
For contract assets that do not contain significant financing components the Company adopts a simplified model of expected
credit losses which always measures its loss provision at an amount equivalent to the expected credit losses for the entire duration.The increase or reversal of the loss provision resulting therefrom is recognized as a loss reduction or gain is included in current profits
and losses.
(1) At the end of the period a separate impairment test shall be conducted on accounts receivable that have objective evidence
indicating impairment. Based on the difference between their expected future cash flow present value and their book value impairment
losses shall be recognized and bad debt reserves shall be withdrawn.
(2) When the expected credit loss information cannot be assessed through a single financial asset at a reasonable cost the
Company establishes aging portfolios based on credit risk characteristics and calculates expected credit losses on the aging portfolio
basis.Aging Expected credit loss rate of contract assets (%)
Within 1 year (including 1 year) 5
1-2 years (including 2 years) 10
2-3 years (including 3 years) 30
Over 3 years 100
For contract assets that contain significant financing components the Company chooses to adopt a simplified model of expected
credit losses which always measures its loss provision at an amount equivalent to the expected credit losses for the entire duration.The increase or reversal of the loss provision resulting therefrom is recognized as a loss reduction or gain is included in current profits
and losses.
16. Contract cost
The contract cost shall include the contract performance cost and the contract acquisition cost.If the cost incurred by the Company in fulfilling a contract simultaneously meets the following conditions it shall be recognized
as a contract performance cost as an asset:
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 due to the contract;
2. Such cost increases the enterprise's resources used for future performance of performance obligations;
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3. This cost is expected to be recovered.
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. However if the asset is amortized for no more than one year it can be included in current
profits and losses when incurred.Assets related to contract costs are amortized on the same basis as the recognition of revenue from goods or services related to
the assets.If the book value of the assets related to the contract cost is higher than the difference between the following two items the
Company shall withdraw the impairment provision for the excess part and recognize it as assets impairment loss:
1. The remaining consideration which the Company is expected to obtain due to the transfer of the commodities or services
related to such assets;
2. The cost estimated to be incurred for the transfer of the relevant commodities or services.
If the above-mentioned asset impairment provision is subsequently reversed the book value of the reversed asset shall not exceed
the book value of the asset on the date of reversal assuming no impairment provision is made.
17. Held-for-sale assets
The Company classifies group components (or non-current assets) that meet the following conditions simultaneously as held for
sale: (1) According to the convention of selling such assets or disposal groups in similar transactions they can be immediately sold
under current conditions; (2) The sale is highly likely to occur and a decision has been made on a sale plan and a confirmed purchase
commitment has been obtained. The confirmed purchase commitment refers to a legally binding purchase agreement signed between
the enterprise and other parties which includes important terms such as transaction price time and sufficiently severe breach penalties
making the possibility of significant adjustment or revocation of the agreement extremely low. The sale is expected to be completed
within one year. Approval from relevant authorities or regulatory authorities has been obtained in accordance with relevant regulations.The Company adjusts the held-for-sale expected net residual value to reflect the net amount of its fair value minus selling
expenses (but not exceeding the original book value of the held for sale assets). The difference between the original book value and
the adjusted expected net residual value is recognized as an asset impairment loss and included in current profits and losses and a
provision for impairment of held-for-sale assets is also made. For the amount of asset impairment loss recognized by the disposal group
held for sale the book value of goodwill in the disposal group shall be offset first and then the book value shall be offset proportionally
according to the proportion of the book value of non-current assets measured and stipulated in the Accounting Standards in the disposal
group.If the net amount of the fair value of non-current assets held for sale minus the selling expenses increases on the subsequent
balance sheet date the amount previously written down shall be restored and reversed within the amount of asset impairment loss
recognized after being classified as held for sale and the reversed amount shall be included in current profits and losses. The impairment
loss of assets recognized before being classified as held for sale is not reversed. If the net amount of the fair value of the disposal group
held for sale minus the selling expenses increases on the subsequent balance sheet date the amount previously written down shall be
restored and reversed within the amount of asset impairment loss recognized for non-current assets to which the measurement
provisions of the Accounting Standards are applicable after being classified as held for sale and the reversed amount shall be included
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in current profits and losses. The book value of goodwill that has been offset and the impairment loss of non-current assets that are
subject to the measurement provisions of these standards before they are classified as held for sale shall not be reversed. For the
subsequent reversed amount of asset impairment loss recognized by the disposal group held for sale the book value shall be increased
in proportion to the book value of non-current assets measured and stipulated in the Accounting Standards in the disposal group except
for goodwill.If an enterprise loses control over a subsidiary due to the sale of its investment in the subsidiary or other reasons regardless of
whether the enterprise retains a portion of its equity investment after the sale the overall investment in the subsidiary shall be classified
as held for sale in the parent company's individual financial statements when the proposed investment in the subsidiary meets the
criteria for classification as held for sale. In the consolidated financial statements all assets and liabilities of the subsidiary are classified
as held for sale.
18. Long-term equity investment
1. Determination of investment cost
(1) In case of a business merger under the same control if the combining party pays cash transfers non-cash assets assumes
debts or issues equity securities as the merger consideration the initial investment cost shall be the share of the owner's equity of the
combined party in the ultimate controller's consolidated financial statements on the merger date. The difference between the initial
investment cost of long-term equity investment and the book value of the paid merger consideration or the total face value of the issued
shares is adjusted to the capital reserve (capital premium or equity premium). If the capital reserve is insufficient to offset the retained
earnings shall be adjusted.In case of a merger of enterprise under the same control step by step the initial investment cost of the investment shall be the
share of the owner's equity of the combined party on the merger date calculated based on the shareholding ratio. The difference between
the initial investment cost and the book value of the original long-term equity investment plus the book value of the newly paid
consideration for further shares obtained on the merger date shall be adjusted to the capital reserve (capital premium or equity premium).If the capital reserve is insufficient to offset the retained earnings shall be offset.
(2) For a merger under different control the fair value of the paid merger consideration shall be used as the initial investment
cost on the date of acquisition.
(3) Except for those formed through business merger: for those acquired through cash payment the initial investment cost shall
be the actual purchase price paid; for those acquired through the issuance of equity securities their initial investment cost shall be the
fair value of the issued equity securities; if it is invested by an investor the initial investment cost shall be the value agreed upon in the
investment contract or agreement (except for those with unfair value agreed upon in the contract or agreement).
2. Subsequent measurement and profit and loss recognition methods
The long-term equity investment that the Company can control over the investee is accounted for using the cost method in
individual financial statements of the Company; the long-term equity investment with joint control or significant influence shall be
accounted for by the equity method.When the cost method is adopted long-term equity investments are valued at the initial investment cost. Except for the declared
but not yet distributed cash dividends or profits included in the actual payment or consideration when obtaining the investment the
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cash dividends or profits declared to be distributed by the investee are recognized as current investment income and the impairment
of long-term investments is considered based on relevant asset impairment policies.When equity method is adopted if the cost of initial investment of long-term equity investment exceeds identifiable fair value of
net assets of invested units sharable at investment cost of initial investment of long-term equity investment is included; if the cost of
initial investment of long-term equity investment is less than identifiable fair value of net assets of invested units sharable at investment
the difference is included in current profits and losses when it is incurred and meanwhile the cost of long-term equity investment shall
be adjusted.When the equity method is adopted after obtaining the long-term equity investment the investment profits and losses shall be
recognized and the book value of the long-term equity investment shall be adjusted according to the share of the net profits and losses
realized by the investee that shall be enjoyed or shared. When recognizing the attributable share of the net profit and loss of the investee
it shall be recognized after adjustment of the net profit of the investee based on the fair value of the identifiable assets of the investee
at the time of acquisition of the investment and in accordance with the Company's accounting policies and accounting period and after
the portion of internal transaction losses incurred between associates and joint ventures is offset and the portion attributable to the
investing enterprise is calculated based on the shareholding ratio (but if internal transaction losses belong to asset impairment losses
they shall be fully recognized). The portion that shall be distributed shall be calculated based on the profits or cash dividends declared
by the investee and the book value of long-term equity investments shall be correspondingly reduced. The Company recognizes the
net loss incurred by the investee to the extent that the book value of the long-term equity investment and other long-term equities that
substantially constitute the net investment in the investee are reduced to zero except for the situation where the Company is obligated
to bear additional losses. For changes in owner's equity of the investee other than net profit or loss the book value of long-term equity
investments shall be adjusted and recorded in owner's equity.
3. Basis for determining control and significant impact on the investee
Control refers to having the power over the invested party enjoying variable returns through participation in related activities of
the investee and having the ability to use the power over the investee to influence the return amount. Significant influence refers to the
investor having the power to participate in decision-making on the financial and operational policies of the investee but not being able
to control or jointly control the formulation of these policies with other parties.
4. Disposal of long-term equity investments
(1) Partial disposal of long-term equity investments in subsidiaries without losing control
When disposing of a long-term equity investment in a subsidiary without losing control the difference between the disposal price
and the corresponding book value of the disposed investment shall be recognized as current investment income.
(2) Partial disposal of equity investments or loss of control over subsidiaries due to other reasons
If control over a subsidiary is lost due to partial disposal of equity investments or other reasons the book value of the long-term
equity investment corresponding to the sold equity shall be carried forward. The difference between the sale price and the book value
of the long-term equity investment shall be recognized as investment income (loss); meanwhile the remaining equity shall be
recognized as long-term equity investment or other related financial assets based on its book value. If the remaining equity after disposal
can exercise joint control or significant influence on the subsidiary accounting treatment shall be carried out in accordance with the
relevant provisions on the conversion of the cost method to the equity method.
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5. Impairment test method and method of provision for assets impairment
If there is objective evidence indicating impairment of investments in subsidiaries associates and joint ventures on the balance
sheet date corresponding impairment provisions shall be made based on the difference between the book value and the recoverable
amount.
19. Fixed assets
(1) Recognition conditions
Fixed assets of the Company are physical assets held by the Company for use in the production of goods labor service leasing
and for administrative purposes. 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
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
(3) Recognition basis valuation method and depreciation methods of fixed assets under financing lease
Not applicable
20. Construction in progress
1. Construction in progress is transferred to fixed assets when it reaches the expected conditions for use according to the actual
project cost. For those that have reached the expected conditions for use but have not yet been subjected to final accounts they shall
be transferred to fixed assets based on the estimated value. After the final accounts are processed the original estimated value shall be
adjusted based on the actual cost but the depreciation already calculated shall not be adjusted.
2. On the balance sheet date if there are signs indicating impairment of construction in progress corresponding impairment
provisions shall be made based on the difference between the book value and the recoverable amount.
21. Borrowing costs
1. Recognition principles for capitalization of borrowing costs
Borrowing costs are loan interests amortization of depreciation or appreciation arising from borrowings auxiliary expenses and
exchange differences from foreign currency borrowings etc. The borrowing costs for inventory and investment properties that can be
directly attributed to the purchase and construction of fixed assets and require a construction or production process of more than one
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year (including one year) to reach the expected conditions for use and sales shall be capitalized; other borrowing costs are recognized
as expenses based on their amount when incurred and included in current profits and losses. The borrowing costs that shall be
capitalized begin capitalizing when the following three conditions are met simultaneously:
(1) Asset expenditure has already incurred;
(2) The borrowing costs have already been incurred;
(3) Acquisition construction or production activities necessary to bring the asset to be ready for its intended use or sale are in
progress.
2. The period of capitalization of borrowing costs: For the borrowing costs that shall be capitalized if they meet the above
capitalization conditions and incur before the relevant assets that meet the capitalization conditions have reached their expected
conditions for use or sale they shall be included in the cost of the relevant assets. If there is an abnormal interruption in the acquisition
construction or production activities of the relevant assets and the interruption lasts for more than 3 consecutive months the
capitalization of borrowing costs shall be suspended. The borrowing costs incurred during the interruption period shall be recognized
as expenses and included in current profits and losses until the acquisition construction or production activities of the assets restart.When the relevant assets reach their expected conditions for use or sale the capitalization of borrowing costs shall be stopped and
subsequent borrowing costs shall be directly recorded in the current financial expenses based on their amount when incurred.
3. Calculation methods for capitalized amount of borrowing costs
(1) Capitalized amount of loan interest: For specialized loans borrowed for the purchase construction or production of assets
that meet the capitalization conditions the capitalized amount of interest for each accounting period shall not exceed the actual interest
expenses incurred in the current period of the specialized loan minus the interest income obtained from depositing unused loan funds
in the bank or the investment income obtained from temporary investments.As for general borrowings for the acquisition construction or production and development of assets eligible for capitalization
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 capitalization rate of general borrowings.The capitalization rate is calculated and determined based on the weighted average interest rate of general borrowings. The capitalized
amount of interest for each accounting period shall not exceed the actual interest amount incurred on the relevant borrowings in the
current period.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.
(2) Auxiliary expenses: Auxiliary expenses incurred for specialized loans that incur before the assets purchased constructed or
produced that meet the capitalization conditions reach their intended conditions for use and sale shall be capitalized based on their
amount when incurred and included in the cost of assets that meet the capitalization conditions. If an asset that meets the capitalization
conditions and is purchased constructed or produced reaches its intended conditions for use and sale it shall be recognized as an
expense based on its amount when incurred and included in current profits and losses.The auxiliary expenses incurred in general borrowing are recognized as expenses based on their amount when incurred and
included in current profits and losses.
(3) During the capitalization period the exchange difference between the principal and interest of foreign currency loans that fall
within the scope of capitalization of borrowing costs shall be capitalized.
22. Right-of-use assets
On the commencement date of the lease term the Company recognizes the right-of-use assets and lease liabilities for the lease
except for short-term leases and low value asset leases that have been simplified using the standards.The right-of-use assets are initially measured at cost by the Company. The cost includes:
1. The initial measurement amount of lease liabilities;
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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;
4. The costs that the Company expects to incur for dismantling and removing the leased assets restoring the site where the leased
assets are located or restoring the leased assets to the state agreed in the lease terms. Where the aforementioned costs are incurred for
the production of inventory the "Accounting Standards for Enterprises No.1 - Inventories" shall apply.The Company recognizes and measures the costs mentioned in item 4 in accordance with the "Accounting Standards for
Enterprises No. 13 - Contingencies".The initial direct cost refers to the incremental cost incurred to achieve the lease. Incremental cost refers to the cost that would
not incur if the enterprise did not acquire the lease.The Company makes depreciation for the right-of-use assets with reference to the relevant depreciation provisions of the
"Accounting Standards for Enterprises No. 4 - Fixed Assets". 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 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 during the shorter period of the lease term and the remaining useful life of the leased asset.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 - Asset Impairment".
23. Intangible assets
(1) Valuation method service life and impairment test
The intangible assets of the Company are valued at their actual cost at the time of acquisition.If the service life of intangible assets is limited they shall be amortized evenly in installments over the expected service life from
the month of acquisition. If it is impossible to foresee the period during which intangible assets will bring economic benefits to the
enterprise they shall be considered as intangible assets with uncertain service lives and shall not be amortized. The amortization period
of the expected service life shall be determined based on the following principles: For intangible assets derived from contractual or
other legal rights their service life shall not exceed the term of the contractual or other legal rights. If the contractual or other legal
rights are extended upon expiration due to renewal or other reasons and there is evidence indicating that the enterprise does not need
to pay a significant cost for renewal the renewal period shall be included in the service life. If the contract or law does not specify a
service life the enterprise shall make a comprehensive judgment based on various factors to determine the period during which
intangible assets can bring economic benefits to the enterprise. If the period during which intangible assets bring economic benefits to
the enterprise cannot be reasonably determined according to the above methods the intangible asset shall be treated as an intangible
asset with an uncertain service life.Depreciation
Category Estimated service life (year)
method
Straight-line
Land use From obtaining the land use right to the termination date of the land use
method
rights right
Straight-line
Software 2-10 method
Recognition criteria and provision methods for impairment of intangible assets:
For intangible assets with uncertain benefit periods such as trademarks impairment tests are conducted at the end of each year
to estimate their recoverable amount. An impairment provision for intangible assets is made based on the difference between their
recoverable amount and their book value.
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For other intangible assets an inspection is conducted at the end of the year. When there are signs of impairment the recoverable
amount is estimated and an impairment provision for intangible assets is made based on the difference between the recoverable amount
and the book value.
(1) It has been replaced by other new technologies causing significant adverse effects on its ability to create economic benefits
for the Company;
(2) The market price has significantly declined in the current period and is not expected to recover within the remaining
amortization period;
(3) It has exceeded the legal protection period but still has partial use value;
(4) Other circumstances that are sufficient to prove that impairment has actually incurred.
(2) Internal R&D expenditure accounting policy
Specific standards for expenditure during the R&D stages of internal R&D projects
Expenditure on R&D projects inside the Company can be divided into expenditure in research stage and expenditure in
development stage;
(1) The expenditures during research shall be included in current profits and losses as incurred.
(2) Expenditures during the development stage shall be recognized as intangible assets when proving the following:
* Complete such intangible asset to make it usable or salable with technical feasibility;
* Intention of completing such intangible asset for use or sale;
* Method for intangible assets to produce future 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;
* 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;
* The expenditures attributable to development stage of such intangible assets shall be measured reliably.The expenses incurred during the research stage of intangible assets developed through self research are included in current
profits and losses when incurred; the expenses incurred during the development stage that meet the following conditions are recognized
as intangible assets (patented technology and non patented technology):
(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) The products produced using the intangible asset have a market or the intangible asset itself has a market;
(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.
24. Long-term assets impairment
The enterprise shall determine whether there are any signs of possible impairment of assets on the balance sheet date.Intangible assets with uncertain goodwill and service life formed by business mergers shall undergo impairment test annually
regardless of whether there are signs of impairment.The presence of the following signs indicates that assets may have been impaired:
(1) The market price of assets has significantly decreased in the current period and its decline is significantly higher than the
expected decline due to the passage of time or normal use; (2) The economic technological or legal environment in which the enterprise
operates as well as the market of the assets have undergone significant changes in the current period or in the near future resulting in
adverse effects on the enterprise; (3) The market interest rate or other market investment return rates have increased in the current
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period which affects the discount rate of the enterprise to calculate the present value of the expected future cash flow of the assets
resulting in a significant reduction in the recoverable amount of the assets; (4) There is evidence indicating that the assets have become
outdated or its entity has been damaged; (5) Assets have been or will be idle terminated or planned for early disposal; (6) The evidence
in the internal report of the enterprise indicates that the economic performance of the assets has been or will be lower than expected
such as the net cash flow created by the assets or the operating profit (or loss) realized being much lower (or higher) than the expected
amount; (7) Other signs indicating that assets may have been impaired.Where there are signs of impairment of assets the recoverable amount shall be estimated.The recoverable amounts are the higher between the net amount of their fair values less the disposal expenses and the present
values of estimated future cash flows of the assets.The disposal expenses shall include the relevant legal expenses relevant taxes truckage as well as the direct expenses for bringing
the assets into a marketable state.The present value of the asset's estimated future cash flow shall be determined per the estimated future cash flow generated in
the process of the asset's continuous use and the final disposal based on the account upon selecting proper discount rate to discount
the asset. The present value of the future cash flow of an asset shall be predicted in comprehensive consideration of the future cash
flow service life discount rate and other factors 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 asset shall be written down to the recoverable amount. The written down amount is recognized as an asset
impairment loss and included in current profits and losses. At the same time a corresponding asset impairment provision shall be made.
25. Long-term deferred expenses
Long-term deferred expenses are recorded based on the actual amount incurred and amortized evenly over the benefit period or
specified period. If a long-term deferred expense item cannot benefit future accounting periods the amortized value of the item that
has not yet been amortized will be fully transferred to the current profit and loss.
26. Contract liabilities
The Company lists contract assets or contract liabilities in the balance sheet according to the relationship between the performance
of performance obligations and customer payment. The Company lists contract assets or contract liabilities in the balance sheet
according to the relationship between the performance of performance obligations and customer payment.
27. Employee compensation
(1) Accounting treatment methods for short-term compensation
During the accounting period when the employees work for the Company the actual short-term compensation is recognized as
liabilities and included in current profits and losses for the current period or relevant asset costs. Among them non-monetary benefits
are measured at the fair value.
(2) Accounting treatment method for post employment benefits
Post employment benefits mainly include basic pension insurance premiums unemployment insurance premiums etc. classified as
defined contribution plans based on the risks and obligations borne by the Company. During the accounting period when employees
provide services the Company will recognize the payable amount calculated in accordance with the above social security regulations
as a liability and include it in the current profits and losses or related asset costs.
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(3) Accounting treatment method for dismissal benefits
The Company terminates the labor relationship with employees before the expiration of their labor contracts or proposes
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
dismissal benefits 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.
28. Lease liabilities
On the commencement date of the lease term the Company recognizes the right-of-use assets and lease liabilities for the lease
except for short-term leases and low value asset leases that have been simplified using the standards.Lease liabilities are initially measured according to the present value of the unpaid lease payments on the commencement date
of the lease term.The lease payment amount refers to the amount paid by the Company to the lessor related to the right to use the leased asset
during the lease term including:
1. Fixed payment and substantial fixed payment. If there is lease incentive the relevant amount of lease incentive shall be
deducted;
2. The variable lease payment amount depends on the index or ratio which is determined at the initial measurement based on the
index or ratio on the commencement date of the lease term;
3. The exercise price of the purchase option provided that the Company reasonably determines that the option will be exercised;
4. The amount to be paid for the exercise of the option to terminate the lease provided that the lease term reflects that the
Company will exercise the option to terminate the lease;
5. The amount expected to be paid according to the residual value of the guarantee provided by the Company.
When calculating the present value of lease payments the Company uses the interest rate implicit in the lease as the discount
rate. If the interest rate implicit in the lease cannot be determined the incremental borrowing interest rate shall be used as the discount
rate.
29. Estimated liabilities
1. When the obligation formed by providing external guarantees litigation matters product quality assurance loss contracts and
other contingencies becomes a current obligation undertaken by the Company and the performance of this obligation is likely to result
in economic benefits flowing out of the Company and the amount of this obligation can be reliably measured the Company recognizes
this obligation as an estimated liability.
2. The Company initially measures the estimated liabilities based on the best estimate of the expenses required to fulfill the
relevant current obligations and reviews the book value of the estimated liabilities on the balance sheet date.
30. Share-based payment
1. Types of share-based payments
This includes equity settled share-based payments and cash settled share-based payments.
2. Method for determining the fair value of equity instruments
(1) If there is an active market it shall be determined based on the quoted prices in the active market;
202ZKTeco 2022 Annual Report
(2) Valuation techniques are adopted if there is no active market including reference to prices used in recent market transactions
by various parties who are familiar with the situation and voluntary transactions reference to the current fair value of other financial
instruments that are substantially the same discounted cash flow method and option pricing model.
3. Basis for confirming the best estimate of exercisable equity instruments
Estimate based on the latest changes in the number of employees with feasible rights and other subsequent information.
4. Accounting treatment for the implementation modification and termination of share-based payment plans
(1) Equity settled share-based payments
Equity settled share-based payments that are immediately exercisable after grant in exchange for employee services shall be
recognized as relevant costs or expenses based on the fair value of the equity instrument on the grant date and the capital reserve shall
be adjusted accordingly. For equity settled share-based payments that require the completion of services during the waiting period or
the achievement of specified performance conditions in exchange for employee services on each balance sheet date during the waiting
period the services obtained in the current period shall be recognized as relevant costs or expenses at the fair value of the equity
instrument grant date based on the best estimate of the number of vested equity instruments and the capital reserve shall be adjusted
accordingly.For equity settled share-based payments in exchange for services from other parties if the fair value of the services from other
parties can be reliably measured they shall be measured at the fair value of the services from other parties on the date of acquisition.If the fair value of services provided by other parties cannot be reliably measured but the fair value of equity instruments can be
reliably measured the fair value of equity instruments on the date of service acquisition shall be measured and included in relevant
costs or expenses with corresponding increase in owner's equity.
(2) Cash settled share-based payments
Cash settled share-based payments that are immediately exercisable after the grant in exchange for employee services are
recognized as relevant costs or expenses at the fair value of the Company's liabilities on the grant date with corresponding increases
in liabilities. 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 in exchange for employee services 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 expense
and the corresponding liabilities according to the fair value amount of the Company's liabilities.
(3) Modify or terminate the share-based payment plan
If the modification increases the fair value of the granted equity instrument the Company shall recognize the increase in services
obtained accordingly based on the increase in fair value of the equity instrument; if the modification increases the number of equity
instruments granted the Company will recognize the fair value of the increased equity instruments as an increase in the acquisition of
services accordingly; if the Company modifies the vesting conditions in a way that benefits employees the Company will consider the
modified vesting conditions when dealing with the vesting conditions.If the modification reduces the fair value of the granted equity instrument the Company will continue to recognize the amount
of services obtained based on the fair value of the equity instrument on the grant date without considering the decrease in the fair value
of the equity instrument; if the modification reduces the number of granted equity instruments the Company will treat the reduced
portion as cancellation of the granted equity instruments; if the vesting conditions are modified in a way that is not conducive to
employees the modified vesting conditions will not be considered when dealing with the vesting conditions.If the Company cancels or settles the granted equity instruments during the waiting period (except for those cancelled due to
failure to meet the vesting conditions) the cancellation or settlement will be treated as accelerated vesting and the amount originally
confirmed during the remaining waiting period will be immediately confirmed.
31. Revenue
Accounting policies adopted for revenue recognition and measurement
1. Revenue recognition
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The Company recognizes the revenue when performance obligations under the contract are performed i.e. the consumer obtains
the control power over relevant goods. 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.
2. According to the relevant provisions of the revenue standards the Company determines that the nature of the relevant
performance obligations belongs to "performance obligations performed within a certain period of time" or "performance obligations
performed at a certain point of time" and recognizes revenue according to the following principles.
(1) When any of the following conditions is satisfied it will be deemed as that the Company fulfills its performance obligations
during certain period:
* The customers obtain and consume the economic benefit arising from the performance of the Company at the time of the
performance of the Company.* The customer is able to control the in-process assets during the Company's performance.* The assets produced during the performance of the Company are for an irreplaceable purpose and during the contract period
the Company has the right to ask for the payment for the completed performance accumulated so far.For the performance obligations within a certain period of time the Company recognizes the revenue in accordance with the
performance progress during the period except that the performance progress cannot be determined reasonably. The Company
considers the nature of the goods and uses the output method or input method to determine the appropriate performance schedule.
(2) For performance obligations that are not fulfilled within a certain period of time and are fulfilled at a certain time point the
Company recognizes revenue at the time when the customer obtains control of the relevant goods.In the judgment of whether the customer has obtained the control over the goods the Company will consider the following
indications:
* The Company has the current right to collect the goods that is the customer has a current payment obligation for the goods.* The Company has transferred the legal ownership of the goods to the customer that is the customer has obtained the legal
ownership of the goods.* The Company has transferred the physical goods to the customer that is the customer has possessed the physical goods.* The Company has transferred the main risks and rewards existing in the ownership of the goods to the customers that is the
customer has obtained the main risks and rewards existing in the ownership of the goods.* The customer has accepted the item.* Other signs that customers have gained control of the goods.
3. Measurement of revenue
Revenue shall be measured by the Company according to the transaction price apportioned to each individual performance
obligation. In determining the transaction price the Company considers the impact of variable consideration major financing
components in the contract non-cash consideration and consideration payable to customers.
(1) Variable consideration
The Company determines the best estimate of variable consideration based on expected value or the most likely amount to occur
but the transaction price including variable consideration shall not exceed the amount of the cumulative recognized revenue that is
highly unlikely to result in a significant reversal when the relevant uncertainty is eliminated. When evaluating whether the cumulative
recognized revenue is highly unlikely to undergo a significant reversal the enterprise shall also consider the possibility and proportion
of revenue reversal.
(2) Significant financing components
If there are significant financing components in the Contract the Company will determine the transaction price based on the
amount payable which is assumed to be paid by the customer in cash when obtaining the control right on goods. The difference between
the transaction price and the contract consideration shall be amortized using the effective interest rate method during the contract period.
(3) Non-cash consideration
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Where a customer pays non-cash consideration the Company determines the transaction price based on the fair value of the non-
cash consideration. Where the fair value of the non-cash consideration cannot be reasonably estimated the Company indirectly
determines the transaction price with reference to the separate selling price of the goods it undertakes to transfer to customers.
(4) Consideration payable to customers
For the consideration payable to customers the payable consideration shall be offset against the transaction price and the current
income shall be offset at the later of the recognition of relevant income and the payment (or commitment to pay) of customer
consideration except for the consideration payable to customers to obtain other clearly distinguishable goods from customers.The consideration payable by the enterprise to customers is to obtain other clearly distinguishable goods from customers and the
purchased goods shall be confirmed in a manner consistent with other purchases of the enterprise. Where the consideration payable by
the enterprise to the customer exceeds the fair value of the identifiable goods obtained from the customer the excess amount shall be
offset against the transaction price. If the fair value of clearly distinguishable goods obtained from customers cannot be reasonably
estimated the Company shall offset the transaction price in full with the consideration payable to customers.Differences in accounting policies for revenue recognition due to different business models used in similar businesses
The Company recognizes revenue at different time points under different business models which can be divided into the
following situations:
(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 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.
32. Government subsidies
1. Government subsidies include government subsidies related to assets and government subsidies related to income.
2. 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 are directly included in the current profits and losses.
205ZKTeco 2022 Annual Report
3. The gross price method is adopted for government subsidies:
(1) Government subsidies related to assets are recognized as deferred income and included in the profits and losses in stages
within the useful life of the relevant assets in a reasonable and systematic way. If the relevant assets are sold transferred scrapped or
damaged before the end of their service lives the balance of relevant deferred income that has not been allocated shall be transferred
to the current profits and losses of asset disposal.
(2) Government subsidies related to income that are used to compensate related costs or losses in subsequent periods shall be
recognized as deferred income and shall be included in current profits and losses during the period when the related costs are
recognized. Those used to compensate related costs or losses that have already occurred are directly included in current profits and
losses.
4. For the government subsidies that include both asset-related and income-related portions accounting treatments shall be
subject to different portions; if difficult to distinguish them they shall be classified as income-related government subsidies in whole.
5. The government subsidies related to the Company's daily activities shall be included in other income or offset against relevant
costs according to the essence of economic business; and the governmental subsidies unrelated to daily activities of the Company shall
be included in non-operating income and expenditure.
6. The policy preferential loans obtained by the Company will be treated in two ways: The government will allocate the discount
funds to the lending bank and the government will directly allocate the discount funds to the Company:
(1) Where the finance department allocates the discount fund to the lending bank and the lending bank provides a loan at the
policy-based preferential interest rate for the Company the Company chooses to conduct accounting treatment according to the
following methods:
1) Use the actually received loan amount as the entry value of the loan and counts relevant borrowing costs based on loan principal
and the policy-based preferential interest rate.
2) The fair value of the loan is used as the entry value of the loan and the borrowing costs are calculated using the effective
interest rate method. The difference between the actual received amount and the fair value of the loan is recognized as deferred income.Deferred income is amortized using the effective interest rate method during the duration of the loan to offset related borrowing costs.
(2) Where the finance directly allocates the discount fund to the Company the Company uses the corresponding discount to
offset relevant borrowing costs.
33. Deferred income tax assets/deferred income tax liabilities
The Company adopts the balance sheet liabilities method to provide deferred income tax based on the temporary difference
between the book value of assets/liabilities and tax basis at the balance sheet date. 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. Recognition of deferred income tax assets
(1) The Company recognizes the deferred income tax assets arising from the deductible temporary differences to the extent that
it is likely to obtain the taxable income used to offset the deductible temporary differences. However deferred income tax assets arising
from the initial recognition of assets or liabilities in transactions with the following characteristics shall not be recognized:
1) This transaction is not a business merger;
2) When a transaction occurs it does not affect accounting profits or taxable income (or deductible losses).
(2) The Company recognizes deferred income tax assets for deductible temporary differences related to investments in
subsidiaries associates and joint ventures that meet the following conditions:
1) The temporary difference is likely to reverse in the foreseeable future;
2) It is likely to obtain taxable income to offset temporary differences in the future.
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(3) As for any deductible loss and tax deduction which can be carried forward to the next year the corresponding deferred income
tax assets are recognized by the Company to the extent the taxable income which is likely to be obtained for offsetting the deductible
loss and tax deduction.
2. Recognition of deferred income tax liabilities
Except for deferred income tax liabilities arising from the following situations the Company recognizes all deferred income tax
liabilities arising from taxable temporary differences:
(1) Initial recognition of goodwill;
(2) The initial recognition of assets or liabilities arising from transactions that simultaneously meet the following characteristics:
1) This transaction is not a business merger;
2) When a transaction occurs it does not affect accounting profits or taxable income (or deductible losses).
(3) The Company has taxable temporary differences related to investments in subsidiaries associates and joint ventures that
meet the following conditions:
1) The investment enterprise can control the timing of the reversal of temporary differences;
2) The temporary difference is likely not to reverse in the foreseeable future.
34. Leasing
(1) Accounting treatment methods for operating leases
(1) The Company as lessor
As the lessor the Company adopts the straight-line method to recognize the rental income from operating leases during each
period of the lease term. The Company capitalizes the initial direct expenses related to operating leases and allocates them on the same
basis as the recognition of rental income during the lease term and includes them in the current profits and losses.For fixed assets in assets under operating lease the Company shall adopt a depreciation policy similar to that of assets to calculate
depreciation; for other assets under operating lease they shall be amortized using systematic and reasonable methods in accordance
with the applicable Accounting Standards for Enterprises. The Company determines whether the assets under operating lease have
been impaired and conducts the corresponding accounting treatment according to the "Accounting Standards for Enterprises No. 8 -
Asset Impairment".
(2) The Company as lessee
When the Company is the lessee on the commencement date of the lease term except for short-term leases and low value asset
leases for which simplified treatment is adopted the right-to-use assets and lease liabilities are recognized for the lease.After the commencement date of the lease term the Company adopts a cost model for subsequent measurement of the right-of-
use asset. The Company makes depreciation for the right-of-use assets with reference to the relevant depreciation provisions of the
"Accounting Standards for Enterprises No. 4 - Fixed Assets". 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 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 during the shorter period of the lease term and the remaining useful life of the leased asset. 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 - Asset Impairment".The Company calculates the interest expense of the lease liability in each period of the lease term according to the fixed periodic
interest rate and records it into the current profits and losses. Where they shall be included in the cost of relevant assets according to
other standards such as the "Accounting Standards for Enterprises No. 17- Borrowing Costs" the provisions shall apply.For short-term leases and low value asset leases the Company chooses not to recognize the right-of-use assets and lease liabilities.The lease payments for short-term leases and low value asset leases are recorded in the relevant asset costs or current profit and loss
using the straight-line method during each period of the lease term.
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(2) Accounting treatment methods for financial leasing
(1) The Company as lessor
As the lessor the Company recognizes the receivable financing lease payments for financing leases on the commencement date
of the lease term terminates the recognition of financing lease assets and calculates and recognizes interest income for each period of
the lease term at a fixed periodic interest rate.
(2) The Company as lessee
When the Company is the lessee on the commencement date of the lease term except for short-term leases and low value asset
leases for which simplified treatment is adopted the right-to-use assets and lease liabilities are recognized for the lease.After the commencement date of the lease term the Company adopts a cost model for subsequent measurement of the right-of-
use asset. The Company makes depreciation for the right-of-use assets with reference to the relevant depreciation provisions of the
"Accounting Standards for Enterprises No. 4 - Fixed Assets". 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 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 during the shorter period of the lease term and the remaining useful life of the leased asset. 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 - Asset Impairment".The Company calculates the interest expense of the lease liability in each period of the lease term according to the fixed periodic
interest rate and records it into the current profits and losses. Where they shall be included in the cost of relevant assets according to
other standards such as the "Accounting Standards for Enterprises No. 17- Borrowing Costs" the provisions shall apply.For short-term leases and low value asset leases the Company chooses not to recognize the right-of-use assets and lease liabilities.The lease payments for short-term leases and low value asset leases are recorded in the relevant asset costs or current profit and loss
using the straight-line method during each period of the lease term.
35. Other important accounting policies and estimates
36. Changes of significant accounting policies and accounting estimates
(1) Significant accounting policy changes
□Applicable □ Not applicable
1) Since January 1 2022 the Company has implemented the provisions of "accounting treatment of products or by-products
produced by enterprises before or during the R&D process of fixed assets reaching their expected conditions for use for external
sales" in "Interpretation No. 15 of the Accounting Standards for Business Enterprises" issued by the Ministry of Finance. This
accounting policy change has no impact on the Company's financial statements.
2) Since January 1 2022 the Company has implemented the provisions of "judgment of loss contracts" in "Interpretation No. 15 of
the Accounting Standards for Business Enterprises" issued by the Ministry of Finance. This accounting policy change has no impact
on the Company's financial statements.
3) Since January 1 2022 the Company has implemented the provisions of "relevant presentation of centralized fund management" in
"Interpretation No. 15 of the Accounting Standards for Business Enterprises" issued by the Ministry of Finance. This accounting
policy change has no impact on the Company's financial statements.
4) Since December 13 2022 the Company has implemented the provisions of "accounting treatment of the income tax impact of
dividends related to financial instruments classified as equity instruments by issuers" in "Interpretation No. 16 of the Accounting
Standards for Business Enterprises" issued by the Ministry of Finance. This accounting policy change has no impact on the
Company's financial statements.
5) Since December 13 2022 the Company has implemented the provisions of "the accounting treatment for enterprises to modify
cash settled share-based payments to equity settled share-based payments" in the "Interpretation No. 16 of the Accounting Standards
for Business Enterprises" issued by the Ministry of Finance. This accounting policy change has no impact on the Company's financial
statements.
208ZKTeco 2022 Annual Report
(2) Changes in significant accounting estimates
□ Applicable □ Not applicable
37. Others
VI. Taxation
1. Main tax types and tax rates
Tax Type Tax Basis Tax rates
13.00%9.00%6.00%5.00%3.00%
Selling goods or providing taxable and applicable value-added tax rate for
VAT
services overseas subsidiaries in their registered
location
Urban maintenance and construction tax Payable turnover tax amount 7.00% 5.00%
For ad valorem taxes the remaining
Property tax value after deducting 30% from the 1.2%
original value of the property in one go
Education surcharge Payable turnover tax amount 3%
Local education surcharges Payable turnover tax amount 2%
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.Hangzhou ZKTeco Hanlian E-commerce Co. Ltd. 20%
Xi’an ZKTeco Co. Ltd. 20%
Dalian ZKTeo CO. Ltd. 20%
Hubei ZKTeco Co. Ltd. 20%
ZKCserv Technology Limited Co. Ltd. 20% 15%
XIAMEN ZKTECO CO. LTD. 15.00%
ZKTeco Huayun (Xiamen) Integrated Circuit Co. Ltd. 25%
ZKTECO (GUANGDONG) CO. LTD 15%
Shenzhen Zhongjiang Intelligent Technology Co. Ltd. 25%
Xiamen ZKTeco Cloud Valley Design and Development Co.
25%
Ltd.Wuhan ZKTeco Perception Technology Co. Ltd. 20% 15%
ZKTeco Sales Co. Ltd. 25%
ZK INVESTIMENTOS DO BRASIL LTDA. 25.00% 15.00%
ZKTECO DO BRASIL S.A. 25.00% 15.00%
Limited Liability Company "ZKTeco biometrics and security" 20%
ZK TECHNOLOGY LLC Not applicable
ZKTECO USA LLC Not applicable
ZKTECO ARGENTINA S.A. 25.00% 30.00% 35.00%
ZKTeco Latam R&D S.A. 25.00% 30.00% 35.00%
ZKTECO BIOMETRICS INDIA PRIVATE LIMITED 25.00% 15.00%
ZKTECO COLOMBIA SAS 31%
ZKTECO EUROPE SL 25%
ZKTECO IRELAND LIMITED 12.5%
ZKTECO ITALIA S.R.L. 27.9%
209ZKTeco 2022 Annual Report
ZKTeco Deutschland GmbH 31.225%
ZKTECO LATAM S.A. DE C.V. 30%
ZK SOFTWARE DE MEXICO S.A. DE C.V. 30%
ZKTECO PERU SOCIEDAD ANONIMA CERRADA 29.5%
ZKTECO SECURITY L.L.C 0%
ZKTECO THAI CO. LTD. 20% 15.00% 0.00%
Armatura Tech Co. Ltd. 20% 15.00% 0.00%
ZKTECO TURKEY ELEKTRONIK SANAYI VE TICARET
23.00%
LIMITED SIRKETI.ZKTECO (M) SDN. BHD. 24%
PT. ZKTECO BIOMETRICS INDONESIA 22.00% 11.00%
Armatura Co. Ltd. 25.00% 22.00% 20.00% 10.00%
ZKTeco Chile SpA 27%
SOLUCIONES INTEGRALES Y SISTEMAS SPA 27%
ZKTECO CO. LIMITED 16.50% 8.25%
NGTECO CO. LIMITED 16.50% 8.25%
ZKTECO PANAMA S.A. 5.00% 25.00%
ZKTECO SG INVESTMENT PTE. LTD. 17.00% 4.25%
ZKTECO SINGAPORE PTE. LTD. 17.00% 4.25%
ZK INTELLIGENT SOLUTIONS (PTY) LTD 28%
ZKTECO BIOMETRIC LIMITED 30%
ZKTECO BIOMETRICS KENYA LIMITED 30%
ZKTECO Investment Inc. 21%
ZK INVESTMENTS INC. 21%
ARMATURA LLC. 21%
ZKTeco Japan Co. Ltd. 23.20%、15.00%
ZKTECO UK LTD 19%
ZKTECO VIETNAM TECHNOLOGY COMPANY LIMITED 20%
ZKTECO ROMANIA S.R.L 16%
2. Tax incentives
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) 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%.ZKCserv Technology Limited Co. Ltd. Dalian ZKTeo CO. Ltd. and Wuhan ZKTeco Perception Technology Co. Ltd. are
taxpayers whose sales revenue from providing postal services telecommunications services modern services and life services
(hereinafter referred to as the four services) accounts for over 50.00% of the total sales revenue. According to the "Announcement of
the Ministry of Finance the State Taxation Administration and the General Administration of Customs on Relevant Policies for
Deepening the Value-Added Tax Reform" (Announcement No. 39 of 2019 of the General Administration of Customs of the Ministry
of Finance State Administration of Taxation) from April 1 2019 to December 31 2021 an additional 10.00% of the current deductible
input tax will be added to offset the payable value-added tax. According to the "Announcement of the Ministry of Finance and the State
Taxation Administration on Relevant Value-Added Tax Policies for Promoting the Resolution of Difficulties so as to Develop the
Difficulty-Ridden Industries in the Service Sector (Announcement No. 11 of the Ministry of Finance and the State Administration of
Taxation in 2022)" issued on March 3 2022 the implementation period of the above-mentioned value-added tax addition and deduction
policy was extended to December 31 2022.According to the Announcement on Further Implementing the "Announcement of the Ministry of Finance and the State Taxation
Administration on Further Implementing the "Six Taxes and Two Fees" Reduction and Exemption Policies for Micro and Small
Enterprises" (Announcement No. 10 of the State Administration of Taxation of the Ministry of Finance 2022) from January 1 2022
210ZKTeco 2022 Annual Report
to December 31 2024 small-scale value-added tax taxpayers small and micro profit enterprises and individual industrial and
commercial households can reduce 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 within a
tax amount range of 50.00%. This policy is applicable to Shenzhen ZKTeco Biometric Identification Technology Co. Ltd. Hangzhou
ZKTeco Hanlian E-commerce Co. Ltd. Xi’an ZKTeco Co. Ltd. Dalian ZKTeo CO. Ltd. Hubei ZKTeco Co. Ltd. ZKCserv
Technology Limited Co. Ltd. and Wuhan ZKTeco Perception Technology Co. Ltd.On December 20 2021 ZKTECO CO. LTD. passed the high-tech review and recognition (high-tech enterprise certificate
number: GR202144002274 valid for 3 years and the income tax preferential period is from January 1 2021 to December 31 2023).According to relevant regulations such as the "Law of the People's Republic of China on Enterprise Income Tax" the Company would
enjoy a preferential corporate income tax rate of 15.00% for high-tech enterprises in 2022.According to the "Announcement of the Ministry of Finance and the State Taxation Administration on Implementing the
Preferential Income Tax Policies for Micro and Small Enterprises and Individual Industrial and Commercial Households"
(Announcement No. 12 of the Ministry of Finance and the State Administration of Taxation 2021) from January 1 2021 to December
31 2022 the portion of Shenzhen ZKTeco Biometric Identification Technology Co. Ltd. Hangzhou ZKTeco Hanlian E-commerce
Co. Ltd. Xi’an ZKTeco Co. Ltd. Dalian ZKTeo CO. Ltd. and Hubei ZKTeco Co. Ltd. that does not exceed RMB 1 million shall be
subject to corporate income tax reduction by half based on the preferential policies stipulated in Article 2 of the "Notice of the Ministry
of Finance and the State Administration of Taxation on Implementing the Inclusive Tax Deduction and Exemption Policies for Micro
and Small Enterprises" (CS [2019] No. 13).According to the "Announcement of the Ministry of Finance and the State Taxation Administration on Further Implementing the
Preferential Income Tax Policies for Micro and Small Enterprises" (Announcement No. 13 of the Ministry of Finance and the State
Administration of Taxation 2022) from January 1 2022 to December 31 2024 the portion of Shenzhen ZKTeco Biometric
Identification Technology Co. Ltd. Hangzhou ZKTeco Hanlian E-commerce Co. Ltd. Xi’an ZKTeco Co. Ltd. Dalian ZKTeo CO.Ltd. and Hubei ZKTeco Co. Ltd. that exceeds RMB 1 million but does not exceed RMB 3 million shall be subject to corporate income
tax reduction by 25.00% and the corporate income tax shall be paid at a tax rate of 20.00%.According to the "Announcement of the Ministry of Finance and the State Taxation Administration on Implementing the
Preferential Income Tax Policies for Micro and Small Enterprises and Individual Industrial and Commercial Households"
(Announcement No. 12 of the Ministry of Finance and the State Administration of Taxation 2021) from January 1 2021 to December
31 2022 the portion of ZKCserv Technology Limited Co. Ltd. that does not exceed RMB 1 million shall be subject to corporate
income tax reduction by half based on the preferential policies stipulated in Article 2 of the "Notice of the Ministry of Finance and the
State Administration of Taxation on Implementing the Inclusive Tax Deduction and Exemption Policies for Micro and Small
Enterprises" (CS [2019] No. 13).According to the "Announcement of the Ministry of Finance and the State Taxation Administration on Further Implementing the
Preferential Income Tax Policies for Micro and Small Enterprises" (Announcement No. 13 of the Ministry of Finance and the State
Administration of Taxation 2022) from January 1 2022 to December 31 2024 the portion of ZKCserv Technology Limited Co. Ltd.that exceeds RMB 1 million but does not exceed RMB 3 million shall be subject to corporate income tax reduction by 25.00% and the
corporate income tax shall be paid at a tax rate of 20.00%.On December 11 2020 ZKCserv Technology Limited Co. Ltd. passed the high-tech identification (high-tech enterprise
certificate number: GR202044201143 valid for 3 years and the income tax preferential period is from January 1 2020 to December
31 2022). According to relevant regulations such as the "Law of the People's Republic of China on Enterprise Income Tax" ZKCserv
Technology Limited Co. Ltd. would enjoy a preferential corporate income tax rate of 15.00% for high-tech enterprises in 2022.On November 17 2022 XIAMEN ZKTECO CO. LTD. passed the high-tech identification (high-tech enterprise certificate
number: GR202235100737 valid for 3 years and the income tax preferential period is from January 1 2022 to December 31 2024).According to relevant regulations such as the "Law of the People's Republic of China on Enterprise Income Tax" XIAMEN ZKTECO
CO. LTD. would enjoy a preferential corporate income tax rate of 15.00% for high-tech enterprises in 2022.
211ZKTeco 2022 Annual Report
On December 19 2022 ZKTECO (GUANGDONG) CO. LTD passed the high-tech identification (high-tech enterprise
certificate number: GR202244002616 valid for 3 years and the income tax preferential period is from January 1 2022 to December
31 2024). According to relevant regulations such as the "Law of the People's Republic of China on Enterprise Income Tax" ZKTECO
(GUANGDONG) CO. LTD would enjoy a preferential corporate income tax rate of 15.00% for high-tech enterprises in 2022.According to the "Announcement of the Ministry of Finance and the State Taxation Administration on Implementing the
Preferential Income Tax Policies for Micro and Small Enterprises and Individual Industrial and Commercial Households"
(Announcement No. 12 of the Ministry of Finance and the State Administration of Taxation 2021) from January 1 2021 to December
31 2022 the portion of Wuhan ZKTeco Perception Technology Co. Ltd. that does not exceed RMB 1 million shall be subject to
corporate income tax reduction by half based on the preferential policies stipulated in Article 2 of the "Notice of the Ministry of Finance
and the State Administration of Taxation on Implementing the Inclusive Tax Deduction and Exemption Policies for Micro and Small
Enterprises" (CS [2019] No. 13).According to the "Announcement of the Ministry of Finance and the State Taxation Administration on Further Implementing the
Preferential Income Tax Policies for Micro and Small Enterprises" (Announcement No. 13 of the Ministry of Finance and the State
Administration of Taxation 2022) from January 1 2022 to December 31 2024 the portion of Wuhan ZKTeco Perception Technology
Co. Ltd. that exceeds RMB 1 million but does not exceed RMB 3 million shall be subject to corporate income tax reduction by 25.00%
and the corporate income tax shall be paid at a tax rate of 20.00%.On December 1 2020 Wuhan ZKTeco Perception Technology Co. Ltd. passed the high-tech identification (high-tech enterprise
certificate number: GR202042002298 valid for 3 years and the income tax preferential period is from January 1 2020 to December
31 2022). According to relevant regulations such as the "Law of the People's Republic of China on Enterprise Income Tax" Wuhan
ZKTeco Perception Technology Co. Ltd. would enjoy a preferential corporate income tax rate of 15.00% for high-tech enterprises in
2022.
3. Others
When the total taxable income of ZK INVESTIMENTOS DO BRASIL LTDA. and ZKTECO DO BRASIL S.A. is below 240000
Reals the tax rate is 15.00%; an additional 10.00% will be levied on the portion exceeding 240000 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 2022 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 2022 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 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 20.00% 15.00% and
0.00% specifically including: accounting profits below THB 300000.00 with a tax rate of 0.00%; from THB 300000.00 to THB
3000000.00 with a tax rate of 15.00%; above THB 3000000.00 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
2022 was 23.00%.
212ZKTeco 2022 Annual Report
PT. ZKTECO BIOMETRICS INDONESIA an Indonesian subsidiary applies the corporate income tax rate for the year 2022 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 Colon Free Zone 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 2022
were 4.25% and 17.00% respectively; the income tax rate was 4.25% for those within SGD 100000 and 17.00% for those exceeding
SGD 100000.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%.VII. Notes to Consolidated Financial Statements
1. Monetary fund
Unit: RMB
Item Ending Balance Beginning Balance
Cash on hand 2646715.85 2185396.69
Cash in bank 1876652122.37 513110594.31
Other monetary funds 33646193.75 57105922.99
Total 1912945031.97 572401913.99
Including: total amount deposited
200783792.34183640918.14
abroad
The total amount of funds
with restrictions on use due to mortgage 31118488.94 56113488.23
pledge or freezing
Other explanations:
Note 1: Other monetary funds are mainly restricted funds such as bank acceptance bill margin funds in transit
withdrawable funds on e-commerce platforms and other funds deposited on WeChat Alipay.Note 2: 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
213ZKTeco 2022 Annual Report
5488562.65
ZK INVESTMENTS INC. 47529677.45
ZKTECO CO. LIMITED 15460746.98 36553332.55
ZKTECO EUROPE SL 13570285.55 9706688.58
ZKTECO Investment Inc. 12478045.71 15503322.67
ZK TECHNOLOGY LLC 49108592.44 20758007.69
ZKTECO SECURITY L.L.C 17077386.32 5486378.03
Armatura Tech Co. Ltd. 33067155.46 1616592.97
Total 146250775.11 137153999.94
Note 3: As of December 31 2022 the restricted funds include bank acceptance bill margin of RMB 30551118.11 funds
in transit of RMB 557108.80 frozen litigation funds of RMB 18.71 pledged guarantee time deposits of RMB 2243.32 and non
withdrawable funds of RMB 8000.00 on e-commerce platforms. Except for the restricted funds mentioned above there are no
other restrictions on the use of funds such as mortgages or pledges. Please refer to VII. Notes to Consolidated Financial Statements
57. Assets with Restricted Ownership or Use Rights" for details. Except for the restricted funds mentioned above there are no
other restrictions on the use of funds such as mortgages or pledges.Note 4: As of December 31 2022 in the year-end balance of bank deposits the principal ending balance of time deposits
and CDs was RMB 798921471.11 and the accrued interest amount was RMB 5296813.82 which does not belong to cash and
cash equivalents. Please refer to the supplementary information item of 55 Cash Flow Statement in this section for details.
2. Trading financial assets
Unit: RMB
Item Ending Balance Beginning Balance
Financial assets measured at fair value
and whose changes are included in the 204318406.05 28444682.61
current profits and losses
Including:
Financial products 204318406.05 28444682.61
Including:
Total 204318406.05 28444682.61
3. Accounts receivable
(1) Disclosure of accounts receivable classification
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Categor
y Accrual Book Accrual Book
Proporti
Amount Amount proporti value
Proporti
Amount Amount proporti value
on on
on on
214ZKTeco 2022 Annual Report
Account
s
receivab
le with
543061543061293393293393
individu 1.26% 100.00% 0.00 1.00% 100.00% 0.00
9.609.600.380.38
al
provisio
n for bad
debts
Includ
ing:
Account
s
receivab
le with
insignifi
cant
single
543061543061293393293393
amount 1.26% 100.00% 0.00 1.00% 100.00% 0.00
9.609.600.380.38
and bad
debt
reserve
withdra
wn
separatel
y
Receiva
ble with
combine
d 426173 226751 403497 289348 153175 274031
98.74%5.32%99.00%5.29%
provisio 082.75 58.48 924.27 654.96 40.52 114.44
n for bad
debt
reserve
Includ
ing:
Account
s
receivab
le with
consolid
ated
provisio
n for bad 426173 226751 403497 289348 153175 274031
98.74%5.32%99.00%5.29%
debt 082.75 58.48 924.27 654.96 40.52 114.44
reserves
accordin
g to the
credit
risk
characte
ristics
431603281057403497292282182514274031
Total 100.00% 6.51% 100.00% 6.24%
702.3578.08924.27585.3470.90114.44
Bad debt reserve made individually: 5430619.60
Unit: RMB
215ZKTeco 2022 Annual Report
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion Reasons for provision
Shanghai Leqi
Expected non-
Automation 490186.63 490186.63 100.00%
recoverable
Technology Co. Ltd.Noble IT Solutions Expected non-
408557.71408557.71100.00%
Co. Ltd recoverable
Zicom Electronic Expected non-
365258.45365258.45100.00%
Securit recoverable
Al Asma Technology Expected non-
346077.38346077.38100.00%
LLC recoverable
Guizhou Zhongjiang
Expected non-
Intelligent Technology 334800.21 334800.21 100.00%
recoverable
Co. Ltd.Shenzhen Xuhui
Expected non-
Information 326350.00 326350.00 100.00%
recoverable
Technology Co. Ltd.TIMEWATCH Expected non-
295708.98295708.98100.00%
INFOCOM PVT. LTD. recoverable
SE DASSAULT Expected non-
241994.64241994.64100.00%
SYSTEMES recoverable
Northwood Investors Expected non-
240696.58240696.58100.00%
LLC recoverable
Gansu Fourth
Expected non-
Construction Group 224676.00 224676.00 100.00%
recoverable
Co. Ltd.Hainan Zhongkong
Expected non-
IOT Technology Co. 199579.00 199579.00 100.00%
recoverable
Ltd.VENDEMMIA
COMERCIO Expected non-
197665.93197665.93100.00%
INTERNACIONAL recoverable
LTDA
Tianjin Eagle Eye
Expected non-
Biotechnology Co. 193330.00 193330.00 100.00%
recoverable
Ltd.Wanqiao Information Expected non-
165900.00165900.00100.00%
Technology Co.Ltd. recoverable
ASIA
IDENTIFICATION
Expected non-
AND SECURITY 165065.90 165065.90 100.00%
recoverable
TECHNOLOGY
COMPANY LIMITED
Baoneng Urban
Development and Expected non-
155292.00155292.00100.00%
Construction Group recoverable
Co. Ltd.PONTO RHJ EIRELI - Expected non-
98393.1598393.15100.00%
ME recoverable
Green Electricity
Expected non-
Renewable Energy Co. 98024.64 98024.64 100.00%
recoverable
Ltd. of Nanhai Foshan
SECUZAA
SECURITY Expected non-
96587.0296587.02100.00%
SOLUTIONS LAB recoverable
PRIVATE LIMITED
Qianxinan Mengku 74672.00 74672.00 100.00% Expected non-
216ZKTeco 2022 Annual Report
Business Service Co. recoverable
Ltd.INTELLISMART Expected non-
73253.6673253.66100.00%
TECHNOLOGY INC. recoverable
RBB Technologies Expected non-
61422.9761422.97100.00%
Private Limited recoverable
Yichang Anlian
Expected non-
Intelligent Technology 56085.00 56085.00 100.00%
recoverable
Development Co. Ltd.Dongguan Yukong
Expected non-
Security Technology 53703.00 53703.00 100.00%
recoverable
Co. Ltd.KWK CELLPHONE Expected non-
36880.4136880.41100.00%
AND ACCESSORIES recoverable
Nanjing Xianji Expected non-
31850.0031850.00100.00%
Technology Co. Ltd. recoverable
Entropy Electronic
Expected non-
Technology Yangzhou 31122.66 31122.66 100.00%
recoverable
Co. Ltd.SECURITY AND
Expected non-
SERVICES REDSITE 29798.11 29798.11 100.00%
recoverable
SPA
SARL MICHEL Expected non-
29041.0629041.06100.00%
HENRY LEPAUTE recoverable
Iss Facility Services Expected non-
28152.0028152.00100.00%
(Shanghai) Ltd. recoverable
SMARTECH CO. Expected non-
24537.2624537.26100.00%
LIMITED recoverable
AVANTI SYSTEM Expected non-
20264.5520264.55100.00%
D.O.O recoverable
Expected non-
Others 235692.70 235692.70 100.00%
recoverable
Total 5430619.60 5430619.60
Bad debt reserve made by portfolio: 22675158.48
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year (including 1
408059760.1120402987.895.00%
year)
1-2 years (including 2 years) 17356998.56 1735699.87 10.00%
2-3 years (including 3 years) 314076.21 94222.85 30.00%
Over 3 years 442247.87 442247.87 100.00%
Total 426173082.75 22675158.48
Explanation of the basis for determining the portfolio:
If the provision for bad debt reserve of accounts receivable is made based on the general model of expected credit losses please
disclose the relevant information of the bad debt reserve with reference to the disclosure methods of other accounts receivable:
□ Applicable □ Not applicable
Disclosure by aging
Unit: RMB
Aging Book balance
Within 1 year (including 1 year) 408148527.11
217ZKTeco 2022 Annual Report
1-2 years 19594239.86
2-3 years 1938043.20
Over 3 years 1922892.18
3-4 years 539762.25
4-5 years 752784.17
Over 5 years 630345.76
Total 431603702.35
(2) 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
2933930.382496689.225430619.60
and bad debt
reserve
withdrawn
separately
Accounts
receivable with
significant
individual
amounts and
separate
provision for
bad debt
reserves
Accounts
receivable with
consolidated
provision for
bad debt 15317540.52 7357617.96 22675158.48
reserves
according to the
credit risk
characteristics
Total 18251470.90 9854307.18 28105778.08
(3) Actual verification of accounts receivable in the current period
Unit: RMB
Item Write-off amount
Important accounts receivable verification status:
Unit: RMB
218ZKTeco 2022 Annual Report
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
Explanation of accounts receivable verification:
No actual verification of accounts receivable in the current period
(4) Accounts receivable from top five borrowers classified based on the ending balance
Unit: RMB
Proportion in the total ending
Ending balance of accounts Ending balance of bad debt
Company name balance of accounts
receivable reserve
receivable
Customer 1 35482757.82 8.22% 2015235.85
Customer 2 22352110.08 5.18% 1118972.50
Customer 3 18800631.46 4.36% 940031.57
Customer 4 17317602.50 4.01% 865880.13
Customer 5 14290503.53 3.31% 714525.18
Total 108243605.39 25.08%
(5) Accounts receivable derecognized due to transfer of financial assets
No accounts receivable derecognized due to transfer of financial assets in current period;
(6) The amount of assets and liabilities formed by transferring accounts receivable and continuing to be
involved
If there are no transferred accounts receivable at the end of the period and they continue to be involved the amount of assets and
liabilities formed by the continued involvement shall be listed.Other explanations:
None
4. Prepayment
(1) Prepayments listed by aging
Unit: RMB
Ending Balance Beginning Balance
Aging
Amount Proportion Amount Proportion
Within 1 year 30444433.08 98.35% 52018868.71 99.56%
1-2 years 343416.74 1.11% 162412.96 0.31%
2-3 years 135428.00 0.44% 54191.80 0.10%
Over 3 years 31407.76 0.10% 14750.00 0.03%
Total 30954685.58 52250223.47
219ZKTeco 2022 Annual Report
Explanation of the reasons why prepayments with an aging of over 1 year and significant amounts were not settled in a timely manner:
None in this period
(2) Prepayments of the top five ending balances collected by prepayment object
Proportion in total prepayment
Company name Closing amount
(%)
Supplier 1 19120530.97 61.77
Supplier 2 1851292.25 5.98
Supplier 3 1215000.00 3.93
Supplier 4 797232.83 2.58
Supplier 5 582458.20 1.88
Total 23566514.25 76.14
Other explanations:
None
5. Other receivables
Unit: RMB
Item Ending Balance Beginning Balance
Other receivables 34207287.53 29330524.65
Total 34207287.53 29330524.65
(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 11109121.37 11256035.51
Guarantee deposit 14623016.19 13530037.20
Reserve funds and loans 8156672.47 7528831.95
Collection and payment on behalf of
826216.462887965.56
others
Withholding and paying social security
1664032.001999527.03
and provident fund on behalf of others
Export tax refund 9631295.37 3047648.41
Others 694798.92 479634.01
Total 46705152.78 40729679.67
220ZKTeco 2022 Annual Report
2) Provision for bad debt reserves
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
1161005.2510238149.7711399155.02
12022
Balance as of January
1 2022 in the current
period
Provision in current
359896.41739907.231099803.64
period
Canceled after
verification in the 1093.41 1093.41
current period
Balance as of
1520901.6610976963.5912497865.25
December 31 2022
Changes in book balance with significant changes in loss reserves during the current period
□ Applicable □ Not applicable
Disclosure by aging
Unit: RMB
Aging Book balance
Within 1 year (including 1 year) 19689275.63
1-2 years 4470977.43
2-3 years 1529919.42
Over 3 years 21014980.30
3-4 years 9890703.33
4-5 years 9786089.34
Over 5 years 1338187.63
Total 46705152.78
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
Other
receivables
with significant
6012062.776012062.77
individual
amounts and
separate
221ZKTeco 2022 Annual Report
provision for
bad debt
reserves
Other
receivables
with provision
for bad debt
reserves based 1161005.25 359896.41 1520901.66
on a
combination of
credit risk
characteristics
Other
receivables
with
insignificant
individual
4226087.00739907.231093.414964900.82
amounts but
separate
provision for
bad debt
reserves
Total 11399155.02 1099803.64 1093.41 12497865.25
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
Company name Amount reversed or recovered Recovery method
4) Other accounts receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Other receivables actually written off 1093.41
Description for writing off other receivables:
The written off amount of RMB 1093.41 in 2022 is due to the resignation of employees Zhu Chuanfeng and Zhou Xiao from
Shandong Branch who are expected to be unable to recover their other receivables resulting in a change in the bad debt reserve for
other receivables.
5) 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
Export tax refund Export tax refund 9631295.37 Within 1 year 20.62%
Shenzhen Zhongan 2-3 years more
Current account 7772552.26 16.64% 6012062.77
Intelligent Control than 3 years
222ZKTeco 2022 Annual Report
Technology Co.Ltd.People's
Government of
Zhangmutou Guarantee deposit 4800000.00 Over 3 years 10.28%
Town Dongguan
City
Shenzhen
Zhikongtaike
Biometric Current account 2500000.00 Over 3 years 5.35% 2500000.00
Technology Co.Ltd.Within 1 year 1-2
ADVANNOTECH
Current account 1559812.85 years 2-3 years 3.34% 1430875.19
(PTY) LTD
more than 3 years
Total 26263660.48 56.23% 9942937.96
6. Inventory
(1) Inventory classification
Unit: RMB
Ending Balance Beginning Balance
Inventory Inventory
depreciation depreciation
Item reserves or reserves or
Book balance contract Book value Book balance contract Book value
performance performance
cost impairment cost impairment
reserves reserves
Raw materials 95807941.08 2700265.89 93107675.19 145842116.37 1948228.96 143893887.41
Products in
22655606.6822655606.6818042904.4618042904.46
process
Inventory goods 233342447.37 11987915.23 221354532.14 255809845.70 9158980.79 246650864.91
Contract
performance 240067.45 240067.45 35165.36 35165.36
cost
Sending goods 9566960.12 80028.51 9486931.61 14290033.04 344218.77 13945814.27
Consigned
processing 1435828.52 1435828.52 1685316.75 1685316.75
materials
Total 363048851.22 14768209.63 348280641.59 435705381.68 11451428.52 424253953.16
(2) Inventory depreciation reserves and contract performance cost impairment reserves
Unit: RMB
Increase in current period Decrease in current period
Beginning
Item Reversal or Ending Balance Balance Provision Others Others
reselling
Raw
1948228.961178489.44426452.512700265.89
materials
223ZKTeco 2022 Annual Report
Inventory
9158980.797966419.275137484.8311987915.23
goods
Sending
344218.7780028.51344218.7780028.51
goods
Total 11451428.52 9224937.22 5908156.11 14768209.63
(3) Explanation of the capitalized amount of borrowing costs included in the ending balance of inventory
None
(4) Explanation of the current amortization amount of contract performance cost
None
7. Contract assets
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Quality
guarantee
329942.1223142.18306799.94760307.0150654.44709652.57
deposit
receivable
Total 329942.12 23142.18 306799.94 760307.01 50654.44 709652.57
The amount and reasons for significant changes in the book value of contract assets during the current period:
Unit: RMB
Item Change amount Reasons for changes
If the provision for bad debt reserve of contract assets is made based on the general model of expected credit losses please disclose
the relevant information of the bad debt reserve with reference to the disclosure methods of other accounts receivable:
□Applicable □ Not applicable
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category Book Accrual
Accrual Book value
Amount Proportion Amount value Amount Proportion Amount proportio
proportion
n
Provision
306799.
for
329942.12 100% 23142.18 7.01% 94 760307.0 100.00% 50654.4 6.66% 709652.57 impairment
by portfolio
Including:
Provision
for
impairment
based on a 306799.general 329942.12 100% 23142.18 7.01% 94 760307.0 100.00% 50654.44 6.66% 709652.57
model of
expected
credit
losses
224ZKTeco 2022 Annual Report
306799.
Total 329942.12 100% 23142.18 7.01% 94 760307.01 100.00% 50654.44 6.66% 709652.57
Provision for impairment of contract assets in current period:
Unit: RMB
Provision in current Reversals in the current Charged or written off
Item Reasons
period period in current period
Quality guarantee Provision of bad debts
-27512.260.000.00
deposit receivable by aging portfolio
Total -27512.26 0.00 0.00 ——
Other explanations:
8. Non-current assets due within one year
Unit: RMB
Item Ending Balance Beginning Balance
Debt investment due within one year 10025638.89 0.00
Total 10025638.89 0.00
Important debt investments/other debt investments
Unit: RMB
Ending Balance Beginning Balance
Debt items Effective Coupon Face Coupon Effective
Face value interest Due Date Due Date
rate value rate interest rate
rate
Certificates
of Deposit
September
(CD) of 10000000.00 3.55% 3.55%
302023
Industrial
Bank
Total 10000000.00
Other explanations:
On January 17 2022 the Company signed a transfer confirmation letter with Guangfa Qianhe Investment Co. Ltd. for the CD
issued by Industrial Bank on September 30 2020 with the CD number 20200583395100100200097239. The principal of the CD is
RMB 10000000.00 with a yield to maturity (YTM) of 3.55% and a maturity date of September 30 2023. The non-current assets of
the Company that mature within one year are the face value of the CD of RMB 10000000.00 and the interest paid from December 21
2021 to January 16 2022 of RMB 25638.89 upon transfer.
9. Other current assets
Unit: RMB
Item Ending Balance Beginning Balance
Input tax to be deducted for value-added
5880824.3015940308.39
tax
Prepaid income tax 10774743.22 7503839.57
Other prepaid taxes 1205787.29 1523756.55
Breakeven financial products within one
60000000.00
year
225ZKTeco 2022 Annual Report
Accrued interest on time certificates 853874.43
Others 12319911.36
Total 17861354.81 98141690.30
10. Debt investment
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Book Impairment
Book balance Book value Book value
provision balance provision
Bank CD -
11997192.9411997192.94
Principal
Bank CD -
333967.35333967.35
Interest
Total 12331160.29 12331160.29 0.00
Important debt investment
Unit: RMB
Ending Balance Beginning Balance
Debt items Effective Coupon Face Coupon Effective
Face value interest Due Date Due Date
rate value rate interest rate
rate
CD of
April 7
Bank of 10000000.00 3.85% 3.85%
2024
China
Total 10000000.00
Provision for impairment
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 2022 in the current
period
Changes in book balance with significant changes in loss reserves during the current period
□ Applicable □ Not applicable
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 10000000.00
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 10000000.00 and the interest paid from April 7 2021 to April 19 2022 of RMB
397833.00.
11. Long-term equity investment
Unit: RMB
226ZKTeco 2022 Annual Report
Increase or decrease in the current period
Investm Ending
Beginni ent Adjust Cash balance
profit Ending ng
Investe Additio Reduce ment to Change dividen Impair
of
or loss balance balance
e nal d other s in ds or ment
impair
(book recogni Others
(book
investm investm compre other profits provisi ment
zed value) value) ent ent hensive equities declare on provisi
under
income d to pay on
equity
method
I. Joint ventures
II. Joint venture
PT.ZKTEC
O -
62070332544.91727.
SECUR 561520.281034
ITY .04
INDON
ESIA
CV -
3386331235436890
Square 9655.0
03.80.2302.99
d Inc. 4
Silk ID -
2320617301715573
System 936317
56.54.3456.71
s Inc. .17
ZKTEC
O
SMAR
T CITY 13019 374497 136789 18132
(THAI 58.94 .57 .15 45.66
LAND)
CO.LTD.-
Subtota 76296 654704 71513
11329
l 22.56 .82 32.70
94.68
-
7629665470471513
Total 11329
22.56.8232.70
94.68
Other explanations:
The increase or decrease in long-term equity investment in the current period mainly refers to the amount of exchange rate changes in
long-term equity investment of the Company.
12. Fixed assets
Unit: RMB
Item Ending Balance Beginning Balance
Fixed assets 446391810.26 243228046.16
Disposal of fixed assets 465698.80
Total 446857509.06 243228046.16
227ZKTeco 2022 Annual Report
(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
212690465.5647294399.268830672.2977909090.98346724628.09
Balance
2. Increase in
207130146.868240597.041779644.7915658140.46232808529.15
current period
(1) Purchase 13222043.52 7914612.32 1603855.45 12003297.16 34743808.45
(2) Transferred
from construction 190401599.38 190401599.38
in progress
(3) Increase in
business merger
(4) Differences
in foreign currency
3506503.96325984.72175789.343654843.307663121.32
statement
translation
3. Decrease in
148206.405931962.73796834.131204794.268081797.52
current period
(1) Disposal or
148206.405931962.73796834.131204794.268081797.52
retirement
4. Ending
419672406.0249603033.579813482.9592362437.18571451359.72
balance
II. Accumulated
depreciation
1. Beginning
28132635.4022136008.037033739.1046194199.40103496581.93
Balance
2. Increase in
8970590.864952988.44870060.7113455172.1328248812.14
current period
(1) Provision 9103955.78 4892521.67 766104.94 10253290.87 25015873.26
(2) Foreign
currency
-133364.9260466.77103955.773201881.263232938.88
translation
difference
3. Decrease in
13600.374441236.40586387.491644620.356685844.61
current period
(1)
Disposal or 13600.37 4441236.40 586387.49 1644620.35 6685844.61
retirement
4. Ending
37089625.8922647760.077317412.3258004751.18125059549.46
balance
III. Provision for
impairment
1. Beginning
228ZKTeco 2022 Annual Report
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
382582780.1326955273.502496070.6334357686.00446391810.26
book value
2. Beginning
184557830.1625158391.231796933.1931714891.58243228046.16
book value
(2) Disposal of fixed assets
Unit: RMB
Item Ending Balance Beginning Balance
Machinery equipment 461708.97
Electronic equipment 2457.35
Other equipment 1532.48
Total 465698.80
13. Construction in progress
Unit: RMB
Item Ending Balance Beginning Balance
Construction in progress 57041298.90 203732622.44
Total 57041298.90 203732622.44
(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 48448261.38 48448261.38 115327290.28 115327290.28
Industrial Base
Project
Multimodal
Biometrics
2982941.952982941.95
Digitalization
Industrial Base
229ZKTeco 2022 Annual Report
Construction
Project
Equipment 5610095.57 5610095.57
Xiamen
Software Park
Phase III D09
Building 3 and
88405332.1688405332.16
Joint
Underground
Garage/Parking
Lot Project
Total 57041298.90 57041298.90 203732622.44 203732622.44
(2) Current changes in important construction in progress
Unit: RMB
Amou Propor Includi
Accum
nt tion of ng: Curren
Other ulated
transfe accum current t
Beginn Increas decrea Engine amoun
Budget rred to Ending ulated interes interes Source
Project ing e in ses in ering t of
amoun fixed Balanc project t t of
Name Balanc current the progre interes
t assets e invest capital capital Funds
e period current ss t
in the ment ized ization
period capital
current to amoun rate
ization
period budget t
Hybrid
Biome
Fundra
trics
ising
IoT
21404 11532 34941 10182 48448 Under self
Intellig 97.30 2359
2000. 7290. 582.5 0611. 261.3 constr owned
ent % 113.42
00 28 0 40 8 uction funds
Industr
bank
ial
loans
Base
Project
Xiame
n
Softwa
re Park
Phase
III
D09
Buildi 11469 88405 88580
17565 93.05 Compl Own
ng 3 8740. 332.1 987.9
5.82 % eted funds
and 62 6 8
Joint
Under
ground
Garage
/Parkin
g Lot
Project
3287420373351171904048448
2359
Total 0740. 2622. 238.3 1599. 261.3
113.42
62442388
230ZKTeco 2022 Annual Report
(3) Current provision for impairment of construction in progress
Unit: RMB
Item Current provision amount Reason for provision
Other explanations:
No signs of impairment were found in the current period so no provision for impairment was made.
(4) Engineering materials
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Other explanations:
None
14. Right-of-use assets
Unit: RMB
Electronic
Houses and Machinery Transportation
Item equipment and Total
buildings equipment vehicles
others
I. Original book value:
1. Beginning
65402564.341354344.67171340.3466928249.35
Balance
2. Increase in
35161549.05255718.9435417267.99
current period
(1) New lease 35161549.05 255718.94 35417267.99
3. Decrease in
7277654.69150554.50150425.227578634.41
current period
(1) Expiration of lease
1073139.5460440.02150425.221284004.78
contract
(2) Lease change 276062.57 276062.57
(3) Termination of lease 5928452.58 90114.48 6018567.06
4. Foreign currency
2246937.9327716.962285.812276940.70
translation differences
5. Ending balance 95533396.63 1487226.07 23200.93 97043823.63
II. Accumulated
depreciation
1. Beginning
22250112.08502298.4683056.4522835466.99
Balance
2. Increase in
26946622.45427561.3174653.8627448837.62
current period
(1) Provision 26946622.45 427561.31 74653.86 27448837.62
3. Decrease in
4657528.24119577.67150425.224927531.13
current period
231ZKTeco 2022 Annual Report
(1) Disposal
(2) Expiration of lease
1073139.5460440.02150425.221284004.78
contract
(3) Lease change
(4) Termination of lease 3584388.70 59137.65 3643526.35
4. Foreign currency
1027499.4817653.201221.881046374.56
translation differences
5. Ending balance 45566705.77 827935.30 8506.97 46403148.04
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
49966690.86659290.7714693.9650640675.59
value
2. Beginning book
43152452.26852046.2188283.8944092782.36
value
15. 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
61791859.0010360684.2198801.8872251345.09
Balance
2. Increase in
10242154.370.000.002474389.755812.6612722356.78
current period
(1) Purchase 9663684.22 2664708.63 12328392.85
(2) Internal
R&D
(3) Increase in
business merger
(4) Differences
in foreign currency
578470.15-190318.885812.66393963.93
statement
translation
232ZKTeco 2022 Annual Report
3. Decrease in
current period
(1) Disposal
(2) Differences
in foreign currency
statement
translation
4. Ending
72034013.3712835073.96104614.5484973701.87
balance
II. Accumulated
amortization
1. Beginning
8532913.444869392.9631017.2513433323.65
Balance
2. Increase in
1569914.100.000.001850383.699567.643429865.43
current period
(1) Provision 1569914.10 1814766.51 6525.01 3391205.62
(2) Differences
in foreign currency
35617.183042.6338659.81
statement
translation
3. Decrease in
current period
(1) Disposal
(2) Differences
in foreign currency
statement
translation
4. Ending
10102827.546719776.6540584.8916863189.08
balance
III. Provision for
impairment
1. Beginning
Balance
2. Increase in
current period
(1) Provision
(2) Differences
in foreign currency
statement
translation
3. Decrease in
current period
(1) Disposal
(2) Differences
in foreign currency
statement
translation
4. Ending
balance
IV. Book value
1. Ending 61931185.83 6115297.31 64029.65 68110512.79
233ZKTeco 2022 Annual Report
book value
2. Beginning
53258945.565491291.2567784.6358818021.44
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%.
16. Goodwill
(1) Original book value of goodwill
Unit: RMB
Name of Increase in the current period Decrease in the current period
invested entity
Beginning
or matters Formed by Caused by Caused by Ending Balance
Balance
forming business exchange rate Disposals exchange rate
goodwill merger fluctuations fluctuations
ZKTECO (M)
155865.2014396.70170261.90
SDN.BHD
ZK
INVESTIMEN
TOS DO 298548.66 27575.84 326124.50
BRASIL
LTDA
Total 454413.86 41972.54 496386.40
(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
forming Provision Disposals
goodwill
Total
Information related to the asset group or combination of asset groups where goodwill is located
Asset group or portfolio of asset groups
Book value of
Has there been any
goodwill
Main components Book value Determination method change in the current
period
An asset group or portfolio of asset groups that
can independently generate cash flow taking into Conversion rate
170261.90 ZKTECO (M) SDN. BHD. 2266182.71 account the synergistic effects of business changes no other
mergers and the management's management or changes
monitoring of production and operating activities.
234ZKTeco 2022 Annual Report
An asset group or portfolio of asset groups that
can independently generate cash flow taking into Conversion rate
ZK INVESTIMENTOS DO
326124.50 -2794290.85 account the synergistic effects of business changes no other
BRASIL LTDA.mergers and the management's management or changes
monitoring of production and operating activities.Describe the goodwill impairment test process key parameters (such as the growth rate in the forecast period the growth rate in the
stable period the profit rate the Discount rate the forecast period) and the recognition method of goodwill impairment loss:
Impact of goodwill impairment test
17. 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 3206728.36 1680213.00 2418621.12 -59950.26 2528270.50
Renovation works 28385.99 28385.99
Others 605455.81 138667.81 224884.94 -8801.16 528039.84
Total 3840570.16 1818880.81 2671892.05 -68751.42 3056310.34
Other explanations:
Other decreases are due to the foreign currency translation difference of RMB -44640.03 for the subsidiary of the Company
ZKTECO CO. LIMITED RMB -23725.20 for the subsidiary of the Company ZKTECO SG INVESTMENT PTE. LTD. and RMB
-386.19 for the subsidiary of the Company ZKTECO VIETNAM TECHNOLOGY COMPANY LIMITED.
18. 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
32373054.685178158.9025095270.573809044.38
impairment of assets
Unrealized profits from
75228978.6114665616.3170041956.7713427824.71
internal transactions
Deductible losses 144679629.19 21701944.38 92525295.06 13878794.26
Provision for inventory
9624621.361622622.897830527.271337195.29
write-down
Deferred income 2039702.49 305955.37 688138.70 103220.81
Withholding rebates 19110934.94 2746709.94 32705608.65 4895445.70
Estimated liabilities 600000.00 90000.00 80046.11 12006.92
Changes in fair value
of trading financial 122116.65 30529.15
instruments
Share-based payments 2925355.23 438714.49
235ZKTeco 2022 Annual Report
Total 286582276.50 46749722.28 229088959.78 37494061.22
(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
Accelerated
depreciation of fixed 23697128.76 3554569.32 20150768.66 3022615.30
assets
Changes in fair value
of trading financial 21836.71 3275.51 851693.32 127754.00
instruments
Total 23718965.47 3557844.83 21002461.98 3150369.30
(3) Details of unconfirmed deferred income tax assets
Unit: RMB
Item Ending Balance Beginning Balance
Deductible temporary difference 67025921.94 9395061.84
Deductible losses 78251101.86 72398420.64
Total 145277023.80 81793482.48
(4) The deductible losses of unrecognized deferred income tax assets will expire in the following years
Unit: RMB
Year Closing amount Opening amount Remarks
20223858410.08
202322728613.6125669736.67
202419643972.4320474929.00
20258690163.508787433.48
20266092224.825234131.88
2027 and beyond 21096127.50 8373779.53
Total 78251101.86 72398420.64
19. Other non-current assets
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Prepaid
563981.71563981.71792842.01792842.01
decoration fee
Prepaid
equipment 563795.61 563795.61 3276299.82 3276299.82
payment
Total 1127777.32 1127777.32 4069141.83 4069141.83
236ZKTeco 2022 Annual Report
20. Short-term loan
(1) Classification of short-term loans
Unit: RMB
Item Ending Balance Beginning Balance
Discounted domestic letters of credit that
9855000.00
cannot be derecognized before expiration
Total 9855000.00 0.00
21. Notes payable
Unit: RMB
Category Ending Balance Beginning Balance
Bank acceptance bill 68293818.22 165377838.17
Total 68293818.22 165377838.17
The total amount of unpaid notes payable at the end of this period is RMB 0.00.
22. Accounts payable
(1) Listing of accounts payable
Unit: RMB
Item Ending Balance Beginning Balance
Material payment 210894468.56 259453549.23
Equipment payment 3130476.79 3928161.64
Service fee 742705.27 3057533.53
Project payment 10886449.82 3435840.95
Others 346376.52 909613.64
Total 226000476.96 270784698.99
(2) Important accounts payable with account age over 1 year
Unit: RMB
Reasons for non-repayment or carry-
Item Ending Balance
forward
There are quality issues with the
Dongguan Saini Electromechanical supplier's supply and payment is on
684562.10
Equipment Co. Ltd. hold. As of the end of this period the
supplier has not initiated any litigation
Total 684562.10
23. Contract liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Within 1 year (including 1 year) 45906147.23 52031633.47
1-2 years (including 2 years) 5800889.87 5632887.77
2-3 years (including 3 years) 4347121.85 2034776.50
237ZKTeco 2022 Annual Report
Over 3 years 2784681.44 1066210.09
Total 58838840.39 60765507.83
Amount and reasons for significant changes in book value during the reporting period
Unit: RMB
Item Change amount Reasons for changes
Shenzhen Zhongan Intelligent Control
1551645.74 Bankruptcy liquidation
Technology Co. Ltd.CV Squared Inc. 1275140.00 The project has not yet been accepted
Total 2826785.74 ——
24. 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
40669613.39501567099.38483731207.0558505505.72
compensation
II. Post-employment
welfare - defined 132794.31 31972348.87 31779445.30 325697.88
contribution plan
III. Dismissal benefit 373560.07 263910.87 109649.20
Total 40802407.70 533913008.32 515774563.22 58940852.80
(2) List of short-term compensation
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
1.Salary bonus
38524561.14470979360.95452775321.2456728600.85
allowance and subsidy
2. Employee benefits 69355.84 7787463.41 7701162.83 155656.42
3.Social insurance 713586.90 16565224.26 16934355.63 344455.53
Including:
medical insurance 710038.89 15174133.38 15575939.73 308232.54
premium
Work-
related injury insurance 3548.01 534319.07 535978.20 1888.88
premium
Birth
856771.81822437.7034334.11
insurance premium
4. Housing fund 49866.85 5751465.84 5720900.84 80431.85
5. Labor union
expenditure and
1312242.66439091.09554972.681196361.07
personnel education
fund
6. Other short-term
44493.8344493.83
compensation
238ZKTeco 2022 Annual Report
Total 40669613.39 501567099.38 483731207.05 58505505.72
(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
130548.9631162025.5530970386.15322188.36
insurance expense
2.Unemployment
2245.35810323.32809059.153509.52
insurance
Total 132794.31 31972348.87 31779445.30 325697.88
25. Taxes and dues payable
Unit: RMB
Item Ending Balance Beginning Balance
VAT 6423184.92 7315063.41
Enterprise income tax 12861731.77 11932330.13
Individual income tax 1582183.19 1673668.44
Urban maintenance and construction tax 423601.95 435166.28
Land use tax 8200.43 9032.33
Property tax 499264.69 490861.17
Education surcharge 449094.47 433283.70
Stamp duty 195980.34 100688.94
Others 178563.28 182282.96
Total 22621805.04 22572377.36
26. Other payables
Unit: RMB
Item Ending Balance Beginning Balance
Other payables 31429478.43 30375420.91
Total 31429478.43 30375420.91
(1) Interest payable
Unit: RMB
Item Ending Balance Beginning Balance
Important overdue and unpaid interest:
Unit: RMB
Borrower Overdue amount Overdue reason
(2) Dividends payable
Unit: RMB
239ZKTeco 2022 Annual Report
Item Ending Balance Beginning Balance
Other explanations including important dividends payable that have not been paid for more than one year whose reasons for the non-
payment shall be disclosed:
(3) Other payables
1) List of other payables by nature of money
Unit: RMB
Item Ending Balance Beginning Balance
Employee reimbursement 6747819.07 5745154.97
Payment to be settled 9597128.66 9256722.02
Withholding and paying social security
66013.83137638.62
and provident fund on behalf of others
Current account 3561040.08 5087272.26
Collection and payment on behalf of
208657.131875440.89
others
Guarantee deposit 3321927.78 1570370.39
Others 7926891.88 6702821.76
Total 31429478.43 30375420.91
2) Other important accounts payable with aging over 1 year
Unit: RMB
Reasons for non-repayment or carry-
Item Ending Balance
forward
Shenzhen Huijiang Industrial Group Co.
1800000.00 Unexpired
Ltd.Total 1800000.00
27. Non-current liabilities due within one year
Unit: RMB
Item Ending Balance Beginning Balance
Long-term loans due within one year 54873.94 208232.85
Lease liabilities due within one year 23663351.45 21368995.29
Total 23718225.39 21577228.14
28. Other current liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Sales rebates payable 19110934.94 32705608.65
Tax to be transferred to output tax 2062685.85 2433399.16
Total 21173620.79 35139007.81
Changes in short-term bonds payable:
Unit: RMB
Bond Face Issue Bond Issue Beginni Current Accruin Amorti Current Ending
240ZKTeco 2022 Annual Report
name value Date duratio amount ng issue g zation repaym Balance
n Balance interest of ent
at face excess
value and
discoun
t
Total
29. Long-term loan
(1) Classification of long-term loans
Unit: RMB
Item Ending Balance Beginning Balance
Credit borrowings 141757.54 226216.85
Total 141757.54 226216.85
Explanation of long-term loan classification:
The subsidiary of the Company ZK INTELLIGENT SOLUTIONS (PTY) signed a loan agreement with NEDBANK on June 14 2022
(No. 1951/000009/06). The agreement stipulates a loan amount of RMB 174882.77 (equivalent to ZAR 425175.00) with a loan term
from June 14 2022 to July 1 2026. As of December 31 2022 the loan balance was RMB 162002.06 and the interest balance was
RMB 34629.42 of which RMB 54873.94 will be repaid within one year.Other explanations including interest rate range:
30. Lease liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Lease payment amount 59266343.29 48433132.36
Unrecognized financing charges -7346274.40 -4385495.75
Less: lease liabilities due within one year -23663351.45 -21368995.29
Total 28256717.44 22678641.32
31. Estimated liabilities
Unit: RMB
Item Ending Balance Beginning Balance Cause of formation
The main reason for the
pending litigation on
December 31 2022 is the
provision of estimated
liabilities based on the
Pending litigation 600000.00 80046.11 judgment of the civil
judgment (2021) Y 03 MC
No. 5383 on the trademark
infringement dispute between
the Company and Shenzhen
Zokon Industry Development
241ZKTeco 2022 Annual Report
Co. Ltd.Total 600000.00 80046.11
32. Deferred income
Unit: RMB
Increase in the Decrease in the
Item Beginning Balance Ending Balance Cause of formation
current period current period
Government Financial
688138.701508449.00156885.212039702.49
subsidies allocation
Total 688138.70 1508449.00 156885.21 2039702.49
Items involving government subsidies:
Unit: RMB
Amo
unt
inclu
ded in
non-
Amount Current
Newly added opera Related to
included in offset
Liability Beginning subsidy ting Other Ending assets/relat
other income cost
items Balance amount in reven changes Balance ed to
in the current expense
current period ue for returns
period amount
the
curre
nt
perio
d
Dongguan
Economic
and
Informatio
n
Technolog Assets-
255930.4958999.06196931.43
y Bureau related
"Human
Replaceme
nt by
Machine"
Project
Automatio
n Project of
Dongguan
Bureau of
Industry Assets-
373244.9860596.78312648.20
and related
Informatio
n
Technolog
y
Integration
of
Assets-
Informatiza 58963.23 25330.17 33633.06
related
tion and
Industrializ
242ZKTeco 2022 Annual Report
ation of
Dongguan
Bureau of
Industry
and
Informatio
n
Technolog
y
Subsidy for
Exhibition Assets-
550000.002676.40547323.60
Hall related
Decoration
Subsidy for
Residency Assets-
958449.009282.80949166.20
and related
Decoration
Assets-
Total 688138.70 1508449.00 156885.21 2039702.49
related
33. Equity
Unit: RMB
Increase/decrease in this change (+ -)
Convert
Beginning Balance Bonu provident Other Ending Balance
Issue new shares Subtotal
s fund into s
shares
Total
111369038.0037123013.0037123013.00148492051.00
Shares
Other explanations:
According to the approval of the "Reply of 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 37123013 RMB denominated ordinary shares (A shares) with
a face value of RMB 1 per share an issuance price of RMB 43.32 per share and a total amount of raised funds of RMB
1608168923.06. After deducting additional external expenses directly related to the issuance of equity securities such as sponsorship
and underwriting fees lawyer fees audit and capital verification fees and information disclosure fees totaling RMB 150870545.46
(excluding tax) the net amount of funds raised by the Company this time is RMB 1457298377.70 of which RMB 37123013.00 is
included in the paid up capital and RMB 1420175364.70 is included in the capital reserve (capital premium). The above raised funds
have been verified by Baker Tilly China Certified Public Accountants (Special General Partnership) and a "Capital Verification Report"
(TX Zi [2022] No. 38654) has been issued.
34. Capital reserve
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Capital premium (share
568049963.231571045910.16150870545.461988225327.93
capital premium)
Other capital reserves 68313695.17 4633889.18 72947584.35
Total 636363658.40 1575679799.34 150870545.46 2061172912.28
243ZKTeco 2022 Annual Report
Other descriptions including changes in current period and reasons for changes:
The increase in equity premium in the current period is due to the increase in capital reserves caused by the issuance of new shares in
the IPO; the decrease in equity premium in the current period is due to the deduction of IPO related issuance expenses resulting in a
decrease in capital reserve.The increase of other capital reserves in the current period is the increase of capital reserves caused by the recognition of share-based
payment of Class II restricted stock.
35. Other comprehensive income
Unit: RMB
Amount incurred in the current period
Less: the
net amount
Less: Profit
that is
and loss
included in
included in
other
Amount other
comprehen
incurred comprehen Attributabl
Beginning sive profits Attributabl
Item before sive Less: e to
Ending
Balance of prior e to parent income tax income at income tax minority Balance
period and company
in the early stage expenses shareholder
retained after tax
current and after tax
earnings
period transferred
transferred
in the
into the
current
current
period
profits and
loss
II. Other
comprehen
sive
-
income that 32584542. 30760782. 1823759.8 5255222.6
25505560.
will be 52 67 5 5
02
reclassified
into profit
or loss
Transl
ation
difference -
32584542.30760782.1823759.85255222.6
of foreign 25505560.
526755
currency 02
financial
statements
Total of
other -
32584542.30760782.1823759.85255222.6
comprehen 25505560.
526755
sive 02
income
244ZKTeco 2022 Annual Report
36. Surplus reserves
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Legal surplus reserve 42581853.37 11393232.40 53975085.77
Total 42581853.37 11393232.40 53975085.77
37. Undistributed profit
Unit: RMB
Item Current period Previous period
Undistributed profits before adjustment
607725356.63447556294.45
at end of the previous period
Undistributed profit at the end of the
607725356.63447556294.45
adjustment period
Plus: Net profits attributable to parent
192239793.75170923050.93
company in this period
Less: withdrawal of legal surplus
11393232.4010753988.75
reserves
Undistributed profit at the end of the
788571917.98607725356.63
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 0.00.
2) Due to changes in accounting policies the undistributed profit at the beginning of the period was RMB 0.00.
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.
5) The total impact of other adjustments on the undistributed profit at the beginning of the period was RMB 0.00.
38. 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 1913553132.72 1065639119.43 1951290724.92 1148296169.29
Other businesses 5006059.04 3995791.18
Total 1918559191.76 1065639119.43 1955286516.10 1148296169.29
Is the lower of net profit before and after deducting non-recurring profits and losses audited negative
□ Yes □ No
Revenue related information:
Unit: RMB
Contract classification Division 1 Division 2 Operating revenue Total
Goods type
245ZKTeco 2022 Annual Report
Including:
Smart office products 328800143.52 328800143.52
Smart entrance and exit
1396715150.301396715150.30
management products
Smart identity
188037838.90188037838.90
verification products
Others 5006059.04 5006059.04
Classification by
region of operation
Including:
Domestic sales 719564575.31 719564575.31
Overseas sales 1198994616.45 1198994616.45
Market or customer
type
Including:
Distribution 1284940494.64 1284940494.64
Direct sales 628612638.08 628612638.08
Others 5006059.04 5006059.04
Type of contract
Including:
Classification by time
of transfer of goods
Including:
Classification by
contract term
Including:
Classification by sales
channel
Including:
Total
Information related to performance obligations:
None
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.Other explanations:
None
39. Tax and surcharges
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
246ZKTeco 2022 Annual Report
Urban maintenance and construction tax 3193940.53 3383157.54
Education surcharge 2128701.68 1956762.90
Property tax 2846813.65 1566506.09
Land use tax 106384.86 108048.67
Stamp duty 964342.89 940091.39
Local education surcharges 1415907.22 1304508.66
Other taxes and fees for overseas
8365735.327509738.46
companies
Others 24738.72 31782.91
Total 19046564.87 16800596.62
40. Selling expense
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 236617683.30 194610846.15
Depreciation and amortization expenses 5743382.82 3492917.33
Exhibition and conference fees 6391411.66 3398732.98
Transport cost 1662004.78 1653675.58
Maintenance and testing fees 5077448.63 6636988.78
Sales and service expenses 14982316.55 12832511.75
Rental expenses 4453303.67 4857031.69
Business entertainment expenses 2225867.93 1992927.21
Travel expense 18980805.21 14916482.30
Office allowance 6169710.05 6236012.31
Insurance premium 5209135.96 3871638.11
Agency fees 8428564.29 8870534.28
Advertising expense 15590300.37 13921207.61
Amortization of right-of-use assets 13459130.31 12698179.62
Share-based payments 1633697.55
Others 14639418.09 12361883.06
Total 361264181.17 302351568.76
41. Administrative expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 56013706.43 54831816.71
Taxes 1454391.49 1172886.70
Office allowance 3796088.25 3505538.58
Depreciation and amortization 9165472.53 8269451.83
Business entertainment expenses 1656274.22 2214183.13
Repair fee 521617.42 654048.11
Travel expense 1681329.66 843083.56
Rent and utilities 3913363.05 3069751.75
Car expenses 1648594.21 1442524.43
Low-value consumables 198337.81 376801.10
Agency fees 7357020.27 5845165.39
Communications fee 1496049.38 1315016.65
Amortization of right-of-use assets 8134347.68 6739269.06
Share-based payments 763691.57
Others 8948648.35 13731795.16
247ZKTeco 2022 Annual Report
Total 106748932.32 104011332.16
42. R&D expense
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee remuneration 150553917.43 150649675.80
Depreciation and amortization expense 4252503.03 3837155.42
Office allowance 584001.49 571714.10
Travel expense 2717699.76 3940478.27
Business entertainment expenses 32132.91 183374.15
Rental fees and utilities 949867.41 609751.52
R&D material costs 8240298.32 15539180.87
Software and technical service fees 8945903.92 9504194.04
Testing and certification fees 1817748.28 2720152.57
Amortization of right-of-use assets 2477285.95 1626980.49
Share-based payments 1288530.21
Others 6123958.71 7604037.12
Total 187983847.42 196786694.35
43. Financial expense
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Interest expense 3101947.12 3011838.38
Less: interest income 28810088.84 5483270.16
Exchange loss (gain) -16566918.67 15964218.14
Handling fee expenditure 1346372.88 1312205.70
Others -147.45 -46375.25
Total -40928834.96 14758616.81
44. 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
17703715.3521593745.63
activities of the enterprise
Other items related to daily activities 145303.33 142629.86
Including: refund of individual income
145303.33142629.86
tax handling fee
Total 17849018.68 21736375.49
45. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Long-term equity investment income
2660914.132603284.16
accounted by equity method
Investment income from disposal of
3959.39
long-term equity investment
Investment income obtained from 1398296.69 7673287.91
248ZKTeco 2022 Annual Report
financial products
Forward foreign exchange settlement and
-6488400.001617192.50
sales contract
Total -2429189.18 11897723.96
46. Income from changes in fair value
Unit: RMB
Sources of income from changes in fair
Amount incurred in the current period Amount incurred in the previous period
value
Trading financial asset -701013.10 881961.80
Including: income from changes in
fair value generated by derivative -802315.17 802315.17
financial instruments
Total -701013.10 881961.80
47. Credit impairment losses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Bad debt losses on other receivables -1099803.64 -615398.83
Impairment losses on debt investments 0.00 0.00
Impairment losses on other debt
0.000.00
investments
Bad debt losses on long-term receivables 0.00 0.00
Bad debt losses on accounts receivable -9854307.18 -5682745.74
Total -10954110.82 -6298144.57
48. Asset impairment losses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Inventory depreciation loss and
contract performance cost impairment -6322267.18 -4030831.29
loss
II. Impairment losses on contract assets 27512.26 -20969.79
Total -6294754.92 -4051801.08
49. Income from asset disposal
Unit: RMB
Source of income from asset disposal Amount incurred in the current period Amount incurred in the previous period
Income from disposal of non-current
6255.3284180.07
assets - fixed assets
Income from disposal of non-current
81878.0332446.32
assets - right-of-use assets
Total: 88133.35 116626.39
249ZKTeco 2022 Annual Report
50. 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
850.14619.10850.14
damaging non-current assets
Payment not required 249949.12
Penalty income 1100.00 900.00 1100.00
Others 857569.35 969049.37 857569.35
Total 859519.49 1220517.59 859519.49
51. 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 229024.07 279804.10 229024.07
Loss in scrap of non-current
442894.77317545.79442894.77
assets
Extraordinary losses 2234814.59 1257460.12 2234814.59
Inventory loss 33.77 1927.02 33.77
Penalty expenses 42440.26 25885.76 42440.26
Others 1185704.29 350705.24 1185704.29
Total 4134911.75 2233328.03 4134911.75
52. Income tax expenses
(1) Income tax expense statement
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Current income tax expenses 17540609.91 20792527.89
Deferred income tax expense -8504898.14 -11821048.99
Total 9035711.77 8971478.90
(2) Accounting profit and income tax expense adjustment process
Unit: RMB
Item Amount incurred in the current period
Total profits 213088073.26
Income tax expenses calculated based on statutory/applicable
31963210.99
tax rates
The impact of different tax rates applicable to subsidiaries 2116773.01
The impact of adjusting previous period income tax -2179909.50
The impact of non-taxable income -4056701.96
The impact of non-deductible costs expenses and losses 1725241.37
The impact of deductible losses on unrecognized deferred -1797672.48
250ZKTeco 2022 Annual Report
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 4892770.89
current period
Deduction of technology development expenses -22460014.39
Equipment and appliances purchased by high-tech enterprises
-799768.00
with additional deductions
Salary paid for the placement of disabled individuals with
-41918.54
additional deductions
The impact of tax rate changes on the beginning deferred
-166273.73
income tax balance
Others -160025.89
Income tax expense 9035711.77
53. Other comprehensive income
Please refer to Note 35 Other Comprehensive Income for details.
54. Cash flow statement items
(1) Other cash received related to operating activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Interest income 23512457.10 5483270.16
Received government subsidies 14002267.31 12128393.81
Current account 11104272.06 22854404.64
Restricted funds such as restricted
27155933.3617968601.54
guarantee deposit and funds in transit
Others 748702.48 1381530.88
Total 76523632.31 59816201.03
(2) Other cash paid relating to operating activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Expense payment 167491966.00 169155212.29
Current account 30365380.88 16935804.29
Restricted funds such as restricted
1870861.485790560.99
guarantee deposit and funds in transit
Others 2239832.81 9568710.60
Total 201968041.17 201450288.17
(3) Other cash received related to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Total 0.00 0.00
251ZKTeco 2022 Annual Report
(4) Other cash paid related to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Differences in disposal of subsidiaries 0.00 322.13
Investment losses on forward foreign
6488400.000.00
exchange settlement and sales
Total 6488400.00 322.13
(5) Other cash received related to financing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Financial loan discount 0.00 162700.00
Total 0.00 162700.00
(6) Other cash paid relating to financing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Lease liability payment amount 29105104.03 27152605.21
IPO issuance expense 24960127.54 0.00
Total 54065231.57 27152605.21
55. 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 204052361.49 186579990.76
Plus: provision for asset impairment 17248865.74 10349945.65
Depreciation of fixed assets
consumption of oil and gas assets and 25015873.26 21364725.94
productive biological assets
Depreciation of right of use assets 27141695.03 25199873.34
Amortization of intangible assets 2074371.52 1834393.62
Long-term unamortized expenses 2671892.05 2529713.99
Loss from disposal of fixed
assets intangible assets and other long- -88133.35 -116626.39
term assets (gains expressed with "-")
Loss on retirement of fixed assets
442044.63318813.11
(gains expressed with "-")
Loss from changes in fair value
701013.10-881961.80
(gains expressed with "-")
Financial expenses (gains -1587290.64 6689680.89
252ZKTeco 2022 Annual Report
expressed with "-")
Investment loss (gains expressed
6223097.99-11897723.96
with "-")
Decrease of deferred income tax
-8912373.67-11464076.34
assets (increase expressed with "-")
Increases of deferred income tax
407475.53-356972.64
liabilities (decrease expressed with "-")
Decrease of inventory (increase
73754064.85-96376676.86
expressed with "-")
Decreases of operational
-71663669.41-99446346.72
receivables (increase expressed with "-")
Increases of operating payables
-157595144.1264820859.90
(decrease expressed with "-")
Others 4633889.18 -1027170.62
Net cash flows from operating
124520033.1898120441.87
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
3. Net change of cash and cash
equivalents:
Ending balance of cash 1077608258.10 516288425.76
Less: beginning balance of cash 516288425.76 622905742.93
Plus: ending balance of cash
equivalents
Less: beginning balance of cash
equivalents
Net increase in cash and cash
561319832.34-106617317.17
equivalents
(2) Net cash paid for acquiring subsidiaries in the current period
Unit: RMB
Amount
Cash or cash equivalents paid for business merger in the
0.00
current period
Including:
Less: cash and cash equivalents held by the Company on the
0.00
date of acquisition
Including:
0.00
Including:
0.00
253ZKTeco 2022 Annual Report
(3) Net cash received from disposal of subsidiaries in the current period
Unit: RMB
Amount
Cash or cash equivalents received from the disposal of
0.00
subsidiaries in the current period
Including:
0.00
Including:
0.00
Including:
0.00
(4) Composition of cash and cash equivalents
Unit: RMB
Item Ending Balance Beginning Balance
I. Cash 1077608258.10 516288425.76
Including: Cash on hand 2646715.85 2185396.69
Bank deposit available for
1072431575.41512309497.13
payment at any time
Other monetary funds available
2529966.841793531.94
for payment at any time
III. Ending balance of cash and cash
1077608258.10516288425.76
equivalents
56. 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:
57. Assets with restricted ownership or use right
Unit: RMB
Item Ending book value Reasons for restriction
The bill deposit is RMB 30551118.11
the funds in transit are RMB 557108.80
the frozen litigation funds are RMB
18.71 the restricted funds of e-
Monetary funds 31118488.94 commerce platform stores are RMB
8000.00 and bank guarantees are
provided to customers. A pledge right of
RMB 2243.32 is established for short-
term time deposits;
Notes receivable 0.00
Inventories 0.00
Fixed assets 159995332.53 See other explanations
Intangible assets 44838016.80 See other explanations
Construction in progress - houses and
51431203.33
buildings
254ZKTeco 2022 Annual Report
Provide bank guarantees to customers
Debt investment 67092.75 and establish pledge rights for long-term
time deposits
Total 287450134.35
Other explanations:
The restrictions on the use rights of buildings and land are as follows:
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.
58. Foreign currency monetary items
(1) Foreign currency monetary items
Unit: RMB
Ending foreign currency Ending equivalent RMB
Item Conversion rate
balance Balance
Monetary funds 413539362.75
Including: USD 50032098.82 6.9646 348453555.49
EUR 2520314.03 7.4229 18708039.01
HKD 1807157.22 0.8933 1614279.32
GBP 125560.03 8.3941 1053963.43
MYR 1190317.13 1.5772 1877323.76
INR 52633205.24 0.0841 4427859.70
COP 522900013.27 0.0014 750756.71
MXN 5425823.11 0.3577 1940705.03
PEN 22155.55 1.8388 40740.47
TRL 1805666.43 0.3723 672258.60
ZAR 15720818.57 0.4113 6466279.44
THB 13603795.48 0.2014 2740104.24
DNS 8339470.57 1.8966 15816619.07
IDR 932327503.96 0.0004 414697.67
CLP 291771447.00 0.0081 2372529.39
ARS 1740312.63 0.0394 68559.20
RUB 7160070.92 0.0942 674250.74
UYU 1789.00 0.1743 311.76
255ZKTeco 2022 Annual Report
CRC 8265.00 0.0118 97.45
GTQ 11.15 0.887 9.89
KRW 374516759.00 0.0055 2068467.68
Brasilia 695288.55 1.3174 915994.82
SGD 275605.21 5.1831 1428489.36
KES 1107355.30 0.0564 62498.27
PYG 436700.00 0.0009 414.86
NGN 25589486.41 0.0156 398187.00
VND 87032547.00 0.0003 25662.44
AUD 211.15 4.7138 995.32
JPY 10410906.00 0.0524 545094.22
DOP 323.00 0.1243 40.15
DZD 11400.00 0.0507 578.26
Accounts receivable 375632825.84
Including: USD 46172805.04 6.9646 321575117.98
EUR 1858573.66 7.4229 13796006.42
HKD
MYR 592914.12 1.5772 935122.03
INR 77936632.09 0.0841 6556554.38
COP 481245767.64 0.0014 690951.39
MXN 27364180.73 0.3577 9787603.09
PEN 858981.68 1.8388 1579528.40
TRL 2208272.77 0.3723 822150.94
Brasilia 1702367.73 1.3174 2242752.35
ZAR 9021926.69 0.4113 3710894.49
THB 15245263.67 0.2014 3070732.10
CLP 357425945.00 0.0081 2906396.66
ARS 474102.82 0.0394 18677.17
KRW 862384222.00 0.0055 4762974.83
NGN 170907038.63 0.0156 2659410.97
SGD 90380.93 5.1831 468453.40
JPY 937559.00 0.0524 49088.71
VND 1392300.00 0.0003 410.53
Long-term loan
Including: USD
EUR
HKD
Other receivables 13876986.21
Including: USD 949707.24 6.9646 6614331.04
EUR 106271.17 7.4229 788840.27
256ZKTeco 2022 Annual Report
MYR 55460.00 1.5772 87469.44
INR 14150716.90 0.0841 1190453.61
COP 21663923.38 0.0014 31104.10
MXN 3714195.77 0.3577 1328491.23
PEN 155200.40 1.8388 285388.44
TRL 58854.25 0.3723 21911.73
Brasilia 342486.71 1.3174 451202.67
ZAR 114543.69 0.4113 47114.05
THB 4777159.70 0.2014 962225.25
IDR 30000000.00 0.0004 13343.95
CLP 19022429.00 0.0081 154680.22
ARS 1269152.43 0.0394 49997.96
RUB 938400.00 0.0942 88367.41
KRW 75940000.00 0.0055 419418.98
NGN 34990211.11 0.0156 544467.64
SGD 62033.78 5.1831 321527.29
JPY 7142585.00 0.0524 373971.47
KES 415000.00 0.0564 23422.28
PKR 651868.02 0.0307 20026.47
VND 200877220.00 0.0003 59230.71
Accounts payable 7287559.14
Including: USD 356094.21 6.9646 2480053.73
EUR 221.96 7.4229 1647.59
MYR 11207.99 1.5772 17676.82
INR 6666664.06 0.0841 560844.68
MXN 4453901.67 0.3577 1593068.77
PEN 22080.35 1.8388 40602.19
TRL 332.27 0.3723 123.71
Brasilia 260276.18 1.3174 342895.96
ZAR 13742.50 0.4113 5652.56
THB 10100360.60 0.2014 2034435.23
CLP 11457932.00 0.0081 93169.78
RUB 28985.82 0.0942 2729.54
NGN 5491526.46 0.0156 85451.28
KES 517500.00 0.0564 29207.30
Other payables 6689793.07
Including: USD 421553.78 6.9646 2935953.46
EUR 158180.74 7.4229 1174159.81
MYR 36411.00 1.5772 57426.07
INR 1119278.07 0.0841 94161.21
COP 5026792.00 0.0014 7217.25
MXN 990205.33 0.3577 354176.02
257ZKTeco 2022 Annual Report
PEN 14163.06 1.8388 26043.59
TRL 27012.42 0.3723 10056.86
Brasilia 156486.94 1.3174 206160.78
ZAR 2457290.69 0.4113 1010731.61
THB 1610747.23 0.2014 324439.99
CLP 30576.00 0.0081 248.63
ARS 1427021.68 0.0394 56217.18
KRW 13293043.00 0.0055 73417.89
NGN 3399777.93 0.0156 52902.48
SGD 8839.79 5.1831 45817.52
JPY 4966343.00 0.0524 260027.79
VND 2153320.00 0.0003 634.93
(2) Description of 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
Registered
Recording Basis for adopting recording
Subsidiaries place of
currency currency
business
Sales and procurement are mainly
ZKTECO CO. LIMITED Hong Kong USD
priced in USD
Currency used in the place of
Armatura Tech Co. Ltd. Thailand THB
operation
Sales and procurement are mainly
ZKTECO SECURITY L.L.C Dubai USD
priced in USD
Currency used in the place of
ZKTECO EUROPE SL Spain EUR
operation
Currency used in the place of
ZK TECHNOLOGY LLC America USD
operation
Currency used in the place of
ZKTECO USA LLC America USD
operation
Currency used in the place of
ZKTECO BIOMETRICS INDIA PRIVATE LIMITED India INR
operation
Sales and procurement are mainly
ZKTECO PANAMA S.A. Panama USD
priced in USD
Currency used in the place of
ZKTECO LATAM S.A DE C.V. Mexico MXN
operation
Currency used in the place of
ZK INTELLIGENT SOLUTIONS (PTY) LTD South Africa ZAR
operation
Sales and procurement are mainly
NGTECO CO. LIMITED Hong Kong USD
priced in USD
59. Government subsidies
(1) Basic information of government subsidies
Unit: RMB
Amount included in current
Category Amount Listed items
profits and losses
Value added tax is collected
5143783.97 Other income 5143783.97
and refunded immediately
258ZKTeco 2022 Annual Report
Dongguan Economic and
Information Technology Deferred income/other
563900.0058999.06
Bureau "Human Replacement income
by Machine" Fund
Subsidy for Residency and
Decoration of Management
Deferred income/other
Committee of Xiamen Torch 958449.00 9282.80
income
High-Tech Industry
Development Zone
Subsidy for Exhibition Hall
Decoration of Management
Deferred income/other
Committee of Xiamen Torch 550000.00 2676.40
income
High-Tech Industry
Development Zone
Stabilization allowance 337478.73 Other income 337478.73
Automation Project Subsidy
of Dongguan Bureau of Deferred income/other
512000.0060596.78
Industry and Information income
Technology
Industrial Support and
Transformation and
Upgrading Special Fund
(Integration of Deferred income/other
301320.0025330.17
Informatization and income
Industrialization) of
Dongguan Bureau of Industry
and Information Technology
Value added tax deduction of
20596.19 Other income 20596.19
10%
Employment value-added tax
41600.00 Other income 41600.00
reduction
Rewards for high-tech
50000.00 Other income 50000.00
enterprise recognition
Economic Development
Bureau of Zhangmutou Town
Dongguan City - Issuing
rewards publicity subsidies 50000.00 Other income 50000.00
and verification of electronic
consumption vouchers on
behalf of others
2022 Innovation Enterprise
R&D Investment Subsidy of
1000000.00 Other income 1000000.00
Dongguan Science and
Technology Bureau
Dongguan Enterprise
Vocational Skill Level
50000.00 Other income 50000.00
Recognition Award and
Subsidiary
One-time job expansion
109500.00 Other income 109500.00
subsidy
The 23rd China Patent Award
and the 9th Guangdong Patent
500000.00 Other income 500000.00
Award (China Patent
Excellence Award)
2022 Dongguan "Double
Growth Plan" Service 663500.00 Other income 663500.00
Package Award of Dongguan
259ZKTeco 2022 Annual Report
Finance Bureau Treasury
Payment Center
Subsidy Funds from
Dongguan Administration for 489906.38 Other income 489906.38
Market Regulation
Fujian Province Patent Award
Bonus (National Patent 200000.00 Other income 200000.00
Award Part)
Subsidies for enterprise R&D
760800.00 Other income 760800.00
expenses
Development Award of
Management Committee of
100000.00 Other income 100000.00
Xiamen Torch High-Tech
Industry Development Zone
Special Subsidiary for
Encouraging Enterprise
Application of the
70000.00 Other income 70000.00
Management Committee of
Xiamen Torch High-Tech
Industry Development Zone
Support Fund for Increasing
R&D Investment of the
Management Committee of 1727200.00 Other income 1727200.00
Xiamen Torch High-Tech
Industry Development Zone
Contribution Award of Two
Zones from the Management
Committee of Xiamen Torch 740317.00 Other income 740317.00
High-Tech Industry
Development Zone
Supporting Expenses for the
China Patent Award of
100000.00 Other income 100000.00
Xiamen Municipal Market
Supervision Bureau
Singapore Employment
258163.62 Other income 258163.62
Support Scheme
One-time Training Subsidy
for Retention of Workers of 1202550.00 Other income 1202550.00
Social Security Bureau
2022 Employment Support
163331.30 Other income 163331.30
Scheme
Government subsidies 97648.46 Other income 97648.46
Policy Funding for Software
and Emerging Digital 177800.00 Other income 177800.00
Industries
The 8th Guangdong Patent
Award City Fund Supporting
Award of Dongguan 200000.00 Other income 200000.00
Administration for Market
Regulation
2022 Provincial Special Fund
for Promoting High Quality
Economic Development of 955805.29 Other income 955805.29
Bureau of Commerce of
Dongguan City
2022 Dongguan Municipal
1977600.00 Other income 1977600.00
Special Fund for Promoting
260ZKTeco 2022 Annual Report
High Quality Development of
Open Economy of Bureau of
Commerce of Dongguan City
Funds for the Second Batch
of High-tech Enterprise
100000.00 Other income 100000.00
Recognition and Support
Projects in Shenzhen in 2020
Reduction and Exemption of
Value-added Tax for Small- 1043.10 Other income 1043.10
scale Enterprises
Graduates' Social Security
14048.70 Other income 14048.70
Subsidies
The government encourages
7500.00 Other income 7500.00
enterprises to recruit workers
Subsidy from the Social
Security Bureau to replace 15540.00 Other income 15540.00
work with training
Others 221117.40 Other income 221117.40
Total 20432499.14 17703715.35
(2) Return of government subsidies
□ Applicable □ Not applicable
Other explanations:
60. Others
None
VIII. Change of Merger Range
1. Changes in the scope of consolidation due to other reasons
Description of 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
ZKTECO VIETNAM New establishment
1 TECHNOLOGY COMPANY January 21 2022 4550000000.00 VND 100.00% on January 21
LIMITED 2022
New establishment
on September 8 2 ZKTECO ROMANIA S.R.L September 8 2022 250.00lei 100.00%
2022
261ZKTeco 2022 Annual Report
IX. Interest in Other Entities
1. Equity in subsidiaries
(1) Composition of the enterprise group
Main Percentage of Shares
Registrat Nature of Acquisition
Name of Subsidiaries business
ion place business
place Direct Indirect
method
1. Xiamen Zkteco Biometric
Software
Identification Technology Xiamen Xiamen 100.00% Acquisition
development
Co. Ltd.
2. Shenzhen ZKTeco
Shenzhe
Biometric Identification Shenzhen Sales of goods 100.00% Acquisition
n
Technology Co. Ltd.
2.1.ZK INVESTMENTS
America America Established 100.00% by investment
INC.
2.1.1.ZK TECHNOLOGY
America America Sales of goods 76.92% by investment
LLC
Donggua Donggu
3. ZKTeco Sales Co. Ltd. Sales of goods 100.00% by investment
n an
4. Hangzhou ZKTeco
Hangzho Hangzho
Hanlian E-commerce Co. E-commerce 100.00% by investment
u u
Ltd.
5. ZKCserv Technology Shenzhe Software
Shenzhen 51.00% by investment
Limited Co. Ltd. n development
Software
6. Dalian ZKTeo CO. Ltd. Dalian Dalian development 100.00% by investment
and sales
Software
7. XIAMEN ZKTECO CO.
Xiamen Xiamen development 100.00% by investment
LTD.and sales
7.1 ZKTeco Huayun
Software
(Xiamen) Integrated Circuit Xiamen Xiamen 51.00% by investment
development
Co. Ltd.
7.2 Xiamen ZKTeco Cloud
Software
Valley Design and Xiamen Xiamen 100.00% by investment
development
Development Co. Ltd.
7.3.ZKTECO VIETNAM
TECHNOLOGY Vietnam Vietnam Sales of goods 100.00% by investment
COMPANY LIMITED
8. ZKTECO Donggua Donggu Production and
100.00% by investment
(GUANGDONG) CO. LTD n an sales of goods
9. Xi’an ZKTeco Co. Ltd. Xi'an Xi'an Sales of goods 100.00% Acquisition
10. Shenzhen Zhongjiang Project
Shenzhe
Intelligent Technology Co. Shenzhen construction 51.00% by investment
n
Ltd. and sales
Hong Hong
11. ZKTECO CO.
Kong Kong Sales of goods 100.00% by investment
LIMITED
China China
11.1.ZKTECO TURKEY
ELEKTRONIK SANAYI
Turkey Turkey Sales of goods 75.99% by investment
VE TICARET LIMITED
SIRKETI.
11.2.ZKTECO LATAM
Mexico Mexico Sales services 100.00% by investment
S.A. DE C.V.
262ZKTeco 2022 Annual Report
Capital increase
11.3.ZK SOFTWARE DE
Mexico Mexico R&D services 51.00% and equity
MEXICO S.A. DE C.V.investment
11.4.ZKTECO COLOMBIA Columbi
Columbia Sales services 100.00% by investment
SAS a
11.5.ZKTECO (M) SDN. Malaysi
Malaysia Sales of goods 51.00% Acquisition
BHD. a
11.6.ZKTECO Capital increase
BIOMETRICS INDIA India India Sales of goods 99.15% and equity
PRIVATE LIMITED investment
11.7.ZKTECO EUROPE SL Spain Spain Sales of goods 51.00% Acquisition
11.7.1.ZKTECO IRELAND
Ireland Ireland Sales services 51.00% by investment
LIMITED
11.7.2.ZKTeco Deutschland German
Germany Sales of goods 51.00% by investment
GmbH y
11.7.3.ZKTECO ITALIA
Italy Italy Sales of goods 40.80% by investment
S.R.L.
11.7.4.ZKTECO UK LTD UK UK Sales of goods 51.00% by investment
11.8.ZKTECO PERU
SOCIEDAD ANONIMA Peru Peru Sales services 100.00% Acquisition
CERRADA
11.9.ZKTECO THAI CO.
Thailand Thailand Sales of goods 99.80% Acquisition
LTD.
11.10.ZKTeco Chile SpA Chile Chile Sales services 100.00% by investment
11.10.1.SOLUCIONES
INTEGRALES Y Chile Chile Sales services 100.00% by investment
SISTEMAS SpA
11.11.ZKTECO SECURITY
Dubai Dubai Sales of goods 100.00% Acquisition
L.L.C
11.12.ZKTECO Argentin
Argentina Sales of goods 60.00% Acquisition
ARGENTINA S.A. a
11.13.Limited Liability
Company "ZKTeco Russia Russia Sales of goods 100.00% by investment
biometrics and security"
11.14.ZKTECO Investment
America America Established 100.00% by investment
Inc.
11.14.1.ZKTECO USA LLC America America Sales of goods 80.00% by investment
11.14.2.Armatura Co. Ltd. Korea Korea Sales of goods 100.00% Acquisition
11.14.3.ZKTeco Japan Co.
Japan Japan Sales of goods 100.00% by investment
Ltd.
11.14.4.ARMATURA LLC. America America Sales of goods 100.00% by investment
11.15.PT. ZKTECO
Indonesi
BIOMETRICS Indonesia Sales of goods 95.00% by investment
a
INDONESIA
11.16.ZK
INVESTIMENTOS DO Brazil Brazil Established 99.68% Acquisition
BRASIL LTDA.
11.16.1.ZKTECO DO
BRASIL S.A. (formerly
BIOMETRUS INDUSTRIA Brazil Brazil Sales of goods 74.76% Acquisition
ELETRO-ELETRONICA
S.A.)
11.17.ZKTeco Latam R&D Argentin
Argentina Sales of goods 99.20% by investment
S.A. a
Hong Hong
11.18.NGTECO CO.
Kong Kong Sales of goods 100.00% by investment
LIMITED
China China
263ZKTeco 2022 Annual Report
11.19.ZKTECO
Nigeria Nigeria Sales of goods 60.00% by investment
BIOMETRIC LIMITED
11.20.ZKTECO PANAMA
Panama Panama Sales of goods 99.86% by investment
S.A.
11.21.ZK INTELLIGENT South South
Sales of goods 100.00% by investment
SOLUTIONS (PTY) LTD Africa Africa
11.22.ZKTECO
BIOMETRICS KENYA Kenya Kenya Sales of goods 100.00% by investment
LIMITED
11.23.ZKTECO ROMANIA
Romania Romania Sales of goods 100.00% by investment
S.R.L
12. Hubei ZKTeco Co. Ltd. Wuhan Wuhan Sales of goods 100.00% by investment
13. Wuhan ZKTeco
Perception Technology Co. Wuhan Wuhan Sales of goods 51.00% by investment
Ltd.
14.ZKTECO SG Singapor Singapor
Sales of goods 100.00% by investment
INVESTMENT PTE. LTD. e e
14.1.ZKTECO Singapor Singapor
Sales of goods 100.00% by investment
SINGAPORE PTE. LTD. e e
14.2.Armatura Tech Co. Production and
Thailand Thailand 99.99% Acquisition
Ltd. sales of goods
(2) Important partly-owned subsidiaries
Unit: RMB
Profit and loss Dividends declared for
Minority shareholding attributable to minority distribution to minority Closing balance of
Name of Subsidiaries
ratio shareholders in current shareholders in the minority interest
period current period
ZK TECHNOLOGY
23.08%12266571.146003135.0012377983.42
LLC
ZKTECO USA LLC 20.00% 1186500.96 602981.56 5091906.81
(3) Main financial information of important partly-owned subsidiaries
Unit: RMB
Ending Balance Beginning Balance
Name
of Curren Non- Curren Non-Non- Total Non- Total
Subsid Curren Total t current Curren Total t current current liabiliti current liabiliti
iaries t assets assets liabiliti liabiliti t assets assets liabiliti liabilitiassets es assets es
es es es es
ZK
TECH 71976 73086 28686 29162 38480 40106 18769 19852
11104753816261082
NOLO 229.0 965.1 703.9 091.0 227.8 502.5 618.7 215.7
736.147.16274.66596.98
GY 4 8 2 8 7 3 7 5
LLC
ZKTE
4025741404158081608039495397551923419234
CO 1147 27271 26028
368.6476.4239.1949.3462.4743.1764.2764.2
USA 107.78 0.13 0.75
64920588
LLC
Unit: RMB
Name of Amount incurred in the current period Amount incurred in the previous period
Subsidiarie Operating Total Cash flow Operating Total Cash flow
s Net profit Net profit revenue comprehen from revenue comprehen from
264ZKTeco 2022 Annual Report
sive operating sive operating
income activities income activities
ZK
1051521040799217.43681037.45981089.1011112544047329.43429815.43764684.
TECHNOL
1.012132518.64833200
OGY LLC
ZKTECO 82261486. 5833234.6 7950859.0 2703493.0 78571421. 7604017.2 7055601.2 3522273.3
USA LLC 98 4 5 3 53 3 6 3
2. Equity in joint arrangements or associates
(1) Important joint ventures or associates
Accounting
Percentage of Shares
treatment
Name of joint
Main business Registration Nature of methods for
venture or
place place business investments in
associate Direct Indirect joint ventures
or associates
Xinhuaxin
(Xi'an)
Information
Software and
Technology
information Long-term
Co. Ltd.Xi'an Xi'an technology 19.89% equity
(formerly:
services investment
Xi'an Huaxin
industry
Smart Digital
Technology
Co. Ltd.)
(2) Major financial information of important associates
Unit: RMB
Beginning balance/amount incurred in
Ending balance/current amount incurred
the previous period
Current assets 9875903.92 7505312.72
Non-current assets 2116980.59 2000290.25
Total assets 11992884.51 9505602.97
Current liabilities 19966606.53 25180147.31
Non-current liabilities 337468.89 768902.69
Total liabilities 20304075.42 25949050.00
Minority interests
Shareholders' equity attributable to the
-8311190.91-16443447.03
parent company
Net asset share calculated based on
-1652796.67-7194008.08
shareholding ratio
Adjustment matters
--Goodwill
--Unrealized profits from internal
265ZKTeco 2022 Annual Report
transactions
--Others
Book value of equity investment in
associates
Fair value of equity investments in
associates with public offers
Operating revenue 15177322.02 9291271.13
Net profit -9790310.97 -15264718.40
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from associates this
year
(3) 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.Ltd. (formerly: Xi'an Huaxin -7194008.08 -4970212.81 -12164220.89
Smart Digital Technology
Co. Ltd.)
ZKTECO SOLUTIONS INC. -870537.55 332410.07 -538127.48
PT. ZKTECO SECURITY
0.00-14844.38-14844.38
INDONESIA
X. Risks Related to Financial Instruments
The main financial instruments of the Company in addition to derivative instruments include bank loans monetary funds etc.The main purpose of these financial instruments is to finance the Company's operations. The Company has a variety of other financial
assets and liabilities directly arising from its operations such as accounts receivable and accounts payable.The main risks caused by the Company's financial instruments are credit risk liquidity risk and market risk.(I) Credit risk
The credit risk of the Company mainly comes from monetary funds trading financial assets notes receivable accounts receivable
and other receivables. The management has established appropriate credit policies and continuously monitors the exposure to these
credit risks.The Company manages credit risks by portfolio classification. Credit risk mainly arises from bank deposits and accounts
receivable. The Company's bank deposits are mainly deposited in banks with high credit ratings and the Company expects that bank
deposits do not pose significant credit risks.For accounts receivable the Company sets relevant policies to control credit risk exposure. The Company evaluates the credit
qualifications of the debtor based on their financial position credit history and other factors such as current market conditions and
sets credit terms. Credit risk is centrally managed by customers and geographical regions. Due to the widespread dispersion of the
Company's accounts receivable customer base in different geographical regions there is no significant concentration of credit risk
266ZKTeco 2022 Annual Report
within the Company. The Company's maximum credit risk exposure is the carrying amount of each financial asset in the balance sheet.The Company has not provided any guarantee that may expose the Company to credit risk.For the quantitative data of the Company's credit risk exposure arising from accounts receivable and other receivables please
refer to "Section X Financial Report VII. Consolidated Financial Reimbursement Item Note 3. Accounts Receivable" and "Section X
Financial Report VII. Consolidated Financial Reimbursement Item Note 5. Other Receivables" in this report.(II) Liquidity risk
Liquidity risk refers to the risk of the Company encountering a shortage of funds when fulfilling its obligations related to financial
liabilities. The Company's policy is to ensure sufficient funds are available to repay maturing debts. Liquidity risk is centrally controlled
by the Company's Finance Department. The Finance Department ensures that the Company has sufficient funds to repay debts under
all reasonable forecasts by monitoring cash balances and rolling forecasts of cash flows for the next 12 months.(III) Market risk
Market risk refers to the risk that the fair value or future cash flow of financial instruments will fluctuate due to changes in market
prices. Market risk mainly includes interest rate risk and foreign exchange risk.
1. Interest rate risk
Interest rate risk refers to the risk of fluctuations in the fair value or future cash flows of financial instruments due to changes in
market interest rates. The loan contract for the Company's loans clearly stipulates the loan interest rate so there is no significant risk
of market interest rate fluctuations in the Company's financial liabilities.
2. Exchange rate risk
The foreign exchange risk faced by the Company is mainly related to its operating activities (when income and expenditure are
settled in foreign currencies different from the Company's recording currency) and its net investment in overseas subsidiaries.The presentation of the Company's foreign currency financial assets and foreign currency financial liabilities at the end of the
period can be found in "Section X Financial Report VII. Consolidated Financial Reimbursement Item Note 58. Foreign Currency
Monetary Items" of this report.XI. 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 First level fair value Second level fair value Third level fair value
Total
measurement measurement measurement
I. Continuous fair value
--------
measurement
(I) Trading financial
204318406.05204318406.05
assets
(1) Debt instrument
204318406.05204318406.05
investment
Total assets
continuously measured 204318406.05 204318406.05
at fair value
II. Continuous fair
--------
value measurement
267ZKTeco 2022 Annual Report
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
None
5. Fair value of financial assets and financial liabilities not measured at fair value
Financial assets and liabilities not measured at fair value mainly include accounts receivable other receivables short-term loans
payables other payables lease liabilities 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.XII. Related Parties and Related 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 30.30% 30.30%
Co. Ltd.Explanation of the parent company of the enterprise
None
The ultimate controller of this enterprise is Che Quanhong.Other explanations:
None
2. Subsidiaries of the enterprise
The enterprise's subsidiaries are detailed in Chapter IX Equity in Other Entities 1. Equity in subsidiaries of the Notes.
268ZKTeco 2022 Annual Report
3. Information of joint ventures and associates of the enterprise
For important joint ventures or associates of the enterprise please refer to Chapter IX Equity in Other Entities. 2. Equity in joint
ventures or associates of the Notes.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. (formerly:
Joint venture
Xi'an Huaxin Smart Digital Technology Co. Ltd.)
Silk ID Systems Inc. Joint venture
Other explanations:
On October 17 2022 the amendment to the Articles of Association of Xinhuaxin (Xi'an) Information Technology Co. Ltd.stipulated that the shareholding ratio of ZKTECO CO. LTD. would be reduced from 43.75% to 19.8864%.
4. Conditions of other affiliated parties
Names of other related parties Relationship between other related parties and the enterprise
Shenzhen ZKTeco Times Investment Co. Ltd. A shareholder of the Company
Shenzhen JYHY Investment Enterprise (Limited Partnership) A shareholder of the Company
Shenzhen JYSJ Investment Enterprise (Limited Partnership) A shareholder of the Company
Dongguan LX Investment Partnership (Limited Partnership) A shareholder of the Company
Controlling shareholder Shenzhen ZKTeco Times Investment
ZK TIMES CO. LIMITED Co. Ltd. holds 100.00% of the shares (dissolved on March 3
2023)
The actual controller Che Quanhong serves as the supervisor of
the Company and holds 50.00% equity while Che Quanzhong
Fujian Zhongkong Mining Co. Ltd. the younger brother of the actual controller Che Quanhong
serves as the Chairman and General Manager of the Company
and holds 50.00% equity
Che Quanzhong the younger brother of the actual controller
Beijing Zhongkong Villa Agricultural Tourism Co. Ltd Che Quanhong serves as the Manager and Executive Director
holding 99.93% equity
An enterprise in which independent director Zhuo Shuyan
Guangzhou Aiji Food Co. Ltd. holds 20.00% equity while her younger brother holds 80.00%
equity and serves as Executive Director and General Manager
Ma Wentao Director and Deputy General Manager
Jin Hairong Director and General Manager
Fu Zhiqian Director
Zhuo Shuyan Independent director
Dong Xiuqin Independent director
Pang Chunlin Independent director
Jiang Wenna Employee supervisor
Wu Xinke Supervisor
Liu Jiajia Supervisor
Wang Youwu CFO
Guo Yanbo Secretary of the board
Li Zhinong Deputy General Manager
269ZKTeco 2022 Annual Report
Executive Director and General Manager of the controlling
Wang Haitao
shareholder ZKTeco Times
Wu Xiongxiong Supervisor of the controlling shareholder ZKTeco Times
Mu Wenting Deputy General Manager
A shareholder holding 10.00% equity in subsidiary ZKTECO
MANISH DINESH DALAL
USA LLC
A shareholder holding 10.00% equity of subsidiary ZKTECO
USA LLC and 0.01% equity of subsidiary Armatura Tech Co.Lawrence John Reed Ltd; simultaneously holding 2.74% of the capital contribution
share of JYLX with JYLX holding 3.28% of the Company's
shares
A shareholder holding 49.00% equity in subsidiary Shenzhen
Shenzhen Huijiang Industrial Group Co. Ltd.Zhongjiang
A shareholder holding 49.00% equity in subsidiary ZKCserv
ITMOMENTUM.COM LIMITED
Technology
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
PSD SECURITY S.L. (formerly PROFESSIONAL Ducay Real of subsidiary ZKTECO EUROPE SL; Fernando
SOFTWARE DEVELOPMENTS.L.) Ducay Real also holds 27.38% of the capital contribution share
of JYLX which holds 3.28% of the Company's equity
An enterprise controlled by minority shareholders of subsidiary
SECURITALY S.R.L
ZKTECO ITALIA S.R.L
An enterprise controlled by minority shareholders of subsidiary
BIO CARD TECNOLOGIA S.R.L
ZKTECO ARGENTINA S.A
A minority shareholder of subsidiary ZKTECO BIOMETRIC
SB-TELECOMS AND DEVICES LIMITED
LIMITED
An enterprise in which independent director Zhuo Shuyan
Zizi Zhongxing Health Culture (Shenzhen) Co. Ltd. holds 39.00% equity her spouse serves as Executive Director
and General Manager and holds 61.00% equity
An enterprise with independent director Zhuo Shuyan as
Shanghai GF Law Firm (Shenzhen Branch)
partner
An enterprise in which independent director Pang Chunlin
Chelian Innovation (Beijing) Science and Technology Center holds 85.00% equity and serves as the Manager Executive
Director and Legal Representative
An enterprise in which independent director Pang Chunlin
Open Unmanned Farm Engineering Technology (Jiangsu) Co.holds 90.00% equity as the Executive Director and Legal
Ltd.Representative of the Company
An enterprise in which independent director Pang Chunlin
Whole Process Unmanned Operation Technology Promotion
holds 100.00% equity as the Executive Director and Legal
(Jiangsu) Co. Ltd.Representative of the Company
An enterprise with independent director Pang Chunlin serving
Shanghai Pateo Electronic Equipment Manufacturing Co. Ltd.as a director
Ningbo Yuping Times Venture Capital Partnership (Limited
Actual controller Che Quanhong holds 97.50% share
Partnership)
Che Quanzhong The actual controller Che Quanhong's younger brother
An enterprise with independent director Pang Chunlin serving
Shenzhen Qingyi Photomask Limited
as a director
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
270ZKTeco 2022 Annual Report
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 3188128.36 1000000.00 Yes 1822895.42
OM SA DE CV
SB-TELECOMS
AND DEVICES Purchasing goods 0.00 10000.00 No 19147.56
LIMITED
PSD SECURITY
S.L. (formerly
PROFESSIONAL
Purchasing goods 2338.21 0.00 Yes 0.00
SOFTWARE
DEVELOPMENT
S.L.)
ZKTECO SMART
CITY
Purchasing goods 56390.11 150000.00 No 147953.71
(THAILAND)
CO. LTD.Silk ID Systems Technology
201308.93 2400000.00 No 2202718.12
Inc. license fee
Xinhuaxin (Xi'an)
Information
Service fee 268419.29 500000.00 No 1327472.00
Technology Co.Ltd.PT. ZKTECO
Marketing
SECURITY 426544.55 0.00 Yes 0.00
expenses
INDONESIA
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 2022 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.Selling goods/rendering labor service
Unit: RMB
Content of
Amount incurred in the Amount incurred in the
Related party related party
current period previous period
transaction
Xinhuaxin (Xi'an) Information Technology
Selling goods 0.00 62690.26
Co. Ltd.PT. ZKTECO SECURITY INDONESIA Selling goods 1444138.35 4970897.74
ZKTECO SMART CITY (THAILAND)
Selling goods 1755587.44 1431378.13
CO. LTD.TVCENLINEA.COM SA DE CV Selling goods 33887845.85 12813452.99
SECURITALY S.R.L Selling goods 1283988.28 1159346.23
PSD SECURITY S.L. (formerly
PROFESSIONAL SOFTWARE Selling goods 7351670.43 5513557.68
DEVELOPMENTS.L.)
BIO CARD TECNOLOGIA S.R.L Selling goods 0.00 80770.41
SB-TELECOMS AND DEVICES
Selling goods 0.00 484403.22
LIMITED
ZKTECO SOLUTIONS INC. Selling goods 11418513.01 4219211.23
271ZKTeco 2022 Annual Report
Description of related party transactions for purchasing and selling goods providing and receiving labor services
According to the substance over form principle as long as it is recognized as a related party during the reporting period the above
table discloses all transactions of the related party that occurred during the reporting period.
(2) Related party lease
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 178667.91 250535.64
INDONESIA
Note: PT. ZKTECO SECURITY INDONESIA began leasing the house and building of the subsidiary PT. ZKTECO BIOMETRICS
INDONESIA on March 1 2020 with a lease term from March 1 2020 to February 28 2022 and a contract renewal on February 21
2022 extending the lease term to February 29 2024.
The Company as lessee:
Unit: RMB
Variable lease
Simplified rental
payments not
fees for short-term Interest expense on
included in the Increased right-of-
leases and low Rent paid lease liabilities
measurement of use assets
value asset leases assumed
Types lease liabilities (if
Name (if applicable)
of applicable)
of
leased
lessor Amoun Amoun Amoun Amoun Amoun Amoun Amoun Amoun Amoun Amoun
assets t t t t t t t t t t
incurre incurre incurre incurre incurre incurre incurre incurre incurre incurre
d in the d in the d in the d in the d in the d in the d in the d in the d in the d in the
current previou current previou current previou current previou current previou
period s period period s period period s period period s period period s period
Houses
Che
and 17500. 95372. 10399 10013 7890.9 63510. 26760 22813
Quanzh 0.00 0.00
buildin 00 33 94.86 35.71 6 93 66.19 64.64
ong
gs
Xinhua
xin
(Xi'an)
Houses
Informa
and 100000 109000 109000 10310. 257801
tion 0.00 0.00 0.00 0.00 0.00
buildin .00 .00 .00 19 .80
Techno
gs
logy
Co.Ltd.
17500.195372114891110318201.63510.2933822813
Total 0.00 0.00
00.3394.8635.71159367.9964.64
Information of related leasing situation
(3) Related party fund borrowing and lending
Unit: RMB
Related party Lending amount Start Date Due Date Remarks
272ZKTeco 2022 Annual Report
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
240000.00; on March
31 2021 the amount
of the loan remitted
was USD 50000.00
with an exchange rate
ZKTECO
348230.00 March 28 2021 March 27 2023 of 6.5713 for the loan
SOLUTIONS INC.on the same day which
was converted into
RMB 328565.00. Both
parties agreed to repay
the loan within 12
months after its
expiration with an
interest rate of 3.00%.At the end of
December 31 2022
the exchange rate was
6.9646 for the loan
which was converted
into RMB 348230.00.
(4) Compensation for key management personnel
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Compensation for key management
6078614.435870852.50
personnel
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
Guizhou Zhongjiang
Accounts
Intelligent Technology 334800.21 334800.21 334800.21 334800.21
receivable
Co. Ltd.PT. ZKTECO
Accounts
SECURITY 4038062.35 287436.39 6103850.23 362333.77
receivable
INDONESIA
Accounts ZKTECO SOLUTIONS
14290503.53714525.184310055.38215502.77
receivable INC.
273ZKTeco 2022 Annual Report
Accounts TVCENLINEA.COM
18800631.46940031.578840826.27442041.31
receivable SA DE CV
Accounts
SECURITALY S.R.L 159062.06 7953.10 353093.53 17654.70
receivable
ZKTECO SMART CITY
Accounts
(THAILAND) CO. 453023.76 22651.19 45608.38 2280.40
receivable
LTD.PSD SECURITY S.L.(formerly
Accounts
PROFESSIONAL 2833385.37 141669.27 1947048.56 97352.48
receivable
SOFTWARE
DEVELOPMENTS.L.)
Accounts BIO CARD
0.000.00213455.8921345.59
receivable TECNOLOGIA S.R.L
Guizhou Zhongjiang
Other
Intelligent Technology 397428.70 397428.70 397428.70 397428.70
receivables
Co. Ltd.Other ZKTECO SOLUTIONS
366547.8736132.41325990.4316299.54
receivables INC.Other
Liu Jiajia 20893.80 0.00
receivables
SB-TELECOMS AND
Prepayment 11980.50 0.00 11936.39 0.00
DEVICES LIMITED
(2) Accounts payable
Unit: RMB
Project Name Related party Closing book balance Opening book balance
Contract
CV Squared Inc. 1275140.00 1275140.00
liabilities
Contract
Silk ID Systems Inc. 52496.86 38926.65
liabilities
Contract
BIO CARD TECNOLOGIA S.R.L 0.00 9136.38
liabilities
Contract SB-TELECOMS AND DEVICES
17717.2579944.26
liabilities LIMITED
Contract ZKTECO SMART CITY (THAILAND)
0.00400389.82
liabilities CO. LTD.Accounts
Silk ID Systems Inc. 0.00 233217.97
payable
Accounts SB-TELECOMS AND DEVICES
12612.610.00
payable LIMITED
Accounts ZKTECO SMART CITY (THAILAND)
1379.340.00
payable CO. LTD.Accounts
TVCENLINEA.COM SA DE CV 428030.88 91119.59
payable
Accounts Xinhuaxin (Xi'an) Information Technology
268420.070.00
payable Co. Ltd.Shenzhen Huijiang Industrial Group Co.Other payables 1800000.00 1800000.00
Ltd.Other payables PT. ZKTECO SECURITY INDONESIA 295856.20 0.00
Other payables Wu Xinke 18525.84 0.00
274ZKTeco 2022 Annual Report
XIII. Share-based Payment
1. Overall information of share-based payment
□Applicable □ Not applicable
Unit: RMB
The total amount of various equity instruments granted by the
2655900.00
Company in this period
The total amount of various equity instruments exercised by the
0.00
Company in the current period
The total amount of various equity instruments that have
0.00
expired in the current period of the Company
Other explanations:
On September 29 2022 the Company held the 19th Session of the Second Board Meeting deliberated and approved the
"Proposal on the Company's Restricted Stock Incentive Plan 2022 (Draft) and its Abstract" the "Proposal on the Company's Restricted
Stock 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".On October 17 2022 the Company held the second extraordinary general meeting of 2022 deliberated and approved the
"Proposal on the Company's Restricted Stock Incentive Plan 2022 (Draft) and its Abstract" the "Proposal on the Company's Restricted
Stock 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". The incentive plan will grant restricted
stocks with a total of not more than 2.9 million shares to incentive objects including 2689972 shares for the first time and 210028
shares reserved. The incentive plan grants 525 incentive objects for the first time including directors senior managers middle
managers and core technology (business) backbones (excluding independent directors and supervisors) of the Company (including
branches and subsidiaries). The grant price of restricted stocks in the incentive plan is RMB 18.70/share and the grant date of restricted
stocks for the first time is November 16 2022.According to the authorization of the second extraordinary general meeting in 2022 the Company held the 21st Session of the
Second Board Meeting on November 16 2022 and deliberated and approved the "Proposal on Granting Restricted Stock to Incentive
Objects of 2022 Restricted Stock Incentive Plan for the First Time" and the "Proposal on Adjusting the List of Incentive Objects of
Restricted Stock Incentive Plan in 2022 and the Number of Granted Objects". Considering that 17 of the incentive objects to be granted
voluntarily gave up participating in the incentive plan due to personal reasons or resignation adjustments have been made to the
incentive objects and the number of grants in the incentive plan. After these adjustments the number of incentive objects granted in
the incentive plan has been adjusted from 525 to 508 and the number of restricted stocks granted for the first time has been adjusted
from 2689972 to 2655900.
2. Equity settled share-based payments
□Applicable □ Not applicable
Unit: RMB
Method for determining the fair value of equity instruments on Grant in 2022: Determination of Fair Value Based on the Black
the grant date Scholes Model
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
275ZKTeco 2022 Annual Report
Reasons for significant differences between the current
None
estimate and the previous estimate
Accumulated amount of equity settled share-based payments
4633889.18
recognized in capital reserve
The total amount of expenses recognized for equity settled
4633889.18
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 Stock to Incentive Objects of 2022 Restricted Stock Incentive Plan for the First Time". The
independent directors of the Company expressed independent 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 stock incentive plan and its subject qualification as the incentive object of the
Company's restricted stock 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.Therefore the grant date of the first grant of restricted stocks is November 16 2022 and the fair value of the granted restricted
stocks is determined according to the Black Scholes model: RMB 20.08/share for the first phase and RMB 20.61/share for the second
phase.The amount of
Recognized
share-based Amortization
Fair value Number of Amortization amount of
Item payment month for
per share shares total month capital reserve
generated this 2022
in 2022
time
20.081327950.0024943777.60121.53117972.18
November
162022
20.611327950.0024254672.40241.51515917.00
Total 2655900.00 49198450.00 4633889.18
In summary the total amount of share-based payments that the Company should recognize is RMB 49198450.00 and the
amount included in the 2022 share-based payments is RMB 4633889.18.
3. Cash settled share-based payments
□ Applicable □ Not applicable
4. Modification and termination of share-based payment
None
5. Others
None
276ZKTeco 2022 Annual Report
XIV. Commitment and Contingency
1. Significant commitments
Significant commitments on the balance sheet date
As of December 31 2022 the Company has no significant commitments that need to be disclosed.
2. Contingencies
(1) Significant contingencies on the balance sheet date
1. ZKTECO filed a lawsuit against Zhongan Intelligent Control Liu Yuntian Yan Pingjin Zhang Peng and Wang Gen
regarding a loan contract dispute
On July 31 2019 the Company filed a lawsuit against Zhongan Intelligent Control Liu Yuntian Yan Pingjin Zhang Peng and
Wang Gen in the Third People's Court of Dongguan City Guangdong Province regarding a loan contract dispute requesting judgment
that Zhongan Intelligent Control repay the loan of RMB 7757380.00 and pay interest of RMB 262560.75 (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 240000.00 a guarantee fee of RMB
8200.00 and all legal costs in this case in the judgment.
The cause of action was in December 2017. Zhongan Intelligent Control borrowed RMB 7000000.00 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 757380.00 to the
Company and the Company once again provided a loan of RMB 757380.00 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 7757380.00 and
interest (with RMB 7757380.00 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 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 240000.00 and preservation and
guarantee service fees of RMB 8200.00 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 9150710.78. 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 plan of Zhongan Intelligent Control. After the completion of
the bankruptcy property distribution plan the assets under the name of Zhongan Intelligent Control were insufficient to repay all of its
debts and the Company did not receive repayment.
277ZKTeco 2022 Annual Report
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
regarding 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
2500000.00 and interest of RMB 84616.44 (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 1020000.00 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 110000.00 the guarantee fee of RMB 3600.00 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 10000000.00 the Company contributed RMB 5100000.00
holding 51.00% of the shares and Zhikongtaike contributed RMB 4900000.00 holding 49.00% of the shares. After the establishment
of Zhongan Intelligent Control due to conflicts between the Company's and Zhongan Intelligent Control's business philosophy after
mutual consultation the Company withdrew from Zhongan Intelligent Control and transferred its equity to Zhikongtaike. On April 22
2019 both parties signed an "Equity Transfer Agreement" and a "Guarantee Contract" regarding the transfer of equity. It was agreed
that the Company would transfer its 51% equity to Zhikongtaike for RMB 5100000.00 and Zhikongtaike would pay RMB
2600000.00 in advance. The remaining RMB 2500000.00 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
2500000.00 and interest as well as liquidated damages of RMB 1020000. 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 110000.00 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 2500000.00 and interest to the Company (with RMB 2500000.00 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 1020000.00 the attorney fee of RMB 110000.00 and the guarantee fee of RMB 3600.00 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 2500000.00 and interest (with RMB
2500000.00 as the principal and calculated at an annual interest rate of 8.7% from April 1 2019) and liquidated damages of RMB
1020000 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 110000.00 and the guarantee fee of RMB 3600.00.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
278ZKTeco 2022 Annual Report
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.
3. Case of unfair competition of Zokon Industry
On April 24 2019 the Company filed a lawsuit with the Shenzhen Intermediate People's Court against Shenzhen Zokon Industry
Development Co. Ltd. (hereinafter referred to as "Zokon Industry Development") for unfair competition disputes requesting that
Zokon Industry Development immediately stop the false propaganda and commercial defamation that affect the Company immediately
delete the articles and promotional materials that contain false propaganda and commercial defamation and immediately stop unfair
competition such as infringing the Company's logo and trade name plundering the Company's goodwill through malicious trademark
infringement litigation and seizing the Company's competitive advantage; requesting the court to order Zokon Industry Development
to apologize to the Company and publish a statement on its official website well-known websites and the front page of newspapers
for a consecutive month to eliminate the negative impact caused; requesting the order to compensate the Company for economic losses
and reasonable expenses paid by the Company to stop infringement totaling RMB 8000000.00; requesting to order Zokon Industry
Development to bear all the legal costs of the case.The cause of action was that in order to plunder the goodwill and product reputation accumulated by the Company's years of
operation in the "ZK" brand Zokon Industry Development carried out false propaganda commercial slander intentional confusion
malicious trademark infringement litigation to plunder the Company's goodwill occupied the Company's competitive advantage and
conducted other unfair competition behaviors which seriously violated the Company's legitimate rights and interests.The case was accepted by Shenzhen Intermediate People's Court Guangdong Province on May 27 2019 with case number of
(2019) Y 03 MC No. 1932. The judgment was made on December 29 2020 ruling Zokon Industry to immediately stop the unfair
competition behavior of false propaganda from the effective date of the judgment immediately stop publishing such claims as
"Currently the ZK brand has been the preferred brand for customers in the field of office equipment attendance and access control for
many years with high influence and market appeal and high visibility"; "The first brand of Chinese patrol machines"; "ZK has become
the largest production base for patrol products and the largest OEM/ODM supplier in China"; "The leader of the Internet of Things
(IoT)"; "The world's leading personnel security management and asset equipment management solution provider"; "The first to build
a domestic leading mobile terminal production line"; "Is establishing a leading position in Chinese Mainland"; "The leading level in
279ZKTeco 2022 Annual Report
China"; "Attendance access professional manufacturer * 15 years' brand * trustworthy"; immediately stop unfair competition behaviors
of commercial slander against ZKTECO and Shenzhen ZKTeco as of the effective date of the judgment that is immediately delete the
article "True or False "ZKTECO""; immediately stop the unfair competition behaviors of using F7 plus and F18 commodity names on
fingerprint attendance access controls that have certain influences on ZKTECO and Shenzhen ZKTeco from the effective date of the
judgment; compensate ZKTECO and Shenzhen ZKTeco for the economic losses and reasonable rights protection expenses of RMB 2
million within ten days from the effective date of the judgment; publish a statement on the front page of its official website
(www.ifacelock. com) for one month within ten days from the effective date of the judgment to eliminate the adverse impact of its
unfair competition on ZKTECO and Shenzhen ZKTeco (the statement must be submitted to the Shenzhen Intermediate People's Court
of Guangdong Province for review within five days after the effective date of the judgment). Where Zokon Industry fails to perform
within the time limit the Shenzhen Intermediate People's Court of Guangdong Province will publish the main content of this judgment
in the Nanfang Daily and the expenses incurred will be borne by Zokon Industry; other litigation requests from ZKTECO and Shenzhen
ZKTeco will be rejected. ZKTECO and Shenzhen ZKTeco shall bear a case acceptance fee of RMB 30000.00 while Shenzhen Zokon
Industry Development Co. Ltd. shall bear a case acceptance fee of RMB 37800.00.On January 28 2021 Zokon Industry filed an appeal to the Guangdong Higher People's Court requesting the revocation of the
judgments (1) (2) (3) (4) and (5) of the civil judgment (2019) Y 03 MC No. 1932 issued by the Shenzhen Intermediate People's
Court Guangdong Province in accordance with the law and the judgment (6) of the civil judgment (2019) Y 03 MC No. 1932 shall be
revised to reject all litigation requests from ZKTECO and Shenzhen ZKTeco and ZKTECO and Shenzhen ZKTeco shall jointly bear
the first instance case acceptance fee and the second instance appeal acceptance fee. The Guangdong Higher People's Court has
accepted this case with case number (2021) YMZ No. 1431. On June 30 2021 the Guangdong Higher People's Court issued a
summons to the Company notifying the Company that the case would be heard on July 14 2021.On September 5 2022 the Guangdong Higher People's Court issued a civil judgment (2021) YMZ No. 1431 rejecting the appeal
of Zokon Industry and upholding the original judgment.On November 3 2022 Zokon Industry filed a retrial with the Guangdong Higher People's Court requesting the revocation of
the civil judgment (2021) YMZ No. 1431 made by the Guangdong Higher People's Court and the judgments (1) (3) and (5) of the civil
judgment (2019) Y 03 MMC No. 1932 made by the Shenzhen Intermediate People's Court Guangdong Province while maintaining
the judgments (2) and (6); the judgment (4) was legally revised as: Shenzhen Zokon Industry Development Co. Ltd. shall compensate
Shenzhen ZKTeco and ZKTECO for economic losses and reasonable rights protection expenses totaling RMB 200000 within ten days
from the effective date of this judgment.On November 10 2022 the Shenzhen Intermediate People's Court Guangdong Province issued a case acceptance notice (2022)
Y 03 Z No. 5902 which filed and enforced the Company's application for compulsory execution of the civil judgment (2019) Y 03
MC No. 1932 of Shenzhen Intermediate People's Court by Zokon Industry.On February 15 2023 the Guangdong Higher People's Court issued a notice of appearance for civil application retrial case (2022)
YMS No. 17262.As of the date of approval of the financial report this case is still under retrial and review by the Guangdong Higher
People's Court and the court has yet to make a decision on whether to proceed with a retrial.
4. Lease contract dispute with Guizhou Yiyun Big Data Service Co. Ltd.
On April 23 2020 Guizhou Yiyun Big Data Service Co. Ltd. as the plaintiff filed a lawsuit against Guizhou Zhongjiang
Intelligent Technology Co. Ltd. in the People's Court of Guanshanhu District Guiyang City claiming to request the termination of
the legal relationship between the two parties regarding the lease of the house the return of the house payment of rent of RMB
923390.28 and overdue interest (interest request judgment until the full payment of the rent) and compensation for rent-free period
losses of RMB 208800.00.
280ZKTeco 2022 Annual Report
On May 26 2020 Guizhou Yiyun Big Data Service Co. Ltd. filed a lawsuit with the People's Court of Guanshanhu District
Guiyang City adding He Siting and Shenzhen Zhongjiang as co-defendants and claiming to request that the defendants bear joint and
several liability for rent overdue interest and compensation for losses during the rent-free period.On July 31 2020 Guizhou Zhongjiang Intelligent Technology Co. Ltd. filed a counterclaim with the People's Court of
Guanshanhu District Guiyang City requesting Guizhou Yiyun Big Data Service Co. Ltd. to compensate for operating losses of RMB
972275.00 and bear legal costs.
On December 23 2021 the People's Court of Guanshanhu District Guiyang City Guizhou Province issued a civil judgment
(2020) Q 0115 MC No. 2786 ruling that: I. Guizhou Zhongjiang Intelligent Technology Co. Ltd. shall vacate the site (house)
(including shared area) with a construction area of 689m2 located at No. 1 8F Building B Morgan Center Lincheng West Road
Guanshanhu District Guiyang City within ten days after the judgment takes effect and return it to Guizhou Yiyun Big Data Service
Co. Ltd.; II. Guizhou Zhongjiang Intelligent Technology Co. Ltd. shall pay a total rent of RMB 501307.00 and a penalty for overdue
payment to Guizhou Yiyun Big Data Service Co. Ltd. within ten days after the judgment takes effect (based on the unpaid rent and
calculated at an annual interest rate of 3.85% from April 23 2020 to the date when the rent is fully paid); III. Guizhou Zhongjiang
Intelligent Technology Co. Ltd. shall pay a rent free period loss of RMB 100000.00 to Guizhou Yiyun Big Data Service Co. Ltd.within ten days after the judgment takes effect; IV. He Siting the shareholder of Guizhou Zhongjiang Intelligent Technology Co. Ltd.and Shenzhen Zhongjiang shall bear joint and several liability for the payment obligations determined in the judgments (2) and (3); V.Reject other litigation requests from Guizhou Yiyun Big Data Service Co. Ltd.; VI. Reject all counterclaim requests from Guizhou
Zhongjiang Intelligent Technology Co. Ltd.On December 31 2021 the subsidiary of the Company Shenzhen Zhongjiang filed an appeal to the Intermediate People's Court
of Guiyang City request to maintain the judgments (1) (2) (3) and (6) of the civil judgment (2020) Q 0115 MC No. 2786 issued by
the People's Court of Guanshanhu District Guiyang City; revoke the judgments (4) and (5) of the civil judgment (2020) Q 0115 MC
No. 2786 made by the People's Court of Guanshanhu District Guiyang City; reject other claims of the appellee. On January 5 2022
Guizhou Zhongjiang Intelligent Technology Co. Ltd. filed an appeal against the first instance judgment to the Intermediate People's
Court of Guiyang City. On January 10 2022 Guizhou Yiyun Big Data Service Co. Ltd. filed an appeal against the first instance
judgment.On March 29 2022 the Intermediate People's Court of Guiyang City Guizhou Province issued a notice to Guizhou Zhongjiang
Intelligent Technology Co. Ltd. for the trial to be held on April 18 2022.On August 9 2022 the Intermediate People's Court of Guiyang City issued a civil judgment (2022) Q 01 MZ No. 2230 rejecting
the appeal and upholding the original judgment.On December 2 2022 the People's Court of Guanshanhu District Guiyang City issued an enforcement notice (2022) Q 0115 Z
No. 9258 and a report property order (2022) Q 0115 Z No. 9258 ordering the subsidiary of the Company Shenzhen Zhongjiang He
Siting and Guizhou Zhongjiang Intelligent Technology Co. Ltd. to immediately fulfill the obligations determined in the civil
judgment (2022) Q 01 MZ No. 2230 and ordering them to report truthfully the current property situation and such situation one year
prior to the date of receiving the enforcement notice within five days after receiving the report property order.
5. Disputes filed by Zokon Industry over infringement of trademark rights and unfair competition against the Company
and Shenzhen Xinjiacheng Intelligent Technology Co. Ltd.On April 22 2021 Zokon Industry sued the Company and Shenzhen Xinjiacheng Intelligent Technology Co. Ltd. to the
Shenzhen Intermediate People's Court. The main claims of the lawsuit are as follows: (1) Request to order the Company and Shenzhen
Xinjiacheng Intelligent Technology Co. Ltd. to immediately stop trademark infringement and unfair competition behaviors and the
Company and/or Shenzhen Xinjiacheng Intelligent Technology Co. Ltd. to immediately stop using the words "ZK Attendance
Machine" or the identification of or containing "ZK" on relevant Internet platforms; (2) Request to order the Company to immediately
stop the unfair competition behaviors of malicious trademark application and objection that is immediately stop the registration of
"attendance machine office punch fingerprint checker and facial recognition equipment" products with "ZK" or "ZOKOTECH" logo
281ZKTeco 2022 Annual Report
or similar logo and withdraw the objection application against the trademark "No. 40407655" and "ZOKOTECH" on the products of
"fingerprint checkers facial recognition devices and computerized attendance clocks with fingerprint recognition" announced in the
preliminary review notice; (3) Request a ruling for the Company to publish a statement on prominent positions of its official website
homepage and the homepage of Tencent Sina and Nanfang Metropolis Daily for a consecutive week (including the ownership of the
"ZK" trademark to the plaintiff and the defendant's commitment to stop infringement) in order to eliminate any adverse effects on the
plaintiff; (4) Request to order the Company to compensate Zokon Industry for economic losses and reasonable expenses incurred by
Zokon Industry to stop infringement totaling RMB 5 million. Shenzhen Xinjiacheng Intelligent Technology Co. Ltd. shall bear joint
and several liability for the Company's aforementioned debts within the range of RMB 300000;(5) Request to order the Company to
bear all the legal costs of this case.On May 20 2021 Shenzhen Intermediate People's Court issued the "Notice of Advance Mediation" (2021) Y 03 SQT No. 6668.On July 29 2021 the Shenzhen Intermediate People's Court filed a case for trial with the case number (2021) Y 03 MC 5383. On
September 3 2021 the Shenzhen Intermediate People's Court issued a "Notice of Appearance" "Evidence Proof Notice" and "Notice"
to the Company. On November 22 2021 the Shenzhen Intermediate People's Court Guangdong Province issued a hearing summons
to the Company notifying the Company that the case would be heard on December 21 2021.On September 15 2022 the Shenzhen Intermediate People's Court Guangdong Province issued a civil judgment (2021) YMC
No. 5383 ruling that: (1) The Company shall immediately stop using the "ZK Attendance Machine" in search keywords page titles
and contents of Baidu 360 Sogou WeChat official account and stop using "ZK" in search keywords brand areas product names and
details pages of Suning.com and JD platform; the Company and Shenzhen Xinjiacheng Intelligent Technology Co. Ltd. shall
immediately stop using "ZK" in the search keywords product names and details pages of the 1688 platform and immediately stop
using "ZK" in the search keywords and product names on Taobao and Tmall platforms; Shenzhen Xinjiacheng Intelligent Technology
Co. Ltd. shall immediately stop using "ZK" on WeChat official account; (2) The Company shall within ten days from the date of legal
effect of the judgment compensate Zokon Industry for economic losses and pay reasonable rights protection expenses of RMB 500000;
(3) The Company and Shenzhen Xinjiacheng Intelligent Technology Co. Ltd. shall within ten days from the date of legal effect of the
judgment compensate Zokon Industry for economic losses and pay reasonable rights protection expenses of RMB 100000; (4) The
defendant ZKTECO shall publish a statement on the homepage of its website (www.zktkeco.com) for a consecutive week within ten
days from the effective date of the judgment in order to eliminate the adverse effects caused by its trademark infringement on Zokon
Industry. If it fails to perform within the time limit the court will publish the main content of this judgment in the Nanfang Metropolis
Daily and the expenses incurred shall be borne by the defendant ZKTECO; (5) Reject other litigation requests from Zokon Industry.On September 15 2022 the Company filed an appeal to the Guangdong Higher People's Court requesting the revocation of the
(2021) Y 03 MC No. 5383 civil judgment issued by the Shenzhen Intermediate People's Court and the modification of the judgment
to reject all litigation claims of Zokon Industry in the first instance.On March 30 2023 the Guangdong Higher People's Court issued a notice of case acceptance (2022) YMZ No. 4634.The Guangdong Higher People's Court held a trial on April 11 2023 and as of the date of approval of the financial report no second
instance judgment has been made.
6. Patent dispute with Hanwang Technology Co. Ltd.
On January 20 2022 the Company received the "Notice of Responding to Civil Cases" and "Civil Complaints" and other relevant
litigation materials from the Beijing Intellectual Property Court concerning the litigation cases numbered (2021) J 73 MC No. 1673-
1679 and No. 1616 and Hanwang Technology Co. Ltd. (hereinafter referred to as Hanwang Technology) requested that: 1. The
Company and Beijing Jingdong Century Information Technology Co. Ltd. immediately stop infringing the patent rights of Hanwang
Technology that is immediately stop producing and selling infringing products (8 models including IFACE102/302/702/702-P); 2.The Company and Beijing Jingdong Century Information Technology Co. Ltd. jointly and severally compensate Hanwang Technology
for economic losses of RMB 99987200.00 in total reasonable expenses for notarization services of RMB 1337108.00 and purchase
282ZKTeco 2022 Annual Report
costs for infringing products of RMB 9676.00; 3. The Company and Beijing Jingdong Century Information Technology Co. Ltd. shall
bear the legal costs of this case.On January 20 2022 the subsidiary of the Company XIAMEN ZKTECO received "Notice of Responding to Civil Cases" and
"Civil Complaints" and other relevant litigation materials from the Beijing Intellectual Property Court concerning the litigation cases
numbered (2021) J 73 MC No. 1617 and Hanwang Technology requests that: 1. XIAMEN ZKTECO and Beijing Jingdong Century
Information Technology Co. Ltd. immediately stop infringing on Hanwang Technology's patent rights that is immediately stop
producing and selling infringing products (UF100PLUS model); 2. XIAMEN ZKTECO and Beijing Jingdong Century Information
Technology Co. Ltd. jointly and severally compensate Hanwang Technology for economic losses of RMB 9120000.00 in total
reasonable expenses for notarization services of RMB 31555.00 and purchase costs for infringing products of RMB 456.00; 3.XIAMEN ZKTECO and Beijing Jingdong Century Information Technology Co. Ltd. shall bear the legal costs of this case.The Company conducted a detailed comparison and analysis of the patents and related products involved in the Hanwang
Technology Announcement. Based on the legal opinions provided by the lawyer hired by the Company the management believes that
the possibility of the Company being convicted of infringement and being liable for infringement compensation is relatively low.According to relevant provisions of the Accounting Standards for Enterprises there is no need to accrue estimated liabilities.On August 3 2022 the Beijing Intellectual Property Court issued a hearing summons to the Company informing the Company
that the case would be heard on August 16 2022. During the hearing Hanwang Technology submitted a written application to the
Beijing Intellectual Property Court on August 16 2022 to withdraw the lawsuit against the Company and Beijing Jingdong Century
Information Technology Co. Ltd. with case number of (2021) J 73 MC No. 1674. On August 17 2022 the Beijing Intellectual Property
Court issued a civil ruling (2021) J 73 MC No. 1674 allowing Hanwang Technology to withdraw its lawsuit against the Company and
Beijing Jingdong Century Information Technology Co. Ltd. with the amount involved of RMB 3751741.00.As of the date of approval of the financial report no judgment has been made for Hanwang Technology filing a lawsuit against
the Company and its subsidiary XIAMEN ZKTECO regarding patent infringement with case number of (2021) J 73 MC No. 1673
1675-1679 and 1616-1617.
7. Dispute over the Invalidation of the Trademark "ZKTECH" No. 36806148
On January 17 2022 the State National Intellectual Property Administration issued the "Award of the Request for Invalidation
of the "ZKTECH" Trademark No. 36806148 "(SP Zi [2022] No. 0000015424) ruling that the trademark No. 36806148 would be
declared invalid on office punch machines and attendance machines and would be maintained on other goods.On February 24 2022 the Company proposed to Beijing Municipal Intellectual Property Office to revoke the "Award of the
Request for Invalidation of the "ZKTECH" Trademark No. 36806148 "(SP Zi [2022] No. 0000015424) issued by the State National
Intellectual Property Administration with the State National Intellectual Property Administration as the plaintiff and the third party as
Zokon Industry.On April 15 2022 the Beijing Intellectual Property Court issued the Notice of Acceptance of Administrative Cases (2022) J 73
XC No. 6449 to accept the case.As of the date of approval of the financial report the Beijing Intellectual Property Court has not yet made a judgment.
3. Others
XV. 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
283ZKTeco 2022 Annual Report
1. The Company and PT
Digital Mediatama Maxima
Tbk. (hereinafter referred to
as "DMMX") jointly invested
and established ZKDIGIMAX
PTE. LTD. (hereinafter
referred to as
"ZKDIGIMAX") in
Singapore through the
wholly-owned subsidiary of
Singapore ZKTECO SG
INVESTMENT PTE.LTD.(hereinafter referred to as
"ZKTECO SG
INVESTMENT"). The
registered capital of
ZKDIGIMAX is USD 20
million of which ZKTECO
SG INVESTMENT
subscribed USD 16 million
and DMMX subscribed USD
4 million. The subsidiary of
the Company ZKTECO SG
INVESTMENT PTE. LTD.holds 80% of the shares
while the minority
shareholder PT Digital
Mediatama Maxima Tbk.Important external investment holds 20% of the shares. 0.00
2. Due to the needs of
strategic planning and
business development
the Company plans to use
its own capital of RMB
48 million as a limited
partner to cooperate with
Hefei Xingniu Private
Equity Fund Management
Co. Ltd. (hereinafter
referred to as "Xingniu
Fund") to establish an
ecological innovation
fund. The investment
direction is "in the field
of computer vision
multi-dimensional
perception smart
terminals scene
interactive robots scene
cloud service software
AR digital twins digital
identity cards and
upstream and
downstream of the other
track industry chains".The target raising scale of
the ecological innovation
284ZKTeco 2022 Annual Report
fund is RMB 120 million.The Company plans to
contribute RMB 48
million with its own
capital as a limited
partner with a
subscription ratio of 40%.Xingniu Fund as a
general partner and
executive partner
contributed no less than
RMB 1 million. Xingniu
Fund shall be responsible
for raising the remaining
capital from other
qualified specific
investors.On February 15 2023 the
Company's sub-subsidiary
ZKTECO Investment Inc.transferred 10% of its shares
(2379 shares) in Armatura
Equity transfer 0.00
Co. Ltd. to LEE KYU
WHAN for KRW 3819 per
share. After the transfer LEE
KYU WHAN held 10% of the
shares in Armatura Co. Ltd.
2. Profit distribution
Unit: RMB
Proposed profits or dividends to be distributed 96519832.85
The Company has formulated a profit distribution plan for
2022 as follows: 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 148492051 shares as of December
31 2022 with the total cash dividend distribution of RMB
51972217.85 (including tax); at the same time to convert
capital reserves to share capital and convert 3 shares per 10
Profit distribution plan
shares to all shareholders with a total of 148492051 shares
with the total conversion of 44547615 shares. After the
conversion the total share capital of the Company will increase
to 193039666 shares; no bonus shares will be given. This plan
needs to be submitted to the Company's Board of Directors for
review and then submitted to the shareholders' meeting for
approval before implementation.
3. Description of other events after the balance sheet date
Bank deposits of US subsidiaries and affiliated enterprises
Item 1: SIGNATURE Bank Deposit Matters
On the afternoon of March 12 2023 the US Treasury Federal Reserve Board and Federal Deposit Insurance Corporation issued
a joint statement announcing the closure of Signature Bank on the grounds of "systemic risk". As of December 31 2022 the balance
285ZKTeco 2022 Annual Report
of bank deposits with the Signature Bank by the sub-subsidiary of the Company ZK Technology LLC was USD 6741223.45 the
balance of bank deposits with the Signature Bank by the sub-subsidiary of the Company ZK INVESTMENTS INC was USD
138809.04 and the balance of bank deposits with the Signature Bank by the sub-subsidiary of the Company ZKTECO USA LLC was
USD 405301.08.The bank deposit of USD 1000000.00 deposited by the sub-subsidiary of the Company ZK Technology LLC with the Signature
Bank was transferred to Columbia Bank on March 13 2023 and USD 3000000.00 was transferred to Magyar Bank from March 15-
162023.
The Federal Deposit Insurance Corporation issued a statement on March 19 2023 stating that it has reached an agreement with
Flagstar Bank a wholly-owned subsidiary of New York Community Bancorp Inc. to sell the majority of the Signature Bank's deposit
business and a portion of its loan business. From March 20 2023 all 40 branches of the Signature Bank will be managed by Flagstar
Bank. This transaction does not include approximately USD 4 billion in deposits related to the digital banking business of the Signature
Bank. In addition the approximately USD 60 billion loan business of the Signature Bank is still under the management of the Federal
Deposit Insurance Corporation and is awaiting disposal.On March 20 2023 New York Community Bancorp Inc. announced that its subsidiary Flagstar Bank acquired some assets and
assumed some of the liabilities originally owned by New York Signature Bank through the Federal Deposit Insurance Corporation.The transaction has been approved by relevant regulatory authorities and has been completed. The name of Signature Bank is changed
to Flagstar Bank.As of April 17 2023 the balance of bank deposits with the Signature Bank by the sub-subsidiary of the Company ZK Technology
LLC was USD 3279634.05 the balance of bank deposits with the Signature Bank by the sub-subsidiary of the Company ZK
INVESTMENTS INC was USD 342587.04 and the balance of bank deposits with the Signature Bank by the sub-subsidiary of the
Company ZKTECO USA LLC was USD 340960.38.The sub-subsidiaries of the Company ZK Technology LLC ZK INVESTMENTS INC and ZKTECO USA LLC do not involve
deposits related to digital banking business deposited with the Signature Bank. The Signature Bank has been acquired by Flagstar Bank
and New York Community Bancorp is the parent company of Flagstar Bank. As of December 31 2022 New York Community Bancorp
had assets of USD 90.1 billion loans of USD 69 billion deposits of USD 58.7 billion and total shareholder equity of USD 8.8 billion.The Company believes that there is no restricted risk in the deposits deposited by its sub-subsidiaries ZK Technology LLC ZK
INVESTMENTS INC and ZKTECO USA LLC with the Signature Bank.Item 2: First Republic Bank Deposit Matters
On March 15 2023 two of the world's three major rating agencies downgraded First Republic Bank and S&P Global downgraded
the issuer credit rating of First Republic Bank from "A-" to "BB+" categorizing it as speculative or "junk"; Fitch Group has also
downgraded its rating from "A-" to "BB". On March 16 2023 First Republic Bank announced a suspension of payment of common
stock dividends. On the same day 11 major US banks announced that they would inject USD 30 billion in deposits into First Republic
Bank to alleviate the liquidity crisis. On March 17 2023 another credit rating agency Moody's also downgraded the rating of First
Republic Bank to "junk" on the ground of "rapid deterioration of the operating environment". On April 7 2023 First Republic Bank
stated in a document submitted to regulatory authorities that it would suspend the payment of quarterly cash dividends on preferred
shares and stated that this was a "prudent measure to address regulatory oversight".As of December 31 2022 the balance of bank deposits with the First Republic Bank by the sub-subsidiary of the Company
ARMATURA LLC was USD 326242.44 the balance of bank deposits with the First Republic Bank by the sub-subsidiary of the
Company ZKTECO Investment Inc. was USD 278401.99 and the balance of bank deposits with the First Republic Bank by the sub-
subsidiary of the Company ZKTECO USA LLC was USD 41632.42.As of April 17 2023 the balance of bank deposits with the First Republic Bank by the sub-subsidiary of the Company
ARMATURA LLC was USD 173820.62 the balance of bank deposits with the First Republic Bank by the sub-subsidiary of the
Company ZKTECO Investment Inc. was USD 203291.94 and the balance of bank deposits with the First Republic Bank by the sub-
subsidiary of the Company ZKTECO USA LLC was USD 5047.50.
286ZKTeco 2022 Annual Report
The First Republic Bank has received USD 30 billion in deposits from 11 large banks in the United States further enhancing and
diversifying its financial position. Currently all unused liquidity funds exceed USD 70 billion and more liquidity can be obtained
through the Federal Reserve's announced "Bank Term Financing Plan". In addition each deposit account of the Company has a deposit
balance of less than USD 250000 in the First Republic Bank. The Company believes that there is no restricted risk in the deposits
deposited by sub-subsidiaries ARMATURA LLC ZKTECO Investment Inc. and ZKTECO USA LLC with the First Republic Bank.Applying for Comprehensive Credit Line from Banks and Handling Bank Loans
The "Proposal on Applying for Comprehensive Credit Line from Banks and Handling Bank Loans" formulated by the Company
(this proposal still needs to be reviewed by the shareholders' meeting): In order to meet the potential funding needs of the Company's
production operation and business development the Company and its controlling subsidiaries (including newly established controlling
subsidiaries) plan to apply for a credit line of not more than RMB 2 billion (including equivalent foreign currency the same below)
from commercial banks and other financial institutions and plan to provide a total credit guarantee limit of not more than RMB 1
billion for the controlling subsidiaries. The above credit extensions include credit mortgage guarantee and margin. The term of this
comprehensive credit line is from the date of approval at the 2022 annual general meeting to the time of the 2023 annual general
meeting.On January 30 2023 XIAMEN ZKTECO CO. LTD. (hereinafter referred to as "XIAMEN ZKTECO") a subsidiary of the
Company signed a "Credit Line Contract" numbered XYXXZE Zi No. 2023003 with Xiamen Branch of Industrial Bank Co. Ltd. The
maximum principal amount of the credit line under this Contract is converted into RMB 40 million and the specific types of credit line
business include but are not limited to short-term working capital loans medium-term working capital loans working capital loans
(technology innovation fund R&D loans) bank acceptance bills non-financing letter of guarantee business and bill pool financing
business which revolve within the limit. On January 30 2023 XIAMEN ZKTECO signed a "Technology Innovation Fund Syndicated
Loan Contract" numbered XYXXZYT Zi No. 2023003 with Xiamen Branch of Industrial Bank Co. Ltd. (hereinafter referred to as the
"lender" "lead bank" "agent bank") and Xiamen International Trust Co. Ltd. (hereinafter referred to as the "lender" "participating
bank"). All lenders agree to provide XIAMEN ZKTECO with a loan limit of not more than RMB 8500000.00 in total principal. The
participating bank and the lead bank as lenders shall undertake loans in a ratio of 5:95. The commitment amount of the participating
bank shall not exceed RMB 425000.00 and the commitment amount of the lead bank shall not exceed RMB 8075000.00. The
Contract stipulates that the borrower shall use each fund withdrawn for the R&D investment of XIAMEN ZKTECO. The fixed interest
rate of the loan is 3.60% with Xiamen International Trust Co. Ltd. bearing 1.60% of the interest expense. The loan term is 3 years
with quarterly interest payments. The repayment term: repay RMB 425000.00 on July 21 2023 RMB 425000.00 on January 21 2024
RMB 425000.00 on July 21 2024 RMB 425000.00 on January 21 2025 RMB 425000.00 on July 21 2025 RMB 425000.00 on
January 21 2026 and RMB 5950000.00 on January 29 2026.On April 17 2023 the Company signed a "Credit Line Agreement" numbered GED476790120230048 with Dongguan Branch of
Bank of China Limited granting the Company a bank acceptance bill limit of RMB 200 million which is valid from the effective date
of the Agreement to March 26 2024.Using idle own funds to purchase financial products
The "Proposal on Using Idle Self-owned Funds to Purchase Financial Products" formulated by the Company (this proposal still
needs to be reviewed by the shareholders' meeting): In order to improve the efficiency of using idle self-owned funds of the Company
while meeting the normal operation of the Company and its subsidiaries and ensuring fund safety some idle self-owned funds will be
used to purchase highly safe and liquid financial products in order to improve the efficiency of using the Company's own funds and
increase the Company's investment income. The maximum amount of idle self-owned funds that the Company and its subsidiaries plan
to use for purchasing financial products shall not exceed RMB 1 billion. The above funds will be recycled within the validity period of
the resolution. The term of this investment is from the date of approval at the 2022 annual general meeting to the time of the 2023
annual general meeting.Carry out forward foreign exchange settlement and sales business
287ZKTeco 2022 Annual Report
The "Proposal on Carrying out Forward Foreign Exchange Settlement and Sales in 2023" formulated by the Company (this
proposal still needs to be reviewed by the shareholders' meeting): Due to the relatively high proportion of the Company's export
business the Company's exported goods are mainly settled in USD. Given the increasing volatility of the foreign exchange market in
order to reduce the impact of exchange rate fluctuations on the Company's operating performance the Company and its subsidiaries
plan to carry out forward foreign exchange settlement and sales transactions in 2023. The Company plans to conduct forward foreign
exchange settlement and sales business with an amount not exceeding the equivalent of USD 50 million in 2023. Within the above
limit it can be used in a circular rolling manner. The validity period of this authorization shall be from the date of approval by the
Board of Directors to the date of convening the board meeting or shareholders' meeting to review the amount of forward foreign
exchange settlement and sales business for the next year.Change the implementation location and total investment amount of some raised fund investment projects and adjust
some construction contents
The "Proposal on Changing the Implementation Location and Total Investment Amount of Some Raised Fund Investment Projects
and Adjusting Some Construction Contents" formulated by the Company (this proposal still needs to be reviewed by the shareholders'
meeting): 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 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. After adjustment the total investment added for 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.XVI. Other Important Events
1. Others
1. On July 6 2022 the Company and HSBC Bank (China) Company Limited extended the "Facility Letter" issued on August 11
2020 with the new letter number CN11002483543-220601. The credit grantor provided the Company with an acceptance credit of up
to RMB 100000000.00 for bank acceptance bills as a guarantee and the Company needs to provide a margin guarantee.
2. On June 22 2022 the Company approved the resolution of 2021 annual general meeting deliberated and approved the
"Proposal on Applying for Comprehensive Credit Line from Banks and Handling Bank Loans" formulated by the Company. In order
to meet the potential funding needs of the Company's production operation and business development the Company and its controlling
subsidiaries (including newly established controlling subsidiaries) plan to apply for a credit line of not more than RMB 1.8 billion in
2022 (including equivalent foreign currency the same below) from commercial banks and other financial institutions and plan to
provide a total credit guarantee limit of not more than RMB 1 billion for the holding subsidiaries. The above credit extensions include
credit mortgage guarantee and margin. The credit line applied by the Company and its controlling subsidiaries to the bank in 2022
will ultimately be based on the actual credit line approved by the bank. The term of this authorization is from the date of approval at
the 2021 annual general meeting to the time of the 2022 annual general meeting.
3. On November 15 2022 the Company and Dongguan Branch of China Merchants Bank Co. Ltd. signed a supplementary
"Credit Agreement" numbered 769XY2022038068 and "Bank Acceptance Cooperation Agreement". According to the "Credit
Agreement" the credit grantor provided the Company with a credit line of RMB 100 million (including revolving and/or one-time
288ZKTeco 2022 Annual Report
lines) and the credit business types include but are not limited to payment for goods/order loans trade financing bill discounting
commercial bill acceptance commercial acceptance bill confirmation/discounting international/domestic letter of guarantee customs
tax payment guarantee and other various credit businesses. The credit period of this "Credit Agreement" starts from November 15
2022 and ends on November 14 2023.
4. On November 25 2022 the subsidiary of the Company ZKTECO (GUANGDONG) CO. LTD signed a "Bank Acceptance
Agreement" numbered DY (0019) 2022 CD Zi No. 005165 with Dongguan Branch of Bank of Dongguan Co. Ltd. granting the
Company a credit line of RMB 62.5 million with a valid period from November 18 2022 to November 17 2024 and Dongguan Bank
agreed to accept bills of exchange opened within this credit line. ZKTECO (GUANGDONG) CO. LTD must open a deposit account
with Dongguan Bank and pay a deposit of 20% of the face amount of the bill of exchange before acceptance. After this Agreement
takes effect the unused amount in the "Bank Acceptance Agreement" numbered DY (9973) 2021 CD Zi No. 032547 shall become
invalid.
5. On January 24 2022 the Company signed a "Bank Acceptance Agreement" numbered DY (9973) 2022 CD Zi No. 001127
with Dongguan Branch of Bank of Dongguan Co. Ltd. Dongguan Bank granted the Company a credit line of RMB 112.5 million for
bank acceptance bill business with a valid period from January 12 2022 to December 7 2023. Dongguan Bank agreed to accept bills
of exchange issued by the Company within this credit line and the Company must open a deposit account with Dongguan Bank and
pay a deposit of not less than 20% of the total amount of the bill of exchange before acceptance.
6. On April 14 2022 the Company signed a "Credit Line Agreement" numbered GED476790120220020 with Dongguan Branch
of Bank of China Limited granting the Company a bank acceptance bill limit of RMB 200 million which is valid from the effective
date of the Agreement to March 10 2023.
7. On August 22 2022 Dongguan Tangxia Sub-branch of Agricultural Bank of China Ltd. issued a "Credit Statement" granting
the Company a credit line of RMB 280 million with a validity period from August 15 2022 to August 15 2023. Among them RMB
50 million is other exclusive credit lines occupied by bank acceptance and guarantee deposits; RMB 50 million is a low risk credit
line and 100% deposit is required for low risk businesses; RMB 180 million is a general credit line used for handling bank acceptance
bills working capital loans trade financing loans domestic letters of credit foreign letters of credit domestic letters of guarantee and
foreign letters of guarantee. Among them RMB 80 million is used for credit and the guarantee way of the other RMB 100 million is
pending. The specific guarantee method for new credit under this line must be approved by Agricultural Bank of China. The specific
use of credit shall be implemented in accordance with the management measures for individual business and the loan interest rate shall
be implemented in accordance with the relevant regulations of Agricultural Bank of China. The proportion of deposit for handling bank
acceptance bills and letter of guarantee business shall not be less than 30% with the bank acceptance bill handling fee being 0.025%
of the total invoicing amount.
8. In August 2022 Dongguan Tangxia Sub-branch of Industrial Bank Co. Ltd. issued the "Comprehensive Service Plan for
ZKTECO" to the Company agreeing to grant the Company Group a credit of RMB 400 million (exposure of RMB 180 million) with
a credit period of one year and a validity period of six months. Among them a single entity credit of RMB 400 million (with an
exposure of not more than RMB 150 million) was granted to the Company and a single entity credit of RMB 150 million (with an
exposure of not more than RMB 100 million) was granted to the wholly-owned subsidiary ZKTECO (GUANGDONG) CO. LTD The
credit and exposure use of the above two entities is based on the overall control of the Group's credit and exposure pilot line. It is
agreed to grant the Company Group a credit line of RMB 400 million (exposure of RMB 180 million). Based on the current credit
needs of the Company after mutual consultation the Group's credit line is controlled to be used within the credit line of RMB 280
million (exposure of RMB 180 million).
289ZKTeco 2022 Annual Report
XVII. Notes to Main Items in the Financial Statements of the Parent Company
1. Accounts receivable
(1) Disclosure of accounts receivable classification
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Categor
y Accrual Book Accrual Book
Proporti Proporti
Amount Amount proporti value Amount Amount proporti value
on on
on on
Account
s
receivab
le with
322467322467202684202684
individu 0.54% 100.00% 0.38% 100.00% 0.00
1.151.150.530.53
al
provisio
n for bad
debts
Includ
ing:
Account
s
receivab
le with
insignifi
cant
single
322467322467202684202684
amount 0.54% 100.00% 0.38% 100.00% 0.00
1.151.150.530.53
and bad
debt
reserve
withdra
wn
separatel
y
Receiva
ble with
combine
d 590426 553225 584894 525512 550425 520008
99.46%0.94%99.62%1.05%
provisio 593.17 9.48 333.69 924.95 4.83 670.12
n for bad
debt
reserve
Includ
ing:
Related
492232492232421917421917
Party 82.92% 79.98%
071.11071.11983.74983.74
Portfolio
Account
981945553225926622103594550425980906
s 16.54% 5.63% 19.64% 5.31%
22.069.4862.58941.214.8386.38
receivab
290ZKTeco 2022 Annual Report
le with
consolid
ated
provisio
n for bad
debt
reserves
accordin
g to the
credit
risk
characte
ristics
593651875693584894527539753109520008
Total 100.00% 1.48% 100.00% 1.43%
264.320.63333.69765.485.36670.12
Bad debt reserve made individually: 3224671.15
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion Reasons for provision
Shanghai Leqi
Expected non-
Automation 490186.63 490186.63 100.00%
recoverable
Technology Co. Ltd.Noble IT Solutions Expected non-
408557.71408557.71100.00%
Co. Ltd recoverable
Zicom Electronic Expected non-
365258.45365258.45100.00%
Securit recoverable
Shenzhen Xuhui
Expected non-
Information 326350.00 326350.00 100.00%
recoverable
Technology Co. Ltd.Gansu Fourth
Expected non-
Construction Group 224676.00 224676.00 100.00%
recoverable
Co. Ltd.VENDEMMIA
COMERCIO Expected non-
197665.93197665.93100.00%
INTERNACIONAL recoverable
LTDA
Tianjin Eagle Eye
Expected non-
Biotechnology Co. 193330.00 193330.00 100.00%
recoverable
Ltd.Hainan Zhongkong
Expected non-
IOT Technology Co. 176179.00 176179.00 100.00%
recoverable
Ltd.Wanqiao Information Expected non-
165900.00165900.00100.00%
Technology Co.Ltd. recoverable
Baoneng Urban
Development and Expected non-
155292.00155292.00100.00%
Construction Group recoverable
Co. Ltd.PONTO RHJ EIRELI - Expected non-
98393.1598393.15100.00%
ME recoverable
Guizhou Zhongjiang
Expected non-
Intelligent Technology 77919.46 77919.46 100.00%
recoverable
Co. Ltd.Qianxinan Mengku
Expected non-
Business Service Co. 74672.00 74672.00 100.00%
recoverable
Ltd.
291ZKTeco 2022 Annual Report
INTELLISMART Expected non-
73253.6673253.66100.00%
TECHNOLOGY INC. recoverable
Dongguan Yukong
Expected non-
Security Technology 53703.00 53703.00 100.00%
recoverable
Co. Ltd.KWK CELLPHONE Expected non-
36880.4136880.41100.00%
AND ACCESSORIES recoverable
Nanjing Xianji Expected non-
31850.0031850.00100.00%
Technology Co. Ltd. recoverable
Entropy Electronic
Expected non-
Technology Yangzhou 31122.66 31122.66 100.00%
recoverable
Co. Ltd.Iss Facility Services Expected non-
28152.0028152.00100.00%
(Shanghai) Ltd. recoverable
Expected non-
Others 15329.09 15329.09 100.00%
recoverable
Total 3224671.15 3224671.15
Bad debt reserve made by portfolio: 5532259.48
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year (including 1
91834976.674591748.845.00%
year)
1-2 years (including 2 years) 5895254.81 589525.48 10.00%
2-3 years (including 3 years) 161864.88 48559.46 30.00%
Over 3 years 302425.70 302425.70 100.00%
Total 98194522.06 5532259.48
Explanation of the basis for determining the portfolio:
If the provision for bad debt reserve of accounts receivable is made based on the general model of expected credit losses please disclose
the relevant information of the bad debt reserve with reference to the disclosure methods of other accounts receivable:
□ Applicable □ Not applicable
Disclosure by aging
Unit: RMB
Aging Book balance
Within 1 year (including 1 year) 584084680.04
1-2 years 7182125.21
2-3 years 987195.33
Over 3 years 1397263.74
3-4 years 70004.12
4-5 years 700525.86
Over 5 years 626733.76
Total 593651264.32
(2) Bad debt reserves withdrawn recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Beginning Current period change amount
Category Ending Balance
Balance Provision Return or Redeem/redem Others
292ZKTeco 2022 Annual Report
reversal ption
Accounts
receivable with
insignificant
single amount
2026840.531197830.623224671.15
and bad debt
reserve
withdrawn
separately
Accounts
receivable with
significant
individual
amounts and 0.00 0.00 0.00
separate
provision for
bad debt
reserves
Accounts
receivable with
consolidated
provision for
bad debt 5504254.83 28004.65 5532259.48
reserves
according to the
credit risk
characteristics
Total 7531095.36 1225835.27 8756930.63
(3) Actual verification of accounts receivable in the current period
Unit: RMB
Item Write-off amount
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
Explanation of accounts receivable verification:
No actual verification of accounts receivable in the current period:
(4) Accounts receivable from top five borrowers classified based on the ending balance
Unit: RMB
Proportion in the total ending
Ending balance of accounts Ending balance of bad debt
Company name balance of accounts
receivable reserve
receivable
Customer 1 211405773.46 35.61%
Customer 2 153563269.68 25.87%
Customer 3 29740217.56 5.01%
293ZKTeco 2022 Annual Report
Customer 4 16560423.10 2.79%
Customer 5 14290503.53 2.41% 714525.18
Total 425560187.33 71.69%
(5) Accounts receivable derecognized due to transfer of financial assets
No accounts receivable derecognized due to transfer of financial assets in current period;
(6) The amount of assets and liabilities formed by transferring accounts receivable and continuing to be
involved
If there are no transferred accounts receivable at the end of the period and they continue to be involved the amount of
assets and liabilities formed by the continued involvement shall be listed.
2. Other receivables
Unit: RMB
Item Ending Balance Beginning Balance
Interest receivable 122433.25 23475.57
Other receivables 33858122.01 32535035.10
Total 33980555.26 32558510.67
(1) Interest receivable
1) Classification of interest receivable
Unit: RMB
Item Ending Balance Beginning Balance
Interest on related party loans 122433.25 23475.57
Total 122433.25 23475.57
2) Significant overdue interest
Unit: RMB
Whether impairment
Borrower Ending Balance Overdue time Overdue reason occurred and its
judgment basis
Other explanations:
There were no significant overdue interests during each reporting period.
3) Provision for bad debt reserves
□ Applicable □ Not applicable
294ZKTeco 2022 Annual Report
(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 26728933.46 30383061.90
Guarantee deposit 1910792.36 1957542.84
Reserve funds and loans 3231834.22 2490576.88
Collection and payment on behalf of
286952.432131114.24
others
Withholding and paying social security
960569.041415315.06
and provident fund on behalf of others
Export tax refund 9631295.37 3047648.41
Total 42750376.88 41425259.33
2) Provision for bad debt reserves
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
53395.958836828.288890224.23
12022
Balance as of January
1 2022 in the current
period
Provision in current
-395.952426.592030.64
period
Balance as of
53000.008839254.878892254.87
December 31 2022
Changes in book balance with significant changes in loss reserves during the current period
□Applicable □ Not applicable
As of December 31 2022 the Company's individual provision for bad debt reserves is: * The equity transfer payment of RMB
2500000.00 from Shenzhen Zhikongtaike Biometric Technology Co. Ltd. is expected to be unrecoverable; * The operating capital
of RMB 6012062.77 paid by the Company to Shenzhen Zhongan Intelligent Control Technology Co. Ltd. in previous years is
expected to be unrecoverable. The Company considers fully withdrawing bad debt reserves out of caution.Disclosure by aging
Unit: RMB
Aging Book balance
Within 1 year (including 1 year) 15916616.20
1-2 years 14792826.76
2-3 years 409311.13
Over 3 years 11631622.79
3-4 years 2747578.23
295ZKTeco 2022 Annual Report
4-5 years 8133140.36
Over 5 years 750904.20
Total 42750376.88
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
Other
receivables
with significant
individual
amounts and 6012062.77 6012062.77
separate
provision for
bad debt
reserves
Other
receivables
with provision
for bad debt
reserves based 53395.95 -395.95 53000.00
on a
combination of
credit risk
characteristics
Other
receivables
with
insignificant
individual
2824765.512426.592827192.10
amounts but
separate
provision for
bad debt
reserves
Total 8890224.23 2030.64 8892254.87
4) Other accounts receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Other major receivable written off:
Unit: RMB
Whether the
Nature of other Verification and
payment is
Company name accounts Write-off amount Write-off reason cancellation
incurred due to
receivable programs that have
related
296ZKTeco 2022 Annual Report
been performed transactions
Description for writing off other receivables:
No other accounts receivable actually written off in the current period;
5) 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
Export tax refund Export tax refund 9631295.37 Within 1 year 22.53%
Shenzhen Zhongan
Intelligent Control 2-3 years more
Current account 7772552.26 18.18% 6012062.77
Technology Co. than 3 years
Ltd.Wuhan ZKTeco
Perception Within 1 year 1-2
Current account 6580000.00 15.39%
Technology Co. years
Ltd.Shenzhen
Zhikongtaike
Biometric Current account 2500000.00 Over 3 years 5.85% 2500000.00
Technology Co.Ltd.Shenzhen
Zhongjiang
Intelligent Current account 1941963.89 1-2 years 4.54%
Technology Co.Ltd.Total 28425811.52 66.49% 8512062.77
6) Other receivables derecognized due to transfer of financial assets
There are no other accounts receivable that have been derecognized due to the transfer of financial assets at the end of the period;
7) The amount of assets and liabilities formed by transferring other receivables and continuing to be involved
The amount of assets and liabilities formed by not transferring other receivables and continuing to be involved in this period.
3. Long-term equity investment
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Investment in
781906396.17781906396.17400533404.13400533404.13
subsidiaries
Total 781906396.17 781906396.17 400533404.13 400533404.13
297ZKTeco 2022 Annual Report
(1) Investment in subsidiaries
Unit: RMB
Increase or decrease in the current period Ending
balance
Beginning Redu of Ending balance
Investee balance (book Additional ced Impairmen impairm(book value)
value) Others investment inves t provision ent
tment provisio
n
Shenzhen ZKTeco
Biometric
Identification 12608518.14 12608518.14
Technology Co.Ltd.Hangzhou ZKTeco
Hanlian E- 2000000.00 11694.58 2011694.58
commerce Co. Ltd.ZKTECO CO.
117693732.0015847754.20133541486.20
LIMITED
XIAMEN
ZKTECO CO. 100000000.00 650998.35 100650998.35
LTD.Xiamen Zkteco
Biometric
Identification 38986734.80 38986734.80
Technology Co.Ltd.ZKCserv
Technology 510000.00 510000.00
Limited Co. Ltd.ZKTECO
(GUANGDONG) 100000000.00 336416752.35 436416752.35
CO. LTD
Dalian ZKTeo CO.
3000000.0075306.013075306.01
Ltd.Xi’an ZKTeco Co.
36392.2542171.3778563.62
Ltd.Shenzhen
Zhongjiang
Intelligent 5100000.00 5100000.00
Technology Co.Ltd.Hubei ZKTeco Co.
3510000.00708.763510708.76
Ltd.ZKTECO SG
INVESTMENT 17088026.94 28193827.50 45281854.44
PTE. LTD.ZKTeco Sales Co.
133778.92133778.92
Ltd.Total 400533404.13 381372992.04 781906396.17
(2) Investment in affiliated and joint ventures
Unit: RMB
298ZKTeco 2022 Annual Report
Increase or decrease in the current period
Investm Ending
Beginni ent Adjust Cash balance
ng profit
Ending
Investo Additio Reduce ment to Change dividen Impair
of
balance
balance or loss
r nal d other s in ds or ment
impair
(book recogni Others
(book
investm investm compre other profits provisi ment
value) zed
value)
ent ent hensive equities declare on provisi
under
income d to pay on
equity
method
I. Joint ventures
II. Joint venture
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 1540809415.40 1144810483.95 1926344535.04 1498995492.43
Other businesses 1729304.31 3944901.99
Total 1542538719.71 1144810483.95 1930289437.03 1498995492.43
Revenue related information:
Unit: RMB
Contract classification Division 1 Division 2 Operating revenue Total
Goods type
Including:
Smart office products 270233255.69 270233255.69
Smart entrance and exit
1127833440.781127833440.78
management products
Smart identity
142742718.93142742718.93
verification products
Others 1729304.31 1729304.31
Classification by
region of operation
Including:
Domestic 715744784.88 715744784.88
Overseas 826793934.83 826793934.83
Market or customer
type
Including:
Distribution 1360717434.43 1360717434.43
Direct sales 180091980.97 180091980.97
Others 1729304.31 1729304.31
Type of contract
Including:
Classification by time
of transfer of goods
Including:
299ZKTeco 2022 Annual Report
Classification by
contract term
Including:
Classification by sales
channel
Including:
Total
Information related to performance obligations:
None
Information related to the transaction price allocated to the remaining performance obligations:
The corresponding revenue amount for performance obligations that have been signed but have not yet been fulfilled or fully fulfilled
at the end of this reporting period is RMB 0.00.
5. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Income from long-term equity
40000000.0039000000.00
investment accounted with cost method
Investment income from financial
801770.276755345.46
products
Forward foreign exchange settlement and
-6488400.001617192.50
sales contract
Total 34313370.27 47372537.96
6. Others
XVIII. Supplementary Information
1. Detailed statement of non-recurring profits and losses in the current period
□Applicable □ Not applicable
Unit: RMB
Item Amount Remarks
Losses and gains from disposal of non-
-353911.28
current assets
Government subsidies included in
current profits and losses (except those
closely related to the normal business of Mainly due to a slight decrease in
the Company which are in line with 12705234.71 government subsidies compared to the
national policies and regulations and previous period
continue to be enjoyed in accordance
with certain standards or quotas)
300ZKTeco 2022 Annual Report
Capital occupancy fees charged to non-
financial enterprises included in current 50026.13
profits and losses
In addition to the effective hedging
business related to the normal business
of the Company the profits and losses
Mainly due to investment gains and
from fair value changes arising from the
losses and changes in fair value
holding of trading financial assets and
-5791116.41 generated by partial forward exchange
trading financial liabilities as well as
settlement to hedge against exchange rate
investment income from the disposal of
fluctuations risk
trading financial assets trading financial
liabilities and available-for-sale financial
assets
Other non-operating income and
-2833347.63
expenses other than the above items
Less: income tax impact 722071.62
Minority interest impact 157523.35
Total 2897290.55 --
Specific situation 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
2. Net return on assets and earnings per share
Earnings per share
Profit during the reporting Weighted average return on
period net assets Basic earnings per share Diluted earnings per share
(RMB/share) (RMB/share)
Net profit attributable to
ordinary shareholders of the 9.39% 1.5027 1.5235
Company
Net profit attributable to
ordinary shareholders of the
Company after deducting 9.25% 1.4796 1.5005
non-recurring profits and
losses
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
301ZKTeco 2022 Annual Report
(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
302
