ZKTECO CO. LTD.2026 Half Year Report
Announcement No.: 2026-071
August 2026
Section I Important Notes Contents and Definitions
The Board of Directors directors and senior management guarantee that the information
presented in the Half Year 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)
Xu Ping hereby declare that the financial information in this Half Year Report is true accurate
and complete.All directors have attended the board meeting to review this Half Year Report.Should this report contain any forward-looking statements involving future plans etc.they do not constitute a commitment by the Company to any investors or related parties.Investors and related parties shall maintain sufficient awareness of the risks involved and
understand the differences among plans forecasts and commitments. Investors are kindly
requested to make prudent decisions and be aware of investment risks.The Company has elaborated in detail on the potential risk factors that may occur in the
future in this report. Investors are advised to refer to the full text of this report and pay special
attention to the content of "Section III Management Discussion and Analysis" - "X. Risks Faced
by the Company and Countermeasures".The Company will not distribute cash dividends distribute bonus shares or distribute
shares from capital reserve during the current reporting period.Table of Contents
Section I Important Notes Contents and Definitions... 2
Section II Company Profile and Key Financial Indic... 7
Section III Management Discussion and Analysis ..... 11
Section IV Corporate Governance Environment and So.. 97
Section V Significant Events ...................... 103
Section VI Changes in Shares and Information about. 111
Section VII Bonds ................................. 121
Section VIII Financial Report ..................... 122
Documents Available for Inspection
I. The original text of the 2026 Half Year Report signed by the Company’s legal representative and stamped by the Company;
II. Financial statements affixed with official stamps and the signatures of the Company’s legal representative the person in charge of
the accounting work and the person in charge of accounting institution (accounting supervisor) of the Company;
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.Place for document inspection: Office of the Company's Board of Directors
Definitions
Terms Refers to Definitions
Company the
Refers to ZKTECO CO. LTD.Company ZKTeco
ZKTeco Times Refers to Shenzhen ZKTeco Times Investment Co. Ltd. a controlling shareholder of the Company
JYHY Refers to Shenzhen JYHY Investment Enterprise (Limited Partnership) a shareholder of the Company
JYSJ Refers to Shenzhen JYSJ Investment Enterprise (Limited Partnership) a shareholder of the Company
Dongguan LX Investment Partnership Enterprise (Limited Partnership) a shareholder of the
LX Investment Refers to
Company
JYLX Refers to Shenzhen JYLX Consulting Enterprise (Limited Partnership) a shareholder of the Company
Shenzhen JYQL Investment Consulting Enterprise (Limited Partnership) a shareholder of
JYQL Refers to
the Company
Guangdong ZKTeco Refers to ZKTeco (Guangdong) Co. Ltd. a wholly-owned subsidiary of the Company
Shenzhen ZKTeco Biometric Identification Technology Co. Ltd. a wholly-owned
Shenzhen ZKTeco Refers to
subsidiary of the Company
Xiamen ZKTeco Refers to Xiamen ZKTeco Co. Ltd. a wholly-owned subsidiary of the Company
Shenzhen Longzhiyuan Technology Company Limited by Shares (later renamed Shenzhen
Longzhiyuan Technology Co. Ltd.). The Company acquired 55% of its equity in 2025 and
Longzhiyuan Refers to
it became a controlling subsidiary of the Company and was included in the Company's
consolidated financial statements.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
Refers to Articles of Association of ZKTECO CO. LTD.Association
A shares Refers to RMB denominated ordinary shares
RMB RMB '0000 Refers to RMB RMB '0000
Reporting Period Refers to January to June 2026
End of Reporting
Refers to June 30 2026
Period
CV Refers to Computer Vision
BioCV Refers to Biometrics & Computer Vision
A computer technology that utilizes the analysis of human biological characteristics to
distinguish biological organisms. It is used for personal identification by a close combination
of computer technology with high-tech methods such as optics acoustics biosensors and
Biometrics Refers to
biostatistics and utilizing the inherent physiological characteristics of the human body
(fingerprints facial features palm veins iris etc.) or behavioral characteristics (sound gait
etc.)
Used to simulate biological vision using cameras computers and related equipment;
simulate human visual abilities capture and process three-dimensional information of the
Computer Vision Refers to
scene by using optical systems and image processing tools understand and command
specific devices to execute decisions
Radio Frequency Identification (RFID) a wireless communication technology that can
identify specific targets and read and write relevant data through radio signals without
RF RFID Refers to
establishing mechanical or optical contact between the identification system and specific
targets
Used to connect any object to the network by using information sensing devices and
Internet of following agreed protocols. The object exchanges and communicates information through
Refers to
Things/IoT information dissemination media to achieve intelligent recognition positioning tracking
supervision and other functions
Single Minute Exchange of Die a process improvement method that minimizes the product
SMED Refers to
die exchange time production startup time or adjustment time of the die. It can significantly
shorten the time required for machine installation and die exchange setting
Software-as-a-Service a software model that provides software applications through the
SaaS Refers to
Internet
Material Requirement Planning the process in which a production enterprise gradually
derives the production and procurement plans for the components raw materials and other
MRP Refers to
materials required for the production of the main product based on the production plan the
structure of the main product and the inventory situation
Secure Access Module a module used for encrypting and decrypting identity card
SAM Refers to
information
Surface Mount Technology a circuit assembly technology used to install surface mounted
components without pins or with short leads on the surface of printed circuit boards (PCBs)
SMT Refers to
or other substrates and then solder and assemble them through methods such as reflow
soldering or immersion soldering
Printed Circuit Board Assembly the process of soldering components onto a PCB substrate
PCBA Refers to
to form a printed circuit board (PCB)
AI Refers to Artificial Intelligence
AIoT Refers to The Artificial Intelligence of Things
IoT Refers to Internet of Things
The rebate the Company provides to dealers based on the rebate policy and the completion of
Rebate Refers to
dealer performance
SDK Refers to Software Development Kit
BioCode Refers to Biometric feature code converted from encrypted biometric features
Manufacturing Execution System a production information management system for the shop
MES Refers to
floor of manufacturing enterprises.Quality Management System the management system that directs and controls an
QMS Refers to organization in terms of quality. It is a systematic quality management model established
within an organization to achieve quality objectives.Advanced Planning and Scheduling system an information management system used to
APS Refers to
optimize production planning and scheduling.Artificial Intelligence Generated Content the process of generating content using AI
AIGC Refers to
technologies including text images audio and video etc.Hyper Text Transfer Protocol Secure a protocol for secure communication on the World
HTTPS Refers to
Wide Web and is the secure version of HTTP (Hypertext Transfer Protocol).ChatGPT Refers to The large language model developed by the American company OpenAI.SMB Refers to Small and Medium-sized Businesses.EEG Refers to Electroencephalogram
fNIRS Refers to Functional Near-Infrared Spectroscopy
Note: If there is a discrepancy between the total count and the sum of the sub item values in any table of this
Half Year Report it is due to rounding reasons.Section II Company Profile and Key Financial Indicators
I. Company Information
Stock Abbreviation ZKTECO Stock code 301330
Stock listing exchange Shenzhen Stock Exchange
Chinese name of the熵基科技股份有限公司
Company
Chinese abbreviation of the熵基科技
Company (if any)
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
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
Email ir@zkteco.com ir@zkteco.com
III. Other Information
1. Company's Contact Information
Whether the registered address office address postal code website email address etc. of the Company changed during the reporting
period
□ Applicable □Not applicable
The registered address office address postal code website email address etc. of the Company have not changed during the reporting
period as detailed in the 2025 Annual Report.
2. Information Disclosure and Place of the Report
Whether the information disclosure and place of the report changed during the reporting period
□Applicable □ Not applicable
Website of the stock exchange for disclosing the Half Year
Shenzhen Stock Exchange (http://www.szse.cn)
Report
Securities Times China Securities Journal Shanghai Securities
media and website for the disclosure of the Half Year Report
News and CNINFO (http://www.cninfo.com.cn)
Office of the Company's Board of Directors No.32 Pingshan
Storage location of the Company's Half Year Report
Industrial Road Tangxia Town Dongguan Guangdong China
3. Registration Change
Whether the registration changed during the reporting period
□ Applicable □Not applicable
The Company's registration remained unchanged during the reporting period as detailed in the 2025 Annual Report.IV. Main Accounting Data and Financial Indicators
Does the Company need to retroactively adjust or restate accounting data from previous years
□ Yes □No
YoY change during the
Current reporting period The same period last year
reporting period
Operating revenue (RMB) 1098427084.69 929258759.50 18.20%
Net profit attributable to
shareholders of listed 79664695.17 93235556.28 -14.56%
companies (RMB)
Net profit attributable to
shareholders of listed
companies after deducting 30395608.96 84430913.49 -64.00%
non-recurring profits and
losses (RMB)
Net cash flows from operating
50492267.08 169183153.56 -70.16%
activities (RMB)
Basic earnings per share
0.3399 0.3999 -15.00%
(RMB/share)
Diluted earnings per share
0.3370 0.3996 -15.67%
(RMB/share)
Weighted average return on
2.29% 2.75% -0.46%
net assets
Increase or decrease at the
At the end of this reporting end of this reporting period
The end of the previous year
period compared to the end of the
previous year
Total assets (RMB) 4940631801.95 4954810629.48 -0.29%
Net assets attributable to
shareholders of listed 3422314489.38 3481488420.71 -1.70%
companies (RMB)
Companies with equity incentives and employee stock ownership plans may disclose net profit after deducting the impact of share-
based payment.YoY change during the
Major Accounting Data Current reporting period The same period last year
current period (%)
Net profit excluding the 117733858.44 116462323.17 1.09%
impact of share-based
payment (RMB)
V. Differences in Accounting Data between Domestic and Foreign Accounting Standards
1. Differences in net profit and net assets in financial reports disclosed in accordance with international
accounting standards and Chinese accounting standards
□ Applicable □Not applicable
During the reporting period there were no differences in net profit and net assets between the financial reports disclosed in accordance
with international accounting standards and Chinese accounting standards.
2. Differences in net profit and net assets in financial reports disclosed in accordance with foreign accounting
standards and Chinese accounting standards
□ Applicable □Not applicable
During the reporting period there were no differences in net profit and net assets between the financial reports disclosed in accordance
with foreign accounting standards and Chinese accounting standards.VI. Items and Amounts of Non-recurring Profits and Losses
□Applicable □ Not applicable
Unit: RMB
Item Amount Remarks
Losses and gains from disposal of non-
current assets (including the offsetting
-305355.94
portion of the provision for asset
impairment)
Government subsidies included in
current profits and losses (except those
closely related to the normal business of
the Company which are in line with
1450253.14
national policies and regulations enjoyed
according to determined standards and
have a continuous impact on the
Company's profits and losses)
Profits and losses from fair value Mainly the gains from changes in fair
changes arising from the holding of value - trading financial liabilities of
financial assets and financial liabilities RMB 43636660.50 recognized in the
by non-financial enterprises as well as current period which is an estimation of
the gains and losses arising from the 51514708.53 the fair value of contingent consideration
disposal of financial assets and financial based on the acquisition agreement of
liabilities except for effective hedging Longzhiyuan taking full account of
business related to the normal operation Longzhiyuan's actual and estimated
of the Company performance commitment completion.Reversal of the provision on receivables
with impairment test conducted on an 610111.71
individual basis
Share-based payment fees recognized in
-1793200.00
a lump sum due to the cancellation or
modification of the equity incentive plan
Other non-operating revenues and
-2105756.04
expenses other than the above items
Less: income tax impact 634446.71
Minority interests impact (after tax) -532771.52
Total 49269086.21
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.Section III Management Discussion and Analysis
I. Main Businesses Engaged by the Company During the Reporting Period
(I) Industry development overview
In the first half of 2026 driven by the iterative upgrades of AI big data and cloud computing technologies the biometric industry
has entered the multimodal perception development stage with various biometric technologies continuously being implemented and
applied. The industry's technical system has achieved a key upgrade evolving from traditional identity recognition to a technical form
deeply integrated with multimodal perception computer vision and AI. In business scenarios it has upgraded from simply performing
the basic function of identity verification to a new model of "identifying user identities matching scene demands and providing
adaptive services". This gradually builds an empathetic experience ecosystem with intelligent response scene adaptation and
immersive interaction capabilities marking a critical stage for industry technical iteration and commercialization with improved quality
and efficiency.In the first half of 2026 the technical iteration process of the domestic multimodal perception (biometric) industry continued to
accelerate mutually empowering spatial intelligence technology and continuously broadening downstream application scenarios. At
the technical dimension level multimodal biometric technology has completed its evolution from feature stacking to cross-modal deep
fusion. Relying on multi-dimensional information fusion across sensors features and decisions it enhances recognition accuracy and
device anti-attack performance. Hardware architecture continues to innovate optimizing device integration efficiency while reducing
on-site deployment costs. Non-contact recognition technology is becoming increasingly mature and hardware devices are iteratively
upgrading towards miniaturization mobility and high throughput further improving their adaptability to complex working conditions
such as strong light and high-density crowds. As AI large models and edge intelligence technologies empower spatial intelligence
scenarios lightweight models and generative AI continuously iterate algorithms based on real-scene datasets. They can perform identity
recognition spatial dynamic perception and intelligent device scheduling in scenarios such as government verification building access
control industrial parks and public venues effectively reducing algorithm false positive rates and shortening end-side data
transmission latency. Concurrently the industry's privacy compliance framework is continuously improving relying on technical means
such as "feature template + dynamic encryption" transmission data desensitization and local storage to meet regulatory requirements
related to personal information protection laws and regulations. Overall multimodal fusion has become the mainstream development
direction for the industry. Biometric and spatial intelligence technologies are deeply coupled driving the industry to transform from a
single identity verification tool into the underlying infrastructure for urban and building digitalization. Domestic substitution in key
links such as core algorithms and dedicated AI chips is steadily advancing and the level of independent control over the industry chain
and supply chain continues to improve.The downstream smart business sector is accelerating its digital transformation with the help of multimodal perception and spatial
intelligence technologies demonstrating ample room for industry growth. In 2026 the domestic retail digitalization transformation and
commercial display market size will continue to expand with unmanned stores and smart store transformation sub-sectors maintaining
high growth rates. The market business model is gradually moving away from mere hardware sales; an integrated solution of hardware
terminal + SaaS platform + supporting O&M services has become the industry mainstream. Large models and AI visual technology
are being implemented in offline physical scenarios utilizing biometric technology for personnel identity verification and relying on
spatial perception capabilities to achieve passenger flow monitoring area-based control and unmanned store O&M helping offline
stores reduce labor operation costs and promoting the intelligent upgrade of the retail industry.Brain-computer interface as a representative new quality productive force in the AI sector has moved from the laboratory
technology exploration phase into the commercialization window period. Driven by the synergistic effect of multiple underlying
technologies the industry has ample development momentum; currently non-invasive solutions have become the mainstream
consumer-grade technology route due to their safety and portability advantages. The industry strengthens user intent recognition
stability by building a multimodal interaction framework; application scenarios are gradually expanding from traditional neuro-
rehabilitation to immersive human-computer interaction fields such as smart education smart office and smart elder care. Coupled
with national policy support for future industries related industry standards and ethical norms are accelerating their implementation
and the upstream and downstream industry chain support and industrial synergy capabilities continue to improve.(II) Overall layout of the Company's main business and core products during the reporting period
1. Business Overview
(1) Business overview
The Company is a globally leading smart space evolution service provider with AI cognition as its core driver. The Company
applies multimodal BioCV (computer vision and biometrics) and AI cognitive space computing technologies to build a comprehensive
perception system promoting the transformation of space from static management to autonomous decision-making and evolution and
bringing comfortable intelligent safe and sustainable scene experiences to global customers. The Company has deeply laid out in the
five strategic fields of smart space smart office digital identity authentication smart business and smart life providing AI-empowered
end-cloud integrated solutions to help customers achieve efficiency leaps and value reshaping in the digital era. ZKTeco relying on its
profound accumulation in algorithms hardware data and scenario-based applications has prospectively incorporated brain-computer
interface into the Company's long-term strategic blueprint. The Company conducts technology R&D and scenario verification around
areas such as work safety health management smart office smart life and human-computer interaction with focus on the integration
of brain-computer interface and multimodal AI technologies.In the first half of 2026 the Company continued to advance its strategic upgrade from a smart terminal and solution provider to
an AI cognitive space intelligence enterprise. During the reporting period the Company continued to deepen its strategic layout around
smart space smart office digital identity authentication smart business and smart living forming an end-cloud integrated product and
solution system covering the "perception layer - intelligent computing layer - platform layer - application layer". This promotes the
application of AI technology in various industry scenarios such as enterprise campuses office buildings education healthcare retail
and public services. At the same time adhering to the philosophy of "technology for good" the Company actively explores future
industry development directions and makes forward-looking layout in brain-computer interface and AI integration technology. Based
on "chip-compute-cloud-application" it builds an innovative ecosystem and relying on its independently developed ZKBrainScape
brain-computer emotion large model conducts technology research and application verification around scenarios such as medical
rehabilitation education and training work safety and consumer entertainment exploring new modes of natural interaction between
humans and intelligent systems.The main business income of the Company's various business segments during the reporting period is as follows:
Unit: RMB '0000
January to June 2026 January to June 2025
Item
Amount Proportion Amount Proportion
I. Smart space 68910.42 64.10% 68617.14 74.13%
II. Smart office 17696.16 16.46% 17035.14 18.40%
III. Digital identity
3596.15 3.35% 4016.31 4.34%
authentication
IV. Smart business 2824.42 2.63% 2894.13 3.13%
V. Smart living 14474.73 13.46% - -
Total 107501.88 100.00% 92562.71 100.00%
(2) Core businesses
* Smart space products: Upgrading from "Digitalized Management" to "Spatial Intelligence"
Smart space is a core business direction for the Company's strategic development.With the continuous maturation of generative AI digital twin IoT and spatial computing technologies traditional buildings
campuses and urban spaces are transforming from "passive management" to "active intelligence". Leveraging years of accumulated
capabilities in computer vision biometric smart terminal and software platforms the Company has built a new generation of smart
space solutions centered on AI cognitive spatial computing.By integrating multimodal BioCV IoT sensing digital twin edge intelligence and AI Agent technologies the Company achieves
real-time perception intelligent analysis and autonomous decision-making for key elements such as personnel vehicles equipment
and environment within spaces promoting the upgrade of space management from traditional manual management to intelligent O&M.Focusing on application scenarios such as enterprise campuses office buildings education healthcare and communities the
Company creates integrated solutions covering smart access smart security smart parking smart environment smart video smart
O&M and other fields.Through the synergy of ZKBio Smart Space Management Platform and Mars Wisdom AI Cognitive Space Platform the Company
promotes the upgrade of smart space from the traditional "system integration model" to the "AI-native space intelligence model"
enabling spaces to possess continuous learning dynamic optimization and autonomous service capabilities.During the reporting period the Company continued to advance smart space product upgrades: promoting the integration of AI
Agent capabilities into space management platforms; accelerating the commercialization of AI edge smart terminals; advancing
application verification in key scenarios such as manufacturing campuses and enterprise campuses; and enriching solutions for industry
sub-segments like smart campuses and smart schools.* Smart office products: A new generation of digital productivity driven by AI intelligent agents
The smart office business is a new generation of intelligent office ecosystem created by the Company to meet the demands of
enterprise digital transformation.As enterprise digital transformation enters the intelligent stage office systems are evolving from traditional process management
towards AI-assisted decision-making and intelligent collaboration. Based on multimodal BioCV AI Agent cloud computing and IoT
technologies the Company has created an integrated smart office solution covering scenarios such as attendance management access
control visitor management meeting management consumption management and device management.Through AI intelligent agent technology the Company promotes the evolution of office systems from "functional tools" to
"intelligent assistants": automatically completing business process handling; providing intelligent analysis and decision
recommendations; optimizing enterprise resource allocation; and enhancing organizational operational efficiency.The Company continues to improve the ZKTeco Interconnection AIoT Cloud Ecosystem Platform providing flexible secure and
efficient digital service capabilities for SMEs and large organizations through an "edge-end-cloud + AI" technical architecture.During the reporting period the Company further promoted the integration of large AI models with office scenes exploring
applications of intelligent agents in business such as smart customer service smart approval smart scheduling and smart visitor
management thereby facilitating the upgrade of enterprise office models towards intelligence and automation. Meanwhile in
collaboration with ecosystem partners such as Lark and WeCom the Company continuously deepens smart office scene innovation
around cutting-edge technologies like AI IoT and cloud computing promoting the further integration of office platforms spatial
intelligence and organizational operations to help more enterprises build a safer more efficient and smarter digital office new
ecosystem.* Digital identity authentication products: Building the infrastructure for a trusted digital world
Digital identity authentication business is one of the Company's core businesses for long-term development.With the rapid development of the digital economy trusted identity has become an important infrastructure connecting people
with the digital world. Leveraging years of biometric technology accumulation and integrating multimodal BioCV large models and
blockchain technologies the Company has built a secure accurate and convenient digital identity authentication system forming a
complete business system covering multimodal biometric terminals identity verification systems industry identity authentication
platforms and smart identity application solutions. This system has been widely applied in scenarios such as education exams medical
services public services and enterprise campuses providing customers with trusted efficient and secure identity authentication
capabilities.During the reporting period the Company continued to drive biometric technology innovation focusing on strengthening the
R&D and industrial application of multimodal palm recognition technology non-contact identity authentication technology and high-
security-level identity verification technology.* Smart business: AI-driven leading business transformation
The Company's smart commercial business leveraging AI big data analysis digital content and smart terminal technologies
promotes the upgrade of traditional commerce from digital display to intelligent operation. The Company's ZKDIGIMAX smart
commercial brand focuses on the needs of industries such as general retail and catering and builds a smart commercial ecosystem of
"hardware terminals + AI capabilities + operation services" by integrating AI visual analysis digital signage smart terminals cloud
platforms and data analysis. The Company helps commercial clients achieve refined operations by using AI technology to analyze
consumer behavior optimize product displays adjust marketing strategies and improve operational efficiency.During the reporting period the Company continuously improved its ZKDIGIMAX Level 3 digital visual marketing solution
promoting the deep application of AI capabilities in commercial scenarios such as retail and catering.* Smart living products: Layout in outdoor smart products expanding the smart home product matrix.The Company's smart living products mainly cover outdoor smart products and smart home businesses.Regarding outdoor smart business Longzhiyuan a subsidiary acquired by the Company in 2025 is a company specializing in
audio-visual and optical equipment in the smart outdoor domain. It focuses on niche markets aiming for smart living and is dedicated
to developing smart products related to daily life. Currently Longzhiyuan's products primarily include two major series: outdoor
products and smart home with outdoor tracking cameras as its core product. Longzhiyuan's business encompasses ID design software
and hardware design and manufacturing. While providing ODM services for multiple professional outdoor brands it also sells its own
branded products through overseas e-commerce channels. This acquisition expands the Company's smart living products into outdoor
areas enriching the product array in smart outdoor business scenarios.The Company's smart home business covers products such as cameras pet feeders and smart cat litter box camera modules.Simultaneously the Company is expanding brain-computer interaction related products around smart living scenarios applying brain-
computer perception chip modules and smart terminal capabilities to consumer electronics human-computer interaction and other
lifestyle scenarios further enriching the product forms and technological connotations of the smart living business.
2. Comprehensive product system and cloud O&M service ecosystem
The Company leverages multimodal BioCV models and AI cognitive spatial computing as its core engine to build a full-stack
technology system covering endpoint edge and cloud. This upgrades various smart terminals from single-perception devices to edge
intelligent nodes capable of real-time inference and autonomous decision-making while enabling model iteration data governance
and large-scale service delivery through a cloud platform. Building on this foundation the Company has established a unified technical
base and application synergy across four major domains: smart space smart office digital identity authentication and smart business.This drives the evolution of its product system from functional systems to task-driven AI agent networks enabling the system with
closed-loop capabilities of perception understanding decision-making and execution. Concurrently with cloud O&M services at its
core the Company builds a full lifecycle service system covering deployment O&M optimization and upgrades. This accelerates the
transformation of its business model towards SaaS and continuous services and through global multi-scenario data accumulation
forms a "data-model-application" positive flywheel. The Company is building next-generation digital infrastructure based on spatial
computing and multimodal intelligence enabling the physical world to gradually evolve into computable cognitive and evolvable
intelligent systems. This drives efficiency improvements security upgrades and operational model restructuring globally.
(1) Smart space business
ZKTeco is leveraging AI cognitive spatial computing as its core driving force integrating the ZKBio software platform and the
Mars Wisdom AI platform to build a full-element multimodal perception and understanding system covering people vehicles objects
and the environment. On this technical foundation the Company is upgrading its traditional system architecture which centered on
"physical space management" to a spatial intelligence system driven by data and models. This transforms space from a passive carrier
responding to commands into a "spatial intelligent agent" capable of perception understanding and decision-making. By introducing
an AI agent mechanism space no longer merely performs management functions but can conduct autonomous analysis and dynamic
optimization based on real-time data. This enables the synergistic evolution of security access control energy consumption and service
experience thereby transforming traditional spaces into "user-oriented intelligent agents" with continuous learning and adaptive
capabilities. This transformation not only redefines the interaction between people and space but also drives the upgrade of operational
models from human-driven to intelligent-driven. While significantly enhancing operational efficiency and user experience it provides
a quantifiable and optimizable technical path for green low-carbon and sustainable development.The comparison between traditional physical spaces and the Company's spatial intelligent agents in the smart space domain is
shown in the figure below:
Persons Vehicles
Shangshang
Smart Assistant
Visual Perception
ZKBio
software
platform
Digital Butler
Elevator management
Apartment lock Video analysis
Visitor appointment Online consumption
Intrusion alarm Parking lot
Smart Front
Video intercom Access security
Desk
inspection
Mars Wisdom
AI Platform Thinking Decision
Patrol
Intelligent
Enviro Agent
Items
nment
Traditional Physical Space Spatial Intelligent Agent
The Company's smart space business layout is as follows:
Access control
Intrusion alarm management
Attendance
management
Locker
management Elevator control
Channel gate
management Visitor
management
Public Parking lot
address management
Smart Scene Center Patrol
management
Energy Video
management surveillance
Consumer terminal
management
* Smart Space Business Products and Solutions - ZKBio Management Software Platform
The ZKBio Intelligent Integrated Management Platform (ZKBio CVSecurity) takes "creating a smart space for all scenarios" as
its core goal. By deeply integrating multimodal BioCVTiny ML technology with the IoT perception system it has built a space
intelligent management platform covering "people vehicles objects and environmental energy". With the machine vision intelligent
analysis provided by the Mars Wisdom platform as the technical foundation the platform integrates personnel biometrics behavioral
characteristic recognition vehicle recognition and intelligent scene algorithms achieving a full-link and full-scenario deep integration
of 18 business subsystems such as access control visitors passages parking video perception and space environment perception
forming a closed-loop smart ecosystem from space access and operations to energy consumption management.As the platform's capabilities continue to evolve the Company further introduced an AI Agent technology architecture building
an enterprise-level AI Agent platform and a "Smart Space Assistant" tailored for smart spaces. This capability through natural language
interaction and intelligent task orchestration achieves intelligent collaboration across various business types including campus
management space operations and device control. This drives the transformation of space management from traditional system
operations to conversational space management and AI Agent collaborative management. The platform can automatically complete
office and space service processes such as visitor invitations meeting space management and permission and parking resource
allocation. It also integrates with video sensing and IoT devices to enable capabilities like environmental control anomaly analysis
and intelligent inspection. Concurrently based on the platform's accumulated data it generates campus operation analysis and
management reports.Leveraging AI Agent capabilities and its knowledge base system the platform has also built a smart space digital employee system
designed for O&M and security scenarios. This system through knowledge base Q&A and SOP (Standard Operating Procedure)
intelligent handling mechanisms provides O&M and security personnel with event analysis and handling suggestions. It also supports
linking with smart terminals such as patrol robots to execute inspection tasks thereby further enhancing campus operation efficiency
and safety management levels. Through the aforementioned technological upgrades the ZKBio platform is gradually evolving into a
spatial AI operating system for smart campuses and smart buildings offering enterprises and urban spaces more efficient and intelligent
digital management capabilities.The panoramic view of the ZKBio Smart Space Integrated Management Platform is as follows:
The main characteristics of the ZKBio Smart Space Integrated Management Platform are as follows:
a. All-scenario integration:
Based on a micro-service distributed architecture the platform supports the flexible combination of modules such as video
perception parking management and elevator control systems. Through a GIS map (Geographic Information System map)
visualization interface it builds a three-dimensional security prevention system of "circle-line-surface-point". At the same time it
enhances the hybrid cloud deployment capability supporting dynamic modeling of smart spaces and real-time analysis of energy
consumption data making carbon footprint management in office parks communities and other scenarios possible.b. Intelligent decision-making hub:
Relying on multimodal BioCV TinyML technology IoT perception and Mars Wisdom platform it has constructed "one center"
and "four intelligent defense lines":
*One center: Monitoring Center (including video alarms real-time TV wall video and custom dashboards);
?The first line: Physical space access control is achieved through seamless passage (multimodal BioCV recognition for
pedestrian and vehicle gates/channels);
?The second line: Process supervision is strengthened through electronic fences and AI video perception (loitering
detection/intrusion detection).?The third line: By integrating the access control and elevator control linkage mechanism after identity verification through
access control the smart elevator dispatching system is activated to improve elevator operation efficiency reduce stop time and
lower motor wear.?The fourth line: It provides post-event verification tools such as personnel trajectory tracking and vehicle feature search.c. Ecological expansion capability:
Adopting standard API interfaces and custom data integration modules it can interface with third-party systems and support rapid
algorithm model iteration. Through a hybrid cloud technical architecture it supports LAN and WAN communication. Through the
ZKBio app and mini-program users can complete visitor reservations remote elevator control and video intercom operations.Meanwhile the platform ensures full-chain information security through HTTPS encryption transmission and data desensitization
technologies. This "end-edge-cloud" collaborative smart space solution is driving traditional management towards digitalization and
smart transformation.d. Mobile and cloud capabilities:
The ZKBio platform now features the ZKBio APP and ZKBio Assistant mini-program integrating core applications such as
attendance consumption access and visitor management in one stop deeply merging mobile and cloud technical capabilities to
provide users with a convenient and efficient one-stop smart service experience.Building upon the continuous deepening of intelligent space security management capabilities the platform further expands its
intelligent inspection terminal matrix adding air-ground collaborative patrol modules such as drones and robot dogs. Powered by Mars
Wisdom Marslume AI as its intelligent engine this module integrates AI visual recognition multi-sensor perception and autonomous
path planning capabilities. It can conduct automated aerial and ground inspections of park perimeters public areas and key facilities
enabling abnormal behavior identification security risk warnings and rapid response to emergencies. By leveraging the complementary
strengths of drones' high-altitude perspective and robot dogs' adaptability to complex terrain the platform establishes a "air + ground"
three-dimensional security inspection system. This effectively extends management radius reduces manual inspection costs and
provides intelligent support for park patrols and security management continuously enhancing operational efficiency and service
quality.* Access control products
In space management entrance and exit management is a crucial component. ZKTeco's access control products are smart terminals
that verify and logically judge the access rights of entrance and exit based on multimodal BioCV. Traditional access control products
depending on the biometric verification method can be divided into single biometrics devices and multimodal recognition products
combining multimodal BioCV methods. With the enhancement of product capabilities and changes in business models the Company's
access control products have iterated into three product forms: traditional products cloud access control product entry points and smart
network edge products.Traditional products: Smart identification access control terminals extending video intercom applications and doorbell three-in-
one capabilities without the need for software management or private server deployment.Cloud access control product entry points: Based on traditional access control products users are free from software deployment
connecting to cloud servers to simplify maintenance.Smart network edge products: Enhanced with AI capabilities enabling front-end voice interaction and back-end multi-device
collaboration to achieve edge intelligence.The Company's multimodal biometrics sensing terminal products are shown below:
Private deployment Cloud deployment Cloud intelligence
ZKBio Agent
Video intercom Doorbell
Voice interaction
Access control 4G data-free
Front-end
Alcohol detection
intelligence
Face
Fingerprint Card QR code Palm
Iris
During the reporting period the hybrid recognition product solution was further optimized launching the BK600 product. As an
entry-level product it supports multiple recognition technologies such as palm face fingerprint and RF card allowing more users to
experience the convenience brought by new technologies.Similarly in response to complex multi-access control interlocking scenarios the Company has launched access controller
products which are paired with multimodal BioCV collectors a wide range of fire water electricity and gas sensors as well as alarm
systems to form a comprehensive system solution integrating personnel identification and spatial security. This solution is mainly
applied to medium and large-scale project sites with a large number of access control points and high security requirements. Accessible
collection methods include facial features fingerprints RFID cards QR codes and passwords. The device has professional access
control function and supports unified management on the software platform.The main intelligent video analysis access controller scenarios of the Company are shown below:
Lightweight Web Service Platform
SATA Disk
Multimodal perception
Verification Passed Anti-tailgating Alarm
Mobile Web Hub
Intelligent Analysis
Edge Controller
Multimodal perception
RF Sensing
* Channel products
As an intelligent device for controlling the entry and exit of people the pedestrian gate is increasingly widely used in various
fields with the rapid development of digital technology. Currently in places such as schools high-end residential areas scenic spots
stations customs airports terminals office buildings and sports venues where there is a need for crowd management identity
verification and self-service charging management automated channel gates have gradually replaced the traditional manual ticket
checking or access verification mode.The pedestrian gate products meticulously developed by the Company integrate multimodal biometrics and RFID identification
and also feature multiple infrared passage detection functions for human bodies and objects enabling efficient intelligent control and
management of the channel. The Company has continuously delved into and expanded in core technologies such as video detection
image recognition behavior analysis and feature comparison. With its leading multimodal BioCV technology and the outstanding
ZKTeco cloud IoT platform Minerva IoT it provides strong and continuous empowerment for pedestrian channel products.Based on a precise understanding of the demand characteristics of different pedestrian channel scenarios the Company has
successfully developed a series of self-service settlement and passage products and solutions that can meet the usage needs of various
scenarios such as libraries sports venues scenic spots conferences unmanned supermarkets communities schools airports border
inspection subways and high-speed railway stations fully promoting the upgrade of convenient travel experiences in these passage
scenarios. The Company's independently developed video passage detection algorithm and device can accurately detect promptly
alarm and effectively dissuade abnormal behaviors such as tailgating intruding walking side by side and hugging leveraging
advanced AI technology. This innovative achievement not only significantly reduces the workload of staff but also significantly
enhances the security of control and the accuracy of passage data.The Company's access control application scenarios developed for airport environments are shown below:
Airport Solution Scenario Diagram
Pre-Security Inspection Pre-Security Inspection
Channel Gate CPW-177Y Channel Gate CPW-177Y
Customs Self-Verification
Channel Gate ImmSBTL-55
Arrival Exit. Anti-return Gate
(AB Gate) ImmSBTL-10/12
Customs Officer Channel
Gate CPW-189Y
VIP Lounge Channel
Gate CPW-164Y
Customs (Foreigner)
Airline Staff Boarding
Channel ImmSBTL-55
Security Staff Channel Ground Staff Channel Airline Staff Channel Logistics Staff Passenger Boarding
CPW-322CS CPW-173Y CPW-172Y Channel CPW-177HS Channel Gate CPW-169Y
* Smart parking
To continuously build a complete smart space operation ecosystem with smart parking and smart charging as core vehicle-related
business segments the Company continues to deeply cultivate its "cloud + edge + AI" core technology architecture iterating and
upgrading its integrated smart parking and charging solutions for all scenarios. The solution with digital twin technology as its core
support achieves the digitization and intelligent transformation of all elements in parking lots breaking down data barriers between
physical and digital spaces. It establishes a smart management system for efficient collaboration among people vehicles charging piles
and parking spaces enabling core functions such as self-service charging smart payment and cloud-based real-time global control in
parking lots thereby comprehensively enhancing the smart operation and management capability of parking lots.Relying on its independently developed smart space central system the Company deeply integrates core technologies such as
high-definition license plate recognition smart perception of parking space status intelligent prediction of charging load and AI visual
recognition. Coupled with a full range of intelligent hardware including smart license plate recognition devices high-speed barrier
gates smart charging piles and parking space sensing terminals it constructs an integrated software and hardware smart parking and
charging solution that covers all scenarios adaptable to multi-scenario refined operation and management needs.During the reporting period the Company continued to promote the iteration of vehicle-related product technology and product
category innovation launching several new core smart vehicle products. This further enriched and improved its smart parking product
matrix continuously strengthening its core market competitiveness. In the first half of the year it notably released innovative products
such as the LPR8000-Y-LCD series license plate recognition all-in-one machines PBS8000 series high-speed servo barrier gates and
EBM100 series non-motorized electric vehicle recognition all-in-one machines. These new series products leverage upgraded AI visual
recognition high-speed servo control and precise smart perception technologies. They offer advantages such as high recognition
accuracy fast passage speed strong adaptability stable operation and convenient O&M. They not only improve the management
system for motorized vehicle parking and passage but also specifically address the shortcomings in the intelligent management of non-
motorized vehicles.As of now the Company has formed a full-chain smart vehicle product system covering license plate recognition smart barrier
gates vehicle identification smart charging and parking space control. This system is fully adaptable to diverse application scenarios
such as administrative agencies enterprises and institutions industrial parks commercial complexes scenic spots residential
communities and public charging stations precisely matching the integrated and intelligent management needs for parking and
charging in various scenarios. It assists operating units in various scenarios to achieve digital and refined operations effectively
increasing the utilization rate of parking spaces and charging piles reducing manual and O&M costs and achieving business goals of
headcount reduction and efficiency improvement. At the same time it comprehensively optimizes the parking and charging experience
for vehicle owners' motorized and non-motorized vehicles and perfects the smart space travel ecosystem layout.The Company's integrated charging and parking management scenarios are as follows:
LPR8000-Y-LCD & PBS8000 ZKTeco Cloud
Series Parking
EBM100 Series Non-motorized
Vehicle Management Solution
Parking Lot Operations
Owner Mini Programs
Merchant Management
CP9 Series 360 480 720 960kW Split
Flexible Charging Piles
* Smart security inspection
The Company has developed a comprehensive smart security inspection product matrix for people vehicles and objects covering
all scenarios. It includes core equipment such as intelligent X-ray scanners walk through metal detectors handheld metal detectors
vehicle underbody scanning systems liquid detectors and road blocker products. The Company possesses independent technical
capabilities from hardware R&D to AI algorithms. Relying on its intelligent recognition system driven by deep learning algorithms
the Company launched an upgraded X-ray scanner integrated with intelligent analysis algorithms during the reporting period assisting
security inspectors in quickly identifying prohibited items. The people and bag association system accurately links the images of people
and bags efficiently tracing and restoring the security inspection process. The smart walk through metal detector combined with AI
algorithms precisely identifies prohibited items such as mobile phones and knives.The Company has formed professional security inspection solutions for the security needs of various scenarios such as rail transit
large-scale events judicial institutions major venues and hospitals. In recent years it has further extended to industries such as logistics
sorting education and factories developing smart security inspection products with industry-specific adaptability such as X-ray
scanners mobile phone walk through metal detectors and high-precision walk through metal detectors to build professional products
and solutions covering specific fields.The Company's smart security inspection scenarios are shown below:
Mobile Management
Platform Management
Smart Sensing Facial Recognition Locker
ZKBio Smart Authentication: Dual mode (facial recognition/card swipe) for
convenient access
IoT Connectivity: Unified device management categorized
Safety & Durability: Hard plastic material waterproof and corrosion-
configuration
resistant ensuring greater safety for students
Data Integration: Consolidated data for personnel vehicle and
Versatile Application: Centralized mobile phone management and
item inspections providing traceable reports
daily item storage multi-purpose cabinet
Security Inspection Closed-Loop: Intelligent Recognition +
Data Management: Traceable operations supporting refined campus
Alarm Linkage Process Closed-Loop
management
Security Enhancement: Visualized Dashboard Exportable
Data Secure and Controllable
First Line of Defense
The second line: Mobile phone detection & security check
Intelligent Roadblock Anti-Collision
Integrated Model
High-definition display clear
Rise Time: 3.5s Protection Rating: IP68 4 major detection modes for precise imaging
Lowering Time: 2.5s Power Unit: Integrated Electro-Hydraulic Actuator identification of electronic devices; 33 Intelligent recognition high
Bollard Interception Height: 600mm Equipment Dimensions: Φ357mm*H1100mm accuracy adjustable detection zones 1000 levels of
Bollard Material: 304 Stainless Steel People and bag association efficient sensitivity; 29-inch ultrawide display for traceability
information at a glance; security inspection Intelligent video real-time
monitoring
linked turnstiles for unattended rapid
Platform management closed-loop
passage security inspection
* Broadcasting audio
As an auditory perception system broadcasting audio plays a crucial role in smart building spaces. It provides efficient and precise
information transmission for building spaces ensuring clear and timely broadcasting services in various scenarios such as background
music information notification and emergency evacuations.The Company offers a wide range of broadcasting audio products including analog broadcasting and network broadcasting which
can be integrated into the ZKBio software platform. Through the ZKBio platform they can be seamlessly connected with other
intelligent systems in the smart space enabling coordinated control and enhancing overall operational efficiency.Moreover the Company's broadcasting audio products emphasize audio quality employing advanced audio processing
technologies to ensure clarity and fidelity thereby creating a superior auditory experience for users. The products are designed to blend
seamlessly with the building space featuring simple and elegant appearances flexible and convenient installation and adaptability to
different architectural styles and spatial layouts.In addition they support remote management and intelligent operation facilitating maintenance and upgrades. They provide
strong support for the management of smart building spaces.The Company's broadcasting audio scenarios are as follows:
* Intrusion alarm
In the smart building space the intrusion alarm system plays a crucial role in safeguarding security. It integrates multiple detection
technologies such as infrared microwave sound waves and vibrations to ensure precise perception of abnormal situations. In terms
of communication methods it utilizes SBUS bus technology (Serial Bus i.e. serial bus technology) which can be integrated into the
ZKBio comprehensive software platform. Through the ZKBio software platform seamless integration and linkage with sub-business
systems such as video and access control can be achieved forming an integrated security solution to meet the needs of different building
environments enhance overall security management levels and provide a solid guarantee for the safe operation of smart building
spaces.The Company's intrusion alarm scenarios are as follows:
Intrusion alarm host Alarm keypad
ZKBio software
Finance office
Kitchen
Gas sensor Infrared sensor Alarm button
Restroom
Warehouse
PIR sensor
Water leak sensor PIR sensor
Lobby
Warehouse
PIR sensor
Perimeter electronic fence
Door/Window
Glass break sensor Smoke detector
contact sensor
* Smart environmental perception
In smart building spaces IoT devices optimize office environments and resource utilization through interconnection and real-time
monitoring assisting enterprise parks and office buildings in achieving energy-efficient and low-carbon operations.The main IoT devices include smart lighting systems smart air conditioning systems and smart curtains among others. Smart
lighting systems can automatically adjust brightness based on natural light and human activities saving energy while providing a
comfortable light environment; smart air conditioning systems can automatically regulate temperature and air volume through
temperature and occupancy sensors improving energy efficiency; smart curtains can automatically open and close based on light and
time coordinating with indoor light management.In addition there is a smart meeting system that integrates functions such as meeting reservations access control and equipment
management. Users can reserve meetings through a PC or mobile phone and the system will automatically notify relevant personnel
and prepare necessary equipment such as projectors and audio systems in advance. During the meeting the system automatically
adjusts the indoor environment to the best state. After the meeting the system automatically turns off related power-consuming devices
saving energy.The application of these IoT devices not only reduces energy consumption but also reduces the need for human labor through
automated management achieving a win-win situation of cost-effectiveness and environmental protection.The Company's main smart environmental perception scenarios are as follows:
Air quality detection
Curtain control TV
Smart gateway
Smart interactive whiteboard
Smart switch
Air conditioning control and smoke
detection
Smart scene panel
Office management
Meeting room
management ZKBio app
Meeting management
terminal
* Smart video
Computer vision perception technology is a technique that uses sensors (such as cameras lidars infrared sensors environmental
sensors etc. and their integration) and algorithms to simulate the human visual system obtaining understanding and processing image
or video data from the spatial environment. Its core objective is to endow machines with the ability to "understand the world". Video
image acquisition devices have always been one of the main visual data entry points for spatial IoT perception systems.Based on computer vision perception technology and combining the Company's long-term technological accumulation in deep
learning BioCV computer vision AI and Minerva IoT cloud platform the Company continuously has optimized its product array
layout enhanced user experience and provided a complete set of competitive smart video system product matrix mainly including:
front-end smart network cameras back-end smart network video recorders smart edge analysis servers video storage services
decoders splicing screens and other hardware devices. At the same time it is combined with the supporting ZKBio integrated
comprehensive management software platform and the cloud video mobile app based on the Minerva IoT cloud platform
comprehensively covering the end edge cloud and service integration and collaboration of the professional smart video security
system.During the reporting period by further integrating and connecting the smart video perception system with other subsystems of the
Company such as the smart attendance system smart access control system smart channel system security inspection system smart
parking system and smart building system and relying on the ZKBio Intelligent Integrated Management Platform to achieve global
linkage and empowerment of software and hardware the intelligent visualization management and intelligent linkage control of the
overall system were achieved effectively forming an overall security solution applicable to the spatial environment IoT perception.With the rapid development of AI technology during the reporting period the Company innovatively leveraged BioCV
multimodal technology BioCV computer vision perception technology and its independently developed BioCV TinyML architecture
to successfully launch the "super brain" for smart spaces—the Mars Wisdom AI platform. By fully integrating the empowerment of the
Mars Wisdom AI platform with the smart video subsystem the Company officially launched the RS Swiss Army Knife series AI edge
servers. This series covers three-tier deployment architectures: end edge and server including:
RS1: InBio CV160 AI access controller device-side deployment three-in-one of access control + video + storage supports 1
access control channel + 4 intelligent analysis channels can be expanded to 16 access control channels + 64 intelligent analysis channels
through master-slave cascading built-in software zero server deployment;
RS2: IVS-X2 AI intelligent analysis box edge deployment supports 8/16 intelligent analysis channels and supports quick
deployment by inputting text;
RS3: CV Server-200 AI cognitive space all-in-one machine server-side deployment supports 32 intelligent analysis channels
expandable to 96 channels and supports text deployment and natural language quick search built-in Mars Wisdom ZKBio server
streaming media and AI intelligent agent integrated management private deployment plug-and-play.End-edge-server three-tier product array
End Edge Service
InBio CV160 IVS-X2 CV Server-200
AI Access Controller AI Intelligent Analysis AI Cognitive Space All-in-One
1 access control channel + 4 Box Machine
intelligent analysis channels One-sentence text deployment One-sentence text deployment and
expandable with built-in and control with 8 or 16 control
software zero-server intelligent analysis channels Supports 32 channels of intelligent
deployment analysis expandable to 96 channels for
natural language quick search snippets
Built-in Mars Wisdom + ZKBio server +
streaming media
+ AI agent integrated management for
private deployment ready to use upon
power-on
This series of AI edge servers not only supports the Company's independently developed BioCV TinyML models but also supports
DeepSeek models with small parameters. It is capable of simultaneously processing multimodal data such as video images audio and
text achieving full-element perception of "people vehicles objects and environment". This provides real-time decision support for
the management of comprehensive security solutions for IoT perception in smart space environments thereby promoting the expansion
of smart space business boundaries.An integrated and comprehensive solution based on visual perception can be widely applied in various scenarios such as parks
communities campuses and enterprises. During the reporting period the Company in its smart video perception subsystem primarily
focused on developing and implementing solutions around the vertical niche scenario of smart parks launching Mars Wisdom AI-
powered intelligent algorithm solutions for production safety supervision and "Bright Kitchen" intelligent algorithm solutions further
delving into scenario-based demands for spatial intelligence and continuously implementing successful projects.The typical scenarios of the Company's smart video are illustrated as follows:
Mars Wisdom Platform Area around the park
Office building
Full-domain spatial
intelligence coverage High-magnification PTZ
camera monitoring Perimeter protection
High-magnification PTZ solution for intrusion alarms
camera monitoring solution
Special materials storage area for key areas
Perimeter protection solution for
flame detection and area intrusion
alarm
In parks
Smart box behavior analysis
solution including behavior
analysis sleep-on-duty and
absence detection fire passage
occupation detection etc.Warehouse
Flame detection high-definition
full-color lamp and area
intrusion alarm
Entrance and exit
Smart box vehicle recognition
solution Perimeter protection
solution Facial recognition license plate
recognition and the linkage of face
and license plate for barrier opening
Smart box behavior analysis solution
Parking area
License plate recognition vehicle
Video Management Center
attribute recognition vehicle shape
detection and illegal parking alarm
Shang'an Yuntong Integrated
Smart box vehicle recognition
Management
solution
Wall
Perimeter protection human
shape detection and area Edge storage HD dashboard
intrusion alarm
Perimeter protection solution
* Smart building space solution
The smart building space solution can provide timely background music to create a relaxing atmosphere control the fresh air
system to keep the air fresh and pleasant sense temperature and humidity to offer a comfortable environment simplify user operations
with smart voice interaction reduce elevator waiting time with smart elevator scheduling and automatically adjust the number of lights
by combining light perception and weather forecasts. Through advanced digital and intelligent technologies it enhances personal
experience from multiple dimensions.The smart building space solution aims to achieve intelligent and efficient building operation by integrating multiple functional
modules such as access control systems visitor systems elevator control systems public broadcasting systems parking systems video
perception systems and intrusion alarm systems along with full business integration and global linkage thereby improving the
building's safety and convenience. In addition the smart building space solution supports emergency response mode integrating smoke
and fire detection systems covering smoke detection emergency notifications broadcasting and opening of escape routes. It ensures
rapid response from fire occurrence to event handling and minimizes personnel and property losses in emergencies.The scenario diagram of the Company's smart building space solution is as follows:
Public areas
Meeting room
Reservation Electronic
Video information screen whiteboard
surveillance Video recognition alarm Energy management
IT computer room Elevator dispatching/call
Video intercom Elevator control
ZKBio software platform Pedestrian gate
terminal host
Parking lot Security room
Handheld identity Video intercom
Vehicle gate LPR verification device management machine
* Smart apartment space solution
The smart apartment space solution integrates multiple functional modules such as access control elevator control video intercom
smart locks parking lot management consumption systems video perception and alarm systems achieving intelligent and efficient
apartment operation.In terms of personnel management access control and entrance/exit control devices are installed at key locations such as apartment
entrances and passages effectively preventing unauthorized personnel from entering and reducing potential security risks.In terms of visitor management the solution offers an integrated solution including self-service reservation and multimodal BioCV
enhancing the visitor experience and management efficiency.The parking lot management module uses license plate recognition technology to automatically identify and restrict external
vehicles from entering enabling seamless passage and improving user experience.The video perception and smart analysis module deploys high-definition cameras and intelligent video analysis edge servers to
comprehensively monitor and intelligently analyze key areas of the apartment such as perimeter protection and key personnel control
effectively enhancing security levels.Furthermore the solution emphasizes data security and privacy protection adopting the ZKBioHA high availability solution to
ensure data integrity and security meeting high standards for data security requirements.The architecture diagram of the Company's smart apartment space solution is as follows:
Public areas IT computer room
Video
Video recognition alarm
surveillance ZKBio Server ZKBio software platform
Elevator dispatching management of Apartment
Apartment owner residences Building
Corridor video Video intercom call Elevator control
Video intercom indoor unit Smart lock Guest app
terminal host
Entrances and exits of Apartment Building Gyms/Lounges/Meeting Rooms
Reservation IOT control panel + Air
SIP video intercom access control integrated machine information screen conditioner/Light/Curtain control
Main entrance and exit Apartment service front desk
Video intercom
Video intercom
LPR + Vehicle gate Pedestrian gate emergency Handheld identity
rescue machine verification device management machine
(2) Smart office business
The Company with multimodal BioCV technology and IoT perception technology as its core provides intelligent solutions for
enterprises and institutions covering scenarios such as attendance visitors meetings and consumption aiming to optimize time
management and operational efficiency. These intelligent solutions integrate AI agents and cloud technology to create an intelligent
time management solution and a one-stop smart office ecosystem making work more efficient and enjoyable.* ZKTeco Interconnection: AIoT Cloud Scene Ecosystem Platform
The Company continuously innovates cloud service products based on the demands of IoT scene ecosystems to meet the diverse
needs of SMEs. By deeply integrating technology and scenarios it is committed to providing efficient convenient and secure digital
solutions for SMEs helping them transform from a rough to a scaled and formalized operation.ZKTeco Interconnection adheres to the product philosophy of "miniaturization rapidity lightness and precision" and tailors
cloud service products for the digital transformation needs of SMEs. The Company emphasizes the ease of use and practicality of its
products to ensure that enterprise users can "use them proficiently effectively and frequently". Through the integration of "end-edge-
cloud + AI" technologies ZKTeco Interconnection products can achieve comprehensive perception intelligent analysis and efficient
management. By continuously investing in R&D the Company deeply integrates new technologies with scene solutions to provide
better cloud scene solutions for enterprises.The ZKTeco Interconnection: AIoT Cloud Scene Ecosystem Platform scenarios are as follows:
ZKTeco Interconnection
Connecting Creates a Better Future
Fully Connected | Widely Connected | Fully Connected Widely Connected and Smartly Connected providing
Smartly Connected "socialized automated intelligent and scenario-based" SaaS solutions for
SMEs.ZKTeco Interconnection AloT
Customer services Connecting service Aggregated Cloud Service Platform
providers
Space Management Operation Management Service Ecosystem
Service Ecosystem Connectivity Application Connectivity
Agent Distribution Platform · Cloud attendance · Cloud video · Smart · Smart
Platform Platform · Cloud access · Cloud alarm customer service customer · Cloud API · Data push
control · Cloud store · Task acquisition · Device management
Ecosystem Applications · Group Meal · Cloud visitor inspection management · Efficiency
Third-party SaaS Consumption · Cloud Attendance analysis
System · Cloud Access Control · Cloud Visitor Management
· Cloud Video · Cloud Controller · Cloud Alarm Multi-scenario Smart Personnel Equipment O&M
Smart office AI Agent service
Aggregated Application Access Management Smart space
ZKTeco Interconnection AloT Aggregated Cloud Service
Platform
Smart lock
· Payment Management Service · File Storage Service · Log Tracking
Service
· Account Authentication Service · Security Management Smart meeting
BI data analysis
Service · Subscription Service
· Organization Management Service · Device Management Service
AI video
Cloud video intercom
ZKTeco Cloud IoT Platform MinervaloT
Group meal consumption
Smart access
· AWS · Tencent Cloud · Alibaba Cloud
IaaS infrastructure Visitor registration
Contactless attendance
Mobile Management
Smart access
The ZKTeco Interconnection Cloud Scene Solution mainly includes the following contents:
? Cloud attendance: Achieve remote attendance management and improve attendance efficiency;
? Cloud access control: Remotely control and manage access control systems to enhance security levels;
? Cloud visitor: Manage visitor information and improve visitor management efficiency;
? Cloud video intercom: Realize video intercom functions and enhance communication efficiency;
? Cloud video: Achieve video perception and intelligent management to enhance security prevention capabilities;
? Cloud consumption: Record and manage enterprise consumption data and provide consumption analysis reports;
? Cloud alarm: Security alarm system achieving real-time monitoring of abnormal situations and timely issuance of
alarm notifications;
? Cloud store inspection: Achieve remote store inspection management and monitor store operation conditions through
digital means to improve management efficiency;
? Cloud device management: Facilitate device management and monitoring of device status to enhance O&M efficiency.? Scenario-based intelligent agent construction: Through a self-developed Agent development platform deeply
integrating large model capabilities such as DeepSeek Doubao and ChatGPT and combining with ZKTeco
Interconnection's currently launched business functions to build self-contained business intelligent agents such as
intelligent customer service visitor appointment approval workflow precise scheduling etc.In addition the Company's ZKTeco Cloud IoT Platform Minerva IoT+ ZKTeco Interconnection can work with ecosystem partner
platforms to build a new digital-intelligent IoT model of "smart office + smart space". The Company's business cooperation model with
WeCom and Lark is shown below:
30
Data connectivity
scenarios Technology building
Developer capabilities
Integrator
Distributor
Engineering
contractor
Installer
Co-creation and co-
building ecosystem
Cloud service scenarios
Data
interoperability
Flexible
combination
Pay-as-you-go
Online O&M
Managed
servicesMulti-ecosystem Integration
Scheme I Scheme II
App availability:
Available on third-party app
stores
Lark
Third-party Cloud
Standard API:
Platform
1. Provide APIs for third-party
applications
2. Develop according to third-
party standard APIs
WeCom
The cooperation between ZKTECO and WeCom has a long history. Since 2019 both parties have collaborated for many years in
the field of enterprise digital transformation accumulating rich experience in collaboration. This upgraded "Cloud-to-Cloud Direct
Connection" mode represents a major breakthrough in the technological and ecological integration of both parties. Through "Cloud-
to-Cloud Direct Connection" terminal devices can flexibly support binding to either the ZKTeco Interconnection APP or WeCom
greatly enhancing device compatibility and usage flexibility.The characteristics of this business are detailed below:
Universal Models Flexible Adaptation: ZKTECO's universal attendance and access control cloud devices fully support a "dual-
version" mode. Users can freely choose their binding method whether through the ZKTeco Interconnection APP or WeCom
significantly enhancing device compatibility and adapting to a wider range of scenarios.Business Enhancement Market Expansion: Dual-version support not only boosts the market competitiveness of the devices but
also significantly expands the customer base through WeCom's vast user base and ZKTeco Cloud's industry coverage creating double
market opportunities for businesses.Synergistic Complementarity Jointly Serving Premium Customers: Both parties serve the same customer based on their respective
areas of expertise providing extensive value-added opportunities throughout the customer lifecycle.Product value of ZKTeco Interconnection Cloud Scene Solution:
A. Product value provided to partners
After the product is launched it can provide partners with customer management application subscription management product
after-sales service digital marketing tools and strategies intelligent equipment O&M systems etc. It can guide partners in transforming
their marketing models from the current role of channel service providers which primarily focus on product sales to a more
sophisticated marketing model that emphasizes delivering high-quality services to users and engaging with them on a deeper level.This transformation will facilitate connections with new business models.B. Product upgrade provided to customers
After the product is launched combined with the mobile Internet and IoT ecosystem it provides convenient product forms for
end users and various cloud-based SaaS applications such as cloud attendance cloud access control cloud visitor cloud consumption
and cloud video. Users can subscribe and combine them flexibly according to their current business needs and scenarios and can also
expand them elastically according to the needs of their own enterprise development. The product creates a software and hardware
integrated scenario-based and intelligent product experience through various product forms such as mini-programs and apps.C. Upgrade of product marketing and operation model for new business paradigms
After the product is launched combined with the current new trends in digital marketing it builds a marketing and operation
model suitable for new user groups through the WeChat official account ecosystem TikTok ecosystem etc. Based on the operation
strategies of public and private domain traffic it connects the entire chain of customer acquisition retention conversion repurchase
and viral growth playing a bridging role in the construction of a digital marketing system and connecting the "user - service provider
- ZKTeco" ecosystem platform to build new business competitiveness.D. Upgrade provided to ZKTeco
Through the refinement of the product and the agile iteration verification process in the market a new digital management
architecture for ZKTeco's marketing organization is gradually built to achieve the transformation from a one-size-fits-all market
demand to a personalized market demand. With a new and efficient organization it dynamically meets the agile demand chain of new
user groups. At the same time based on the analysis of various data such as user data device data application data scene data and
sales data it improves marketing decision-making efficiency and accurately positions the direction of product iteration.E. Ecosystem partners
Through various flexible methods such as "Cloud-to-Cloud Interconnection" "Cloud API" and "Application Availability"
ZKTECO leveraging smart office scenarios can both partner with ecosystem partners to serve key accounts or vertical industry
customers and also address the vast SMB customer base with "nimble efficient refined and accurate" small-scenario solutions
accumulating large-scale user data to provide data assets for future commercialization and monetization.During the reporting period multiple industry benchmark projects for ZKTeco Interconnection Cloud Scene Solution were
implemented: For project management scenarios in the construction industry the Company's cloud attendance product supports
integrated management of personnel attendance across regions and project levels enabling enterprise headquarters to uniformly
coordinate national project personnel attendance operations; for property management the product achieves linked attendance across
projects compatible with various verification methods such as location check-in facial recognition and fingerprint recognition and
supports multi-project data aggregation and automated report output; for automotive chain operation scenarios cloud access control
relies on a business architecture of permission grouping time-slot control and personnel list matching to achieve precise configuration
of access permissions for different area entrances and exits. The aforementioned scenario cases are commercial application
demonstrations at the current stage and market expansion still faces uncertainties such as industry competition customer budgets and
project implementation cycles.* ZKTeco Cloud Commerce: Digital and Intelligent Marketing Service Platform
By continuously promoting the construction of a new digital marketing system for "online + offline" channels it helps partners
enter the era of digital marketing. ZKTeco Cloud Commerce focuses on creating industrial internet community platform tools such as
product stores solution stores application stores knowledge stores and service stores serving millions of B2B practitioners and end
users. It helps partners continuously evolve throughout the entire chain of marketing customer expansion operational monetization
and online services strengthens industry chain's collaborative growth and achieves resource optimization and allocation. It is
committed to becoming a trusted one-stop high-quality product and service provider for users collaborating with service providers to
develop from traditional operations to digital operations and providing customers with high-quality products and services through a
one-stop digital marketing service platform.Interface and functions of ZKTeco Cloud Commerce digital and grid-based marketing system are shown below:
ZKTeco Cloud Commerce's Five Major
Functional Modules
Workbench
It integrates interconnected enterprises my
order matching common tools for ZKTeco's
Service Business Card various product lines the resource center and
the service network of authorized service
providers among other functions and contents. Multi-dimensional information display and
Service providers can query the common
minimalist business card creation. Users only need
problem-solving methods for general equipment
to fill in four basic pieces of information: name
through this section.mobile phone number company and position to
generate a simple and professional digital business
card. It also supports multiple layout templates and
background customization. It offers a
comprehensive display of personal and company
business and the content can be updated at any time
to ensure its accuracy and timeliness.Home My
Content base enabling users to use marketing
materials easily serve customers drive new The user's personal center where all personal
sales service development quickly query information and data of the user on the platform are
product library view best-selling products gathered. Users can view and manage their potential
prominently select favorite products by one customer sources points mall my plans case
click and quickly switch to product detail management data analysis etc. here.page.Stock code: 301330
Home Service Workbench Co. Ltd. My
The relevant functions are as follows:
[Home]: It includes a product database solution database marketing material database case sharing library information database
etc. serving as a digital information supermarket for marketing and customer acquisition.[Services]: The product FAQ (Frequently Asked Questions) database empowers after-sales service convenience meeting the
technical support needs of partners or enabling end customers to quickly self-diagnose product usage issues thereby enhancing service
efficiency.[Workbench]: It includes mobile order placement product debugging tools and common product issue troubleshooting etc.facilitating partners in marketing and service work. Based on location services it connects the online and offline marketing and service
networks making it easier for customers to find us.[Business Card]: Based on the efficient and fast ecological dissemination capability of electronic business cards the new business
card module enables partners to quickly create their company homepage information through the ZKTeco Cloud Commerce marketing
system and connect with customers through business cards to accumulate their own private domain traffic.[My]: A system management assistant that makes operations simpler.The ZKTeco Cloud Commerce Digital Marketing Service Tool Ecosystem Closed-Loop Diagram is as follows:
Marketing and Service Digitalization
ZKTeco
Manufacturing
Standardized Marketing
Product Requirements Materials
Online Service Capabilities
Core Partner
ZKTeco Cloud
Distributors/Engineering Customers by Scenario
Commerce
Contractors
Online Skills Training
Mobile Service Tools
Supply Chain
ZKTeco Ecosystem
Precise User Engagement
Stock code: 301330
In addition ZKTeco Cloud Commerce empowers B2B practitioners in marketing and service and in conjunction with the offline
[ZKTeco Smart Alliances] marketing service system and continuously builds an [offline + online] front-end marketing and service
and back-end organization and coordination of new organizations. Through continuous system construction and improvement it will
provide digital and intelligent assistants to partners throughout the entire sales process from pre-sale to post-sale. At the same time
with the continuous construction of the offline [ZKTeco Smart Alliances] marketing center it will provide convenient and reliable
support to end users in product experience marketing services training delivery and local after-sales support continuously enhancing
end users' loyalty and stickiness to the brand.* Ralvie AI: Intelligent Time Management and Productivity Engine
Ralvie AI is an intelligent time management and productivity engine launched by the Company positioned as an "Organizational
Workload Structure Analysis Intelligent Agent". It evolves from "time management" to an "organizational and work intelligent agent"
providing enterprises with decision support and resource optimization capabilities through deep integration of its AI capability hub
with existing attendance hardware.Ralvie AI's core concept: Let time work for you. It emphasizes empowerment over monitoring focusing analysis on job roles and
organizational levels. By enhancing data transparency it improves management rigor reduces subjective bias and promotes
collaborative growth for organizations and individuals under clear objectives.Core functions of Ralvie AI:
A. Automatic work record and activity grouping
? Precisely record users' operation behaviors and time spent on various applications and websites.? Automatically generate time logs for analysis and settlement.B. Intelligent project and time management
? Distinguish billable from non-billable time.? Analyze resource input and support better resource allocation strategies.C. Intelligent work hours statistics and performance suggestions
? Generate dynamic work reports by day week and project.? Provide actionable performance improvement suggestions.D. AI-driven summary and mapping function
? Provide daily and weekly work summaries extracting key events and data.? Smartly map user activities to corresponding projects and tags continuously learning user behavior preferences.E. Visual reports and insight support
? Offer cross-dimensional insights for managers to enhance organizational decision-making speed and quality.F. AI agent aggregation platform
? Offer quickly subscribable and usable AI agent tools for managers or individual users based on work scenarios and
efficiency improvement needs.The functional diagram of Ralvie AI is as follows:
March 23 - March 29 2025 All Departments All Members
Dashboard App Categories Project Time Most Frequently Used Apps
Timesheets
Project
Tasks
Members Total Hours
09h20m
Tags
Integration
Report
Billing
Settings Weekly Active Time Weekly Free Time
AI Assistant
Notification
Sunday Monday Tuesday WednesdaTyh ursdaFyr iday Friday Sunday Monday TuesdayW ednesdTahyu rsdaFyr iday Saturday
Light Mode
Ralvie AI utilizes an AI-driven automation mechanism to continuously observe learn from and optimize the work behaviors of
individuals or organizations. It not only provides real-time insights and detailed reports but also proactively offers optimization
suggestions to help you make efficient decisions and enhance performance.The Ralvie AI Work Time Accounting Form Diagram is as follows:
Timesheet
Day Day-Month-Year Week Month Sync Status Inactive
ZKTeco Biometrics
Options Recorded Hours
Record Hours
Home
Set Up Time
Timesheet Step 1: Basic Record Edit | Delete
Record Billing Non-billable
Tasks
Enter Time
Step 2: Projects and Tasks Start time
Members
End time
RED00C Task
Project
Step 3: Document
Analysis
Settings
Step 4: Collaboration
Edit | Delete
Step 5: Event
+ New Record
Priscilla
35
Hour
HourApplicable scenarios of Ralvie AI: Comprehensive coverage of all types of work roles
? Freelancers/Remote workers
?Precisely record the time spent switching between multiple projects.?Enhance the return on investment and optimize the allocation of working hours.? Corporate employees/Team members
?Improve collaboration efficiency and track progress bottlenecks.?Automatically analyze team resource waste points to help projects be completed on schedule.? Students/Researchers
?Track time input in courses and research.?Optimize personal learning paths and improve knowledge absorption efficiency.? Management/Founders
?Build a data-driven operational optimization closed loop.Business model of Ralvie AI: Flexible support for individuals and enterprises
*Enterprise subscription version: Can be distributed in bulk. It centrally manages project progress and employee time.*Personal subscription version: Suitable for freelancers and personal growth managers to use flexibly.
(3) Digital identity authentication business
Digital identity authentication business is one of ZKTeco's core business segments. The Company deeply integrates three core
technologies: multimodal BioCV large models and blockchain to build a precise secure convenient and traceable full-scenario
identity authentication system laying a solid foundation of trust for the digital world and assisting various industries in achieving
digital and intelligent upgrades for identity verification. Leveraging years of accumulated biometric technology expertise the Company
has developed a diversified product matrix and integrated solutions. By virtue of the uniqueness of biometric features the deep learning
and intelligent analysis capabilities of large models combined with the decentralized and immutable characteristics of blockchain it
effectively addresses pain points in traditional identity authentication such as low efficiency weak security and susceptibility to forgery
ensuring the accuracy security and trustworthiness of identity verification and comprehensively meeting the high-security identity
verification needs across multiple sectors including government enterprises and public services.* Smart terminal products
The Company's digital identity authentication product system is comprehensive primarily covering four major categories:
multimodal biometric products reading machine products trusted digital products and industry smart terminal products which can
adapt to the differentiated needs of various industries and scenarios. During the reporting period the Company continued to increase
R&D investment and launched a new generation of multimodal palm recognition products. This product features comprehensive
technological upgrades integrating high-definition visible light cameras and near-infrared cameras with a built-in high-performance
algorithm chip to achieve rapid acquisition and precise recognition of multimodal palm information. It boasts advantages such as
strong anti-interference capabilities fast recognition speed and high adaptability. This palm recognition product can be deeply
integrated with scenarios such as time and attendance access control and channel management and is widely applied in areas like
enterprise offices park management and public venues providing users with secure efficient and convenient identity verification
services. It further enriches the application scenarios of the Company's smart terminal products and enhances the product's market
competitiveness.* 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 BioCV technology addressing the core demand for "the integration of
people and certificates" across various industries. It is composed of two parts: the One Card Solution Cube Terminal Software (APP)
and the Identity Authentication Management Platform forming an integrated architecture of "terminal collection + platform
management". The system deeply integrates the Company's independently developed ZKLiveFace facial recognition algorithm and
ZKFinger V15.0 ID card fingerprint comparison algorithm. The algorithm accuracy is at an industry-leading level capable of quickly
reading information from various valid certificates such as 2nd-generation ID cards Residence Cards for Hong Kong Macao and
Taiwan Residents and foreign permanent residence permits. It performs real-time comparison of "the integration of people and
certificates" using biometric information (such as fingerprints and portraits) collected on site from the cardholder accurately and
quickly verifying the authenticity of user identity effectively preventing issues like impersonation and certificate forgery.The One Card Solution Cube Identity Authentication Management Platform has comprehensive functions such as intelligent
device management personnel information management blacklist/whitelist monitoring and data statistical analysis. It enables real-
time comprehensive multi-dimensional monitoring and visual analysis of terminal devices verification personnel and verification
data facilitating clients to stay informed of verification dynamics and optimize management processes. Meanwhile the system supports
access to large-capacity facial servers possessing backend facial verification capability for millions of faces. It can provide authoritative
trustworthy stable and secure identity authentication services to clients in different vertical sectors such as government education
healthcare and finance. It comprehensively covers the entire industry chain of "core algorithms + smart terminals + software platforms
+ scenario applications" providing clients with one-stop identity authentication industry solutions and further consolidating the
Company's core competitiveness in the identity authentication field.* Industry scenario solutions
Based on its extensive identity verification product system and core technological advantages the Company deeply integrates the
actual needs of specific segmented scenarios in various industries continuously incubating highly adaptable and easily implementable
industry solutions. After years of dedicated effort it has established identity verification systems for several major core scenarios
including smart examination affairs smart healthcare smart new student reception smart visitor management and identity
authentication for plasma collection stations. These systems cover multiple high-security demand fields such as education healthcare
and public services having cumulatively served thousands of clients nationwide and gained widespread market recognition.In terms of smart examination affairs the Company focuses on the core need for candidate identity verification in various
examination scenarios creating a full-process smart examination affairs identity verification solution. This solution comprehensively
covers the entire business closed-loop of pre-examination candidate information collection in-examination identity verification and
post-examination data statistical analysis. This solution fully integrates the particularity of examination scenarios balancing security
and convenience. It can not only form a self-contained system and be directly deployed meeting the rapid application needs of various
examination places but also seamlessly integrate with third-party standardized examination place construction solutions adapting to
examination scenarios of different scales and types (including college entrance examinations senior high school entrance examinations
various professional qualification examinations etc.). The solution offers core competitive advantages such as intelligence and
convenience flexible deployment and accurate verification. It effectively addresses issues like low efficiency proneness to errors and
difficult management in traditional examination affairs identity verification assisting examination affairs work in achieving digital and
standardized upgrades and ensuring fairness and impartiality in examinations. The Company's smart examination affairs application
scenarios are shown below:
* Registration data collection
Identity verification terminal
equipment * Examination affairs arrangements
to authenticate and collect
candidate identity information Distribute candidate information via the
dedicated examination network
to the examination affairs management platform
and examination place terminal equipment.Multifunctional Human
Certificate Verification
Terminal
Desktop multifunctional
Human Certificate
Verification Terminal
* Data reporting
* Examination place
The platform automatically aggregates
authentication
and analyzes candidate data outputs
reports and synchronizes with the Candidates use the examination
examination platform. place terminal equipment
to authenticate their identity for
entry.Handheld ID card reader
In the medical field the Company addresses the unique and stringent requirements of identity verification in the medical industry
focusing on core scenarios such as newborn birth certificate processing assisted reproduction management outpatient registration and
inpatient admission and has launched specialized smart healthcare identity verification solutions. This solution precisely matches the
information collection and identity verification needs of various hospital windows and can securely integrate with hospital HIS systems
electronic medical record systems and third-party medical service systems achieving seamless embedding of the identity verification
functional module without requiring extensive modifications to existing systems thereby reducing hospital deployment costs. Through
precise identity verification the solution effectively prevents issues such as fraudulent medical visits and impersonation for certificate
collection ensuring patient information security and standardized medical services helping major medical institutions optimize service
processes and improve service quality and providing patients with high-quality and compassionate medical services. Currently related
products and solutions have been deployed in hospitals of various levels across multiple provinces and cities nationwide providing
effective support for hospitals' standardized services and refined management.In terms of smart freshman orientation the Company is guided by the core business of university freshman orientation and
registration creating a comprehensive smart orientation management solution covering the entire process achieving front-end and
back-end integrated linkage between the orientation Human Certificate Verification Terminal and the orientation registration
management platform. The solution comprehensively covers all stages including information collection before freshman enrollment
identity verification and registration during enrollment and information archiving and management after enrollment effectively
addressing pain points in university orientation such as concentrated personnel cumbersome processes and data silos achieving
vertical data connectivity and efficient collaboration among various departments involved in orientation significantly improving the
overall efficiency and service quality of orientation work. This solution can be customized according to the operating scale and
management model of different universities meeting the differentiated needs of various universities for new student admission identity
verification and comprehensive management and has become the preferred solution for the digital upgrade of university welcoming
processes.Regarding smart visitor management the Company focuses on the pain points of visitor management in scenarios such as
industrial parks office buildings government agencies and enterprise factories. The smart visitor identity authentication solution
developed by the Company builds a full-process visitor management system of "appointment registration + identity verification +
access control + full-process traceability" achieving digitalization intelligence and standardization of visitor management while
balancing security and visitor experience. The solution supports both online appointment (WeChat Mini Program enterprise official
account) and offline on-site registration modes. Visitors can upload certificate information in advance to complete appointments. On-
site they can quickly complete "the integration of people and certificates" verification through multimodal biometrics (facial
recognition fingerprint ID card) eliminating the need for tedious manual registration. The system can be linked with access control
and channel devices automatically granting corresponding area access permissions based on visitor appointment permissions
monitoring visitor movement trajectories in real time and automatically revoking permissions after visitors leave. Meanwhile the
solution can seamlessly integrate with enterprise OA systems and park management systems enabling interoperability between visitor
data and internal management data and supporting visitor information archiving querying and statistical analysis facilitating
managers to accurately grasp visitor dynamics and strengthen security management. Currently this solution has been widely applied
in various industrial parks office buildings and government agencies effectively addressing issues such as low efficiency non-
standardized registration and significant security risks in traditional visitor management thereby enhancing the security level and
service quality of these venues. The Company's smart visitor business scenario diagram is as follows:
Visitor verification
Visitor appointment
Standing Self-Service Visitor
Terminal Visitor Gate Terminal
On-device on-site
appointment
Identity
verification
Mobile App appointment
Admin console proactive
invitation
Visitor check-out
Visitor registration
ID card IC card facial recognition
QR code CTID trusted identity
authentication Data statistics
Desktop Visitor Terminal
For identity authentication at plasma collection stations in response to relevant regulatory requirements from the National Health
Commission the Company has exclusively developed an identity authentication solution for plasma collection stations specifically
addressing the identity verification pain points in the plasma collection industry. This solution covers key nodes throughout the entire
process of plasma donor registration and filing health check-ups and plasma collection establishing a four-fold security defense line
of "certificate verification + biometric features + liveness detection + full-process traceability" to eliminate illegal plasma donation
activities and ensure the safety of plasma sources and the rights and interests of plasma donors. The solution adopts proprietary
multimodal BioCV technology integrating functions such as ID card authenticity verification facial liveness detection and
fingerprint/palm print matching. It adapts to complex lighting environments at plasma stations with matching accuracy and speed
meeting the retrieval demands of a million-level plasma donor database. It can seamlessly integrate with the plasma apheresis
information system (PAIS) achieving automated full-process identity verification. Verification data is stored on the blockchain and is
traceable helping plasma stations achieve 100% compliance with regulatory standards. Currently the solution has been implemented
in multiple plasma stations nationwide effectively standardizing the plasma supply order and ensuring the quality of plasma raw
materials.
(4) Smart business services
The Company adopts "AI+" as its core strategy iteratively applying TinyML and BioCV core technologies to products in retail
scenarios empowering end-users and continuously launching superior overall solutions to enhance customer experience.As a smart business brand under the Company ZKDIGIMAX has launched a new digital visual marketing solution -
ZKDIGIMAX Level 3 which is tailor-made for the general retail and catering industries. This solution integrates five core services
and six smart perception terminals to build a new ecosystem of borderless retail that covers the entire scene and the entire chain. The
five core services include: Minerva IoT a cloud IoT platform from ZKTeco a machine vision analysis platform a big data analysis
platform an AIGC content generation platform and an advertising production and distribution platform; the six smart perception
terminals cover digital signage smart cameras smart edge gateways smart shopping carts intelligent robots and positioning sensors.ZKDIGIMAX Level 3 relies on scene perception AI interaction visual analysis and deep learning technologies to deeply
empower smart business. Through advanced machine vision analysis technology it accurately captures multi-scenario data such as
consumer movement lines preference insights and product displays and structures and outputs it. Based on multi-dimensional smart
business analysis of the data lake it further helps enterprises achieve refined operations and decision-making optimization. Whether it
is enhancing the consumer experience or optimizing marketing strategies this solution helps the general retail and catering industries
move towards a new future of intelligence unmanned operation and borderlessness with its all-round digital capabilities.Smart business scenario solutions
A. Digital marketing solution for chain retail scenarios
The Company focuses on the convenience store industry within the chain retail scenario providing digital solutions for attracting
customers and increasing sales to operators as well as efficient and real-time marketing solutions to brand owners.The application scenario diagram of the digital marketing solution for chain retail scenarios is as follows:
* Vertical digital signage
In-store floor-standing
* Electronic price tag colored screen
* Shelf digital signage
10.1-inch color display suspended
above the pile
* LCD splicing screen Above store shelves
LCD ultra-narrow bezel video wall
* Electronic price tag e-ink screen
Shelves in black white and red
* Smart shopping cart
* Show window digital signage for
customer attraction
Shop window position
* Intelligent shopping guide robot
* AI passenger flow sensor
* Self-service POS terminal
Intelligent solutions for retail scenarios have five core capabilities:
a. Brand promotion and customer acquisition: Increase customer traffic through product or brand promotion and quickly
implement promotional plans in a timely manner.b. Product recognition: Smart electronic scales enable product recognition allowing for quick weighing and settlement at the
checkout counter.c. Shelf area interactive promotion: A complete set of smart shelves to enable customers' attention to products within the scene
and their recognition of advertisements and promotional schemes.d. Product price management: Product prices can be dynamically displayed for members/non-members according to promotional
schemes.e. Business data analysis: Provide diverse analysis reports displaying real-time customer traffic area popularity trajectory
movements dwell time and other data thereby achieving more scientific product display and presentation.B. Zero-carbon kiosk solution
The Company offers a zero-carbon kiosk smart business solution that integrates supply chain stores and marketing for open
spaces such as scenic spots and parks. The zero-carbon kiosk aims to become a new benchmark for unmanned smart business. This
solution uses photovoltaic power supply to achieve green energy conservation and cloud monitoring for 24-hour unmanned operation.Customers enter by scanning a code self-check out and receive real-time support from back-end customer service. This solution can
save costs improve efficiency and provide consumers with a convenient and environmentally friendly new shopping experience.The application scenario diagram of this solution is as follows:
The zero-carbon kiosk smart business solution encompasses four major product clusters:
a. Clean energy: Using photovoltaic power generation and a complete energy storage system it provides 24/7 power supply for
core areas of the store's daily operations such as the checkout system and access control system ensuring that consumers can still shop
normally in case of abnormal mains power supply.b. Store integration: Using standard containerized cabinets the overall design and decoration of the store are completed in a
factory process and can be set up simply by transporting and placing them at the destination offering convenient delivery.c. Cloud agent store monitoring: Through self-checkout remote monitoring and personal credit authorization the overall concept
of unmanned retail is adopted to easily achieve store operation.d. Managed operation: On the basis of providing a supply chain the price tags and digital signage in the store are all managed
uniformly through the cloud enabling automatic price changes in the store regular updates of promotional content scenic area public
welfare content and brand advertisements on digital signage.
(5) Smart living products
The Company's smart living products mainly cover outdoor smart products and other businesses.* Regarding outdoor smart business Longzhiyuan a subsidiary acquired by the Company in 2025 is a company specializing
in audio-visual and optical equipment in the smart outdoor domain. It focuses on niche markets aiming for smart living and is dedicated
to developing smart products related to daily life. Currently Longzhiyuan's products primarily include two major series: outdoor
products and smart home with outdoor tracking cameras as its core product. Longzhiyuan's business encompasses ID design software
and hardware design and manufacturing. While providing ODM services for multiple professional outdoor brands it also sells its own
branded products through overseas e-commerce channels. This acquisition expands the Company's smart living products into outdoor
areas enriching the product array in smart outdoor business scenarios.* Regarding other businesses relying on its technological accumulation in AI multimodal perception bio-signal analysis and
human-computer interaction the Company has made forward-looking layout in the brain-computer interface track continuously
exploring the integrated application of BCI and AI technologies. During the reporting period the Company focused on R&D of non-
invasive brain-computer interface technology specifically making breakthroughs in four major technical directions:
electroencephalogram (EEG) signal acquisition and analysis intelligent interpretation of neural data multimodal perception fusion
and the construction of brain-computer emotional cognitive models.At the application level the Company primarily focuses on the potential for brain-computer interface technology implementation
in four major scenarios:
?Medical rehabilitation: Exploring innovative applications such as brain state assessment and rehabilitation assistance covering
areas such as depression intervention sleep improvement cognitive rehabilitation and brain health screening;
?Education and training: Deepening the understanding of learning status and intelligent assistance with a focus on concentration
training cognitive load monitoring and adaptive learning systems;
?Work safety: By using brain state perception technology to identify risk states such as fatigue and inattention in real time it
provides intelligent safety assurance for high-risk industrial scenarios;
?Consumer entertainment: Focusing on mindfulness meditation mood regulation sleep management and wearable EEG devices.As of now the relevant technologies are still in the research and development and application verification stage and the progress
of commercialization is uncertain. Investors are advised to pay attention to investment risks.
3. Global business layout and in-depth expansion
The Company has established a business layout of "core business deep cultivation + innovative business expansion + global
market coverage". The five core business segments have formed a mature commercialization system innovative businesses have
achieved technical verification and scenario pilots and the global marketing and service network has achieved localized
implementation and operation.Core businesses: The five major areas of smart space smart office digital identity authentication smart business and smart life
have completed full-scenario product and solution layouts covering dozens of vertical industries such as government and enterprises
retail education healthcare and transportation.Global layout: A grid-based global layout of "headquarters + branches/subsidiaries + service outlets" has been formed. As of June
30 2026 the Company has established 27 branches and 15 subsidiaries domestically and 62 controlling subsidiaries overseas located
in 33 countries and regions worldwide achieving globalized and localized synergy in R&D production sales and services.(III) 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 as well as ecosystem products that need to be externally sourced 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 determining procurement prices and controlling procurement costs. The Executive Procurement Department is mainly
responsible for executing purchase orders and following up on material delivery and reconciliation and payment request. The
Comprehensive Procurement Department is mainly responsible for administrative office and fixed asset procurement except for
production materials.The Company mainly adopts the MRP procurement model. The Planning Department of the Company's Manufacturing Center
based on the production plan and Bill of Materials (BOM) calculates and analyzes raw material requirements prioritizes them
allocates resources in conjunction with existing inventory and subsequently derives the procurement plan for raw materials required
for production. For some common materials the Company sets a minimum safety stock threshold establishes an inventory early
warning mechanism and implements dynamic 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 and the Quality Department to conduct on-site reviews of the supplier. For suppliers who pass the assessment
formal certification will be introduced for storage.In the daily procurement process in order to ensure the quality of the Company's raw material supply except for the SAM (security
module) involved in the card business which can only be purchased from Xingtang Communication Technology Co. Ltd. the only
supplier selected by the Ministry of Public Security the Company usually selects two or more suppliers that meet the Company's
certification standards for the main raw materials for supply. The Company will also strengthen the management of suppliers by signing
relevant "Supply Quality Agreement" and conducting monthly and annual reviews. Suppliers who fail the monthly assessment will
undergo interviews and on-site guidance. For suppliers who show no quality improvement after three consecutive months of guidance
new project quotations and prototyping will be stopped their cooperation share will be reduced or they will be included in the backup
and elimination supplier management program.
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). In MTS the Company makes production plans based
on historical sales data and sales strategies for standardized products and maintains an appropriate amount of finished goods inventory
to respond quickly to market demands. In contrast in MTO the Company organizes production based on customer orders taking into
account the customers' personalized demands for product types model specifications and performance. The finished products are
directly delivered to customers without the need for finished goods inventory thus avoiding inventory overstock and enhancing
customer satisfaction.The Company's application software and platform products support two delivery and service models: localization and cloud
subscription after being developed and tested. In the localization model the Company's application software and platform products are
independently deployed used and managed by users in their local environment. The Company provides software installation packages
which users can download from CDs or the official website and install. The basic version can be activated for free while the advanced
version software and platform functions require payment of software license fees. For large-scale engineering projects the Company
can dispatch engineering personnel to the user's site to provide installation commissioning and training services. In the localization
model the Company does not participate in software operation maintenance security protection and version updates and only
provides necessary after-sales technical support based on the sales contract. In the cloud subscription model users can access and use
the Company's application software and platform via the Internet without local deployment and maintenance. Users can choose the
subscription service that suits their actual needs. In the cloud subscription model the Company is responsible for the continuous
operation maintenance security protection and version updates of the software and provides customer support and technical services
to ensure a stable and reliable user experience.
3. Marketing and management models
The Company adopts a sales model that combines distribution and direct sales.
(1) Distribution model
In the distribution model the Company's customers are mainly dealers and the relationship between the Company and dealers
belongs to a purchase and sales relationship adopting a buyout sales method.
(2) Direct sales model
The Company's direct sales customers mainly include system integrators engineering contractors end users etc. On the one hand
the Company can provide smart terminal devices and application software platforms to system integrators and engineering contractors
which can integrate or include the aforementioned products in products systems or engineering services sold to downstream end users.On the other hand the Company can also directly sell to end users through offline direct sales or online self operated platforms.Normally the Company's direct sales business can be divided into two categories based on whether installation and O&M are
required: product sales and project implementation. For project implementation related businesses the Company will customize its
own smart terminals and application software platforms based on different engineering project requirements and provide O&M services.(IV) Market position and brand influence of the Company's products during the reporting period
Leveraging its core technological advantages a full-scenario product system and global service capabilities the Company firmly
ranks among the industry's top tier with continuously improving brand influence and market recognition.During the reporting period the Company was honored with the "Top 10 Channel Gate Brands of 2025-2026" "Top 10 License
Plate Recognition Brands of 2025-2026" and "Top 10 Smart Pedestrian and Vehicle Access Brands of 2025-2026" by Smart CRK
Headliner Tingchongquan and www.86crk.com-Smart Access & Parking Charging Portal; honored with "Vice President Unit of
Shenzhen Smart Security Chamber of Commerce" by Shenzhen Smart Security Chamber of Commerce; honored with "Second Council
Member of FSAISE" by FSAISE; honored with "Vice President Unit of China Shenzhen Security & Protection Industry Association"
by China Shenzhen Security & Protection Industry Association; and honored with the "2026 Excellent Partner for Co-building
Consumer Security Ecosystem Award" by the CPSE Organizing Committee. ZKTECO USA LLC's Certus cloud access control solution
was awarded the "2026 Secure Campus Awards" - ACCESS CONTROL CLOUD-BASED MANAGEMENT category special award
by Campus Security Today an international authoritative security industry media. The product's innovative strength and value in
campus scenarios were highly recognized by authoritative figures in the American industry. ZKTECO SECURITY L.L.C was awarded
the "Government Security Solution Provider of the Year" at the GovTech Innovation Forum & Awards 2026 hosted by TahawulTech
a leading Middle East technology media. ZKTeco obtained the renewed "GB/T 45001-2020/ISO 45001:2018 Occupational Health and
Safety Management System Certification" and "ISO/IEC 27001:2022 Information Security Management System Certification". During
the reporting period the subsidiary ZKTECO BIOMETRICS INDIA PRIVATE LIMITED obtained six ISO system certifications
including ISO/IEC 27001 Information Security Management System ISO/IEC 27017 Security Controls for Cloud Services ISO/IEC
27018 Protection of Personally Identifiable Information in Public Clouds ISO/IEC 27701 Privacy Information Management System
ISO/IEC 20000-1 IT Service Management System and ISO 9001 Quality Management System.ZKTeco’s three major brands ZKTeco ARMATURA and ZKDIGIMAX simultaneously passed the audit by the international
authoritative certification body SGS obtaining IEC 62443-4-1:2018 Cybersecurity certification for industrial automation control
systems and securing three IECEE CB scheme certification certificates at once.Guangdong Zkteco obtained the renewed "GB/T 45001-2020/ISO 45001:2018 Occupational Health and Safety Management
System Certification" and was recognized as an SRDI SME by the Department of Industry and Information Technology of Guangdong
Province.XIAMEN ZKTECO obtained the renewed National High-tech Enterprise Certificate from Xiamen Science and Technology
Bureau Xiamen Municipal Finance Bureau and Xiamen Tax Service State Taxation Administration.(V) Key performance drivers
1. Continuous breakthroughs in multimodal BioCV technology
In-depth development of multimodal BioCV technology: Multimodal BioCV technology is accelerating its evolution from
traditional single biometrics capabilities towards a highly secure and robust composite identity recognition system becoming the
mainstream technical path amidst continuously upgrading information security demands. ZKTeco continues to achieve key
breakthroughs in the multimodal BioCV field building a new generation of multimodal palm recognition technology system by
integrating the advantages of visible light palm recognition and palm vein recognition performing multi-dimensional deep analysis of
palm shape texture and vein patterns significantly improving recognition accuracy while strengthening anti-spoofing capability and
security boundaries. The Company continuously optimizes its multimodal recognition algorithm system dynamically adjusting fusion
strategies and weight distribution based on different application scenarios and business needs achieving flexible collaboration from
the feature layer to the decision layer. Related products have been widely applied in diverse scenarios such as employee attendance
smart access control and smart payment providing users with identity authentication solutions of higher accuracy and security.The accelerated popularization of non-contact biometric technology: Non-contact biometric technology is accelerating its
popularization and gradually becoming an important form of next-generation identity interaction. Benefiting from advantages such as
efficiency hygiene and optimized user experience palm vein recognition as an emerging non-contact biometric technology is rapidly
becoming a key focus in the industry due to its high discretion and strong anti-replication capability. ZKTeco actively participates in
the formulation of group standards related to non-contact palm recognition promoting the application and deployment of this
technology in high-security scenarios such as finance. Concurrently the Company is advancing its patent layout and technology
reserves for non-contact fingerprint capture devices building multi-dimensional technical barriers. Simultaneously the Company
continuously strengthens its facial recognition technology capabilities leveraging AI algorithm optimization and enhanced liveness
detection capabilities enabling it to deliver higher value in scenarios such as real-name verification intelligent monitoring and risk
early warning further perfecting its multi-level identity security system.Deeper integration of multimodal BioCV technology in mobile terminals: In the field of mobile terminals multimodal BioCV
technology is accelerating its development towards portability and integration. ZKTeco uniformly encodes multimodal biometric
features such as fingerprints facial features and palms into BioCode which is then integrated into mobile devices in the form of a QR
code. This enables efficient carrying and convenient invocation of identity information enhancing user experience while ensuring
authentication security. Building on this the Company continues to explore the deep integration of mobile-end multimodal BioCV
technology with application scenarios such as mobile payment and smart office. This promotes the extension of identity authentication
capabilities from single functions to cross-scenario applications creating a more efficient convenient and secure integrated mobile
identity experience for users.
2. Deep empowerment of AI technology across all scenarios
Multimodal large models are accelerating their transition from perception layer capabilities to cognition and decision-making
layer capabilities becoming the core technical path for driving AI to achieve deep understanding and intelligent reasoning. ZKTeco is
seizing the opportunities presented by AI technology evolution continuously iterating its self-developed BioCV VLM/LLM
multimodal large model system and deeply integrating the Mars Wisdom AI cognitive computing platform general large models and
edge AI technologies. This integration builds an integrated cloud-edge-device technical foundation connecting algorithmic capabilities
with all business scenarios and promoting the upgrade of the Company's core technology from traditional "identity recognition" to a
"full-domain cognitive service" system. Relying on this composite technical architecture the Company deeply applies cutting-edge AI
capabilities in the core domain of multimodal BioCV. While significantly improving recognition accuracy and response efficiency it
achieves multi-dimensional modeling and in-depth analysis of dynamic behavior trajectories complex environmental features and
scene interaction relationships breaking through the limitations of single-point perception in traditional visual recognition and building
a new generation of identity verification and scene analysis system with full-domain perception and intelligent judgment capabilities.At the same time the application of AI technology in smart spaces smart office digital identity authentication and smart
commerce continues to deepen becoming an important engine driving business efficiency and value creation. ZKTeco achieves the
automation and intelligence of security and operational processes through AI technology significantly improving overall operational
efficiency. In smart commerce scenarios based on in-depth mining and intelligent analysis of multi-source data it provides enterprises
with more forward-looking decision support capabilities. By combining natural language interaction technology it builds intelligent
Q&A and service systems widely applied in scenarios such as smart reception and intelligent customer service significantly optimizing
user experience and improving operational efficiency and promoting the continuous evolution of enterprises from digital to intelligent
operational models.
3. Dual drivers of policy and market
National industrial policies continue to provide support: Based on 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" and the "Overall Layout Plan for the
Construction of Digital China" the "Measures for the Security Management of the Application of Facial Recognition Technology"
effective from June 2025 further regulate industry development. This coupled with the continuous advancement of Digital China
construction and the implementation of the "AI+" initiative creates a more compliant and broader development environment for the
industry in which the company operates. At the same time the draft "15th Five-Year Plan" outline explicitly includes brain-computer
interfaces as a key focus for future industrial foresight. The Ministry of Science and Technology has clarified that during the "15th
Five-Year Plan" period it will strengthen scientific and technological research in areas such as brain-computer interfaces. Coupled
with the issuance of relevant implementation opinions by seven departments to promote the innovative development of the brain-
computer interface industry this provides new opportunities for the extended development of the industry. The Company responds to
the call of policies continuously increasing R&D investment in core technologies such as multimodal BioCV and multi-dimensional
sensing smart terminals. At the same time relying on the relevant technological layouts of its subsidiaries it explores the integrated
application of brain-computer interfaces and multimodal BioCV technologies aligning with policy compliance requirements
accelerating product iteration and contributing to the construction of the digital industry ecosystem.Continuous growth in market demand: With the deep penetration of digitalization and intelligence the demand for biometric and
AI technologies in various industries continues to increase. ZKTeco leveraging its core technological advantages in multimodal BioCV
and a rich array of product solutions can meet the needs of users in public services enterprises institutions and individuals in areas
such as identity recognition security protection and intelligent management presenting a broad market prospect.Global biometric technology with the continuous iteration and upgrade of elements such as AI chips and algorithms coupled
with the increasing demand for security authentication across various industries sees its application scenarios continuously expanding.In governments and law enforcement agencies biometric technology is used for border control national ID programs and public safety
improving the overall security and efficiency of government operations. In the banking and financial sectors with the increasing
application of biometric technologies such as palm vein identity theft and fraud risks are further reduced. In healthcare industrial and
other sectors biometric technology is deeply integrated into various scenarios ensuring security while improving management
efficiency. Furthermore the integration of biometrics with self-service and AI agents continues to increase balancing convenience and
security and driving global market demand growth.II. Analysis of Core Competitiveness
(I) Core technology system
As of June 30 2026 the Company and its consolidated subsidiaries collectively have 1303 patents including 246 invention
patents; 866 computer software copyrights and 89 work copyrights as well as strong sustained innovation capabilities. As of the end
of the reporting period the Company has actively participated in the formulation of 41 national and local industry standards grasping
the direction of technological development and laying out product R&D in advance to ensure a leading position in market competition.The Company's core technological advantages are demonstrated in the following aspects:
1. Multimodal BioCV fusion technology
ZKTeco has been deeply engaged in the field of multimodal BioCV and smart perception for many years building a
comprehensive multimodal BioCV technology system covering all categories of recognition modalities including fingerprint palm
(palmprint + palm vein) facial iris and finger vein. The Company's independently developed core algorithms combine high precision
high speed and high security. They maintain excellent recognition performance even in special scenarios with complex lighting or
harsh environments demonstrating profound technological accumulation.In terms of hardware and core technology innovation the Company has made a breakthrough by adopting an ultra-wide-angle
binocular camera architecture enabling palm recognition and facial recognition to share the same hardware acquisition device. This
efficiently integrates bimodal capabilities and significantly enhances device integration efficiency. Specifically palm recognition
employs a hybrid solution of palmprint + palm vein relying on near-infrared imaging technology to capture vein information combined
with palmprint texture details to form a dual security guarantee and is complemented by image enhancement algorithms to optimize
feature acquisition in complex environments. Facial recognition adopts a near-infrared + visible light hybrid mode flexibly adapting
to all-scenario lighting. In low-light environments dedicated algorithms restore key details to ensure recognition stability.The facial and palm live detection modules are simultaneously upgraded utilizing RGB+IR bimodal fusion and deep learning
algorithms. This effectively defends against spoofing attacks such as photos videos and 3D masks maintaining stable discrimination
capabilities even in low-light environments through detail restoration algorithms. Concurrently the Company has launched a cross-
platform adaptation solution fully supporting mobile terminals such as HarmonyOS Android and iOS as well as various desktop and
dedicated device terminals. By employing unified feature template extraction and encryption standards secure interoperability across
devices is achieved eliminating the need for users to register repeatedly. Furthermore the transmission process only conveys feature
templates not raw biometric data which combined with dynamic encryption and decentralized storage technologies fully safeguards
user privacy and data security.At the algorithm optimization level we innovatively integrate deep learning with traditional pattern recognition algorithms. Deep
learning addresses challenges posed by complex scenarios and high-dimensional data while traditional pattern recognition ensures
system operational efficiency achieving an optimal balance between recognition accuracy and speed. This significantly enhances the
system's generalization capability and reliability further solidifying our industry technical advantages.
2. Mars Wisdom AI Cognitive Computing Platform
AI is driving the leap of smart spaces from "automation" to "intelligence". The Company's independently developed Mars Wisdom
AI platform is an AI cognitive space computing platform built for the era of spatial intelligence aiming to empower spaces with
understanding and decision-making capabilities through AI technology.The Mars Wisdom AI platform is based on multimodal data fusion integrating technical capabilities such as computer vision
large language models (LLM) multimodal large models (VLM) AI Agent and edge intelligent computing to build an intelligent
closed loop covering "perception-understanding-reasoning-execution".The platform can comprehensively analyze people objects events and environmental states within a space and output intelligent
decision-making suggestions based on business rules and AI models. For example in campus operation scenarios the platform can
identify abnormal behaviors personnel flow trends and space utilization efficiency through AI visual analysis; in office scenes it can
combine personnel equipment and environmental data to achieve smart office assistance; in manufacturing scenarios it can assist
enterprises in improving production environment management safety management and operational efficiency.During the reporting period the Company continued to upgrade the capabilities of the Mars Wisdom AI platform promoting the
evolution of AI capabilities from single-point applications to platform-based capabilities and implementing them in large
manufacturing parks commercial and other scenarios.In the future the Company will further promote the integration of the Mars Wisdom AI platform with businesses such as smart
space smart office and digital identity authentication building an important technical infrastructure for the company in the AI era.
3. AIoT technology
ZKTeco's self-developed AIoT solution Minerva IoT The platform adopts a cloud-native architecture supporting concurrent
access of hundreds of millions of devices; it flexibly adapts to diverse scenarios through low-code API development and third-party
ecosystem integration; it provides full-chain capabilities such as device connection audio and video processing payment gateway
data analysis and content management achieving cloud edge and end collaboration. For the Company's business scenarios Minerva
IoT deeply integrates AI big data and IoT technologies to build an AIoT ecosystem providing enterprises with efficient and intelligent
digital operation support. Through technological innovation and scenario-based services it helps customers achieve digital
transformation and business upgrading.
4. BCI technology
ZKTeco establishes a core EEG interface technology system through multimodal AI and edge-cloud synergy empowering a new
future for human-computer interaction. This technology system based on non-invasive brain-computer interaction with multimodal
AI integration as its core and supported by edge-cloud integration focuses on livelihood scenarios such as improving educational
concentration early screening for neurological diseases rehabilitation assistance and smart elder care. It deeply integrates biosensing
edge computing and brain science laying a solid foundation for the transition of BCI technology from laboratories to large-scale
civilian applications.ZKTeco's EEG interface technology system adheres to a safe non-invasive approach. Based on the precise acquisition of
microvolt-level weak EEG signals it develops flexible sensor arrays and lightweight wearable hardware balancing signal stability
wearing comfort and portability making it adaptable to daily long-term monitoring and large-scale popular applications. Leveraging
the Company's long-term technological accumulation in multimodal BioCV the system innovatively achieves multi-dimensional
integrated perception of EEG EOG EMG iris and retinal images and clinical health data. This breaks through industry bottlenecks
such as single-modal signals being susceptible to interference and limited recognition accuracy. Through deep learning and correlated
feature mining it achieves stable analysis of concentration relaxation emotional states fatigue levels and movement intentions.(II) Scenario-based R&D model achieving precise alignment of technology with scenarios
The Company uses a scenario-based R&D model driven by "technology foundation + scenario traction" as its engine with an
integrated edge-cloud R&D technology ecosystem as its foundation. Centered around the core needs of various scenarios it builds
specialized business capability platforms deeply integrating core technologies with specific scenarios. This achieves rapid
industrialization of technological achievements and scenario-based innovation creating an R&D system where "technology is
implementable products are adaptable and solutions are valuable" thereby achieving precise adaptation of technology to scenarios.The Company's core advantages in scenario-based R&D are reflected in the following aspects:
1. Construction of specialized business capability platforms
Building a series of specialized business capability platforms including Smart Space Management Platform Brain-Computer
Sovereign Cloud Platform Smart Audio-Video Platform and Digital Marketing Platform. These platforms serve as a connecting hub
between technology and scenarios enabling modular and standardized output of core technologies and rapidly adapting to the
personalized needs of different industries and scenarios.
2. Smart space scenarios + Large model application technology + Edge AI
Integrating the Mars Wisdom AI cognitive computing platform with BioCV TinyML edge AI technology into smart space
scenarios we create an AI cognitive spatial computing solution achieving an upgrade from "physical control" to "intelligent decision-
making" and evolving from "perception" to "autonomous decision-making". Encompassing all scenarios including campuses buildings
communities and transportation it enables integrated smart management for access optimization energy management security
protection and improved operational efficiency.
3. Smart office scenarios + Large model application technology
We launched the Ralvie AI Agent Platform integrating large model technology to achieve an upgrade from "time management"
to "organizational performance management". Through intelligent analysis of workload structure it provides enterprises with decision
support for resource optimization and performance improvement creating a smart office ecosystem of "empowerment rather than
monitoring" and realizing a dual enhancement in office efficiency and organizational value.
4. Smart business scenarios + AI Agent
In smart business scenarios we integrate VLM/LLM large models and AI Agent technology to create the ZKDIGIMAX Level3
Digital Marketing Solution enabling consumer behavior analysis merchandise display optimization intelligent generation of
marketing content and cloud monitoring smart services. This builds a full-scenario full-chain boundless retail ecosystem providing
retail enterprises with precision operations and digital transformation capabilities.
5. Smart identity verification scenarios + BioCV fusion technology
Combining multimodal BioCV fusion technology with blockchain and large model technology we create identity authentication
solutions such as Human Certificate Rubik's Cube achieving precise verification for "the integration of people and certificates". This
covers segmented scenarios like smart examination management smart healthcare and smart new student/employee onboarding
fortifying the digital world with a secure and trustworthy identity authentication foundation.
6. Smart life service scenarios
Leveraging the Company's advantages in multimodal BioCV and AIoT technologies and products we are deploying smart
outdoor smart home and other smart life service scenarios creating core products such as outdoor tracking cameras and smart audio-
visual devices to achieve intelligent and convenient upgrades for smart life scenarios and expand the application boundaries of the
Company's technologies and products.
7. Education health and elderly care and medical service scenarios
Integrating BCI technology with multimodal BioCV technology we focus on livelihood scenarios such as improving educational
concentration health monitoring for elderly care early screening for neurological diseases and rehabilitation assistance creating
customized solutions to lay the technical and scenario foundation for future big health and smart education tracks.(III) Pan-scenario capability support
The Company has built a full-dimensional scenario product support system of smart terminal + software platform system + cloud
operation subscription services. With multimodal BioCV technology as the core foundation and digitalization and intelligence as the
main connecting line it breaks down software and hardware collaboration barriers and deeply integrates cloud-native service
capabilities creating pan-scenario solutions covering all fields such as smart space smart office digital identity authentication and
smart commerce. Meanwhile relying on cloud-native technology platforms like ZKTeco Interconnection it deeply strengthens cloud
operation core capabilities and a diversified subscription service system achieving a product model upgrade from the traditional
"hardware product sales + one-time service" model to "cloud operation full-cycle O&M + subscription-based on-demand service" thus
forming pan-scenario support capabilities that combine scenario breadth technical depth and service stickiness.Regarding software systems and platforms the Company highly values the integrated development and design of software and
hardware focusing on building a software-hardware integrated AIoT ecosystem that can provide diversified personalized and
customized system software and platform services for different users different application scenarios and different vertical fields. On
one hand we are deploying the ZKTeco Cloud IoT Platform MinervaIoT based on the Amazon Web Services technology stack to
provide deployment-free SaaS application products for smart space smart office smart life and other scenarios. At the same time we
specifically develop platforms for segmented fields providing ZKBio Smart Park Integrated Management Platform V8800 and ZKBio
Intelligent Integrated Management Platform V6600 for large park-type enterprise customers; ZKBio Netxis Cloud middleware
development platform and Time and Security Refined Service Platform E-ZKEco Pro for medium and large enterprise customers;
ZKTeco Cloud Attendance and Access Control Management System BioTime 8.0 for overseas customers; and ZKBio Partner ZKTeco
Cloud Commerce Smart Marketing Management Tool Platform for channel partners comprehensively empowering partners to achieve
digital business operations and refined management. On the other hand based on the mature technical modules and software
middleware of various platforms we provide combined applications and flexible platform function customization and development
services to users precisely meeting personalized needs and establishing good brand awareness.Regarding smart terminals the Company has built a full-category highly adaptable hardware product matrix which can provide
smart perception and control terminals covering multiple fields: 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 digital identity authentication 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 the field of smart business we focus on the needs of chain customers providing hardware products such as smart perception
terminals and commercial interactive terminals along with business system development and data analysis capabilities for people
products and places. By empowering with technology we help retail enterprises improve sales efficiency optimize consumer
experience and loyalty reduce operating costs and risks and achieve sustainable growth.In terms of cloud operations and subscription services the Company with ZKTeco Interconnection Ralvie AI and other cloud-
native technology platforms at its core has built a diversified subscription service system covering basic cloud services value-added
cloud services and industry-customized cloud services thereby deeply strengthening core cloud operation capabilities such as
centralized cloud device management intelligent data analysis and operation continuous system iteration and upgrade and scenario-
based intelligent O&M. We have launched subscription packages deeply integrating smart terminals with full-lifecycle cloud O&M
services while also offering lightweight and flexibly expandable subscription options to meet the low-threshold digitalization needs of
SMEs and the customized service needs of large enterprises thereby achieving a transformation from "product delivery" to "full-
lifecycle value services".The Company's full-dimensional product array is built upon multimodal BioCV core technology with deep synergy between
software and hardware and efficient integration of cloud network and edge forming a general-purpose scenario support capability
that covers all scenarios and adapts to multiple industries. In the future as the boundaries of user application scenarios continue to
expand and extend the Company will continue to enrich and improve its hardware terminal software platform and cloud service
product matrix deepen its cloud operation and subscription service capabilities and continuously enhance product scenario adaptability
and service value to provide customers with more comprehensive professional and high-quality end-to-end solutions.(IV) Synergistic advantages of the global service operation network
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 and domestic online and offline operations have formed a strong
marketing and service network advantage. Furthermore the global marketing and service network continues to deepen its penetration
and the cloud service system is continuously improving further solidifying the foundation for all-scenario full-coverage service
assurance.As of June 30 2026 the Company has established 27 branches and 15 subsidiaries across China mainland with a sales and
service system covering the whole country. The Company has established a total of 62 controlling subsidiaries overseas located in 33
countries and regions worldwide with product sales covering over 100 countries and regions. Through the aforementioned arrangement
globalized and localized synergy in R&D production sales and service has been achieved.Domestically the Company takes "regional deep cultivation + structural penetration" as its core strategic focus continuously
strengthening its synergistic capabilities with core partners and distribution systems. Through the construction of a terminal brand
system and multi-dimensional touchpoints such as industry exhibitions and professional forums it systematically enhances brand
penetration and industry influence. Meanwhile the Company is accelerating the build-out of its marketing service center network and
digital marketing platform driving its sales and service capabilities to extend deeply into tier-three tier-four and tier-five cities as
well as county-level markets further unleashing the growth potential of the lower-tier markets. Building on this the Company is
actively exploring a new digital marketing model of "short video + live streaming + e-commerce" achieving a transformation and
upgrade from traditional channel-driven to data-driven and content-driven approaches continuously improving customer acquisition
efficiency and conversion rate. The integrated online and offline convergence continues to deepen not only effectively expanding
market coverage but also significantly enhancing channel operational efficiency and resource allocation capabilities enabling the
Company to build a more resilient growth curve in the domestic market.The Company always adheres to the concept of localized services in the process of developing global markets. The Company
continued to expand its marketing and service network to second and third tier cities in medium-sized and large countries. The Company
has resident business technical service personnel and marketers in the global market which can provide customers with comprehensive
pre-sales in-sales and after-sales support and services. The localized service system helps the Company quickly understand the
personalized needs of local users based on factors such as local economic development level social stability religion and culture
providing flexible software and hardware personalized customization services thereby improving customer satisfaction and brand
awareness and enhancing customer viscosity. Based on a localized service team the Company actively guides some overseas
subsidiaries to transform from traditional channel sales to value-added development expanding vertical and deep projects optimizing
the revenue structure and enhancing profitability and anti-cyclical capabilities.(V) Intelligent manufacturing advantages ensuring efficient product delivery
The Company builds a "fully integrated customized and flexible lean and intelligent" production and manufacturing system
and has established a global manufacturing system.
1. Fully integrated production process system
With a highly integrated production process system and high-quality production facilities at the forefront of the industry the
Company has built a rich and diverse product portfolio. From injection molding and laser precision cutting to precise optical processing
and sheet metal precision machining to the application of SMT through-hole component soldering operations algorithm burning and
programming implementation PCBA board-level assembly product final assembly integration full-process testing and verification
and finished product packaging the Company has established a complete and interlinked process chain at every key process node. This
deeply vertically integrated process architecture has laid a solid foundation for a demand-driven pull production model enabling
efficient collaboration and precise alignment among various process links. The production capacity layout and production rhythm are
in perfect harmony endowing the Company with a prominent competitive edge in the industry.
2. Customized and flexible production capacity
The Company can provide comprehensive product services in various niche markets such as smart spaces smart offices digital
identity authentication and smart business and possesses the capability to rapidly respond to customized demands for 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. Lean production model
The Company has achieved industry-leading lean production model in multiple production lines through overall planning of
various processes in the product production process and optimization of process flow. The lean production model can effectively
reduce waste throughout the entire production and manufacturing process reduce workers improve labor productivity improve output
and product quality shorten delivery cycles and quickly meet customer needs while reducing manufacturing costs.
4. Advantages of automation and informatization
The Company continuously promotes and enhances the automation and informatization of its production processes. During the
production process multiple procedures have introduced robotic arms and successfully deployed the first automated production line
improving production continuity and product quality. In the digital transformation systems such as MES QMS and APS will be
introduced. Through technologies like IoT and big data production equipment will be networked and data shared precisely controlling
the production process reducing waiting times and human errors in production steps and enhancing production efficiency.
5. Advantages in global manufacturing synergy
The Company continues to optimize its global intelligent manufacturing layout establishing a three-in-one global production
system comprising the Dongguan Manufacturing Headquarters the Thai overseas manufacturing hub and the US high-end intelligent
manufacturing base. The Dongguan Headquarters Manufacturing Base serves as the core manufacturing base solidifying the
foundation of global production capacity and mass production capabilities; the Thai factory is positioned as a core overseas
manufacturing hub coordinating global cross-regional capacity allocation and playing a central role in the supply chain; the US factory
focuses on localized manufacturing of high-end products and the transformation of technological achievements deeply serving the
North American regional market and strengthening local rapid delivery and technical support.(VI) Advantages of high-value brands building a global market reputation
Leveraging its core technological advantages a full-scenario product system and global service capabilities the Company firmly
ranks among the industry's top tier with continuously improving brand influence and market recognition.During the reporting period the Company was honored with the "Top 10 Channel Gate Brands of 2025-2026" "Top 10 License
Plate Recognition Brands of 2025-2026" and "Top 10 Smart Pedestrian and Vehicle Access Brands of 2025-2026" by Smart CRK
Headliner Tingchongquan and www.86crk.com-Smart Access & Parking Charging Portal; honored with "Vice President Unit of
Shenzhen Smart Security Chamber of Commerce" by Shenzhen Smart Security Chamber of Commerce; honored with "Second Council
Member of FSAISE" by FSAISE; honored with "Vice President Unit of China Shenzhen Security & Protection Industry Association"
by China Shenzhen Security & Protection Industry Association; and honored with the "2026 Excellent Partner for Co-building
Consumer Security Ecosystem Award" by the CPSE Organizing Committee. ZKTECO USA LLC's Certus cloud access control solution
was awarded the "2026 Secure Campus Awards" - ACCESS CONTROL CLOUD-BASED MANAGEMENT category special award
by Campus Security Today an international authoritative security industry media. The product's innovative strength and value in
campus scenarios were highly recognized by authoritative figures in the American industry. ZKTECO SECURITY L.L.C was awarded
the "Government Security Solution Provider of the Year" at the GovTech Innovation Forum & Awards 2026 hosted by TahawulTech
a leading Middle East technology media. ZKTeco obtained the renewed "GB/T 45001-2020/ISO 45001:2018 Occupational Health and
Safety Management System Certification" and "ISO/IEC 27001:2022 Information Security Management System Certification". During
the reporting period the subsidiary ZKTECO BIOMETRICS INDIA PRIVATE LIMITED obtained six ISO system certifications
including ISO/IEC 27001 Information Security Management System ISO/IEC 27017 Security Controls for Cloud Services ISO/IEC
27018 Protection of Personally Identifiable Information in Public Clouds ISO/IEC 27701 Privacy Information Management System
ISO/IEC 20000-1 IT Service Management System and ISO 9001 Quality Management System.ZKTeco’s three major brands ZKTeco ARMATURA and ZKDIGIMAX simultaneously passed the audit by the international
authoritative certification body SGS obtaining IEC 62443-4-1:2018 Cybersecurity certification for industrial automation control
systems and securing three IECEE CB scheme certification certificates at once.Guangdong Zkteco obtained the renewed "GB/T 45001-2020/ISO 45001:2018 Occupational Health and Safety Management
System Certification" and was recognized as an SRDI SME by the Department of Industry and Information Technology of Guangdong
Province.XIAMEN ZKTECO obtained the renewed National High-tech Enterprise Certificate from Xiamen Science and Technology
Bureau Xiamen Municipal Finance Bureau and Xiamen Tax Service State Taxation Administration.(VII) Continuously building a talent ecosystem stimulating organizational innovation vitality
With "talent as the core ecosystem as the support and incentives as the guarantee" the Company continues to build a diversified
and professional talent ecosystem. The core team of the Company has over two decades of industry experience and has a deep
understanding of the development trends of 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 sound development.The core management team of the Company is stable. Currently the core management team and key employees of the Company also
directly or indirectly hold shares of the Company through the employee shareholding platform or equity incentive plan and employee
stock ownership plan.(VIII) Full-process quality control advantage solidifying product and service quality
The Company always regards quality as its core development driver taking the entire chain of R&D procurement production
and after-sales as control dimensions to build a refined quality control system that covers all software and hardware categories and
spans the entire product lifecycle. While integrating AI technology to empower R&D quality control and through the dual assurance
of technological innovation and process standardization it continuously strengthens product and service quality thereby building an
industry-leading quality competitive barrier.In the R&D and design phase the Company strictly adheres to the "Design and Development Management Control Procedure"
introducing a cross-departmental collaboration mechanism from project initiation and review integrating the professional advantages
of R&D production quality control and marketing to achieve a deep match between design requirements and scenario applications
as well as production implementation. For the software R&D process an innovative AI-assisted programming quality control system
is introduced leveraging tools like CodeRider for intelligent code review. Through AI algorithms it achieves comprehensive control
across dimensions such as code vulnerability detection logical compliance verification performance optimization analysis and coding
standard unification significantly improving code writing quality and R&D efficiency avoiding potential software product issues from
the technical source and ensuring the stability and reliability of software and hardware collaborative development.In the procurement process the Company establishes a standardized "Supplier Management Control Procedure" building a
comprehensive supplier screening evaluation and dynamic management system. It conducts strict qualification audits capacity
verification and sample testing for core raw material and component suppliers while simultaneously establishing monthly and annual
supplier evaluation mechanisms to achieve precise control over supply-side quality ensuring the quality stability of production
materials from the source.In the production and manufacturing process the Company strictly implements the "Production Process Control Procedure"
leveraging industry-leading automated production equipment lean production model and digital management systems such as MES
and QMS to conduct refined and standardized control over various processes such as injection molding SMT placement algorithm
burning finished product assembly and full-process testing. This achieves full data traceability and quality control at every stage of
the production process ensuring the consistency and stability of product manufacturing quality.Regarding quality after-sales service the Company adheres to the "customer first" service philosophy establishing an efficient
global after-sales service system. It collects customer issues and suggestions during product use in real time through a multi-channel
feedback system establishes a tiered problem-handling and closed-loop tracking mechanism and simultaneously conducts in-depth
analysis of customer feedback data. Quality improvement suggestions are fed back to the R&D and production processes forming an
"after-sales feedback - problem rectification - technical optimization" quality improvement closed loop.Leveraging its full-process standardized quality control system and innovative control capabilities assisted by AI technology the
Company has achieved full-chain quality control from R&D and design to after-sales service forming a strong quality competitive
advantage. In the future the Company will continue to uphold the principle of quality first continuously integrating cutting-edge
technologies to optimize its quality control system deepening its full-chain quality control capabilities and continuously improving
product and service quality to provide global customers with more reliable and higher-quality products and solutions and create long-
term value for shareholders.III. Main Business Analysis
Overview
See relevant contents of "I. Main Businesses Engaged by the Company During the Reporting Period".YoY Changes in Major Financial Data
Unit: RMB
Current reporting The same period YoY change Reasons for changes
period last year
Mainly due to the newly acquired
Longzhiyuan's consolidated data in the
Operating revenue 1098427084.69 929258759.50 18.20%
current period which was not consolidated
in the same period last year
Mainly due to the newly acquired
Longzhiyuan's consolidated data in the
Operating cost 541469700.14 454165899.16 19.22%
current period which was not consolidated
in the same period last year
Mainly due to the newly acquired
Longzhiyuan's consolidated data in the
Selling expenses 238548331.91 209649741.81 13.78%
current period which was not consolidated
in the same period last year
Mainly due to the newly acquired
Administrative Longzhiyuan's consolidated data in the
73446857.65 57337406.90 28.10%
expenses current period which was not consolidated
in the same period last year
Mainly due to exchange losses caused by
exchange rate fluctuations in the current
Financial expenses 18058271.23 -26916455.19 167.09%
period (compared to exchange gains in the
same period last year)
Mainly due to the increase in current
Income tax expenses 19531318.60 10696749.06 82.59% income tax recognized by some overseas
subsidiaries in the current period
Mainly due to the decrease in R&D
R&D investment 88821794.44 104067183.21 -14.65% personnel in the current period which led
to a reduction in employee benefits
Mainly due to the increase in cash flow
Net cash flows from
50492267.08 169183153.56 -70.16% from the purchase of goods and acceptance
operating activities
of services in the current period
Mainly due to the increase in cash flow
Net cash flows from
56659061.63 -454974965.27 112.45% from the redemption of financial products
investing activities
in the current period
Mainly due to the decrease in cash flow
Net cash flows from
-97195505.42 -29847665.57 -225.64% from repaying discounted bills in the
financing activities
current period
Mainly due to the combined impact of the
Net increase in cash net cash flows generated from operating
-23140973.41 -310175901.73 92.54%
and cash equivalents activities investing activities and financing
activities
Mainly due to gains from changes in fair
value - trading financial liabilities
recognized as a result of estimating the fair
Gains from changes in value of contingent consideration based on
49212654.08 7977831.68 516.87%
fair value the acquisition agreement of Longzhiyuan
in the current period fully considering the
actual and estimated completion of
Longzhiyuan's performance commitments
Mainly due to the increase in impairment
Losses from
-48556226.49 -9329887.04 -420.44% losses on goodwill provision in the current
impairment of assets
period
Significant changes in the composition or source of profits of the Company during the reporting period
□ Applicable □Not applicable
There have been no significant changes in the composition or source of profits of the Company during the reporting period.Products or services accounting for more than 10%
□Applicable □ Not applicable
Unit: RMB
YoY change of YoY change of
Operating Gross profit YoY change of
Operating cost operating gross profit
revenue margin operating costs
revenue margin
By products or services
Smart office
176961566.09 44218776.69 75.01% 3.88% -11.48% 4.33%
products
Including:
attendance 100295634.39 35376184.56 64.73% -3.22% -13.21% 4.06%
products
Other products 76665931.70 8842592.13 88.47% 14.91% -3.84% 2.25%
Smart space
689104180.56 362764913.12 47.36% 0.43% 2.20% -0.91%
products
Including:
access control 450771765.96 239224975.33 46.93% 1.40% 9.15% -3.77%
products
Other products 238332414.60 123539937.79 48.16% -1.36% -9.02% 4.36%
Digital identity
authentication 35961507.55 22803812.22 36.59% -10.46% -13.33% 2.10%
products
Including:
biometrics 14418305.94 5873081.90 59.27% -3.87% -8.67% 2.15%
sensor products
Including: card
18344599.84 16157797.54 11.92% -10.72% -14.36% 3.74%
products
Other products 3198601.77 772932.78 75.84% -30.72% -23.83% -2.18%
Smart business
28244235.25 21283227.15 24.65% -2.41% -3.80% 1.09%
products
Including:
commercial 9737612.73 7366531.54 24.35% -32.20% -30.58% -1.77%
products
Including:
digital signage 10034360.40 6968945.46 30.55% -12.69% -21.96% 8.25%
products
Other products 8472262.12 6947750.15 17.99% 174.59% 169.13% 1.66%
Smart living
144747258.73 74995748.94 48.19%
products
Including:
Outdoor 132573821.26 67134683.48 49.36%
products
Including:
12173437.47 7861065.46 35.42%
Smart home
Other products 23408336.51 15403222.02 34.20% 544.57% 1777.10% -43.20%
By region
Domestic sales 234560784.30 159519150.23 31.99% 4.01% 2.82% 0.78%
Overseas sales 863866300.39 381950549.91 55.79% 22.76% 27.74% -1.72%
By sales model
Distribution 628666597.77 352077535.54 44.00% 3.60% 5.34% -0.92%
Direct sales 446352150.41 173988942.58 61.02% 40.02% 46.07% -1.61%
Others 23408336.51 15403222.02 34.20% 544.57% 1777.10% -43.20%
R&D investment
1. R&D investment table
Amount in the Same Period of
Amount in the Current Period Change
Previous Year
R&D investment amount (RMB) 88821794.44 104067183.21 -14.65%
Ratio of R&D investment to
8.09% 11.20% -3.11%
operating revenue
Amount of R&D expenditure
- - -
capitalization (RMB)
Ratio of capitalized R&D
0.00% 0.00% -
expenditure to R&D investment
Proportion of capitalized R&D
0.00% 0.00% -
expenditure to current net profit
2. Status of ongoing projects
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
This project aims to deeply
integrate self-developed
multimodal BioCV biometric
algorithms with AI-Agent
This project deeply integrates
intelligent middle-platform
the cloud AI intelligent agent
capabilities to iteratively create a
middle-platform architecture This project can enhance
new generation of access control
enabling terminals with enterprise brand value by
smart terminal V2.0. Leveraging
proactive intelligent service shaping a humanized
a device-cloud collaborative
capabilities such as intelligent technology brand positioning
intelligent agent architecture it
voice interaction precise user through human-centered
connects local edge sensing and
intent parsing and scene intelligent interaction building
computing power with cloud-
abnormal behavior prediction product differentiation
based scheduling hubs. The
breaking through the advantages and raising market
R&D of Access device integrates a multimodal
traditional passive verification premium. Relying on the AI
Control Smart identity verification engine
mode of access control. intelligent agent-biometric
Terminal Based establishing a fully intelligent Ongoing
1 Relying on the device-cloud fusion architecture it promotes
on AI Agent interactive channel for visitors to projects
collaborative intelligent the transformation of entrance
Technology complete self-service approval
interaction system it achieves and exit terminals from passive
V2.0 and authentication of access
a dual upgrade of personnel verification to proactive sensing
permissions. By coupling
frictionless verification and services leading the iteration of
perception and recognition
intelligent emotional feedback smart office space control
autonomous scheduling and
in human-computer technology driving the upgrade
human-computer interaction
interaction building a smart of industry solutions and
technologies the project delivers
entrance and exit control advancing the industry towards
a highly adaptive user-friendly
system with proactive intelligent efficient and
space access interaction system
perception intelligent humanized directions.empowering managers to
response and enhanced
achieve refined automated and
experience.smart control of entrance and
exit scenarios thus constructing
an AI-Agent entrance and exit
solution for smart spaces.This project addresses the This project aims to build an This project aims to enhance the
R&D of an All- industry demands of massive integrated verification Company's edge-side smart all-
Scenario terminal access and platform that deeply integrates scenario verification solution.Verification differentiated verification in edge intelligence and IoT By building a closed-loop
2 Application multiple scenarios in the era of
Ongoing sensing focusing on achieving capability encompassing
Platform Based AIoT overcoming technical
projects three core objectives: "terminal + platform + data" it
on Edge AIoT bottlenecks such as insufficient 1. To build a composite will accumulate rich scenario-
Integration real-time performance weak standardized verification based data and edge AI models
privacy protection high network service system covering thereby establishing long-term
dependency and lack of cross- multimodal biometrics (face technical barriers and market
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
scenario collaboration in fingerprint palmprint) and competitiveness for the
traditional verification systems. multiple types of credentials company and improving project
It self-develops and builds an (IC card Bluetooth QR code delivery quality and customer
all-scenario smart verification digital token). stickiness. While further
application platform that 2. To empower terminals with consolidating and expanding the
integrates edge AI computing edge intelligent analysis and Company's market share in
power and IoT sensing autonomous interaction traditional advantageous fields
capabilities. By building a capabilities enabling scenario- like access control and
localized intelligent decision- based strategy scheduling attendance the platform will
making and multi-device dynamic response and empower the Company to enter
collaboration mechanism it localized intelligent decision- broader IoT application markets
breaks down data barriers making. such as smart campuses digital
between terminals services and 3. To build a comprehensive factories and smart schools
scenarios creating a secure business framework covering becoming a core engine for
efficient and autonomously all scenarios including access future sustained growth.controllable new generation control attendance visitor
identity verification and business management channel control
access service system realizing video intercom and identity
a systematic and intelligent verification forming a general
upgrade of smart verification and deployable integrated
services. smart verification solution.This project plans to complete
the R&D iteration of the AI
This project targets various
intelligent agent's core This project innovates
scenarios including enterprise
modules empowering the diversified revenue models such
offices chain businesses smart
platform with core capabilities as cloud subscription
manufacturing and campuses.such as smart perception data customized services and value-
Addressing pain points such as
linkage risk early warning added intelligent services
fragmentation of traditional
and smart decision-making. It opening up new profit growth
smart spaces and O&M
will achieve real-time points for enterprise cloud
management systems weak
collection analysis and smart services and contributing to
business collaboration high
handling of various cloud sustained and steady revenue
O&M costs and insufficient
application data realizing growth. Relying on lightweight
intelligence it will build an AI
intelligent functions such as cloud architecture and AI
intelligent agent-based smart
attendance anomaly reminders intelligent agent automation
office cloud application platform
video behavior recognition capabilities it effectively
with AI empowerment and SaaS
smart access control reduces hardware investment
inclusiveness as core R&D
R&D of an permission management and and manual O&M costs.orientations. The platform
SaaS smart alarm event response Through continuous iterative
integrates full-scenario cloud
Application thereby building a human- optimization of algorithm
capabilities including cloud
Platform Based Ongoing machine collaborative models using user data it forms
3 attendance cloud video cloud
on the Smart projects intelligent service model a positive cycle of data models
access control cloud intercom
Office + effectively reducing false products and revenue
cloud alarm and cloud control.Intelligent positive and missed report continuously enhancing overall
It reconstructs the platform's
Agent rates and improving the profitability. Meanwhile it will
interaction integration and
platform's smart O&M level. accumulate core proprietary
execution architecture with the
Concurrently it will complete technical assets such as AI
AI intelligent agent as its core
the integration adaptation and intelligent agents and cloud
hub. Leveraging natural
functional optimization of all service architecture enrich
language interaction and
cloud application modules intellectual property reserves
intelligent agent collaborative
breaking down data silos enhance the Company's
orchestration technology it
between various business technical asset foundation and
achieves business process
modules achieving seamless improve brand influence and
automation and deep release of
linkage of businesses such as capital market valuation
data value building a new
attendance video access advantages providing solid
generation of intent-driven
control intercom alarm and support for the Company's long-
autonomous execution and
device control and term capital operations and
cross-domain collaborative
establishing an end-to-end strategic layout in the AI smart
cloud-native space management
full-process closed-loop smart office sector.system.office SaaS integrated
management system.Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
1. Build differentiated technical
This project addresses the core This project aims to build an
barriers and accumulate
needs of smart space integrated smart space
independent core technologies
management: "all-domain management platform with
such as multidimensional
perception intelligent deep synergy between multi-
perception spatial intelligent
collaboration efficient O&M dimensional perception and
decision-making end-edge-
and low-threshold deployment". spatial intelligent agents. At
service collaboration and zero-
It leverages ZKTeco's the technical level it will open
code development continuously
independently developed BioCV up the full link of multimodal
strengthening the Company's
multimodal model as its perception intelligent
technological leadership and
technical core Mars Wisdom as decision-making and end-edge
industry discourse power in
its intelligent base and the collaborative execution build
AIoT smart space management;
ZKBio CVSecurity platform as a closed-loop technical
2. Promote the iteration and
its deployment vehicle. By architecture optimize large
upgrade of the product system
deeply integrating cutting-edge model inference and intelligent
assisting the business
technologies such as AI large interaction performance form
transformation from single
models multi-dimensional a standardized equipment
hardware sales to an integrated
perception (face human body access and data
"platform + algorithm +
vehicle environment behavior interoperability system and
hardware + service" solution
etc.) spatial intelligence and enhance platform
enriching the product matrix
intelligent agent interaction it compatibility and scalability.increasing product premium and
aims to build an integrated end- At the product level it will
market competitiveness and
R&D of a edge-service spatial intelligent upgrade multimodal identity
helping to deeply cultivate the
Spatial agent platform. verification and all-domain
mid-to-high-end smart space
Intelligent It solves the industry pain points security early warning
management market;
Agent Platform of traditional space management Ongoing capabilities significantly
4 3. Innovate a sustainable
Based on and entrance and exit projects improving traffic efficiency
business model break through
Multi- management such as "single and reducing recognition error
the traditional one-time sales
dimensional perception data silos complex rates and achieving proactive
model and expand long-term
Perception operations high development and precise early warning for
revenue channels such as
threshold and delayed decision- hidden dangers in smart
platform subscriptions
making". Through multi- spaces. Relying on intelligent
algorithm iterations customized
dimensional perception it agent interaction and zero-
services and O&M hosting
achieves all-domain situational code development capabilities
optimizing the overall revenue
awareness of physical spaces. it will lower the threshold for
structure;
Through spatial intelligent scenario deployment and
4. Align with the industry's
agents it realizes autonomous shorten project delivery cycles
intelligent transformation trend
decision-making intelligent adapting to the differentiated
relying on lightweight and
interaction and zero-code scenario needs of multiple
highly adaptable platform
development capabilities industries. At the operational
capabilities supporting the
comprehensively upgrading the level it will complete pilot
Company's business scale
entrance and exit management implementations in multiple
expansion and global layout;
and security protection system. core scenarios establish a
5. Accumulate industry scenario
This transforms the Company's normalized iterative
data and solutions build an
smart space products from mechanism for platform self-
industrial ecosystem based on a
"hardware-driven" to "platform- learning and self-optimization
standardized open system
based intelligent and achieve intelligent O&M for
solidify the Company's core
ecological" adapting to the cost reduction and efficiency
competitive position in the
intelligent upgrade needs of improvement and ensure long-
industry and continuously
space management across term high stability and large-
empower the enterprise's long-
multiple industries. scale operation of the platform.term high-quality development.R&D of This project focuses on the This project aims to build a 1. Build domestic core
Domestic demand for domestic complete domestic full-stack technology barriers seize the
Multimodal substitution driven by IT technology system complete technological high ground in the
Identity application innovation in the the comprehensive domestic IT application innovation and
Authentication field of smart identity Ongoing iterative R&D of hardware continuously strengthen the
5
Device Based verification carrying out R&D projects operating systems and Company's core competitiveness
on Smart of full-stack domestic application software and and industry leading advantages
Identity multimodal identity establish full-link capabilities in the smart identity verification
Verification authentication devices for both covering chip-level security track;
Scenario 3.0 software and hardware. The encryption algorithms 2. Deeply adapt to domestic
terminal integrates multi- terminal devices and cloud rigid demand scenarios such as
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
dimensional identity verification verification platforms government affairs smart
capabilities such as fingerprint achieving full-process spaces and transportation
facial recognition iris independent control of identity effectively broaden business
palmprint card swipe QR code verification services. Through boundaries explore diversified
and OCR building a composite the reconstruction of the market space and cultivate
authentication system. domestic technology stable business growth
Leveraging a full-link domestic architecture the security increments;
security architecture it protection capability for 3. Contribute to the construction
effectively circumvents the risks identity data in critical of the domestic identity
of theft and tampering of core industry scenarios is authentication industry
identity data during transmission comprehensively strengthened ecosystem highly conform to
and storage. By empowering forming a standardized the national strategic layout for
industry chain upgrades with reusable and scalable IT application innovation fully
independent technology domestic smart identity obtain policy empowerment and
breakthroughs an integrated verification solution that meets capital market recognition and
ecological closed loop covering industry compliance and lay a solid foundation for the
chips smart terminals and cloud security control requirements. enterprise's long-term stable and
verification services is built high-quality development.assisting the intelligent and
localized compliance
transformation of identity
verification scenarios in critical
fields such as government
affairs smart spaces and
transportation.This project plans to complete
the core capability
construction and
implementation of the smart
This project relies on the commercial comprehensive
1. Deeply implement AI agents
independent decision-making platform launch a self-
and AIoT fusion technology to
and collaborative scheduling developed cloud monitoring
comprehensively upgrade the
capabilities of AI agents to application and improve the
Company's smart business
innovate the manual operation platform's cloud monitoring
overall solutions enhance
mode of traditional commercial operational capabilities.product intelligence and
systems achieving full-process Complete the deep integration
R&D of a Full- scenario application
intelligent upgrading of core and adaptation of smart POS
link AIoT effectiveness build
business links such as content devices broadening payment
Integrated differentiated market
generation scheduling and data linkage capabilities in
Smart competitive advantages and
arrangement and advertising commercial scenarios.Commercial Ongoing empower industries with digital
6 distribution. Combining edge- Empower AI digital signage
Comprehensive projects and intelligent efficiency
side AIoT smart perception edge-side intelligent
Solution improvements; 2. Enrich the
technology it optimizes terminal computing power and achieve
Platform Company's product system and
data collection and circulation autonomous control of device
Driven by AI technological accumulation in
efficiency. Through the deep brightness volume and
Agents the smart business sector
integration of AI agents and IoT content scheduling as well as
enhance the brand's professional
technology a new L3-level human-AI collaborative
influence and industry
smart interaction system is built decision-making. Equipped
reputation in smart business
creating an automated refined with edge-side smart voice
solutions and continuously
and intelligent new-generation interaction function it builds a
expand the market space for
smart commercial operation highly autonomous
business scenarios.service platform. interactively friendly
intelligent commercial
terminal system forming a
complete smart commercial
solution capability matrix.R&D of a This project focuses on This project centers on high- 1. Enhance market
Comprehensive intelligent building control and Ongoing security access control relying competitiveness: The system
7 Governance high-security access projects on general standardized API has passed numerous high-
Platform for management scenarios interfaces to achieve rapid security standard certifications
Full-domain leveraging system integration integration of various third- helping the Company provide
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
Intelligent capabilities to consolidate party systems empowering the more comprehensive and
Access industry resources and platform with intelligent data intelligent solutions in medium
specifically address pain points analysis and full-domain to large-scale space
such as fragmented access security control capabilities management projects precisely
management and scattered and adapting to diverse and meeting diverse customer needs
services across multiple fragmented scenario needs of and significantly enhancing the
scenarios. By building an customers. Create an Company's market
integrated comprehensive integrated management competitiveness in the smart
governance platform we cover platform that combines space domain; 2. Improve
the diversified application needs intelligent space collaborative operational efficiency: By
of various users providing one- linkage efficient O&M and integrating multiple video
stop digital access management scenario adaptation platforms and various device
services and standardized comprehensively enhancing communication protocols the
comprehensive solutions for the level of digital access aim is to reduce client
clients in multiple fields such as governance and security integration development efforts
parks commercial complexes control in all scenarios such as and effectively improve
and industrial sites achieving enterprises industrial parks operational efficiency; 3.intelligent intensive and digital shopping malls hospitals Expand business areas: The
upgrading of access space factories and construction newly added hybrid cloud
management. sites. model and multi-server model
can better meet the system
stability requirements and fault
tolerance of large smart space
projects.Addressing current bottlenecks This project aims to complete
in the biometrics field such as the full-link technical iteration This project will empower
insufficient palm image data and engineering ZKTeco across four major
scale lagging compliance implementation of palm dimensions: technology market
construction limited accuracy of recognition optimize the ecosystem and strategy. At the
multimodal fusion and weak optical design and image technological level by co-
large-capacity high-concurrency enhancement algorithms of building a million-level palm
recognition capabilities this palm modules achieve image biometrics database with
project is guided by real industry denoising and contrast customers through a back-to-
scenarios and compliance data optimization in complex back compliant approach we
demands. It adopts a secure environments such as low will address the industry pain
controllable and privacy- illumination and high noise point of lacking high-quality
compliant back-to-back and improve the clarity and compliant data. At the market
R&D of Key collaborative cooperation model consistency of palm image level aligning with data
Technologies with clients to jointly build a acquisition across all compliance policy guidance we
and standardized high-quality and scenarios. Based on real will improve the multimodal
Engineering million-scale palm biometrics customer business scenarios product matrix achieve full-
Applications database. The project focuses on we will establish a compliant stack adaptation with existing
for Large-scale
8 multimodal palm feature fusion
Ongoing palm data collection solution terminals and enhance scenario
Palm enhancing the robustness projects and build a million-level coverage and customer
Recognition accuracy and retrieval efficiency compliant palm feature stickiness. At the ecosystem
Based on A of palm recognition algorithms database through a back-to- level by innovating the "back-
Million-level in complex scenarios and back collaborative model. By to-back" collaborative model
Compliance forming an engineered iterating and optimizing we will bind core industry
Database technology system and solution recognition algorithms based customers to form a long-term
capable of supporting million- on massive compliant data R&D mechanism leveraging
level large-capacity identity and fusing palmprint external the reputation of different
authentication. Through key texture with palm vein features customers to empower market
technological breakthroughs and to construct multimodal expansion both domestically
verified practical applications feature vectors we will and internationally. At the
we are advancing palm significantly improve the strategic level we will
biometrics from laboratory algorithm's recognition accumulate core intellectual
algorithms to large-scale accuracy low-light property in areas such as palm
compliant deployments adaptability and anti- recognition and data
providing independent interference and anti-attack compliance contributing to the
controllable efficient and capabilities. We will Company's long-term intelligent
reliable technical support and collaborate with the laboratory development strategy.demonstration models for smart to complete in-depth algorithm
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
identity verification and secure optimization iterate and adapt
access control in relevant palm recognition models for
industries. large-capacity complex
scenarios involving over
hundreds of thousands of
entries and output mature
palmprint and palm vein
fusion recognition SDKs
forming core technical
achievements that can be
scaled and reused.This project plans to complete
the research development and
verification of an industrial-
grade dual-system smart The research related to this
identification terminal project has strategic and
achieving stable operation overarching implications for the
under full working conditions Company's future development.in harsh environments. It represents a crucial initiative
Regarding environmental for the company to deepen its
adaptability the device can roots in the high-end smart
operate stably in a wide terminal sector expand into
temperature range and domestic and international
complex lighting scenarios markets and solidify its
industry position. The specific
This project aims to develop a such as strong light and dim
impacts are as follows:
smart identification terminal light. It is equipped with a
1. Technical level: The project
adapted for high-end outdoor high-brightness display and
hardware selection tackles core technologies such industrial scenarios. It deeply
as dual-system integration high
integrates Linux and Android optimization and thermal
R&D of a
dual-system architecture protection structure design
protection and low power
Smart have been completed. consumption. incorporating core functions
Identification
such as large-angle facial Regarding optical design we
2. Market level: The project
Terminal Based
recognition professional visual are developing an ultra-wide-
focuses on high-end outdoor
on Linux and
intercom IK10 impact angle facial recognition optical
industrial scenarios addressing
Android Dual product compliance and
resistance IP66 water and dust solution realizing an
Systems adaptability pain points
protection high-brightness Ongoing integrated optical design for
9 Designed for expanding into high-end
display of 1000 nits and above projects facial and palm recognition
Harsh markets both domestically and
and professional wireless which simplifies hardware
Industrial
communication (WiFi/4G). This structure and reduces overall
overseas and enriching the
Environments product matrix.will address industry pain points research development and
3. Brand level: The high-end
like insufficient adaptability and
production costs. Regarding
non-compliance of similar system architecture it adapts
compliant products developed in
this project will enhance the
products in specific markets mainstream Linux and
continuously enhancing Android dual-system solutions
Company's brand influence and
ZKTeco's international to meet diverse customer
recognition in the domestic and
international high-end smart
competitiveness and market selection and scenario
terminal fields.influence in high-end smart deployment needs. Regarding
4. Industry chain level: The
terminals. audio video and
communication we are project promotes the
overcoming high-fidelity transformation of core
visual intercom noise technological achievements
reduction and echo cultivates professional R&D
suppression technology teams strengthens the
achieving high industry Company's core competitiveness
standards for voice input and and sustainable development
output indicators; and capabilities thereby helping the
integrating multi-mode Company reshape its value
wireless communication system and achieve long-term
modules to support multi- development.mode network switching.Regarding reliability and
protection we are developing
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
low-power temperature control
management technology
optimizing overall device
temperature rise and power
consumption strategies;
completing electrostatic and
surge protection design
according to industrial high
standards achieving an
industrial-grade high
protection level for the entire
device. Regarding production
and compliance we are
optimizing PCBA structural
design to adapt to standardized
testing assembly and mass
production processes ensuring
the entire device passes a full
set of compliance
certifications. The structure is
compatible with various wall
types panel materials and
fence materials enabling
flexible installation and
deployment in all scenarios.This project addresses core pain This project aims to complete 1. Solidify technical architecture
points within the Company's IoT the full-stack R&D and advantages: Relying on the dual
ecosystem such as protocol implementation of a new technical foundations of the
fragmentation weak generation IoT platform MQTT self-developed unified
compatibility high iteration and achieving six core construction protocol and Matter standard
O&M costs and insufficient goals. adaptation thoroughly resolve
ecosystem interoperability. We 1. Complete the standardized protocol fragmentation issues
will independently develop and design and implementation of significantly reduce R&D and
build a new generation IoT the new MQTT unified O&M costs and remarkably
platform based on the new communication protocol enhance system stability
MQTT unified communication achieving protocol uniqueness extensibility and iteration
protocol and Matter international structural standardization field efficiency;
standard adaptation. By adopting extensibility and version 2. Strengthen security and
R&D of IoT a unified standardized iterability comprehensively compliance competitiveness:
Platform communication protocol system replacing the outdated The full-link security protection
Construction to replace the traditional fragmented protocol system; architecture effectively
Project based fragmented protocol 2. Build a full-coverage full- mitigates data and device
on New MQTT architecture we will Ongoing link security and compliance security risks enhances
10 Unified fundamentally resolve projects protection system addressing platform credibility and industry
Communication challenges related to multi- both internal O&M control and recognition and meets the
Protocol and protocol adaptation O&M and third-party access security to security and compliance needs
Matter expansion. Reconstruct the meet industry compliance of high-end customers;
Standard platform's full-link security standards and customer 3. Broaden omni-domain
Adaptation protection system enhancing security requirements; application scenarios: With
security capabilities such as 3. Optimize omni-domain integrated online and offline
identity authentication scenario adaptation capabilities and cross-ecosystem
transmission encryption capabilities realizing precise device interoperability
permission isolation and synchronization of device advantages break traditional
behavior auditing to ensure the online/offline status reliable business barriers and
full lifecycle security of devices transmission in weak network comprehensively cover diverse
and data. Optimize complex environments achieving scenarios such as smart homes
network transmission integrated online and offline smart buildings and industrial
capabilities in weak network and business linkage and adapting IoT forming industry-leading
offline environments enabling to various complex operating scenario adaptation and
integrated online and offline environments of IoT devices; ecosystem compatibility
business interaction. Deeply 4. Deeply adapt to the Matter capabilities;
adapt to the Matter IoT common international IoT standard 4. Innovate ecological business
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
standard break down device complete cross-device cross- models: Achieve controllable
ecosystem silos build a low- brand and cross-ecosystem O&M for proprietary devices
threshold manageable and open interoperability development convenient access for third-
third-party access system and enable seamless access for party devices and
construct an open win-win and compliant third-party devices interconnectedness for all
commercializable omni-domain and reach mainstream industry ecosystem devices promoting
IoT ecosystem to support the compatibility levels; the Company's transformation
long-term iterative development 5. Establish a standardized IoT and upgrade from a single
of the Company's IoT business. platform integrating unified hardware product model to a
device access status "platform + ecosystem" model
monitoring O&M effectively broadening revenue
management data flow and channels and expanding market
remote control possessing share;
high-concurrency and high- 5. Fortify industry strategic
stability operational barriers: Closely follow
capabilities for massive international IoT standard
devices; development trends accumulate
6. Build a standardized third- independent and controllable
party open ecosystem core platform technologies help
leveraging the dual advantages the Company complete the
of self-developed protocols strategic upgrade from a device
and the Matter ecosystem to manufacturer to a platform-
achieve low-threshold based ecosystem-based
controllable rapid access for enterprise seize the high ground
partners forming a replicable of IoT industry development
and implementable ecosystem and provide core support for the
cooperation and Company's long-term
commercialization operation digitalization and intelligent
model. strategy implementation.This project aims to complete
a comprehensive iterative
upgrade of the intelligent
cloud-edge-device AIoT
platform V3.0 building a fully
functional secure
controllable and commercially
viable enterprise-grade IoT This project will be a key pillar
service platform. of the Company's IoT strategy
1. At the communication driving the upgrade of an end-
access layer it is compatible edge-cloud integrated IoT
This project centered on the with mainstream protocols platform and by combining AI
Company's "End-Edge-Cloud" such as MQTT HTTP and multimodal and data analysis
strategy continuously develops WebSocket supporting high capabilities it will enhance
the Cloud IoT Platform. It concurrency and high stability market competitiveness and
Cloud-Edge- provides efficient and intelligent
Ongoing access and data business value. In the future the
11 End AIoT Cloud IoT foundational
projects communication for massive Company will leverage this
Platform V3.0 capabilities and services to the terminal devices. At the platform to expand into more
Company and enterprise-level commercial operation layer AIoT application scenarios
customers thereby facilitating establish a standardized forming core advantages of
the construction of a cloud-edge- subscription billing and technological barriers business
end integrated ecosystem. settlement system to model innovation and deep
implement a subscription- industry integration thereby
based commercial operation contributing to the development
model for IoT devices; of the global IoT ecosystem.
2. At the architectural
capability layer build a multi-
enterprise and multi-tenant
architecture to achieve secure
data isolation between tenants
and adapt to diverse
enterprise-grade customized
scenarios; build a complete
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
identity authentication and
permission control system
based on OAuth and JWT
security protocols with
enterprise hierarchical
organization management
capabilities optimizing device
permission allocation and team
collaboration efficiency;
3. At the O&M service layer
establish a multi-channel
message push and alarm
mechanism to achieve efficient
reach of business events. At
the intelligent capability layer
improve the platform's real-
time audio/video processing
storage and intelligent
analysis capabilities
integrating AI technology to
achieve intelligent parsing of
image voice and text
multimodal data
comprehensively enhancing
the platform's IoT business
intelligent processing
capabilities.This project relies on the This project aims to build a With the industry trends of
Company's accumulated time unified secure controllable refined enterprise operations
management technology iterative and commercially remote equipment O&M and
integrating LLM AI agents viable cloud-based time intelligent personal
cloud computing and IoT management platform management the market
technologies to build an accumulating underlying demand for automated cloud-
intelligent cloud-based capabilities such as permission based and intelligent time
integrated time management and control data processing cloud management solutions continues
business optimization platform. storage multi-terminal to expand. This project
Through a cloud-native collaboration AI analysis and integrates core technologies of
architecture full-domain data data security providing a LLM AI agents cloud
processing and an AI analysis standardized technical computing and IoT
engine it adapts to the foundation for all categories of comprehensively strengthening
LLM and AI differentiated needs of products and multi-scenario the Company's core R&D and
Agents-based enterprises suppliers and businesses. Leverage LLM and product capabilities in
Automated individual users. In enterprise AI agents to enhance natural intelligent time control AI
Time scenarios it achieves automatic Ongoing language understanding attendance scheduling remote
12
Management behavior categorization projects behavior recognition process O&M collaboration and big
and Business attendance scheduling task automation and intelligent data intelligent analysis.Optimization collaboration and data-assisted decision-making capabilities 1. At the enterprise application
System V2.0 decision-making combined with achieving fully automated level through full-process
cloud storage and system recording and intelligent business automation centralized
integration for centralized classification of user activities cloud management multi-
control and cost reduction; in reducing dependence on terminal collaborative linkage
supplier O&M scenarios it manual input. Deepen and intelligent data analysis we
streamlines the device O&M enterprise-level management effectively streamline manual
link achieving device to centralize and visualize the operations reduce labor
monitoring task scheduling management of working hours management costs and enhance
man-hour statistics and full attendance scheduling task the efficiency of personnel
traceability of operations collaboration and business scheduling and resource
improving O&M data; intelligently generate allocation for enterprises.standardization response optimized scheduling Simultaneously by leveraging
efficiency and auditability; in workforce dispatch and overseas compliance adaptation
personal scenarios it provides resource allocation plans and third-party system
man-hour records schedule through AI algorithms. integration capabilities we
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
planning task arrangement Connect data links across significantly improve product
efficiency analysis and mobile PC and attendance internationalization and market
personalized optimization plans terminals and adapt to competitiveness assisting the
to meet refined management interfaces of mainstream Company in deeply expanding
needs for work study and life. management systems. Improve into overseas markets;
Benchmarking labor the vendor O&M system 2. At the supplier O&M level
employment and data security enabling remote device access we extend the Company's core
compliance requirements in status monitoring task time management capabilities to
North America and Europe handling working hour equipment O&M and supply
strengthen integration and statistics and operation chain services building an
adaptation with mainstream traceability. Enrich smart integrated control system for
management platforms and services for individual users O&M tasks equipment status
build a full-scenario time covering time logging service hours and operational
management cloud product schedule planning efficiency workflows. This enhances
system covering enterprise analysis timed reminders and remote O&M service efficiency
management supplier O&M personalized optimization and transparency effectively
and individual efficiency suggestions. Build a big data broadening the product's
improvement. analysis and visualization industry application boundaries;
system enabling multi- 3. At the individual user level
dimensional data mining and we promote product services
automatic generation of from the B-end enterprise
operational reports and market to the C-end consumer
management dashboards. market enriching the product
Align with overseas market scenario matrix and user
compliance standards iterating coverage. This fosters new
and optimizing data business models for the
permissions secure access Company such as individual
and privacy protection subscriptions and value-added
mechanisms. Complete full- services cultivating continuous
feature development multi- revenue growth;
scenario testing and business 4. At the platform architecture
validation forming a mature level we achieve a unified
product version that is iterable technical foundation for
deployable and promotable. enterprise management supplier
O&M and personal services
significantly boosting the reuse
efficiency of underlying
technologies data processing
and AI capabilities. This avoids
repetitive R&D investment and
accelerates product iteration
helping the Company build a
comprehensive iterative and
commercializable full-scenario
smart time management cloud
ecosystem continuously
solidifying the Company's
industry competitive advantage
in smart time management and
digital operations.This project aims to develop an This project aims to build an This project integrates cloud-
An Enterprise- enterprise-grade access control integrated platform based access security smart
Grade Access and security management architecture for cloud-edge- visitor management and mobile
Control and solution based on cloud end collaboration achieving credentials into a unified
Security architecture building a unified access centralized product system. This will help
13 Management collaborative technical
Ongoing control and remote O&M for promote the Company's existing
architecture for cloud edge and projects Solution Based all categories of hardware products towards cloudification
on Cloud smart terminal. It integrates including access control intelligence and
Architecture functions such as access control devices camera devices platformization enriching the
V2.0 remote monitoring intrusion identity recognition terminals Company's product capabilities
alarm smart visitor and sensing devices. Improve in digital identity contactless
management identity the access control security access remote O&M and space
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
verification mobile credentials protection system iterate and management.and video intercom providing optimize core capabilities such The project can meet the needs
integrated access control and as intelligent access control of customers of various sizes for
visitor management services for remote real-time monitoring access control visitor and
clients including enterprises abnormal behavior mobile credential management
commercial venues government identification proactive and lowers deployment and
agencies and commercial real intrusion alarming and closed- usage thresholds through SaaS-
estate. loop security incident based services. Conducting
The project intends to support handling significantly product adaptation and third-
the issuance verification enhancing access control party system integration for
permission configuration and security prevention and control markets such as North America
full lifecycle management of levels and remote O&M will help enhance the
Mobile Credentials and enhance efficiency. Build a full-process applicability and
the security and operational intelligent visitor management competitiveness of the
efficiency of access control and system covering the entire Company's products in overseas
visitor management through business chain including markets.multi-terminal collaboration AI online visitor appointments The Company can explore
analysis and third-party system intelligent identity verification business models such as
integration. Simultaneously the self-service check-in access software subscriptions mobile
project intends to provide permission approval video credential services and value-
lightweight SaaS services for intercom interaction passage added features based on project
SMEs and adapt the product authorization trajectory R&D and market promotion
according to the relevant recording and intelligent progress providing support for
requirements of target markets visitor data analysis achieving expanding customer coverage
such as North America. standardized automated and enhancing customer stickiness
intelligent visitor management. and improving revenue
Establish a complete full sustainability. The actual impact
lifecycle management of the project on the Company's
mechanism for mobile future operating performance
credentials achieving closed- depends on subsequent R&D
loop management of credential achievements product
application multi-level implementation and market
approval cloud-based expansion.issuance terminal activation
intelligent verification
dynamic permission
adjustment validity period
control and credential
revocation realizing integrated
overall control of personnel
identity access control
permissions and mobile
credentials. Support multi-
terminal data synchronization
and business collaboration for
Web management terminal
mobile client and self-service
visitor terminal. Continuously
promote standardized interface
docking with third-party space
management systems and
identity management systems
to enhance product integration
adaptability and scenario
deployment flexibility. To
address the lightweight and
low-cost deployment needs of
SMEs we will create
standardized SaaS cloud
service products.Simultaneously we will
optimize the full-lifecycle
security control mechanism for
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
identity information mobile
credentials and access data
aligning with overseas market
data protection and
information security
compliance requirements thus
building a solid foundation for
data security and compliance.
1. At the technical level achieve
a leapfrog dimension upgrade
and breakthrough in the
Company's biometric
This project aims to complete technology breaking through
the basic research and the bottleneck of traditional
algorithm verification of brain- single-modal identification
computer and eye-tracking technology. It integrates multi-
This project focuses on the multimodal fusion technology dimensional biological
cutting-edge technical field of and build a complete technical perception data from EEG eye
multimodal fusion in brain- research system and prototype movement iris retina and
computer interaction and eye- results. Complete the selection EMG to build precise decoding
tracking perception. It addresses procurement deployment capabilities for user intent
technical bottlenecks such as debugging and standardized emotional state cognitive
limited perception dimensions implementation of core ability concentration and
insufficient recognition research equipment such as fatigue. This significantly
accuracy and weak anti- EEG acquisition and eye- enhances the accuracy richness
interference capability in single tracking establishing a stable and environmental anti-
biometric modalities and will and reliable experimental interference capability of
tackle core key technical research environment. biometrics establishing
challenges. By equipping core Collaborate with third-party differentiated technical barriers
fundamental research equipment professional institutions to in the industry. 2. At the
in brain-computer and eye- conduct collaborative technical ecosystem level deeply link
R&D Based on
tracking fields collaborating research addressing core with the Company's existing
Key
with professional third-party algorithms for brain-computer mature biometric technology
Technologies
research institutions for interface-eye movement systems for fingerprints faces
for Multimodal Ongoing
14 synergistic R&D we aim to multimodal data fusion and irises and establish a
Brain- projects
overcome core technical feature extraction and multimodal perception data link.Computer and
challenges such as multimodal intelligent recognition and This will build a triune all-
Eye-Tracking
data fusion precise feature completing the construction domain smart perception system
Fusion
recognition and basic algorithms training and validation of of "identity authentication +
for brain-computer applications. basic algorithm models. state perception + intent
This will establish a Achieve the preliminary interaction" seamlessly
standardized professional brain- integrated application of integrating with the Company's
computer-eye-tracking fusion multimodal biometric Mars Wisdom AI platform to
technology research and technology conduct algorithm perfect the AIoT smart
experimental platform laying feasibility tests performance perception ecosystem layout and
the core technical and verification and metric maximize the value of BioCV
experimental foundation for the evaluation and form a core technologies. 3. At the
dimensional upgrade and standardized technical product level fully expand the
iteration of the Company's verification system. Deliver a Company's smart terminal
multimodal biometric complete research report on product matrix enabling
technology and innovation in brain-computer and eye- iterative development and
new human-computer interaction tracking fusion technology a deployment of various product
products. runnable algorithm prototype categories such as concentration
and joint research outcomes headbands brain-controlled
with third parties providing interactive terminals medical-
full support for subsequent grade vital sign monitoring
technology industrialization. devices and elderly care
assistance smart devices. These
products will widely cover
diverse application scenarios
including education healthcare
elder care automotive
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
industrial and consumer
electronics continuously
expanding market segments.This empowers the
diversification and high-end
upgrade of the Company's
intelligent product system
solidifying the Company's
industry-leading position in
multimodal biometrics and
human-computer interaction.
1. At the technical level build
the Company's core technical
This project aims to complete barriers in the brain-computer
the R&D of multi-dimensional interface field and
EEG core algorithms establish independently develop multi-
a system closed-loop and dimensional EEG feature
conduct preliminary research extraction and analysis models
on cutting-edge technologies for concentration emotional
thereby forming a deployable states cognitive load etc.This project focuses on core and iterative EEG signal Leveraging the joint synergy
areas such as human brain processing technology system. advantage with NeuroSky co-
concentration relaxation and Complete the research build an integrated full-stack
emotional states analyzing development iteration and technical capability
multi-dimensional EEG signals. performance optimization of encompassing chips algorithm
It conducts specialized algorithm core algorithms for focus and clouds and scenario solutions
research and technological relaxation and design a thereby creating a software-
breakthroughs revolving around scientifically standardized hardware integrated end-cloud
cutting-edge application baseline calibration paradigm collaborative EEG technical
scenarios like non-invasive to precisely adapt to closed-loop system and
brain-computer interfaces application requirements in continuously strengthening the
human cognitive state core business scenarios such as Company's core technical
monitoring and wearable neuro- educational training and discourse power in the field of
R&D Based on interaction. By deeply meditation relaxation. non-invasive brain-computer
Multi-channel cultivating multi-channel EEG Establish a closed-loop interaction;
Multi- data processing and intelligent Ongoing technical system integrating 2. At the market and product
15
dimensional recognition technologies we projects high-precision EEG signal level open up new business
EEG Key enhance our fine-grained EEG acquisition human state growth curves for the enterprise
Technologies state quantitative analysis intelligent recognition and relying on self-developed EEG
capabilities and establish an adaptive stimulation feedback algorithm capabilities to launch
EEG algorithm system adaptable achieving automated linkage consumer-grade wearable
to scenarios such as educational throughout the entire process products such as brain rings
training meditation & of "EEG acquisition - state concentration head-mounted
relaxation and health assessment - binaural beat devices and sleep monitors
monitoring. This solidifies the acoustic adaptive feedback." deeply penetrating high-quality
Company's underlying Conduct prospective research sectors such as education big
technological foundation in the on algorithms for emotion health and cultural and
field of wearable brain-computer valence and arousal entertainment consumption.interfaces supporting the recognition cognitive load Simultaneously support the
technological iteration and and human fatigue assessment commercialization of value-
practical application of novel complete scenario-based EEG added subscription services such
neuro-interactive products. data acquisition model as concentration training and
training and effectiveness emotional regulation building a
verification and provide new business model of hardware
technical reserves for the terminals + software services
subsequent industrialization of enriching the Company's smart
multi-dimensional human perception and wearable product
neuro-state analysis matrix and continuously
technology. enhancing core market
competitiveness and commercial
profitability.Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
1. At the technical level the
project will build a full-link
autonomous and controllable
software and hardware technical
This project focuses on the pain system in the field of EEG
points of industrial application emotion monitoring effectively
for non-invasive EEG emotion breaking the technical
quantitative monitoring. It monopoly of foreign high-end
targets wearable neuro- EEG equipment and core
perception and human emotion algorithms making up for the
This project supports high-
smart monitoring scenarios Company's technical
density multi-channel non-
conducting specialized R&D for shortcomings in EEG emotion
invasive EEG acquisition with
a multi-dimensional EEG cognition and quantitative
high signal fidelity and
emotion quantitative monitoring monitoring improving the
outstanding resistance to
system. The project aims to complete technical chain of
motion and environmental
establish a full-link technical brain-computer interaction and
interference. It can achieve
system covering precise EEG further solidifying the
various emotion recognition
signal acquisition intelligent Company's core technical
R&D Based on and quantitative analysis
noise reduction and purification barriers in the field of non-
a Wearable including relaxation calmness
multi-dimensional feature invasive EEG smart perception;
Multi- tension stress and
mining and emotional intelligent 2. At the industrial and market
dimensional Ongoing concentration forming a
16 decoding. It will focus on level relying on high-precision
EEG Emotion projects complete technical chain with
overcoming common technical emotion quantitative monitoring
Quantitative independent intellectual
bottlenecks in the industry such technical capabilities to deeply
Monitoring property rights.as signal artifact interference in empower the digital and
System Leverage the joint innovation
complex scenarios individual intelligent transformation and
of non-invasive multi-channel
EEG difference adaptation and upgrading of emerging
and multi-dimensional
continuous quantification of industrial scenarios such as
features combined with high-
emotional states thereby smart healthcare smart
density spatial information and
promoting the transition of EEG education and digital therapy
multi-dimensional feature
emotion monitoring technology incubate innovative products
analysis significantly
from theoretical research to and service models like
improving emotion recognition
practical application and wearable emotion monitoring
accuracy and system stability.productization and improving terminals and health status
the Company's layout in quantitative assessment
wearable brain-computer cultivate new technical tracks
interaction and emotion and performance growth poles
cognitive monitoring for the Company and
technology. continuously expand the
enterprise's market
competitiveness and industrial
influence in the big health and
smart wearable fields.This project is geared towards This project aims to achieve 1. At the technical level this
the rigid demand for refined deep integration and project integrates lightweight
management and control of innovation between EEG dry-electrode EEG acquisition
industrial work safety. Relying sensing technology and high-precision posture sensing
on cutting-edge technologies in industrial safety protective full-domain environmental
R&D of EEG perception and multimodal equipment establishing a perception and edge intelligent
Intelligent EEG fusion perception it carries out brand-new intelligent computing. It represents cutting-
Safety Helmet specialized R&D of industrial- monitoring technology system edge innovative technology at
Equipment grade EEG smart safety helmets. Ongoing and product form for industrial the intersection of wearable
17
Based on The project integrates EEG projects personnel status. Breaking EEG perception and industrial
Multimodal signal acquisition human through the technical IoT. Its technical roadmap
Fusion physiological sign monitoring limitations of traditional smart demonstrates industry
Perception posture perception safety helmets that only leadership and originality
environmental perception and monitor external behaviors and which can further enrich the
audio-video capture capabilities basic physiological signs we Company's multimodal
to achieve comprehensive real- are implementing EEG sensing perception technology matrix
time perception of workers' brain technology into industrial and solidify its technological
mental state physical signs safety helmet products. This barriers in the industrial
work behavior and site allows for precise capture of application of brain-computer
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
environment. This builds a the mental state of workers' interaction. 2. At the policy
safety and prevention system for brains achieving a deep level the project deeply aligns
pre-warning industrial monitoring upgrade from with the national industrial
operational risks and real-time external behavior monitoring policy orientation of refined and
control during operations to internal state analysis—a intelligent work safety
thereby reducing work safety shift from "outward supervision conforming to the
accidents caused by human appearance to inner essence". industry trend of digital
factors at the root. Focus on Achieve miniaturization upgrading in industrial safety. It
breakthroughs in key core wearability and industrial- possesses excellent policy
technologies such as lightweight grade adaptation iterations of adaptability and promising
EEG acquisition multi-source EEG acquisition technology industrial application prospects.heterogeneous data fusion and utilizing a dry electrode 3. At the market level there are
edge-side intelligent analysis. acquisition solution that currently no mature smart safety
This addresses pain points like requires no auxiliary helmet products integrating
the single monitoring dimension conductive medium. This EEG multimodal data in the
of traditional industrial wearable solution is suitable for long- industry. The results of this
devices their inability to duration high-dynamic project offer significant product
recognize the internal mental industrial operation scenarios differentiation advantages and
state of personnel and difficulty completely resolving the market scarcity effectively
adapting to complex industrial industry challenges of enhancing the Company's core
operation scenarios thereby traditional EEG equipment competitiveness in industrial
promoting the industrial being bulky having poor smart wearables and industrial
application of brain-computer wearability and being unable work safety management and
perception and multimodal to achieve scaled industrial control. This will open up new
fusion technology in the deployment. Build a five- product categories and business
Industrial IoT and smart dimensional integrated growth opportunities in
wearable fields. multimodal fusion perception industrial scenarios helping the
system covering EEG Company deeply cultivate the
physiological vital signs smart safety market within the
posture behavior site industrial IoT.environment and audio-video
data. Through cross-validation
and intelligent fusion analysis
of multi-source data
effectively avoid deviations in
judgment from single data
sources significantly
improving the accuracy
reliability and stability of
industrial personnel status
recognition and risk
assessment.This project aimed at This project revolves around a The successful implementation
international scenarios utilizes cloud-edge-end integrated of this project will vigorously
technologies such as IoT license smart parking and payment promote the Company's
plate recognition mobile technical architecture. The business internationalization
payment and cloud platform system's layout focuses on two product premiumization and
management to build an main directions: core function market diversification.R&D of integrated smart parking and implementation and Leveraging independent R&D
Unattended and self-service payment system that international characteristic of core technologies such as
Full-process supports multi-language multi- adaptation. It aims to achieve cloud-edge-device integrated
Ongoing
18 Self-Service currency and cross-regional the following research architecture multi-country
Payment compatibility. Through
projects objectives: license plate intelligent
Vehicle unattended operation automatic 1. Based on IoT computer recognition and multi-currency
Solutions billing frictionless access and vision encrypted payment and multi-channel self-service
cloud-based control the project cloud platform control payment it will enhance the
achieves full-process technologies build a cloud- Company's core competitiveness
digitalization automation and edge-device integrated and industry influence in the
standardized O&M of parking technical architecture to smart payment terminal field.lots meeting overseas users' achieve intelligent recognition Relying on a standardized
needs for convenient parking and of license plates from multiple scalable and replicable
self-service payment enhancing overseas countries automatic technical foundation it will lay
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
parking lot operational billing multi-currency and a solid groundwork for the
efficiency service capabilities multi-channel self-service Company to expand into
and commercial value and payment automatic barrier overseas markets improve
supporting the project's large- gate linkage and unified profitability and achieve long-
scale replicable deployment cloud-based O&M. term stable development.overseas. 2. Support international
characteristics such as multi-
language cross-network
offline fault tolerance and data
security compliance ensuring
high stability high security
and high efficiency in the
entire process of parking
access transaction settlement
and device control providing a
standardized scalable and
replicable technical foundation
for overseas unattended
parking lots.This project adopts a distributed
server deployment architecture
providing unified efficient and
secure biometric retrieval
capabilities. The system supports
This project helps to refine the
mainstream biometric
Company's technological layout
modalities employing a layered
in multimodal biometric fusion
interface design for different This project centered on
and large-capacity retrieval.biometrics to facilitate unified multimodal biometric fusion
Through independent R&D of
access and rapid integration for and large-capacity retrieval
core technologies such as
upper-layer applications. It technology focuses on two
distributed architecture layered
balances algorithm main directions: breakthrough
interface design and multi-
characteristics with business performance indicators and
service active-active disaster
security isolation achieving full-process functional
recovery it will build core
functions such as multimodal development. It aims to
R&D of technological barriers with
biometric fusion rapid retrieval achieve the following research
Multimodal independent intellectual
from large-capacity databases objectives:
Biometric property rights. Leveraging the
multi-service active-active Ongoing 1. Retrieval accuracy reaches
19 Fusion and R&D of multi-scenario
disaster recovery and projects industry-leading levels and
Large-Capacity adaptation capabilities it will
communication and feature data response time and concurrency
Retrieval drive product expansion into
encryption meeting accuracy capabilities meet industry
Technology multi-industry application areas
and compliance requirements in standards supporting
cultivate new revenue growth
various scenarios. The service expansion to millions of
points and enhance overall
runs entirely on the server side feature records.market competitiveness.without relying on complex 2. Complete full-process
Furthermore it will develop the
terminal computing power development implement
R&D team accumulate core
offering characteristics such as layered interfaces and deliver
technological reserves
stability scalability and easy commercial SDKs and
strengthen overall technological
maintenance. It can be widely deployment packages.R&D capabilities and enhance
applied in scenarios such as
visibility and brand recognition
identity verification access
in the biometric industry.control attendance management
and smart space monitoring
providing reliable and unified
technical support for business
systems.R&D of Core This project focuses on This project revolves around In terms of technology upgrade
Technology for overcoming key challenges in non-contact multimodal through the fusion of non-
Non-contact non-contact fingerprint Ongoing 20 fingerprint acquisition core contact and multimodal
Multimodal technology conducting R&D projects technology systematically (fingerprint +
Fingerprint and and design of a new generation planning four major directions: face/palmprint/finger vein/iris)
Palmprint of multimodal acquisition prototype R&D core this effectively solves the
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
Acquisition terminals completing the algorithm breakthrough inherent pain points of
conversion and empowerment of collaborative research and traditional contact
core algorithms and technology transfer aiming to fingerprinting such as wet
collaborating with third-party achieve the following research hands oil stains wear residue
organizations to create a typical objectives: and hygiene significantly
case of biometric core 1. Complete the R&D and improving identification
technology breakthrough functional verification of a accuracy and speed and greatly
providing technical support for non-contact multimodal enhancing anti-forgery and
the Company's core identity fingerprint acquisition terminal environmental interference
authentication business. prototype realizing precise 3D capabilities. In terms of scenario
non-contact fingerprint expansion and premium it
acquisition; promotes the penetration of
2. Break through core products from general access
algorithms for non-contact control to diverse scenarios such
fingerprint liveness detection as financial payment
feature extraction and government verification
matching completing medical care transportation
algorithm conversion and border clearance and smart
scenario-based empowerment; homes. Non-contact multimodal
3. Collaborate with third-party products have significantly
professional organizations to higher gross profit margins than
carry out joint research on key single-contact fingerprint
technologies promoting products effectively supporting
synergistic innovation among the optimization of the
industry academia and Company's profit structure.research;
4. Formulate complete
technical solutions and related
research achievements
building practical technical
reserves.This project aims to significantly This project systematically
enhance the reliability and plans the entire technology
accuracy of biometric systems chain including multispectral
by adopting multispectral acquisition multimodal fusion
information acquisition Build significant technological recognition algorithms large
technology and multimodal advantages in multimodal data model frameworks and
fusion biometric recognition fusion and complex integrated applications aiming
methods. Specifically environment adaptability to achieve the following five
multispectral technology greatly improving the security research objectives:
Research and effectively addresses the
and accuracy of biometrics and
1. Conduct research on
problem of high-dimensional contraband detection through Industrial multispectral feature image
Application of information loss in traditional
deep learning and multimodal
acquisition technology for
Key single-spectral imaging
feature fusion; break through the
biometric identification;
Technologies technology by capturing spectral
limitations of single-modality
2. Research multimodal
for Biometric information across multiple
technology achieving organic
Ongoing feature collaborative
21 bands while multimodal fusion serial fusion of multiple Fusion projects acquisition technology for
integrates facial iris palmprint biometric features such as face Recognition biometric identification;
and vein features enhancing the iris palmprint and vein Based on 3. Develop fast analysis and
system's anti-counterfeiting comprehensively enhancing the Multispectral recognition algorithms for
capability and recognition overall security performance of Multimodal multimodal biometrics;
accuracy. The project the identification system; Large Models 4. Construct a multimodal
innovatively combines deep provide critical technical biometrics large model
learning and feature vector support for the Company to framework and situational
generation models to construct expand into high-security assessment algorithms;
deep feature extraction modules identification application 5. Research a multispectral
local region extraction modules markets and enhance core multimodal large model
and feature alignment product competitiveness. biometric fusion identification
transformation and splicing integrated system completing
modules for multimodal system integration and
biometric matching achieving engineering verification.fast and accurate extraction of
Expected Impact on the
Main R&D Project
S/N Project Objective Proposed Objective Company's Future
Project Name Progress
Development
biometric parameters.IV. Non-main Business
□Applicable □ Not applicable
Unit: RMB
Proportion to Total
Amount Description of Reason Sustainable or Not
Profit
Mainly due to the
profit and loss
generated during the
Investment income 898614.73 0.71% holding period of the No
financial products
purchased in the
current period
Mainly due to gains
from changes in fair
value - trading
financial liabilities
recognized as a result
of estimating the fair
value of contingent
consideration based on
Profits and losses from the acquisition
49212654.08 38.64% No
fair value changes agreement of
Longzhiyuan in the
current period fully
considering the actual
and estimated
completion of
Longzhiyuan's
performance
commitments
Mainly due to
impairment losses
provisioned for
Asset impairment -48556226.49 -38.12% No
goodwill in the current
period and inventory
depreciation provisions
Mainly due to the
confirmation of
Non-operating revenue 373285.67 0.29% supplier payments not No
required to be paid in
the current period
Mainly due to asset
write-offs destructions
Non-operating
2826379.06 2.22% and charitable No
expenditure
donations in the current
period
Other income 3474131.42 2.73% Mainly due to other No
income arising from
government subsidies
additional VAT
deductions and similar
items in the current
period
Mainly due to the
provision of bad debt
Losses from credit
-1492369.49 -1.17% reserves for accounts No
impairment
receivable in the
current period
V. Analysis of Assets and Liabilities
1. Significant changes of asset items
Unit: RMB
At the end of this reporting period The end of the previous year Proportion
Note of significant
Proportion to Proportion to increase or
Amount Amount change
total assets total assets decrease
Mainly due to the
maturity of
Monetary
1301334793.26 26.34% 1243119411.23 25.09% 1.25% purchased financial
funds
products in the
current period
Accounts
638619772.07 12.93% 676383210.14 13.65% -0.72% No major change
receivable
Contract
34945.93 0.00% 26949.78 0.00% 0.00% No major change
assets
Mainly due to the
increase in strategic
Inventory 658591157.42 13.33% 468837064.12 9.46% 3.87%
reserves of raw
materials
Investment
19042558.65 0.39% 19863144.69 0.40% -0.01% No major change
real estate
Long-term
equity 26204251.39 0.53% 25112854.58 0.51% 0.02% No major change
investment
Mainly due to the
American
Manufacturing
Factory
Fixed assets 764216256.81 15.47% 723300476.82 14.60% 0.87% Construction Project
carrying forward
fixed assets in the
construction project
in the current period
Construction
74260468.75 1.50% 113147627.97 2.28% -0.78% No major change
in progress
Right-of-use
46975819.01 0.95% 55789456.58 1.13% -0.18% No major change
assets
Short-term Mainly due to the
119522060.62 2.42% 81101188.00 1.64% 0.78%
borrowings receipt of
discounted proceeds
from bank
acceptance bills in
the current period
Contract
100194437.29 2.03% 76516595.89 1.54% 0.49% No major change
liabilities
Long-term
95891.27 0.00% 139871.08 0.00% 0.00% No major change
borrowings
Lease
19098993.63 0.39% 25370074.36 0.51% -0.12% No major change
liabilities
Mainly due to the
fair value change of
Longzhiyuan
Trading
performance
financial 126147273.71 2.55% 208175000.00 4.20% -1.65%
commitment
liabilities
compensation
confirmed in the
current period
Mainly due to the
adjustment of
settlement method
for some material
procurement
payments from wire
transfer to
Notes
366761718.28 7.42% 239870823.79 4.84% 2.58% acceptance bill in
payable
the current period
and the notes
payable issued
according to the
settlement cycle
have not yet
matured
2. Information on main overseas assets
□Applicable □ Not applicable
Proportion
Control of overseas Is there a
Specific
Cause of Operation measures to assets to significant
content of Asset size Location Income
formation mode ensure asset the impairment
assets
security Company's risk
net assets
ZKTECO Wholly-
Overseas Control by
CO. owned Hong Kong 432.57 18.03% No
65368.73 sales subsidiary
LIMITED subsidiary
ZK
Controlling Overseas Control by
TECHNOLO America 7406.17 3.42% No
subsidiary 12412.94 sales subsidiary
GY LLC
ARMATURA Wholly- R&D Control by
Thailand 1417.67 6.75% No
TECH owned 24484.60 manufactur subsidiary
CO.LTD. subsidiary ing and
sales of
products
Haofan Controlling Overseas Control by
Technology Hong Kong subsidiary 15030.05 sales subsidiary 1362.78 4.14% No
Co. Ltd.RICHFULL
Controlling Overseas Control by
COMPANY Vietnam
subsidiary 13124.22 sales subsidiary 2176.13 3.62% No
LIMITED
Note: Main overseas assets mean that the assets of overseas individual companies exceed 10% of the consolidated
Other
assets or the net profit of overseas individual companies exceeds 10% of the consolidated net profit of the Group.explanations
Unit: RMB '0000
3. Assets and liabilities measured at fair value
□Applicable □ Not applicable
Unit: RMB
Profits and Cumulative
Impairment
losses from fair changes in Purchase amount
Opening accrued in Sales amount in
Item value changes fair value in the current Other changes Ending balance
balance the current current period
in the current recognized period
period
period in equity
Financial assets
1. Trading
financial
assets
(excluding 800444410.21 5575993.58 1433506431.26 1624284813.85 -2466385.64 612775635.56
derivative
financial
assets)
2.
Derivative
0.00 0.00 0.00
financial
assets
3. Other
debt
0.00
investment
s
4. Other
equity
instrument 0.00
investment
s
5. Other
non-current
0.00
financial
assets
Subtotal of
financial 800444410.21 5575993.58 1433506431.26 1624284813.85 -2466385.64 612775635.56
assets
Investment
0.00
real estate
Productive
biological 0.00
assets
Others 0.00
Total 800444410.21 5575993.58 0.00 0.00 1433506431.26 1624284813.85 -2466385.64 612775635.56
Financial
208175000.00 -43636660.50 0.00 0.00 0.00 0.00 -38391065.79 126147273.71
liabilities
Other changes
Other changes in financial assets are mainly due to exchange rate fluctuations.Other changes in financial liabilities are acquisition payments made to Longzhiyuan.Has there been any major change in the measurement attributes of the Company's main assets during the reporting period
□ Yes □No
4. Assets right restrictions as of the end of the reporting period
Please refer to "Section VIII Financial Report VII. Notes to Consolidated Financial Statements 23. Assets with Restricted Ownership
or Use Rights" in this report for details
VI. Investment Analysis
1. Overall
□Applicable □ Not applicable
Investment in the reporting period Investment in the same period of the
YoY
(RMB) previous year (RMB)
1458919802.49 1221756775.36 19.41%
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
Accumulated Reasons for
Actual Accumulated Not
Investment
Fixed Asset Investment Investment Realized Income Achieving Disclosure
Investment Amount During Source of Project Expected Disclosure
Project Name Assessment or Project Amount As of As of the End of Planned Index (if
Mode the Reporting Funds Progress Income Date (if any)
Not Industry the End of the the Reporting Progress and any)
Period
Reporting Period Expected
Period Benefits
Hybrid
Own funds
Biometrics IoT Plant and
bank loans Under Not Not
Intelligent Self-built Yes supporting 610710.16 227130229.71 74638095.63
and raised construction applicable applicable
Industrial Base facilities
funds
Project
Multimodal
Biometrics
Plant and Own funds
Digitalization 5577950.83 201103923.71 Under Not Not
Self-built Yes supporting and raised 0.00
Industrial Base construction applicable applicable
facilities funds
Construction
Project
American
Manufacturing Plant and Own funds
Under Not Not
Factory Self-built Yes supporting 14362411.65 64053054.33 and raised 0.00
construction applicable applicable
Construction facilities funds
Project
European
regional Plant and Own funds
Under Not Not
headquarters Self-built Yes supporting 4862298.59 6290363.71 and raised 0.00
construction applicable applicable
construction facilities funds
project
25413371.23 498577571.46 Not
Total -- -- -- -- -- 74638095.63 -- -- --
applicable
4. Financial assets measured at fair value
□Applicable □ Not applicable
Unit: RMB
Profits and Cumulative
Initial losses from fair changes in fair Purchase amount Sales amount Accumulated
Source of
Asset Category investment value changes value during the during the investment Other changes Closing amount
Funds
outlay in the current recognized in reporting period reporting period income
period equity
Own funds and
Others 800444410.21 5575993.58 0.00 1433506431.26 1624284813.85 0.00 -2466385.64 612775635.56
raised funds
Total 800444410.21 5575993.58 0.00 1433506431.26 1624284813.85 0.00 -2466385.64 612775635.56 --
5. Use of raised funds
□Applicable □ Not applicable
(1) Overall use of raised funds
□Applicable □ Not applicable
Unit: RMB '0000
Total amount The purpose
Proportion of Proportion of
of raised Accumulated and
Accumulated raised funds accumulated Amount of
Total amount funds with total amount destination
Total amount Net amount total amount utilized at total amount Total amount raised funds
Year of Fundraising Listing date of raised changed of raised of the raised
of raised of raised of raised the end of of raised of unused idle for more
fundraising method of securities funds used in purposes funds with funds that
funds funds (1) funds used the reporting funds with raised funds than two
this period during the changed have not
(2) period (3) = change years
reporting purposes been used
(2)/(1) purposes
period yet
Stored in the
bank's
special
Initial public August 17
2022 160816.89 145729.84 5716.36 79918.3 54.84% 29018.00 61103.41 41.93% 70560.45 account for 0
offering 2022
fundraising
and wealth
management
Total -- -- 160816.89 145729.84 5716.36 79918.3 54.84% 29018.00 61103.41 41.93% 70560.45 -- 0
Description of the overall use of raised funds:
1. 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 1.00 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 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 June 30 2026 the cumulative amount used for the investment project was RMB 799.183 million and the balance of the remaining raised funds (including interest income and financial
product income net of bank handling fees) was RMB 705.6045 million.
(2) Committed projects with raised funds
□Applicable □ Not applicable
Unit: RMB '0000
Has there
Committed Has the
Accumulated Investment Date when Accumulated been a
investment project Committed Investment Benefits Have the
Adjusted investment progress as the project benefits major
Listing projects and been total Amount achieved expected
Financing Project total amount as of of the end reaches its achieved as change in
date of the investment changed investment During the during this benefits
project name nature investment the end of of the expected of the end of the
securities direction of (including amount of Reporting reporting been
(1) the period period conditions the reporting feasibility
over-raised partial raised funds Period period achieved
(2) (3)=(2)/(1) for use period of the
funds changes)
project
Committed investment projects
1. Tangxia 1. Tangxia
Production Production Production
August 17 Not Not Not
Base Base and Yes 24841.18 Yes
2022 applicable applicable applicable
Construction Construction construction
Project Project
2. Hybrid 2. Hybrid Production
August 17 September Not
Biometrics Biometrics and Yes 43689.94 32689.94 1180.62 29301.33 89.63% 701.43 7463.81 No
2022 30 2026 applicable
IoT Intelligent IoT Intelligent construction
Industrial Industrial
Base Project Base Project
3. American 3. American
Manufacturing Manufacturing Production
August 17 August 31 Not Not Not
Factory Factory and Yes 17392.21 14392.65 1352.91 4782.39 33.23% No
2022 2027 applicable applicable applicable
Construction Construction construction
Project Project
4. R&D 4. R&D
Center August 17 Center R&D September Not Not Not
Yes 18240.58 14692.19 10997.94 74.86% No
Construction 2022 Construction project 29 2025 applicable applicable applicable
Project Project
5. Global 5. Global
Marketing Marketing
Service August 17 Service Operational August 31 Not Not Not
Yes 26802.01 26802.01 2392.22 14346.7 53.53% No
Network 2022 Network management 2028 applicable applicable applicable
Construction Construction
Project Project
6. Remaining 6. Remaining
funds after the funds after the
previous previous
change in the change in the Production
August 17 Not Not Not
American American and Yes 2999.56 No
2022 applicable applicable applicable
Manufacturing Manufacturing construction
Factory Factory
Construction Construction
Project Project
7. Multimodal 7. Multimodal
Biometrics Biometrics
Digitalization Digitalization
Production
Industrial August 17 Industrial June 30 Not Not Not
and Yes 39605.1 790.61 20489.94 51.74% Yes
Base 2022 Base 2026 applicable applicable applicable
construction
Construction Construction
Project (Note Project (Note
3) 3)
8. Remaining 8. Remaining
funds after the August 17 funds after the R&D Not Not Not
Yes 3548.39 No
change in the 2022 change in the project applicable applicable applicable
R&D Center R&D Center
Construction Construction
Project Project
9. Remaining 9. Remaining
funds from the funds from the
Hybrid Hybrid
Production
Biometrics August 17 Biometrics Not Not Not
and Yes 11000 No
IoT Intelligent 2022 IoT Intelligent applicable applicable applicable
construction
Industrial Industrial
Base Project Base Project
after changes after changes
Subtotal of committed investment projects -- 130965.92 145729.84 5716.36 79918.3 -- -- 701.43 7463.81 -- --
Direction of over-raised fund investment direction
1. 1. Production
August 17 Not
Undetermined Undetermined and Yes 14763.92 No
2022 applicable
funds funds construction
Subtotal of over-raised fund investment direction -- 14763.92 -- -- -- --
Total -- 145729.84 145729.84 5716.36 79918.3 -- -- 701.43 7463.81 -- --
Hybrid Biometrics IoT Intelligent Industrial Base Project: In view of significant changes in domestic and international situations and market demand in recent years
and to adapt to these changes combined with the actual construction progress of the investment project the Company convened the 25th Session of the Third Board
Meeting on March 10 2026 and the first extraordinary general meeting of shareholders in 2026 on March 26 2026. These meetings reviewed and approved the
"Proposal on Adjusting the Investment Plan Reducing the Total Investment Amount and Extending the Completion Date for Certain Raised Funds Investment Projects"
agreeing to adjust the investment plan reduce the total investment amount and extend the date for the Company's raised funds investment project "Hybrid Biometrics
Describe the situation and
IoT Intelligent Industrial Base Project" to reach its expected conditions for use. For details please refer to the "Announcement on Adjusting the Investment Plan
reasons why the planned
Reducing the Total Investment Amount and Extending the Completion Date for Certain Raised Funds Investment Projects" (Announcement No.: 2026-011). The
progress and expected
aforementioned adjustments to the investment plan reduction in total investment and extension will have an impact on the estimated benefits. The specific impact will
benefits have not been
be subject to the calculations disclosed upon the project's completion.achieved by projects
Global Marketing Service Network Construction Project: In view of adjustments made to the internal investment structure and implementation methods of the Global
(including the reason for
Marketing Service Network Construction Project and considering the current construction cycle of the raised funds investment project to utilize the raised funds more
selecting "not applicable"
scientifically reasonably and effectively the Company has extended the date for the Global Marketing Service Network Construction Project to reach its expected
for "whether the expected
conditions for use until August 31 2028.benefits have been
American Manufacturing Factory Construction Project: Given that the American Manufacturing Factory Construction Project is implemented in the US due to
achieved")
differences in regulatory environments the Company's customized requirements and the coordination of supply chain and construction resources the project has been
delayed. After comprehensive consideration the Company decided to extend the date for this project to reach its expected conditions for use until August 31 2027.Regarding the aforementioned Global Marketing Service Network Construction Project and American Manufacturing Factory Construction Project the Company held
the 17th Session of the Third Board Meeting and the 16th Session of the Third Supervisory Board Meeting on April 21 2025 and the General Meetings on May 15
2025 and deliberated and approved the "Proposal on Adjusting the Internal Investment Structure Implementation Method and Extension of Some Raised Fund
Investment Projects". For details please refer to the "Announcement on Adjusting the Internal Investment Structure Implementation Method and Extension of Some
Raised Fund Investment Projects" (Announcement No.: 2025-045).Multimodal Biometrics Digitalization Industrial Base Construction Project: Considering the current market environment the Company's overall business layout and
existing capacity utilization after careful evaluation the Company's existing capacity and completed and operational project content are sufficient to meet current
business development needs. In view of this the Company convened the Second Session of the Fourth Board Meeting on April 21 2026 and reviewed and approved
the "Proposal on Terminating Certain Raised Funds Investment Projects and Continuing to Deposit the Remaining Raised Funds in a Special Account for Raised Funds
Management". The Board of Directors believes that based on the current actual situation of the project and after careful consideration it agrees to terminate the
implementation of the "Multimodal Biometrics Digitalization Industrial Base Construction Project" and continue to deposit the remaining raised funds in the special
account for raised funds. This proposal was approved at the 2025 shareholders' meeting held on May 15 2026.The American Manufacturing Factory Construction Project is currently in the pre-production phase and has not yet generated benefits; the Multimodal Biometrics
Digitalization Industrial Base Construction Project has been terminated and this project is not applicable to benefit generation both before and after its termination; the
R&D Center Construction Project and Global Marketing Service Network Construction Project are investment projects and do not generate benefits.Affected by the macroeconomic environment increased market competition in the attendance and access control industry rising prices of some raw materials coupled
with the comprehensive impact of multiple factors such as increased exchange losses due to the depreciation of the USD the actual benefits achieved by the Hybrid
Biometrics IoT Intelligent Industrial Base Project did not meet expectations.Multimodal Biometrics Digitalization Industrial Base Construction Project: Considering the current market environment the Company's overall business layout and
existing capacity utilization after careful evaluation the Company's existing capacity and completed and operational project content are sufficient to meet current
Description of significant business development needs. In view of this the Company convened the Second Session of the Fourth Board Meeting on April 21 2026 and reviewed and approved
changes in project the "Proposal on Terminating Certain Raised Funds Investment Projects and Continuing to Deposit the Remaining Raised Funds in a Special Account for Raised Funds
feasibility Management". The Board of Directors believes that based on the current actual situation of the project and after careful consideration it agrees to terminate the
implementation of the "Multimodal Biometrics Digitalization Industrial Base Construction Project" and continue to deposit the remaining raised funds in the special
account for raised funds. This proposal was approved at the 2025 shareholders' meeting held on May 15 2026.The amount purpose and
progress of the over-raised Not applicable
funds
Instances of unauthorized
alteration of the use of
Not applicable
raised funds and illegal
occupation of raised funds
Changes in the
implementation location
Not applicable
of projects invested with
raised funds
Applicable
Adjustment of
implementation methods Occurred during the reporting period
for projects invested with
raised funds Hybrid Biometrics IoT Intelligent Industrial Base Project: In view of significant changes in domestic and international situations and market demand in recent
years and to adapt to these changes combined with the actual construction progress of the investment project the Company convened the 25th Session of the Third
Board Meeting on March 10 2026 and the first extraordinary general meeting of shareholders in 2026 on March 26 2026. These meetings reviewed and approved the
"Proposal on Adjusting the Investment Plan Reducing the Total Investment Amount and Extending the Completion Date for Certain Raised Funds Investment
Projects" agreeing to adjust the investment plan for the Company's raised funds investment project "Hybrid Biometrics IoT Intelligent Industrial Base Project" and
reduce the total investment amount from RMB 436.8994 million to RMB 326.8994 million a reduction of RMB 110 million.Applicable
On September 16 2022 the Company held the 18th Session of the Second Board Meeting and the 12th Session of the Second Supervisory Board Meeting and
deliberated and approved the "Proposal on Using Its Own Funds and Foreign Exchange to Pay for Part of the Funds Raised for Investment Projects and Exchanging
Them with the Raised Funds in Equal Amounts". On January 18 2023 the Company held the 23rd Session of the Second Board Meeting and the 17th Session of the
Second Supervisory Board Meeting. On February 6 2023 the Company held the Second Extraordinary General Meeting and deliberated and approved the "Proposal
on Changing the Investment Projects of Raised Funds Changing the Special Account for Raised Funds Increasing Capital and Providing Loans to Subsidiaries to
Implement Investment Projects". The salaries social insurance premiums housing fund utilities etc. of domestic personnel of the Company in implementing the
investment projects "Hybrid Biometrics IoT Intelligent Industrial Base Project" "R&D Center Construction Project" "Global Marketing Service Network Construction
Advance investment and
Project" and the "Multimodal Biometrics Digitalization Industrial Base Construction Project" are planned to be paid by the Company or its subsidiary implementing
replacement of raised
the investment projects in advance with their own funds. The Company collected and calculated the aforementioned advance expenses incurred by each investment
funds for investment
project on a monthly basis and then transferred an equal amount of funds from the special account for investment to the Company's or its subsidiary's own fund account
projects
for implementing the investment projects. The implementation location of the Company's investment project "American Manufacturing Factory Construction Project"
is in the United States and the investment project construction funds need to be paid in USD. The Company's investment projects "Global Marketing Service Network
Construction Project" and "R&D Center Construction Project" include overseas construction content and the operability of paying funds required for overseas
construction directly from the special account for raised funds is poor. Therefore the Company plans to use its own foreign exchange to pay the required funds for the
overseas parts of the "Global Marketing Service Network Construction Project" "American Manufacturing Factory Construction Project" and "R&D Center
Construction Project". Subsequently the amount of advance payments will be calculated monthly and equal amounts will be transferred from the special account for
raised funds to the Company's own fund account. As of June 30 2026 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 156.8272 million.Temporary replenishment
of working capital with Not applicable
idle raised funds
Applicable
As of September 30 2025 the investment project "R&D Center Construction Project" had reached its expected conditions for use. To rationally allocate funds and
improve the efficiency of raised fund utilization the Company convened the 21st Session of the Third Board Meeting and the 20th Session of the Third Supervisory
The amount and reasons
Board Meeting on October 9 2025 and reviewed and approved the "Proposal on Closing Some Raised Fund Investment Projects from Initial Public Offering and Using
for the surplus of raised
the Remaining Raised Funds". The Company agreed to close the initial public offering investment project "R&D Center Construction Project" based on the actual
funds during project
construction progress of the raised fund investment projects and agreed to use the remaining raised funds from this project totaling RMB 38.6589 million (the actual
implementation
remaining amount shall be based on the balance in the special account for raised funds on the day of fund transfer) to permanently supplement working capital for the
Company's production and operating activities.During the construction of this investment project based on changes in market environment and the Company's actual situation and considering the optimization of
resource allocation and enhancement of intensive benefits some surplus funds were generated. The reasons include: Firstly due to changes in market environment and
equipment upgrades and iterations some equipment originally planned for purchase could no longer meet the latest R&D requirements. The Company adjusted its
demand for this part of the equipment and the corresponding capital investment for this part was covered by the Company's own funds; secondly some software
originally planned for purchase had a low compatibility with the Company's demand for agility and flexibility. The Company intends to achieve higher agility and
scalability at a lower cost by independently developing some software; thirdly during the implementation of the raised fund investment projects the Company strictly
complied with relevant regulations on raised fund management. Based on project planning and actual market conditions and without affecting the smooth
implementation and completion of the raised fund investment projects the Company used raised funds following the principles of reasonableness economy
effectiveness and prudence strengthening cost control supervision and management at all stages of project construction thereby reasonably reducing costs and saving
some raised funds.The purpose and As of June 30 2026 the balance of the Company's unused IPO raised funds was RMB 705.6045 million (including interest income and financial product income net
destination of the raised of handling fees) including RMB 158.6045 million of demand deposit in the special account for raised funds and RMB 547 million of time deposit and other financial
funds that have not been products. The above financial products have high safety meet the requirements of capital preservation and have good liquidity which does not affect the normal
used yet operation of the investment plan for raised funds.Problems or other
situations in the use and Not applicable.disclosure of raised funds
(3) Change in the use of raised funds
□Applicable □ Not applicable
Unit: RMB '0000
The total
Actual Has there been
amount of Actual Investment Date when the Benefits
Corresponding accumulated Have the a significant
raised funds to investment progress as of project reaches achieved
Financing Fundraising Changed original investment expected change in the
be invested in amount during the end of the its expected during this
project name method project committed amount as of benefits been feasibility of
the project this reporting period conditions for reporting
projects the end of the achieved the project after
after the period (3)=(2)/(1) use period
period (2) the change
change (1)
Hybrid Hybrid Hybrid
Biometrics IoT Biometrics IoT Biometrics IoT
Initial public September 30
Intelligent Intelligent Intelligent 32689.94 1180.62 29301.33 89.63% 701.43 Not applicable No
offering 2026
Industrial Base Industrial Base Industrial Base
Project Project Project
Multimodal Multimodal Multimodal
Initial public
Biometrics Biometrics Biometrics 39605.1 790.61 20489.94 51.74% Not applicable Not applicable Not applicable Yes
offering
Digitalization Digitalization Digitalization
Industrial Base Industrial Base Industrial Base
Construction Construction Construction
Project Project Project
Total -- -- -- 72295.04 1971.23 49791.27 -- -- 701.43 -- --
Hybrid Biometrics IoT Intelligent Industrial Base Project: In view of significant changes in domestic and international situations and market
demand in recent years and to adapt to these changes combined with the actual construction progress of the investment project the Company
convened the 25th Session of the Third Board Meeting on March 10 2026 and the first extraordinary general meeting of shareholders in 2026 on
March 26 2026. These meetings reviewed and approved the "Proposal on Adjusting the Investment Plan Reducing the Total Investment Amount
and Extending the Completion Date for Certain Raised Funds Investment Projects" agreeing to adjust the investment plan reduce the total
investment amount and extend the date for the Company's raised funds investment project "Hybrid Biometrics IoT Intelligent Industrial Base
Project" to reach its expected conditions for use. The total investment amount was adjusted from RMB 436.8994 million to RMB 326.8994 million
a reduction of RMB 110 million; the date for expected conditions for use was extended by 6 months with the new date for the project to reach
expected conditions for use being September 30 2026.Multimodal Biometrics Digitalization Industrial Base Construction Project: The Company convened the Second Session of the Fourth Board
Meeting on April 21 2026 and the 2025 annual shareholders' meeting on May 15 2026. These meetings reviewed and approved the "Proposal
Description of reasons for changes decision-
on Terminating Certain Raised Funds Investment Projects and Continuing to Deposit the Remaining Raised Funds in a Special Account for Raised
making procedures and information disclosure
Funds Management". The Company intends to terminate the implementation of the "Multimodal Biometrics Digitalization Industrial Base
(by specific project)
Construction Project" and continue to deposit the remaining raised funds in the special account for raised funds. Reasons for adjustment: Firstly
the originally planned processes such as injection molding CNC prism processing and spray painting have been completed and put into use
effectively improving the Company's production efficiency and product quality and optimizing production costs. Secondly relevant product orders
involved in the original plan did not meet expectations resulting in insufficient capacity demand. Thirdly as the Company's digitalization
capabilities continue to improve the Company continuously carries out digital transformation and upgrading of traditional products with some
products possessing intelligent application functions which can better adapt to the Company's actual operational needs and provide effective
support for business development. Therefore the demand for some originally planned products for the multimodal digitalization project has
decreased. Considering the current market environment the Company's overall business layout and existing capacity utilization after careful
evaluation the Company's existing capacity and completed and operational project content can already meet the current stage of business
development needs. If the multimodal digitalization project were to continue it would not be conducive to improving the efficiency of raised
funds utilization and would be difficult to achieve optimal investment benefits.The situation and reasons for not achieving the
planned progress or expected benefits (by Not applicable.specific project)
Multimodal Biometrics Digitalization Industrial Base Construction Project: Considering the current market environment the Company's overall
business layout and existing capacity utilization after careful evaluation the Company's existing capacity and completed and operational project
content are sufficient to meet current business development needs. In view of this the Company convened the Second Session of the Fourth Board
Description of major changes in project Meeting on April 21 2026 and the 2025 annual shareholders' meeting on May 15 2026 and reviewed and approved the "Proposal on Terminating
feasibility after the change Certain Raised Funds Investment Projects and Continuing to Deposit the Remaining Raised Funds in a Special Account for Raised Funds
Management". The Board of Directors believes that based on the current actual situation of the project and after careful consideration it agrees
to terminate the implementation of the "Multimodal Biometrics Digitalization Industrial Base Construction Project" and continue to deposit the
remaining raised funds in the special account for raised funds.6. Entrusted financial management and derivative investment
(1) Entrustment of financial management
□Applicable □ Not applicable
Overview of entrusted financial management during the reporting period
Unit: RMB '0000
Balance of entrusted financial
Product Category Risk Characteristics management during the Overdue uncollected amount
reporting period
Bank financial products Low risk 65403.47 0
Other categories Low risk 54.53 0
Specific situation of the Company as a sole principal entrusting financial institutions to conduct asset management activities or
investing in high-risk entrusted financial products with lower security and poorer liquidity
□ Applicable □Not applicable
(2) Derivative investment
□ Applicable □Not applicable
There were no derivative investments during the Company's reporting period.VII. Disposal of Significant Assets and Equity
1. Disposal of significant assets
□ Applicable □Not applicable
There is no disposal of significant assets for the Company during the reporting period.
2. Disposal of significant equity
□ Applicable □Not applicable
VIII. Analysis of Major Holding and Joint-stock Companies
□Applicable □ Not applicable
Major subsidiaries and joint-stock companies with an impact on the Company's net profit of over 10%
Unit: RMB
Company Main Registered Operating Operating
Company Name Total assets Net assets Net profit
type business Capital revenue profit
ZK
Sales of
TECHNOLOGY Subsidiaries Not applicable 124129370.37 82161209.58 109202514.23 74078940.84 74061680.09
goods
LLC
ARMATURA Production
THB
TECH Subsidiaries and sales 244845958.67 197784773.32 74891788.22 13893456.47 14176726.71
602983200.00
CO.LTD. of goods
Haofan
Sales of HKD
Technology Co. Subsidiaries 150300517.80 52948548.95 111135966.48 16146301.29 13627788.92
goods 10000.00
Ltd.RICHFULL Subsidiaries Production USD 131242236.90 22752537.94 170167650.53 21713373.58 21761266.69
COMPANY and sales 500000.00
LIMITED of goods
Acquisition and disposal of subsidiaries during the reporting period
□Applicable □ Not applicable
Method of acquiring and
Impact on overall production operation and
Company Name disposing of subsidiaries
performance
during the reporting period
With no significant impact on the overall production
NEXTGEN TECO INC Establishment
operation and performance of the Company.With no significant impact on the overall production
Anonova Display Tech Co. Ltd. Establishment
operation and performance of the Company.Wuhan ZKTeco Perception Technology With no significant impact on the overall production
Cancellation
Co. Ltd. operation and performance of the Company.Limited Liability Company "ZKTeco With no significant impact on the overall production
Cancellation
biometrics and security" operation and performance of the Company.With no significant impact on the overall production
ZKTECO ITALIA S.R.L. Cancellation
operation and performance of the Company.Description of the main controlling and participating companies
Please refer to the relevant content of "Section VIII Financial Report - X. Equity in Other Entities" for details
IX. Structured Entities Controlled by the Company
□ Applicable □Not applicable
X. Risks Faced by the Company and Countermeasures
1. Operational risk
(1) Market competition risk
After years of deep cultivation in the biometric industry the Company has formed competitive advantages in the fields of smart
space smart office digital identity authentication smart business smart life and computer vision applications including technological
and R&D strength flexible production capacity brand influence and marketing service network. However in recent years the relevant
business sectors of the Company have shown an increasing number of market entities increased industry concentration and
increasingly fierce market competition. With a large number of domestic competitors turning to "going global" the competitive
situation in overseas markets has further intensified. The Company's businesses are facing competition pressure from various aspects
such as price service and brand. Other competitors may compete for market share through different market positioning strategies or
cost controls making the competition more intense. In order to maintain the Company's leading position in the industry the Company
has continuously increased its R&D investment in recent years insisting on developing and optimizing single and multimodal BioCV
technology and continuously expanding and enriching the types of multimodal BioCV products and services. With the development
of AI the Company pays more attention to the application of AI technology in business and its integration into products and focuses
on the overall linkage design of product software and hardware strengthening competitiveness of multiple categories thus
consolidating the Company's leading position in the industry. However with the increasing market competition if the Company cannot
continuously optimize product design improve production quality enhance brand competitiveness expand and consolidate sales
network and Improve market penetration the Company's existing industry and market position will be affected and the Company will
face the risk of declining market share and profitability.
(2) Overseas business operational risks
In the first half of 2026 the Company's overseas sales revenue from countries and regions was RMB 859.2214 million accounting
for 79.93% of the Company's main business income. The Company's overseas business income accounted for a relatively large
proportion.In recent years the international market has been facing changes in trade policies of major economies the rise of international
trade protectionism the deterioration of local economic environments and stagnation of maritime transport caused by geopolitical
conflicts significantly rising freight rates and the fluctuations in the tariff policy of US and some other countries. As a result global
trade policies have shown a strong degree of uncertainty. The Company's international sales business may face international trade
friction especially the risk of Trade disputes between China and the United States. If trade disputes between China and the United
States and geopolitical situations worsen in the future it may have a certain adverse impact on the Company's product sales which in
turn will affect the Company's future business performance. In addition the Company's international business accounts for a relatively
large proportion of exports to developing countries such as India Mexico and Indonesia. Although the overall political financial and
economic systems of relevant countries are currently relatively stable the economic development momentum is good their
infrastructure is relatively weak and government efficiency is relatively inefficient compared to developed countries which poses
potential social instability factors. If major changes occur in its political environment economic environment geopolitics trade policies
with China tariff and non-tariff barriers and industry standards in the future it will have a negative impact on the Company's export
business.In addition to the risks of economic and political environment changes trade frictions and tariffs 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 June 30 2026 the Company has a total of 62 overseas controlling subsidiaries located in countries and regions such as
Thailand the United States Mexico India and Hong Kong. During the reporting period there were cases where the Company sold
products to overseas subsidiaries and sold them locally through these subsidiaries due to business needs between the Company and
some overseas subsidiaries. There was a situation of transfer pricing in the above-mentioned transaction links. According to the
Company's self inspection there were no cases of the Company or its overseas subsidiaries being punished by the tax department due
to transfer pricing issues during the reporting period. From the perspective of its own compliance the Company regularly hires
professional consulting agencies to analyze and demonstrate the transfer pricing strategies involved in the operation of the Company
and some overseas subsidiaries and issues special reports.If there are major changes in the tax policies of the Company in different tax jurisdictions in the future or if the Company fails
to be correctly or timely informed of the changes in tax policies or if there are cases of tax recovery and fines due to the re-approval
of transaction prices by the competent tax authorities it may lead to adverse effects on the Company's operations.
(4) Legal risks of the impact of industry regulatory policies related to personal information protection and data protection on
company operations
Laws regulations and industry norms such as the "Civil Code of the People's Republic of China" the "Cybersecurity Law of the
People's Republic of China" the "Data Security Law of the People's Republic of China" the "Personal Information Protection Law of
the People's Republic of China" the "Measures for the Security Management of the Application of Facial Recognition Technology"
and the "General Data Protection Regulation" all stipulate the collection and use of personal information by citizens as well as the
compliance obligations of personal information controllers and emphasizes the legal liability for violating personal information
protection and data security has been strengthened. The "Provisions of the Supreme People's Court on Several Issues concerning the
Application of Law in the Trial of Civil Cases Relating to Processing of Personal Information by Using the Facial Recognition
Technology" (FS [2021] No. 15) provides detailed provisions on the behavior and civil liability of information processors who violate
the personal rights and interests of 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. Although the Company invited a professional
compliance lawyer team in 2024 to thoroughly review and improve personal information protection and data security and has
maintained long-term cooperation with professional data compliance law firms if it 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.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 BioCV. 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 multimodal BioCV technology applications such as smart space smart office digital
identity authentication and smart business 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 the first half of 2026 the Company's R&D expenses were RMB 88.8218 million accounting for 8.09% of
operating revenue.As of June 30 2026 the Company and its consolidated subsidiaries collectively have 1303 patents including 246 invention
patents; 866 computer software copyrights and 89 work copyrights as well as strong sustained innovation capabilities. However if the
Company cannot keep up with the development trends of domestic and foreign multimodal BioCV 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 of the Company's global marketing network R&D Center and manufacturing factories the Company's
scale will also constantly expand and the number of global sales R&D and management personnel will increase 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 the first half of 2026 the Company achieved a revenue of RMB 628.6666 million
through the distribution model accounting for 58.48% of the Company's main business income in the first half of 2026.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 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 714.9031 million
accounting for 65.08% 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 economic 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 658.5912 million accounting for 19.47% 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 5.92%. 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 gross profit margin of the Company's exported products after conversion to RMB thereby affecting the Company's product profits;
on the other hand fluctuations of the RMB exchange rate may also affect changes in the Company's RMB income. If the RMB further
appreciates in the future it will have a significant adverse impact on the Company's operating performance.
(4) Risk of raw material price increases
The prices of core components required for the Company's product production such as storage chips master control chips and
PCBs are affected by multiple factors including the global supply and demand landscape and changes in AI industry demand and
there is a risk of significant fluctuations. The Company has to a certain extent hedged the pressure brought by raw material price
fluctuations through measures such as cost optimization and product price adjustments. However if the prices of core components
continue to rise subsequently and costs cannot be effectively passed downstream it will have an adverse impact on the Company's
profitability and operating performance.
5. Risks related to raising funds to invest in projects
(1) The risk of raising funds to invest in projects that do not yield expected returns
The investment projects with raised funds are a prudent decision and planning made by the Company based on a thorough analysis
of the current market situation development speed industrial environment and future development trends of the industry as well as
the Company's existing technological level management ability and expected future customer needs combined with development
prospects of the biometric industry and related application fields as well as the expected changes in the international trade environment.However if there are significant changes in the future market demand industry structure industrial policies or the 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 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 and Global Marketing Service
Network Construction Project may be affected by multiple factors considering the international market 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.
6. Risks of BCI innovation business
The Company's BCI innovation business relies on EEG and fNIRS non-invasive brain electrical perception technologies for its
R&D layout. It is currently in the stages of technology R&D prototype verification and market cultivation and has not yet generated
large-scale commercial revenue. This field is characterized by rapid technological iteration and high interdisciplinary thresholds posing
risks such as neural signal decoding accuracy individual adaptability and long-term stability in technology R&D falling short of
expectations. At the same time it faces uncertainties such as ununified industry standards strict ethical review continuously improving
regulatory policies and slow implementation of market application scenarios. The business requires continuous high R&D investment
which will put certain pressure on the Company's profitability in the short term. Furthermore factors such as intensified global market
competition technological route iteration cross-border data compliance and intellectual property protection may all lead to business
progress falling short of expectations and uncertainty in investment returns.
7. Risks associated with acquiring subsidiaries
The Company acquired Longzhiyuan in 2025. This acquisition of a subsidiary presents the following main risks: Firstly goodwill
impairment risk. This transaction is expected to generate a significant amount of goodwill and according to the requirements of the
Accounting Standards for Business Enterprises an impairment test must be performed on goodwill annually. If the target company's
future operating performance falls short of expectations the Company will face the risk of goodwill impairment which will adversely
affect the listed company's current profits and losses. Secondly risks related to business integration and synergistic effects falling short
of expectations. Although ZKTeco and Longzhiyuan have certain synergistic foundations in terms of market supply chain products
and technology there are objective differences between them in management systems and business models. The effectiveness of
organizational business and personnel integration after the merger is uncertain posing risks of inadequate business integration and
failure to fully realize synergistic effects. Thirdly there are risks of failure to achieve performance commitments and fulfill
compensation obligations. The performance commitment parties have made commitments regarding the target company's operating
performance for 2025-2027. The achievement of the target company's performance is constrained by multiple external and internal
operating factors such as international trade situations macroeconomic policy environments and downstream market demand posing
risks that performance commitments may not be fulfilled. Even if performance compensation arrangements are triggered there is still
a risk that the performance commitment parties may have insufficient ability to perform and compensation obligations may not be
fully executed which will adversely affect the interests of the listed company.XI. Reception of Activities including Research Communication and Interviews During the Reporting Period
□Applicable □ Not applicable
Reception The main content of the
Reception Reception Reception Index of basic information of
object Reception object discussion and the
time location methods research
type materials provided
CNINFO
ZKTECO Online http://www.cninfo.com.cn
January Meeting Room Communication See CNINFO Announcement date: January 4
Institution TF Securities E Fund Western Leadbank Fund GF Fund
4 2026 and Online on Online (http://www.cninfo.com.cn) 2026 Investor Relations Activity
Meetings Platforms Record Form of ZKTECO CO.LTD. (No. 2026-01)
Guotai Haitong Securities Co. Ltd. Ping An Life Insurance
Company of China Ltd. Ledger Capital Investment Co.Limited Xinghe Fund Management Co. Ltd. ABC-CA Fund
Management Co. Ltd. Dajia Asset Management Co. Ltd. CIB
Wealth Management Co. Ltd. CHINA NATURE ASSET
MANAGEMENT CO. LTD. DH Fund Management Co. Ltd.CNINFO
Bank of China Investment Management Co. Ltd. Kingsun
ZKTECO Online http://www.cninfo.com.cn
(Shanghai) Investment Co. Ltd. Huiquan Fund Management
January Meeting Room Communication See CNINFO Announcement date: January 5
Institution Co. Ltd. Sinolink Securities Co. Ltd. Enreal Asset
5 2026 and Online on Online (http://www.cninfo.com.cn) 2026 Investor Relations Activity
Management Limited Hexie Health Insurance Co. Ltd. Huaxi
Meetings Platforms Record Form of ZKTECO CO.Fund Management Co. Ltd. Guomin Pension & Insurance Co.LTD. (No. 2026-02)
Ltd. Oceanpine Capital Inc. China Merchants Fund
Management Company Limited Soochow Asset Management
Co. Ltd. Union Asset Management Co. Ltd. ABC Life
Insurance Co. Ltd. Lion Fund Management Co Ltd. Shangyin
Wealth Management Co. Ltd. China United Property Insurance
Co. Ltd. Harvest Fund Management Co. Ltd. Haitong
International Securities Company Limited First-Trust Fund
Management Co. Ltd. Tencent Cloud Technology Co. Ltd.Great Wall Fund Management Co. Ltd. SPDB Wealth
Management Co. Ltd. KUNLUN HEALTH INSURANCE CO.LTD. Guoxin Investment Co. Ltd. Shenzhen Prosperous
Capital Co. Ltd. Pinpoint Asset Management Limited China
Securities Co. Ltd. Shanghai Lingze Private Equity Fund
Management Co. Ltd. CINDA FUND Management Co. Ltd.Shanghai Kandao Asset Management Co. Ltd. Shanghai
Qinchen Private Equity Fund Partnership (Limited Partnership)
CITIC-Prudential Fund Management Co. Ltd. China Universal
Asset Management Co. Ltd. Hwabao Trust Co. Ltd. Goldman
Sachs ICBC Wealth Management Co. Ltd. Soochow Life
Insurance Co. Ltd. Shanghai Life Insurance Co. Ltd. China
Southern Fund Management Co. Ltd. Zheshang Securities Co.Ltd. Pacific Investment Management Co. Ltd. TruValue
ASSET MANAGEMENT Great Wall Fund Guangzhou Boulder
Investment Co. Ltd. Panjing Investment ABC-CA Guotai
Asset Hexie Health Insurance Asset Management Guojin
Securities Asset Management Bank of China Investment Orient
Fund Hongsheng Private Equity Fuzhong Investment Shanghai
Share-Fortune Danen Capital Decent Investment Chisage
Resource Group UBS SDIC SUNSOURCE Huafu Securities
PICC Pension Harvest Fund Yinhua Fund Panyao Asset
Junrong Asset Bank of Beijing Scotiabank Asset Huaya Hua
An Fund Shanghai SUNSOURCE Purekind Fund GROW
WinSure Capital CICC Fund BOSERA Quanxi Investment
Shenzhen Hongding CCB Wealth Management Commando
Capital Zhongtai Anhe Investment Tongben Investment Suzhou
Junrong Asset Management Co. Ltd. Chisage Resource Group
Co. Ltd. Zijin Trust Panhou Dynamic Yongle Huaicheng
Fund Qianhai Chenxing Fund Point Zhejiang Wojin Investment
Management Co. Ltd. Yuancheng Investment Xuanyuan
Investment South Land Asset Cactus Asset Tansun Technology
Hefeng Shanghai Yizhenglang Investment Management Co.Ltd. Chiyue Investment Daoren Blueocean Elite Private Fund
Harmony Huiyi Century Proprietary Miyuan Investment
Yinsheng Asset Invesco Great Wall Taiping Pension SSE Asset
Management Zhong Ou Asset Minmetals Asset Management
Penghua Fund Zheshang Asset Management Green Le
Investment Huashan Capital S-LAND Dachun Fund Galaxy
DH Fund Management Harvest Fund Ping An Asset
Management (Hong Kong) WinSure Bank of China Asset
Management
CNINFO
CITIC Securities Juzhongxinchuang Investment Orient
http://www.cninfo.com.cn
Securities Hairongxin Investment Asia Pacific Huijin Fund
January ZKTECO See CNINFO Announcement date: January 28
Field research Institution CICC Capital Hoda Investment Minfeng Fund Everbright
28 2026 Meeting Room (http://www.cninfo.com.cn) 2026 Investor Relations Activity
Securities Chuanghua Investment Zhongtian Securities Saima
Record Form of ZKTECO CO.Capital
LTD. (No. 2026-03)
CNINFO
Value Online
Online http://www.cninfo.com.cn
(https://www.ir-
April 29 Communication Investors participating in the Company's 2025 annual See CNINFO Announcement date: April 29
online.cn/) Others
2026 on Online performance briefing online and Q1 2026 performance briefing (http://www.cninfo.com.cn) 2026 Investor Relations Activity
Network
Platforms Record Form of ZKTECO CO.Interaction
LTD. (No. 2026-04)
XII. Formulation and Implementation of the Market Value Management System and the Plan
for Enhancing Valuation
Has the Company established a market value management system
□ Yes □No
Has the Company disclosed its plan for enhancing valuation
□ Yes □No
XIII. Implementation of the Action Plan for "Double Improvement of Quality and Return"
Has the Company disclosed an action plan announcement for "dual improvement of quality and return".□ Yes □No
Section IV Corporate Governance Environment and Society
I. Changes of directors and senior management of the Company
□Applicable □ Not applicable
Name Positions Type Date Reasons
Resignation upon
Ma Wentao Director March 26 2026 General election
expiration of term
Deputy General Resignation upon
Ma Wentao March 26 2026 General election
Manager expiration of term
Resignation upon
Dong Xiuqin Independent director March 26 2026 General election
expiration of term
Resignation upon
Zhuo Shuyan Independent director March 26 2026 General election
expiration of term
Resignation upon
Pang Chunlin Independent director March 26 2026 General election
expiration of term
Gao Benhe Director Elected March 26 2026 General election
Liang Long Independent director Elected March 26 2026 General election
Wang Yihua Independent director Elected March 26 2026 General election
Jin Zhenzhao Independent director Elected March 26 2026 General election
II. Profit Distribution and Conversion of Capital Reserve to Share Capital during the
Reporting Period
□ Applicable □Not applicable
The Company plans not to distribute cash dividends issue bonus shares or distribute shares from capital reserve during the current
reporting period on a half year basis.III. Implementation of the Company's Equity Incentive Plans Employee Stock Ownership
Plans or Other Employee Incentive Plans
□Applicable □ Not applicable
1. Equity incentives
During the reporting period the Company's 2025 Restricted Share Incentive Plan was in implementation. The specific details are
as follows:
On January 23 2025 the Company held the 15th Session of the Third Board Meeting and the 14th Session of the Third Supervisory
Board Meeting and deliberated and approved the "Proposal on the Company's Restricted Share Incentive Plan 2025 (Draft) and Its
Abstract" and the "Proposal on the Company's Restricted Share Incentive Plan Implementation Assessment Management Measures
2025" and other related proposals. For details please refer to the relevant announcements disclosed by the Company on the website of
CNINFO (http://www.cninfo.com.cn) on January 24 2025. On February 11 2025 the Company's first 2025 Extraordinary General
Meeting deliberated and approved the aforementioned related proposals.On March 28 2025 the Company's 16th Session of the Third Board Meeting and the 15th Session of the Third Supervisory Board
Meeting deliberated and approved the "Proposal on Adjusting the List of Incentive Objects of Restricted Share Incentive Plan in 2025
and the Number of Granted Objects" and the "Proposal on Granting Restricted Shares to the Incentive Objects of 2025 Restricted Share
Incentive Plan". Given that some incentive objects have resigned or voluntarily waived all or part of their restricted shares for personal
reasons the Company adjusted the list of incentive objects and the number of shares granted under this incentive plan. The Board of
Directors believes that the grant conditions stipulated in the Company's 2025 Restricted Share Incentive Plan have been fulfilled and
has agreed to set March 28 2025 as the grant date and to grant 2121170 restricted shares to 353 incentive objects who meet the grant
conditions. For details please refer to the relevant announcements disclosed by the Company on the website of CNINFO
(http://www.cninfo.com.cn) on March 28 2025.On April 21 2026 the Company held the Second Session of the Fourth Board Meeting and deliberated and approved the
"Proposal on Adjusting the Granting Price and Quantity of 2025 Restricted Share Incentive Plan" the "Proposal on Cancelling Some
Granted but Not Affiliated Restricted Shares" and the "Proposal on the Achievement of the Attribution Conditions for the First
Attribution Period of the 2025 Restricted Share Incentive Plan". Due to the resignation unqualified assessment or voluntary
abandonment of some incentive objects a total of 93426 restricted stocks that have been granted but not yet attributed to the relevant
incentive objects were invalidated; due to the Company's implementation of the 2024 annual equity distribution plan the grant price
of the 2025 Restricted Share Incentive Plan was adjusted from RMB 13.25/share to RMB 10.63/share and the number of granted
restricted shares was adjusted from 2121170 shares to 2545404 shares; due to the achievement of the attribution condition for the
first grant of the first attribution period the Board of Directors has agreed to allocate a total of 734774 shares to 332 incentive objects.The Board of Directors' Salary and Assessment Committee verified the list of vested incentive objects and issued a clear opinion on
whether the attribution conditions had been met. Please refer to the "Announcement on Adjusting the Granting Price and Quantity of
2025 Restricted Share Incentive Plan" (Announcement No. 2026-039) the "Announcement on Cancelling Some Granted but Not
Affiliated Restricted Shares" (Announcement No. 2026-040) and the "Announcement on the Achievement of the Attribution
Conditions for the First Attribution Period in the 2025 Restricted Share Incentive Plan" (Announcement No. 2026-041) disclosed by
the Company on the website of CNINFO (http://www.cninfo.com.cn) on April 23 2026.The Company has completed the registration of the first attribution period of the 2025 Restricted Share Incentive Plan in
accordance with relevant regulations and the relevant shares were listed and circulated on May 27 2026. Please refer to the
"Announcement on the Attribution Results of the First Attribution Period in the 2025 Restricted Share Incentive Plan and the Listing
of Shares" (Announcement No. 2026-051) disclosed by the Company on the website of CNINFO (http://www.cninfo.com.cn) on May
28 2026.
2. Implementation of employee stock ownership plan
□Applicable □ Not applicable
Details of all effective employee stock ownership plans during the reporting period
Proportion to Total
Source of Funds
Number of Total Shares Held Share Capital of
Scope of Employees Changes for the Plan
Employees (Shares) the Listed
Implementation
Company
Company directors
supervisors senior Funds obtained
management middle from employees'
management and core legitimate
technical (business) remuneration self-
personnel who play an raised funds and
important role and 358 1336560 None 0.57% funds obtained
have a significant through other
impact on the methods permitted
Company's overall by laws and
performance and administrative
medium- and long- regulations
term development.Shareholdings of directors and senior management in the employee stock ownership plan during the reporting period
Number of Shares Held Number of Shares Held Proportion to Total
Name Position at the Beginning of the at the End of the Share Capital of the
Reporting Period Reporting Period Listed Company
Fu Zhiqian Director 4200 2940 0.00%
Gao Benhe Director 16800 11760 0.00%
Deputy General
Mu Wenting 4620 3260 0.00%
Manager
Changes in asset management institutions during the reporting period
□ Applicable □Not applicable
Changes in equity arising from holders' disposal of shares during the reporting period
□ Applicable □Not applicable
Exercise of shareholder rights during the reporting period
Not applicable.Other related circumstances and explanations of the employee stock ownership plan during the reporting period
□Applicable □ Not applicable
During the reporting period in accordance with the relevant provisions of the Company's "2025 Employee Stock Ownership Plan
(Draft)" and "2025 Employee Stock Ownership Plan Management Measures" the management committee recalled the shares held by
some holders and designated eligible personnel to acquire the relevant shares. There is no associated relationship or acting-in-concert
relationship between the acquirer and shareholders holding 5% or more shares of the listed company or the actual controller. The related
disposal complies with the terms of the employee stock ownership plan.The first lockup period of the Company's 2025 employee stock ownership plan expired on May 22 2026. Based on the Company's
2025 performance assessment results the unlocking conditions for the first lockup period of this employee stock ownership plan have
been met. The proportion of shares eligible for unlocking this time is 30% of the total shares held by this employee stock ownership
plan amounting to 400968 shares. After the unlocking of the aforementioned shares the Company will in accordance with the
provisions of the "2025 Employee Stock Ownership Plan (Draft)" opportunistically sell or transfer the corresponding shares to the
individual securities accounts of the holders.Changes in the members of the Employee Stock Ownership Plan Management Committee
□ Applicable □Not applicable
Financial impact of the employee stock ownership plan on the listed company during the reporting period and related accounting
treatment
□Applicable □ Not applicable
According to the relevant provisions of Accounting Standards for Enterprises No.1 – Share-based Payment RMB 3.02 million of
share-based payment fees for the employee stock ownership plan were amortized in the current period and included in current profits
and losses correspondingly increasing capital reserve.Circumstances of the termination of the employee stock ownership plan during the reporting period
□ Applicable □Not applicable
Other explanations:
3. Other employee incentive plans
□ Applicable □Not applicable
IV. Environmental Information Disclosure
Whether the listed company and its main subsidiaries are included in the list of enterprises required by law to disclose environmental
information
□ Yes □No
V. Social Responsibilities
(I) Protection of rights and interests of investors
The Company strictly fulfills its information disclosure obligations in accordance with regulatory requirements truthfully
accurately completely and timely disclosing all company information to ensure that investors can fully understand the Company's
operating conditions financial position risk profile and development prospects. Through the Shenzhen Stock Exchange CNINFO
the Company's official website etc. it timely discloses information such as periodic reports and ad hoc announcements and also
releases the latest company information on the Company's official website WeChat official account and other channels to facilitate
stakeholders to understand the situation of the Company in a timely and comprehensive manner.The Company values investor relations management and has established diversified communication and interaction channels. The
Company responds to investors' concerns through Easy to Interact of Shenzhen Stock Exchange investor relations email investor
hotline and other channels. It maintains friendly exchanges and communication with investors through performance briefings General
Meetings and other forms focusing on protecting the legitimate rights and interests of investors such as the right to know and vote
and maintaining a good trust relationship between the Company and investors.The Company values shareholder investment returns and formulates a continuous and stable profit distribution policy. While
ensuring the Company's long-term development it actively promotes cash dividends to share development achievements with
shareholders.(II) Protection of employee rights and interests
The Company strictly complies with the "Labor Law" and formulates multiple management systems to effectively safeguard the
legitimate rights and interests of employees and build harmonious and stable labor relations. The Company adheres to equal
employment clearly stipulating in the "Recruitment Behavior Operation Standards" the prohibition of child labor and the use of any
form of forced or compulsory labor the prohibition of disseminating discriminatory ideas based on region race gender etc. and the
respect and protection of employee rights at all stages.The Company has built a diversified compensation and benefits system continuously optimizing the performance management
system and incentive and restraint mechanism to effectively stimulate employee enthusiasm and creativity. The Company establishes
the trade union in accordance with relevant laws and regulations facilitates communication channels and safeguards the legitimate
rights and interests of employees such as the right to know and participate. The Company also establishes equal and democratic diverse
communication methods and sets up employee suggestion boxes so that employees can raise questions and provide feedback in a
timely manner.The Company focuses on employee development and formulates the career development path and promotion channels for
employees based on actual conditions providing diversified career development directions and opportunities. The Company builds a
high-quality team of mentors and internal lecturers formulates the "Training Management System" and relies on online learning
platforms and offline practical training resources to establish talent training mechanisms such as on-the-job training and professional
technical training accelerate employee career growth and broaden employee development channels.Adhering to the philosophy of "safety first prevention first and comprehensive governance" the Company has formulated
occupational health and safety management systems such as the "Occupational Health and Safety Management Manual" and
"Occupational Disease Management System" and has established a sound occupational health and safety management system.ZKTECO and Guangdong Zkteco have passed ISO 45001:2018 Occupational Health and Safety Management System Certification.The Company regularly conducts safety hazard inspections strengthens work safety risk management develops the "Emergency
Rescue Plan for Work Safety Accidents" and conducts work safety fire drills. In addition the Company conducts annual occupational
hazard factor testing in the workplace implements a rotation and job change mechanism for occupational disease risk personnel
regularly conducts occupational health examinations and conducts occupational health education and training to strengthen all
employees' safety awareness and emergency response capabilities.(III) Protection of the rights and interests of suppliers and customers
Adhering to the principles of "transparent procurement honesty and trustworthiness and integrity and self-discipline" the
Company has established a full lifecycle management system covering supplier access hierarchical evaluation performance control
and elimination and relies on digital systems such as SRM and SAP to enhance supply chain management transparency and
collaboration efficiency. The Company and its suppliers have signed a "CSR Agreement" with suppliers to regulate the requirements
of both parties including labor rights environmental protection occupational health and safety business ethics and other aspects. The
Company is committed to establishing clean fair honest and trustworthy business cooperation relationships with suppliers and the
Company and its suppliers have signed the "Integrity Agreement" and the "Procurement Framework Agreement" advocating mutual
supervision and creating a fair competition honest and trustworthy and sunny and healthy business environment. At the same time
the Company requires suppliers to sign the "Letter of Commitment for Not Using Conflict Minerals" to ensure the compliance of metal
raw materials such as gold tantalum tin and tungsten and to prevent human rights and environmental risks in the supply chain.The Company continues to improve its customer service management system and develop different service strategies for both
domestic and overseas markets constantly listens to the opinions of partners and customers and strives to improve product quality.The Company conducts satisfaction surveys with customers annually regularly or irregularly through telephone WeChat QQ
questionnaire and other survey methods and follows up on customer feedback or suggestions. The Company regularly conducts
specialized training and assessments for its service team to enhance professional service capabilities and continuously improve
customer experience.The Company attaches great importance to product quality management and requires all employees to establish the guiding
ideology of "quality first" and the service awareness of "customer first" ensuring product quality throughout the entire product life
cycle. ZKTECO ZKTECO Dongguan Branch and Guangdong Zkteco have all passed GB/T 19001-2016 and ISO 9001:2015 Quality
Management System Certification.(IV) Environmental protection and sustainable development
The Company adheres to the ecological and environmental protection concept of "Clear waters and lush mountains are invaluable
assets" continuously improves its environmental management level establishes a sound environmental governance system and has
passed the ISO 14001:2015 Environmental Management System Certification. The Company focuses on the management of emissions
and waste and hires a third-party organization to professionally treat the scattered wastewater produced by Tangxia Industrial Park
ensuring proper wastewater treatment. Hazardous waste is entrusted to qualified organizations for standardized disposal effectively
avoiding pollution to the surrounding environment.The Company is committed to reducing resource and energy consumption and environmental costs in its production and operation
processes achieving green production and low-carbon operation. The Company has established regulatory systems such as the "Energy
Conservation Target Management System" "Energy Conservation Publicity System" and "Energy Conservation and Emission
Reduction Reward and Punishment System". It continuously optimizes its energy consumption structure promotes green office models
and enhances employees' environmental protection and energy-saving awareness.The Company has always been committed to integrating green technology into product R&D. According to representative
environmental requirements such as RoHS and REACH it continuously promotes technological innovation to achieve environmental
protection and energy conservation of products. The Company has enhanced the competitiveness of products by continuously
developing energy-saving products optimizing production processes and reducing energy consumption contributing to the sustainable
development of society.(V) Actively assuming social responsibility
The Company actively fulfills its social responsibility fully leverages its own advantages to continuously carry out public welfare
practices in areas such as education support community services and environmental protection giving back to society with practical
actions and conveying warmth and love to society. Guangdong Zkteco actively participated in the 2026 "6·30" Assistance to Rural
Revitalization and Dongguan Charity Day activities in Zhangmutou Town in the reporting period making positive contributions to
consolidating and expanding poverty alleviation achievements and rural revitalization and promoting common prosperity.Section V Significant Events
I. Commitments completed by actual controllers shareholders related parties purchasers or the Company within the reporting period
and commitments not fulfilled by the end of the reporting period
□Applicable □ Not applicable
Undertaking Commitment Date of Term of
Causes of Commitment Commitment Content Performance
Party 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
ZKTeco is not a trading day it is the first trading day after that day) (if ex-right or August 17 February 16
IPO-related commitments Stock lockup Fulfilled
Times ex-dividend is carried out due to reasons such as cash dividends 2022 2026
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 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 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
Che ex-dividend is carried out due to reasons such as cash dividends August 17 February 16
IPO-related commitments Stock lockup Fulfilled
Quanhong distribution stock dividends conversion to share capital or issuance of new 2022 2026
shares corresponding adjustments must be made in accordance with the
relevant regulations of the CSRC and the Shenzhen Stock Exchange) the
lockup period for ZKTeco stocks I hold directly or indirectly is
automatically extended by six months.
3. 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.
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 I should bear due to violating the above commitments I voluntarily and
unconditionally comply with these provisions.Whether the commitment is
Yes
fulfilled on time
If the commitment is not
fulfilled within the promised
period a detailed explanation
of the specific reasons for the Not applicable
incomplete fulfillment and
the next work plan should be
provided.II. Non Operating Occupation of Funds by Controlling Shareholders and Other Related Parties
of Listed Company
□ Applicable □Not applicable
During the reporting period there was no non-operating occupation of funds by controlling shareholders or other related parties of the
listed company.III. Illegal Provision of Guarantees for External Parties
□ Applicable □Not applicable
There were no illegal external guarantees during the reporting period of the Company.IV. Appointment and Dismissal of Accounting Firms
Whether the half year financial report has been audited
□ Yes □No
The Company's Half Year Report has not been audited.V. Explanation Given by the Board of Directors and Audit Committee Regarding the "Non-
standard Audit Report" Issued by the Accounting Firm for the Current Reporting Period
□ Applicable □Not applicable
VI. Explanation Given by the Board of Directors regarding the "Non-standard Audit Report"
in the Previous Year
□ Applicable □Not applicable
VII. Matters Related to Bankruptcy Reorganization
□ Applicable □Not applicable
There were no bankruptcy or restructuring related matters during the reporting period of the Company.VIII. Litigation Matters
Major litigation and arbitration matters
□ Applicable □Not applicable
There were no significant lawsuits or arbitration matters for the Company during the reporting period.Other litigation matters
□Applicable □ Not applicable
Is there an Litigation Execution of
Basic information
Amount involved estimated (arbitration) litigation Disclosure
of litigation Progress of litigation (arbitration) Disclosure Index
(RMB '0000) liability trial results and (arbitration) Date
(arbitration)
formed effects judgments
In January 2026 Hengfu Company sued
Guangdong Zkteco and the Company
requesting a judgment ordering Guangdong
Zkteco and the Company to jointly and
severally pay for project costs liquidated
Hengfu damages for overdue payment of progress
Construction Group payments liquidated damages for overdue
Co. Ltd. payment of completion settlement payments
(hereinafter referred the first installment of quality guarantee
to as "Hengfu deposit and legal costs etc. (the above No significant
Not yet
Company") sued 3005.49 No amounts were tentatively calculated up to impact on the
concluded
the Company and October 20 2025) totaling RMB 21.2931 Company
Guangdong Zkteco million. At the same time Hengfu applied to
for disputes over the court for pre-litigation property
construction preservation and the funds in Guangdong
contracts. Zkteco's relevant bank accounts involved in
the lawsuit were frozen accordingly.In August 2026 Hengfu added relevant
project costs and quality guarantee deposit
increasing the amount involved in this case to
RMB 30.0549 million.Other
lawsuits/arbitrations
where the Company
CNINFO
(including
The Company (http://www.cninfo.com.cn)
subsidiary
The Company strictly follows the progress of No significant strictly follows April 23 "2025 Annual Report of
companies in the 1973.26 No
each case impact the progress of 2026 ZKTECO CO. LTD."
consolidated
each case (Announcement No. 2026-
financial
030)
statements) as the
plaintiff fails to
meet the disclosure
standards for major
lawsuits
Other
lawsuits/arbitrations
where the Company
(including
CNINFO
subsidiary
The Company (http://www.cninfo.com.cn)
companies in the
The Company strictly follows the progress of No significant strictly follows April 23 "2025 Annual Report of
consolidated 1514.53 No
each case impact the progress of 2026 ZKTECO CO. LTD."
financial
each case (Announcement No. 2026-
statements) as the
030)
defendant fails to
meet the disclosure
standards for major
lawsuits
IX. Punishment and Rectification
□ Applicable □Not applicable
There were no penalties or rectifications during the reporting period of the Company.X. 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.XI. Significant Related-Party Transactions
1. Related-party transactions related to daily operations
□ Applicable □Not applicable
There were no related-party transactions related to daily operations during the reporting period of the Company.
2. Related-party transactions arising from the acquisition and sale of assets or equity
□ Applicable □Not applicable
There were no related-party transactions related to asset or equity acquisitions or sales during the reporting period of the Company.
3. Related-party Transactions Arising from Joint Investments on External Parties
□ Applicable □Not applicable
During the reporting period the Company did not engage in any related-party transactions related to joint foreign investment.
4. Related Credit and Debt Transactions
□ Applicable □Not applicable
There were no current associated rights of credit and liabilities during the reporting period of the Company.
5. Transactions with Related Financial Companies
□ Applicable □Not applicable
There is no deposit loan credit or other financial businesses between the Company and its affiliated financial companies the
financial companies held by the Company 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
Please refer to the "Announcement on Signing a Lease Contract and Related Party Transaction" (Announcement No.: 2025-103)
disclosed by the Company on CNINFO on December 26 2025.Temporary Announcement Disclosure Temporary Announcement Disclosure
Temporary Announcement Name
Date Website Name
Announcement on Signing a Lease
December 26 2025 CNINFO http://www.cninfo.com.cn
Contract and Related Party Transaction
XII. 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
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
The Company had no material guarantees during the reporting period.
3. Significant contracts for daily operations
Not applicable
4. Other significant contracts
□ Applicable □Not applicable
There were no other significant contracts during the reporting period of the Company.XIII. Explanation of Other Significant Events
□Applicable □ Not applicable
To deeply advance its globalization strategic layout further expand overseas business build an international capital operation
platform and enhance its international brand image and comprehensive competitiveness in the global market the Company is planning
to issue shares overseas (H-shares) and apply for listing on the Stock Exchange of Hong Kong Limited.According to the requirements of the "Company Law of the People's Republic of China" the "Securities Law of the People's
Republic of China" the "Rules Governing the Listing of Shares on the ChiNext Market of Shenzhen Stock Exchange" the "Interim
Measures for the Administration of Overseas Securities Offering and Listing by Domestic Enterprises" the "Rules Governing the
Listing of Securities on the Stock Exchange of Hong Kong Limited" and other relevant laws regulations and normative documents
after the specific plan is determined the Company's H-share issuance and listing matter will need to go through the Company's relevant
decision-making procedures and obtain filing approval or consent from the China Securities Regulatory Commission the Stock
Exchange of Hong Kong Limited the Securities and Futures Commission of Hong Kong and other relevant government agencies and
regulatory agencies.There is significant uncertainty as to whether this H-share issuance and listing can be approved registered reviewed and
ultimately implemented. The Company will timely fulfill its information disclosure obligations in accordance with relevant laws
regulations and normative documents based on the subsequent progress of this H-share issuance and listing. Investors are kindly
requested to be aware of investment risks.XIV. Significant Events of the Company's Subsidiaries
□ Applicable □Not applicable
Section VI 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 this change
Share
Issue new transferred
Quantity Proportion Bonus Others Subtotal Quantity Proportion
shares from capital
reserve
I. Restricted
121436679 51.60% 0 0 0 -80391800 -80391800 41044879 17.44%
shares
1. Shares
0 0.00% 0 0 0 0 0 0 0.00%
held by State
2. Shares
held by state-
0 0.00% 0 0 0 0 0 0 0.00%
owned legal
persons
3. Shares
held by other
121436679 51.60% 0 0 0 -80391800 -80391800 41044879 17.44%
domestic
enterprises
Including:
shares held by
80561949 34.23% 0 0 0 -70200000 -70200000 10361949 4.40%
domestic
corporations
Shares
held by
40874730 17.37% 0 0 0 -10191800 -10191800 30682930 13.04%
domestic
natural persons
4. Foreign
0 0.00% 0 0 0 0 0 0 0.00%
shareholding
Including:
shares held by
0 0.00% 0 0 0 0 0 0 0.00%
overseas
corporations
Shares
held by
0 0.00% 0 0 0 0 0 0 0.00%
overseas
natural person
II. Shares not
subject to
113914871 48.40% 0 0 0 80391800 80391800 194306671 82.56%
trading
restrictions
1. RMB
denominated 113914871 48.40% 0 0 0 80391800 80391800 194306671 82.56%
ordinary
shares
2. Domestic
listed foreign 0 0.00% 0 0 0 0 0 0 0.00%
shares
3. Overseas
listed foreign 0 0.00% 0 0 0 0 0 0 0.00%
shares
4. Others 0 0.00% 0 0 0 0 0 0 0.00%
III. Total
235351550 100.00% 0 0 0 0 0 235351550 100.00%
shares
Reasons for changes in shares
□Applicable □ Not applicable
1. On February 24 2026 a total of 111026760 shares (accounting for 47.17% of the Company's total share capital) issued before the
Company's initial public offering held by Shenzhen ZKTeco Times Investment Co. Ltd. and Mr. Che Quanhong were listed and
circulated. Simultaneously 75% of the shares released from trading restrictions held by Mr. Che Quanhong were converted into
executive lockup shares;
2. The conditions for the first attribution period of the Company's 2025 Restricted Share Incentive Plan have been met. 75% of the
vested shares held by the Company's directors and senior management participating in this Restricted Share Incentive Plan are
converted into executive lockup shares;
3. The conditions for unlocking upon expiry of the first lockup period of the Company's 2025 employee stock ownership plan have
been met. The portion of shares that meet the unlocking conditions are transferred to relevant directors supervisors and senior
management through non-trading transfer and 75% of these shares are converted into executive lockup shares.Approval of changes in shares
□ Applicable □Not applicable
Transfer of changes in shares
□ Applicable □Not applicable
Implementation progress of share repurchase
□Applicable □ Not applicable
The Company held the 7th Session of the Third Board Meeting on November 10 2023 and deliberated and approved the "Proposal on
Repurchasing Company Shares through Centralized Bidding Trading": it plans to use its own funds to repurchase some of the
Company's shares through centralized bidding trading for the implementation of employee stock ownership plans or equity incentives.The total amount of repurchase funds is not less than RMB 30 million and not more than RMB 60 million. As of February 1 2024 the
share repurchase plan has been completed. The Company has repurchased a total of 2230000 shares of the Company through a
dedicated securities account for share repurchases. The cumulative number of repurchased shares accounts for 1.1455% of the total
share capital of the Company at that time with a maximum transaction price of RMB 31.40 per share and a minimum transaction price
of RMB 23.20 per share. The total transaction amount is RMB 59683228.10 (excluding transaction costs).The Company convened the 15th Session of the Third Board Meeting and the 14th Session of the Third Supervisory Board Meeting
on January 23 2025 and the first extraordinary general meeting of 2025 on February 11 2025. These meetings separately reviewed
and approved the "2025 Employee Stock Ownership Plan (Draft)" and the "2025 Restricted Share Incentive Plan (Draft)". The
Company agreed the Company to implement the employee stock ownership plan with 1113800 repurchased A-share common stock
of ZKTeco. For details please refer to the relevant announcements disclosed by the Company on the website of CNINFO on January
24 2025.
1. The conditions for the first attribution period of the Company's 2025 Restricted Share Incentive Plan have been met. The Company
will transfer 733604 A shares repurchased from the secondary market to the securities accounts of relevant incentive objects through
non-trading transfer on May 26 2026.
2. The conditions for unlocking upon expiry of the first lockup period of the Company's 2025 employee stock ownership plan have
been met. The Company will transfer 400968 A shares repurchased from the secondary market to the securities accounts of relevant
share holders through non-trading transfer.Progress in implementing centralized bidding trading to reduce holdings and repurchase shares
□ Applicable □Not applicable
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
Other contents deemed necessary by the Company or required to be disclosed by the securities regulatory authority
□ Applicable □Not applicable
2. Changes in restricted shares
□Applicable □ Not applicable
Unit: share
Number of Number of Number of
Increase in Date of
restricted shares released restricted
Name of restricted Reason for releasing from
shares at the from trading shares at the
shareholder shares during restrictions trading
beginning of restrictions in end of the
the period restrictions
the period this period period
Shenzhen Listed and
Restricted
ZKTeco Times circulated on
70200000.00 70200000 0 0 shares before
Investment Co. February 24
IPO
Ltd. 2026
During the
tenure of
directors and
senior
executives
25% of the total
Executive number of
Che Quanhong 40826760 40826760 30620070.00 30620070.00
lockup shares shares held will
be unlocked
annually while
the remaining
75% will be
automatically
locked
During the
tenure of
directors and
senior
Executive executives
Gao Benhe 0.00 0.00 7020.00 7020.00
lockup shares 25% of the total
number of
shares held will
be unlocked
annually while
the remaining
75% will be
automatically
locked
During the
tenure of
directors and
senior
executives
25% of the total
Executive number of
Fu Zhiqian 12870.00 0.00 2700.00 15570.00
lockup shares shares held will
be unlocked
annually while
the remaining
75% will be
automatically
locked
During the
tenure of
directors and
senior
executives
25% of the total
Executive number of
Mu Wenting 21060.00 0.00 1930.00 22990.00
lockup shares shares held will
be unlocked
annually while
the remaining
75% will be
automatically
locked
Shares acquired
by supervisors
due to the
Company’s
cancellation of
the Board of
Supervisors
shall be locked
up by 75%
within six
Executive
Jiang Wenna 0.00 0.00 1890.00 1890.00 months after
lockup shares
the expiration
of their original
term of office
and the trading
restrictions
shall be lifted
six months after
the expiration
of their original
term of office.Shares acquired
by supervisors
Executive
Yang Xianfeng 0.00 0.00 1350.00 1350.00 due to the
lockup shares
Company’s
cancellation of
the Board of
Supervisors
shall be locked
up by 75%
within six
months after
the expiration
of their original
term of office
and the trading
restrictions
shall be lifted
six months after
the expiration
of their original
term of office.Total 111060690.00 111026760.00 30634960.00 30668890.00 -- --
II. Issuance and Listing of Securities
□ Applicable □Not applicable
III. Number of Shareholders of the Company and Shareholding
Unit: share
Total number
Total number of preferred
of
Total number of ordinary shareholders with restored
shareholders
shareholders at the end of 21959 voting rights at the end of 0 0
holding
the reporting period the reporting period (if
special voting
any) (see Note 8)
shares (if any)
Shareholding of shareholders holding more than 5% or the top 10 shareholders (excluding shares lent through refinancing)
Changes in Pledge marking or
Number of
increase Number of freezing
shares held Number of
and shares not
Name of Nature of Percentage at the end shares with
decrease subject to
shareholder shareholder of shares of the trading
during the trading
reporting restrictions Share status Quantity
reporting restrictions
period
period
Shenzhen
Domestic
ZKTeco
non state- Not
Times 29.83% 70200000 0 0 70200000 0
owned applicable
Investment
corporation
Co. Ltd.Domestic
Che Not
natural 17.35% 40826760 0 30620070 10206690 0
Quanhong applicable
persons
Shenzhen
JYHY Domestic
Investment non state- Not
5.43% 12789002 -1189510 4176315 8612687 0
Enterprise owned applicable
(Limited corporation
Partnership)
Shenzhen Domestic 5.41% 12722899 -1215957 4232280 8490619 Not 0
JYSJ non state- applicable
Investment owned
Enterprise corporation
(Limited
Partnership)
Dongguan
LX
Domestic
Investment
non state- Not
Partnership 5.04% 11856000 0 0 11856000 0
owned applicable
Enterprise
corporation
(Limited
Partnership)
Shenzhen
JYLX Domestic
Consulting non state- Not
1.55% 3636645 -338628 1424514 2212131 0
Enterprise owned applicable
(Limited corporation
Partnership)
China
Merchants
Fund
Management
Co. Ltd. - Not
Others 0.46% 1092174 1092174 0 1092174 0
Social applicable
Security
Fund
Portfolio
1903
Shenzhen
JYQL
Domestic
Investment
non state- Not
Consulting 0.43% 1003160 -132100 528840 474320 0
owned applicable
Enterprise
corporation
(Limited
Partnership)
Domestic
Not
Han Xiao natural 0.42% 979600 171684 0 979600 0
applicable
persons
ZKTECO
CO. LTD. -
2025
Not
Employee Others 0.40% 935618 -400942 0 935618 0
applicable
Stock
Ownership
Plan
Strategic investors or
general legal persons
become the top 10
Not applicable
shareholders due to the
placement of new shares (if
any) (see Note 3)
Shareholder Che Quanhong is elder brother of shareholder Che Quanzhong from ZKTeco Times are
brothers and son of Che Jun partner of LX Investment.Description of the above
Shareholder Che Quanhong is the controlling shareholder of ZKTeco Times. Che Quanhong indirectly
shareholder's association or
holds 53366040 shares of the Company through Shenzhen ZKTeco Times Investment Co. Ltd.concerted action
accounting for 22.68% of the Company's total shares; Che Quanhong indirectly holds 140400 shares
of the Company through LX Investment accounting for 0.06% of the Company's total shares; Che
Quanhong indirectly holds 374400 shares of the Company through JYLX accounting for 0.16% of
the Company's total shares.Che Quanzhong the younger brother of shareholder Che Quanhong holds a 23.98% stake in ZKTeco
Times.Che Jun the father of shareholder Che Quanhong holds 98.68% of the property share of LX
Investment.In addition there is no affiliated relationship between the other shareholders of the Company.Description of the above
shareholders' involvement
in entrusting/entrusted Not involved
voting rights and waiver of
voting rights
Special description of the
existence of special
repurchase accounts among Not involved
the top 10 shareholders
(see Note 11)
Particulars about the top 10 shareholders not subject to trading restrictions (excluding shares lent through refinancing and executive
lockup shares)
Number of shares not subject to trading restrictions held at Types of shares
Name of shareholder
the end of the reporting period Types of shares Quantity
Shenzhen ZKTeco Times RMB denominated
70200000 70200000
Investment Co. Ltd. ordinary shares
Dongguan LX Investment
RMB denominated
Partnership Enterprise 11856000 11856000
ordinary shares
(Limited Partnership)
RMB denominated
Che Quanhong 10206690 10206690
ordinary shares
Shenzhen JYHY
RMB denominated
Investment Enterprise 8612687 8612687
ordinary shares
(Limited Partnership)
Shenzhen JYSJ Investment
RMB denominated
Enterprise (Limited 8490619 8490619
ordinary shares
Partnership)
Shenzhen JYLX
RMB denominated
Consulting Enterprise 2212131 2212131
ordinary shares
(Limited Partnership)
China Merchants Fund
Management Co. Ltd. - RMB denominated
1092174 1092174
Social Security Fund ordinary shares
Portfolio 1903
RMB denominated
Han Xiao 979600 979600
ordinary shares
ZKTECO CO. LTD. -
RMB denominated
2025 Employee Stock 935618 935618
ordinary shares
Ownership Plan
Hong Kong Securities RMB denominated
676251 676251
Clearing Company Limited ordinary shares
Shareholder Che Quanhong is elder brother of shareholder Che Quanzhong from ZKTeco Times are
Description of the
brothers and son of Che Jun partner of LX Investment.association or concerted
Shareholder Che Quanhong is the controlling shareholder of ZKTeco Times. Che Quanhong indirectly
action between the top 10
holds 53366040 shares of the Company through Shenzhen ZKTeco Times Investment Co. Ltd.shareholders not subject to
accounting for 22.68% of the Company's total shares; Che Quanhong indirectly holds 140400 shares
trading restrictions as well
of the Company through LX Investment accounting for 0.06% of the Company's total shares; Che
as between the top 10
Quanhong indirectly holds 374400 shares of the Company through JYLX accounting for 0.16% of
shareholders not subject to
the Company's total shares.trading restrictions and the Che Quanzhong the younger brother of shareholder Che Quanhong holds a 23.98% stake in ZKTeco
top 10 shareholders Times.Che Jun the father of shareholder Che Quanhong holds 98.68% of the property share of LX
Investment.In addition there is no affiliated relationship between the other shareholders of the Company.In addition the Company does not know whether there is a related relationship between the other top
10 shareholders of shares not subject to trading restrictions as well as between the top 10
shareholders of outstanding shares not subject to trading restrictions and the top 10 shareholders or
whether they belong to Concerted Parties.Description of top 10
Among the top 10 shareholders not subject to trading restrictions at the period end shareholder Han
ordinary shareholders
Xiao held a total of 979600 A shares of the Company including 74600 A shares held through margin
participating in margin
accounts and 905000 A shares held through client credit transaction guaranty securities accounts of
trading (if any) (see Note
China Galaxy Securities Co. Ltd.
4)
Participation of shareholders holding more than 5% of the shares the top 10 shareholders and the top 10 shareholders of outstanding
shares not subject to trading restrictions in the lending of shares through refinancing
□ Applicable □Not applicable
Changes to the top 10 shareholders and the top 10 shareholders of outstanding shares not subject to trading restrictions compared to
the previous period due to reasons related to lending/repayment through refinancing
□ Applicable □Not applicable
Does the Company have voting right difference arrangements
□ Yes □No
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.IV. Changes in Shareholding of Directors and Senior Management
□Applicable □ Not applicable
Number of
Number of
restricted Number of
Shares held Shares Shares restricted
Shares held shares restricted
at the increased decreased shares
Tenure at the end of granted at shares
Name Position beginning of during the during the granted at
status the period the granted in
the period period period the end of
(shares) beginning of this period
(shares) (shares) (shares) the period
the period (shares)
(shares)
(shares)
Fu Zhiqian Director Incumbent 17160 36001 0 20760 6500 0 54603
Gao Benhe Director Incumbent 0 93602 0 9360 26000 0 218403
Deputy
Mu Wenting General Incumbent 28080 25742 0 30654 7150 0 60063
Manager
Total -- -- 45240 15534 0 60774 39650 0 33306
Note: 1. This period's increase in holdings is due to the vesting of shares from the first attribution period of the Company's 2025
Restricted Share Incentive Plan and the non-trading transfer of shares upon the expiration of the first lockup period of the 2025
employee stock ownership plan.
2. This period's increase in holdings is due to the vesting of shares from the first attribution period of the Company's 2025 Restricted
Share Incentive Plan.
3 The number of restricted shares granted at the end of the period = The number of restricted shares granted at the opening balance
(after adjustment due to the Company's implementation of the 2024 equity distribution) - The number of shares vested and registered
in the current reporting period.V. Changes in Controlling Shareholders and Actual Controllers
If the Company has previously disclosed that the actual controller is planning a change in control but it has not yet been completed
please explain the progress of the change in control.□ Applicable □Not applicable
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.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.VI. Preferred Shares
□ Applicable □Not applicable
There is no preferred share in the Company during the reporting period.Section VII Bonds
□ Applicable □Not applicable
Section VIII Financial Report
I. Audit Report
Whether the Half Year Report has been audited
□ Yes □No
The Company's half year financial report has not been audited.II. Financial Statements
The unit of the financial statements in the financial notes is: RMB
1. Consolidated Balance Sheet
Prepared by: ZKTECO CO. LTD.June 30 2026
Unit: RMB
Item Ending Balance Beginning Balance
Current assets:
Monetary funds 1301334793.26 1243119411.23
Deposit reservation for balance
Lendings to banks and other financial
institutions
Trading financial assets 612775635.56 800444410.21
Derivative financial assets
Notes receivable 129198.80 538349.21
Accounts receivable 638619772.07 676383210.14
Receivables financing
Prepayments 39599435.12 18032290.05
Premiums receivable
Reinsurance accounts receivable
Reserves for reinsurance contract
receivable
Other receivables 48763695.94 52567928.29
Including: interest receivable
Dividends receivable
Buying back the sale of financial
assets
Inventory 658591157.42 468837064.12
Including: Data resources
Contract assets 34945.93 26949.78
Held-for-sale assets
Non-current assets due within one year 2709767.95 2320265.60
Other current assets 67548071.76 104567979.67
Total current assets 3370106473.81 3366837858.30
Non-current assets:
Loans and advances to customers
Debt investment 29590889.51 28977331.32
Other debt investment
Long-term receivables 19727728.05 17932540.32
Long-term equity investment 26204251.39 25112854.58
Other equity instrument investments
Other non-current financial assets
Investment real estate 19042558.65 19863144.69
Fixed assets 764216256.81 723300476.82
Construction in progress 74260468.75 113147627.97
Productive biological assets
Oil and gas assets
Right-of-use assets 46975819.01 55789456.58
Intangible assets 260734700.32 271465068.24
Including: Data resources
Development expenditures
Including: Data resources
Goodwill 206520555.18 239061688.95
Long-term deferred expenses 9575657.47 10365428.72
Deferred tax assets 82828124.38 82533157.92
Other non-current assets 30848318.62 423995.07
Total non-current assets 1570525328.14 1587972771.18
Total assets 4940631801.95 4954810629.48
Current liabilities:
Short-term borrowings 119522060.62 81101188.00
Borrowings from the Central Bank
Borrowings from banks and other
financial institutions
Trading financial liabilities 126147273.71 208175000.00
Derivative financial liabilities
Notes payable 366761718.28 239870823.79
Accounts payable 377917627.87 404450021.92
Advances from customer
Contract liabilities 100194437.29 76516595.89
Financial assets sold for repurchase
Deposit from customers and interbank
Acting trading securities
Acting underwriting securities
Employee benefits payable 42069960.90 62261494.07
Taxes payable 39362282.27 38878015.23
Other payables 63140018.94 71479362.71
Including: interest payable
Dividends payable 838914.16 556900.00
Handling charges and commissions
payable
Reinsurance accounts payable
Liabilities held for sale
Non-current liabilities due within one
20887254.49 30859013.86
year
Other current liabilities 10590497.29 18771142.30
Total current liabilities 1266593131.66 1232362657.77
Non-current liabilities:
Reserves for insurance contracts
Long-term borrowings 95891.27 139871.08
Bonds payable
Including: preferred stock
Perpetual bonds
Lease liabilities 19098993.63 25370074.36
Long-term payables 550000.00
Long-term employee benefits payable
Estimated liabilities
Deferred income 2190789.45 1364769.40
Deferred tax liabilities 26022301.85 29991667.84
Other non-current liabilities
Total non-current liabilities 47957976.20 56866382.68
Total liabilities 1314551107.86 1289229040.45
Owner's equity:
Share capital 235351550.00 235351550.00
Other equity instruments
Including: preferred stock
Perpetual bonds
Capital reserve 2067905968.71 2068821395.02
Less: treasury stock 20187362.06 44078890.10
Other comprehensive income -9229800.64 39799829.67
Special reserve
Surplus reserves 67458631.43 67458631.43
General risk reserves
Undistributed profits 1081015501.94 1114135904.69
Total owners' equity attributable to the
3422314489.38 3481488420.71
parent company
Minority interests 203766204.71 184093168.32
Total owners' equity 3626080694.09 3665581589.03
Total liabilities and owner's equity 4940631801.95 4954810629.48
Legal Representative: Jin Hairong Person in charge of the accounting work: Wang Youwu Person in charge of accounting institution:
Xu Ping
2. Balance Sheet of Parent Company
Unit: RMB
Item Ending Balance Beginning Balance
Current assets:
Monetary funds 393777584.76 369007059.01
Trading financial assets 271394362.56 331610473.21
Derivative financial assets
Notes receivable 129198.80 156790.41
Accounts receivable 358065306.32 428225183.76
Receivables financing
Prepayments 11904470.39 6462285.58
Other receivables 30797723.56 31318946.42
Including: interest receivable 46922.03 46922.03
Dividends receivable 8000000.00
Inventory 74434405.48 62381514.53
Including: Data resources
Contract assets 22615.30 9172.80
Held-for-sale assets
Non-current assets due within one year 1193525.71 1020439.67
Other current assets 33073064.97 65277597.19
Total current assets 1174792257.85 1295469462.58
Non-current assets:
Debt investment 21315782.30 21036292.96
Other debt investment
Long-term receivables 8514731.29 7693859.44
Long-term equity investment 1866725384.96 1837314121.27
Other equity instrument investments
Other non-current financial assets
Investment real estate
Fixed assets 38999760.85 39234838.25
Construction in progress
Productive biological assets
Oil and gas assets
Right-of-use assets 3874062.11 3397123.73
Intangible assets 26081010.84 28442988.56
Including: Data resources
Development expenditures
Including: Data resources
Goodwill
Long-term deferred expenses 3603514.87 3770321.93
Deferred tax assets 45570372.84 49321418.19
Other non-current assets 3000000.00
Total non-current assets 2017684620.06 1990210964.33
Total assets 3192476877.91 3285680426.91
Current liabilities:
Short-term borrowings
Trading financial liabilities 126147273.71 208175000.00
Derivative financial liabilities
Notes payable 139473358.98 77782177.57
Accounts payable 69517137.94 162076940.64
Advances from customer
Contract liabilities 23464884.09 18868667.39
Employee benefits payable 9693989.96 14248129.06
Taxes payable 1893700.12 1945673.22
Other payables 169279553.75 87941897.36
Including: interest payable
Dividends payable 838914.16 556900.00
Liabilities held for sale
Non-current liabilities due within one
2413237.32 2792552.49
year
Other current liabilities 4915862.73 6057760.52
Total current liabilities 546798998.60 579888798.25
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: preferred stock
Perpetual bonds
Lease liabilities 1196819.55 692690.06
Long-term payables 550000.00
Long-term employee benefits payable
Estimated liabilities
Deferred income
Deferred tax liabilities 0.00 2341558.59
Other non-current liabilities
Total non-current liabilities 1746819.55 3034248.65
Total liabilities 548545818.15 582923046.90
Owner's equity:
Share capital 235351550.00 235351550.00
Other equity instruments
Including: preferred stock
Perpetual bonds
Capital reserve 2077968165.85 2080952283.49
Less: treasury stock 20187362.06 44078890.10
Other comprehensive income
Special reserve
Surplus reserves 67367334.94 67367334.94
Undistributed profits 283431371.03 363165101.68
Total owners' equity 2643931059.76 2702757380.01
Total liabilities and owner's equity 3192476877.91 3285680426.91
3. Consolidated Income Statement
Unit: RMB
Item Half Year of 2026 Half Year of 2025
I. Total operating revenue 1098427084.69 929258759.50
Including: operating revenue 1098427084.69 929258759.50
Interest income
Premium earned
Revenue from handling fees
and commissions
II. Total operating cost 972189871.06 810404715.03
Including: operating cost 541469700.14 454165899.16
Interest expense
Expenses from handling fee
and commissions
Surrender value
Net payments for insurance
claims
Net provisions for policy
reserves
Policy dividend expenses
Reinsurance expenses
Taxes and surcharges 11844915.69 12100939.14
Selling expenses 238548331.91 209649741.81
Administrative expenses 73446857.65 57337406.90
R&D expenses 88821794.44 104067183.21
Financial expenses 18058271.23 -26916455.19
Including: interest expenses 1700552.10 1322384.38
Interest income 13227169.06 18677549.88
Plus: other income 3474131.42 6937337.84
Investment income (loss
898614.73 2885464.65
expressed with "-")
Including: investment
-1682929.06 1265201.27
income in associates and joint ventures
Gains from
derecognition of financial assets
measured at amortized cost
Gains from foreign exchange
(loss expressed with "-")
Gains from net exposure hedging
(loss expressed with "-")
Gains from changes in fair value
49212654.08 7977831.68
(loss expressed with "-")
Losses from credit impairment
-1492369.49 -3853667.85
(loss expressed with "-")
Losses from impairment of assets
-48556226.49 -9329887.04
(loss expressed with "-")
Gains from disposal of assets
41981.41 141757.67
(loss expressed with "-")
III. Operating profit (loss expressed with
129815999.29 123612881.42
"-")
Plus: non-operating revenue 373285.67 299936.36
Less: Non-operating expenditure 2826379.06 1737567.87
IV. Total profit (loss expressed with "-") 127362905.90 122175249.91
Less: income tax expenses 19531318.60 10696749.06
V. Net profit (loss expressed with "-") 107831587.30 111478500.85
(I) Classification by business
continuity
1. Net profit from continuing
107831587.30 111478500.85
operations (net loss expressed with "-")
2. Net profit from discontinued
operations (net loss expressed with "-")
(II) Classification by ownership
1. Net profit attributable to
shareholders of the parent company (net 79664695.17 93235556.28
loss expressed with "-")
2. Minority shareholders' profit and
28166892.13 18242944.57
loss (net loss expressed with "-")
VI. Other comprehensive income - after
-49794497.73 13551797.73
tax
Net of tax of other comprehensive
income attributable to the owner of the -49029630.31 11090133.24
parent company
(I) 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
(II) Other comprehensive income
-49029630.31 11090133.24
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
-49029630.31 11090133.24
foreign currency financial statements
7. Others
After-tax net amount of other
comprehensive income attributable to the -764867.42 2461664.49
minority shareholders
VII. Total comprehensive income 58037089.57 125030298.58
Total comprehensive income
attributable to owners of the parent 30635064.86 104325689.52
company
Total comprehensive income
27402024.71 20704609.06
attributable to minority shareholders
VIII. Earnings per share:
(I) Basic earnings per share 0.3399 0.3999
(II) Diluted earnings per share 0.3370 0.3996
In the event of business merger under common 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 the accounting work: Wang Youwu Person in charge of accounting institution:
Xu Ping
4. Parent Company's Income Statement
Unit: RMB
Item Half Year of 2026 Half Year of 2025
I. Operating revenue 322324528.49 399608284.19
Less: operating cost 237275250.83 274399587.13
Taxes and surcharges 1970054.45 1725090.87
Selling expenses 46728850.84 63003265.18
Administrative expenses 18363657.46 23491068.76
R&D expenses 25414557.29 39065003.66
Financial expenses 8747320.99 -11249381.24
Including: interest expenses 79189.71 151110.67
Interest income 4543935.55 9565323.02
Plus: other income 287755.18 1698822.06
Investment income (loss
8208849.36 20211693.27
expressed with "-")
Including: investment income
-1144067.36 44575.58
in associates and joint ventures
Gains from
derecognition of financial assets
measured at amortized cost
Gains from net exposure hedging
(loss expressed with "-")
Gains from changes in fair value 45734393.39 2501228.42
(loss expressed with "-")
Losses from credit impairment
795019.10 -7683700.45
(loss expressed with "-")
Losses from impairment of assets
-4632725.83 -868834.34
(loss expressed with "-")
Gains from disposal of assets
0.00 -48176.51
(loss expressed with "-")
II. Operating profit (loss expressed with
34218127.83 24984682.28
"-")
Plus: non-operating revenue 28186.94 134172.76
Less: Non-operating expenditure 233288.06 408366.76
III. Total profits (total losses expressed
34013026.71 24710488.28
with "-")
Less: income tax expenses 961659.44 -2845223.05
IV. Net profit (net loss expressed with "-
33051367.27 27555711.33
")
(I) Net profit from continuing
33051367.27 27555711.33
operations (net loss expressed with "-")
(II) Net profit from discontinued
operations (net loss expressed with "-")
V. Net of tax of other comprehensive
income
(I) 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
(II) 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 33051367.27 27555711.33
VII. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share
5. Consolidated Cash Flow Statement
Unit: RMB
Item Half Year of 2026 Half Year of 2025
I. Cash flows from operating activities:
Cash received from sale of goods and
1259216899.84 972536504.27
rendering of services
Net increase in deposits from
customers and deposits in banks and
other financial institutions
Net increase in borrowings from the
Central Bank
Net increase in borrowings from banks
and other financial institutions
Cash received from receiving
insurance premiums of original insurance
contracts
Net cash received from reinsurance
business
Net increase in deposits and
investments from policyholders
Cash received from interest handling
fees and commissions
Net increase in borrowings from banks
and other financial institutions
Net capital increase in repurchase
business
Net cash received from vicariously
traded securities
Refund of taxes and surcharges 63206358.10 54248297.48
Cash received from other operating
65049102.97 79222721.97
activities
Subtotal of cash inflows from operating
1387472360.91 1106007523.72
activities
Cash paid for purchase of goods and
782873895.66 422815870.66
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 288454019.64 269063841.06
Payments of all types of taxes 54477884.64 40252008.01
Other cash payments relating to
211174293.89 204692650.43
operating activities
Subtotal of cash outflows from operating
1336980093.83 936824370.16
activities
Net cash flows from operating activities 50492267.08 169183153.56
II. Cash flows from investing activities:
Cash received from disinvestment 1723239510.07 934811362.57
Cash received from investment
11330066.92 4289144.22
income
Net cash received from disposal of
fixed assets intangible assets and other 49849.16 81406.35
long-term assets
Net cash received from disposal of
subsidiaries and other business units
Cash received from other investing
285803.23
activities
Subtotal of cash inflows from investing
1734619426.15 939467716.37
activities
Cash paid to acquire and construct
fixed assets intangible assets and other 73337456.41 79189512.48
long-term assets
Cash paid for investments 1566231842.32 1315253169.16
Net increase in pledge loans
Net cash paid to acquire subsidiaries
38391065.79
and other business units
Cash paid for other investing activities
Subtotal of cash outflows from investing
1677960364.52 1394442681.64
activities
Net cash flows from investing activities 56659061.63 -454974965.27
III. Cash flows from financing activities:
Cash received from investors 1410368.98 981714.84
Including: Cash received from
investment by minority shareholders of 1410368.98 981714.84
subsidiaries
Cash received from borrowings
Cash received from other financing
98468440.30 89309900.16
activities
Subtotal of cash inflows from financing
99878809.28 90291615.00
activities
Cash paid for debt repayments 6717699.46 524174.15
Cash paid for distribution of dividends
121622980.48 104321613.66
and profits or payment of interest
Including: dividends and profits paid
9139115.65 8902314.29
to minority shareholders by subsidiaries
Cash paid for other financing activities 68733634.76 15293492.76
Subtotal of cash outflows from financing
197074314.70 120139280.57
activities
Net cash flows from financing activities -97195505.42 -29847665.57
IV. Effect of exchange rate changes on
-33096796.70 5463575.55
cash and cash equivalents
V. Net increase in cash and cash
-23140973.41 -310175901.73
equivalents
Plus: beginning balance of cash and 1085719132.48 1214344327.43
cash equivalents
VI. Closing balance of cash and cash
1062578159.07 904168425.70
equivalents
6. Cash Flow Statement of Parent Company
Unit: RMB
Item Half Year of 2026 Half Year of 2025
I. Cash flows from operating activities:
Cash received from sale of goods and
274320553.21 415337253.75
rendering of services
Refund of taxes and surcharges 10072381.12 25222229.18
Cash received from other operating
126525508.47 72727351.01
activities
Subtotal of cash inflows from operating
410918442.80 513286833.94
activities
Cash paid for purchase of goods and
131119555.79 170338570.68
rendering of services
Cash paid to and for employees 55628228.78 77341779.52
Payments of all types of taxes 6492900.09 6065323.29
Other cash payments relating to
89605649.61 132304972.21
operating activities
Subtotal of cash outflows from operating
282846334.27 386050645.70
activities
Net cash flows from operating activities 128072108.53 127236188.24
II. Cash flows from investing activities:
Cash received from disinvestment 976700000.00 681413782.78
Cash received from investment
5575353.60 1915897.25
income
Net cash received from disposal of
fixed assets intangible assets and other 315053.64 1974486.44
long-term assets
Net cash received from disposal of
subsidiaries and other business units
Cash received from other investing
285803.23
activities
Subtotal of cash inflows from investing
982590407.24 685589969.70
activities
Cash paid to acquire and construct
fixed assets intangible assets and other 8155878.22 1297573.72
long-term assets
Cash paid for investments 964764752.25 1081583640.72
Net cash paid to acquire subsidiaries
38391065.79
and other business units
Cash paid for other investing activities
Subtotal of cash outflows from investing
1011311696.26 1082881214.44
activities
Net cash flows from investing activities -28721289.02 -397291244.74
III. Cash flows from financing activities:
Cash received from investors
Cash received from borrowings
Cash received from other financing
7798210.52 14757850.00
activities
Subtotal of cash inflows from financing 7798210.52 14757850.00
activities
Cash paid for debt repayments
Cash paid for distribution of dividends
112469721.22 95340047.50
and profits or payment of interest
Cash paid for other financing activities 1992428.13 3153682.13
Subtotal of cash outflows from financing
114462149.35 98493729.63
activities
Net cash flows from financing activities -106663938.83 -83735879.63
IV. Effect of exchange rate changes on
-5628272.93 1588106.03
cash and cash equivalents
V. Net increase in cash and cash
-12941392.25 -352202830.10
equivalents
Plus: beginning balance of cash and
352098551.73 688934703.03
cash equivalents
VI. Closing balance of cash and cash
339157159.48 336731872.93
equivalents
7. Consolidated Statement of Changes in Equity
Amount in current period
Unit: RMB
Half Year of 2026
Equity attributable to owners of the parent company
Item Other equity instruments Other General
Less: treasury Special Minority interests Total owners' equity
Share capital Preferred Perpetual Capital reserve comprehensive Surplus reserves risk Undistributed profits Others Subtotal
Others stock reserve
stock bonds income reserves
I. Ending balance of previous
235351550.00 2068821395.02 44078890.10 39799829.67 67458631.43 1114135904.69 3481488420.71 184093168.32 3665581589.03
year
Plus: changes in
accounting policies
Corrections of prior
period errors
Others
II. Beginning balance of this
235351550.00 2068821395.02 44078890.10 39799829.67 67458631.43 1114135904.69 3481488420.71 184093168.32 3665581589.03
year
III. Amount increase/decrease
of the current period -915426.31 -23891528.04 -49029630.31 -33120402.75 -59173931.33 19673036.39 -39500894.94
(decrease expressed with "-")
(I) Total comprehensive 27402024.71 58037089.57
-49029630.31 79664695.17 30635064.86
income
(II) Capital invested and
-915426.31 -23891528.04 22976101.73 1410368.98 24386470.71
reduced by the owners
1. Common stock contributed
1410368.98 1410368.98
by owners
2. Capital invested by holders
of other equity instruments
3. Amount of share-based
10917606.21 10917606.21 10917606.21
payments recognized in
equity
4. Others -11833032.52 -23891528.04 12058495.52 12058495.52
(III) Profit distribution -112785097.92 -112785097.92 -9139357.30 -121924455.22
1. Surplus reserves
withdrawal
2. Withdrawal of general risk
preparation
3. Distribution to owners (or
-112785097.92 -112785097.92 -9139357.30 -121924455.22
shareholders)
4. Others
(IV) Internal carryover of
owner's equity
1. Capital reserve transfer to
capital (or equity capital)
2. Surplus reserve transfer to
capital (or equity capital)
3. Surplus reserve offsetting
losses
4. Changes in defined benefit
plans carried forward to
retained earnings
5. Retained earnings carried
forward from other
comprehensive income
6. Others
(V) Special reserve
1. Withdrawal in this period
2. Use in the current period
(VI) Others
IV. Ending balance of current
235351550.00 2067905968.71 20187362.06 -9229800.64 67458631.43 1081015501.94 3422314489.38 203766204.71 3626080694.09
period
Amount of previous year
Unit: RMB
Half Year of 2025
Equity attributable to owners of the parent company
Item Other equity instruments Other Minority Total owners'
Special Surplus General risk Undistributed
Share capital Preferred Perpetual Capital reserve Less: treasury stock comprehensive Others Subtotal
interests equity
Others reserve reserves reserves profits
stock bonds income
I. Ending balance of previous year 196312325.00 2107323633.23 59683228.10 41914807.74 64002687.03 1000479479.18 3350349704.08 27650759.04 3378000463.12
Plus: changes in accounting policies
Corrections of prior period errors
Others
II. Beginning balance of this year 196312325.00 2107323633.23 59683228.10 41914807.74 64002687.03 1000479479.18 3350349704.08 27650759.04 3378000463.12
III. Amount increase/decrease of the current period
39039225.00 -52238325.78 -15604338.00 11090133.24 -4362506.22 9132864.24 16499818.15 25632682.39
(decrease expressed with "-")
(I) Total comprehensive income 11090133.24 93235556.28 104325689.52 20704609.06 125030298.58
(II) Capital invested and reduced by the owners -13199100.78 -15604338.00 2405237.22 4697523.38 7102760.60
1. Common stock contributed by owners 981714.84 981714.84
2. Capital invested by holders of other equity
instruments
3. Amount of share-based payments recognized in
5569086.64 5569086.64 4216.32 5573302.96
equity
4. Others -18768187.42 -15604338.00 -3163849.42 3711592.22 547742.80
(III) Profit distribution -97598062.50 -97598062.50 -8902314.29 -106500376.79
1. Surplus reserves withdrawal
2. Withdrawal of general risk preparation
3. Distribution to owners (or shareholders) -97598062.50 -97598062.50 -8902314.29 -106500376.79
4. Others
(IV) Internal carryover of owner's equity 39039225.00 -39039225.00
1. Capital reserve transfer to capital (or equity 39039225.00 -39039225.00
capital)
2. Surplus reserve transfer to capital (or equity
capital)
3. Surplus reserve offsetting losses
4. Changes in defined benefit plans carried forward
to retained earnings
5. Retained earnings carried forward from other
comprehensive income
6. Others
(V) Special reserve
1. Withdrawal in this period
2. Use in the current period
(VI) Others
IV. Ending balance of current period 235351550.00 2055085307.45 44078890.10 53004940.98 64002687.03 996116972.96 3359482568.32 44150577.19 3403633145.51
8. Statement of Changes in Equity of the Parent Company
Amount in current period
Unit: RMB
Half Year of 2026
Other equity instruments Other
Item Less: treasury Special Surplus Undistributed Total owners'
Share capital Preferred Perpetual Capital reserve comprehensive Others
Others stock reserve reserves profits equity
stock bonds income
I. Ending balance of
235351550.00 2080952283.49 44078890.10 67367334.94 363165101.68 2702757380.01
previous year
Plus: changes in
accounting policies
Corrections
of prior period errors
Others
II. Beginning balance
235351550.00 2080952283.49 44078890.10 67367334.94 363165101.68 2702757380.01
of this year
III. Amount
increase/decrease of
the current period -2984117.64 -23891528.04 -79733730.65 -58826320.25
(decrease expressed
with "-")
(I) Total
comprehensive 33051367.27 33051367.27
income
(II) Capital invested
and reduced by the -2984117.64 -23891528.04 20907410.40
owners
1. Common stock
0.00 0.00 0.00
contributed by owners
2. Capital invested by
holders of other
equity instruments
3. Amount of share-
based payments 8848914.88 8848914.88
recognized in equity
4. Others -11833032.52 -23891528.04 12058495.52
(III) Profit
-112785097.92 -112785097.92
distribution
1. Surplus reserves
withdrawal
2. Distribution to
owners (or -112785097.92 -112785097.92
shareholders)
3. Others 0.00
(IV) Internal
carryover of owner's
equity
1. Capital reserve
transfer to capital (or
equity capital)
2. Surplus reserve
transfer to capital (or
equity capital)
3. Surplus reserve
offsetting losses
4. Changes in defined
benefit plans carried
forward to retained
earnings
5. Retained earnings
carried forward from
other comprehensive
income
6. Others
(V) Special reserve
1. Withdrawal in this
period
2. Use in the current
period
(VI) Others 0.00
IV. Ending balance of
235351550.00 2077968165.85 20187362.06 67367334.94 283431371.03 2643931059.76
current period
Amount of previous period
Unit: RMB
Half Year of 2025
Other equity instruments Other
Item Less: treasury Special Surplus Undistributed Total owners'
Share capital Preferred Perpetual Capital reserve comprehensive Others
Others stock reserve reserves profits equity
stock bonds income
I. Ending balance of
196312325.00 2116684780.13 59683228.10 63911390.54 429659664.62 2746884932.19
previous year
Plus: changes in
accounting policies
Corrections
of prior period errors
Others
II. Beginning balance
196312325.00 2116684780.13 59683228.10 63911390.54 429659664.62 2746884932.19
of this year
III. Amount
increase/decrease of
the current period 39039225.00 -48558685.77 -15604338.00 -70042351.17 -63957473.94
(decrease expressed
with "-")
(I) Total
comprehensive 27555711.33 27555711.33
income
(II) Capital invested
and reduced by the -9519460.77 -15604338.00 6084877.23
owners
1. Common stock
contributed by owners
2. Capital invested by
holders of other
equity instruments
3. Amount of share-
based payments 5527977.23 5527977.23
recognized in equity
4. Others -15047438.00 -15604338.00 556900.00
(III) Profit
-97598062.50 -97598062.50
distribution
1. Surplus reserves
withdrawal
2. Distribution to
owners (or -97598062.50 -97598062.50
shareholders)
3. Others
(IV) Internal
carryover of owner's 39039225.00 -39039225.00
equity
1. Capital reserve
transfer to capital (or 39039225.00 -39039225.00
equity capital)
2. Surplus reserve
transfer to capital (or
equity capital)
3. Surplus reserve
offsetting losses
4. Changes in defined
benefit plans carried
forward to retained
earnings
5. Retained earnings
carried forward from
other comprehensive
income
6. Others
(V) Special reserve
1. Withdrawal in this
period
2. Use in the current
period
(VI) Others
IV. Ending balance of
235351550.00 2068126094.36 44078890.10 63911390.54 359617313.45 2682927458.25
current period
III. Basic Information of the Company
ZKTECO CO. LTD. (hereinafter referred to as "the Company" or "Company") formerly known as Dongguan Zhongkong
Electronic Technology Co. Ltd. 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. Approved by the Dongguan
Administration for Market Regulation the Company obtained the "Business License" with a unified social credit code of
914419006698651618 on July 14 2016. The Company was listed on the Shenzhen Stock Exchange on August 17 2022 and currently
holds a business license with a unified social credit code of 914419006698651618.As of June 30 2026 the Company has issued a total of 235351550 shares of share capital after years of converting into share
capital and issuing new shares with a registered capital of RMB 235351550. The registered address is: No. 32 Pingshan Industrial
Road Tangxia Town Dongguan Guangdong China. The parent company is Shenzhen ZKTeco Times Investment Co. Ltd. and the
actual controller is Che Quanhong.The Company belongs to the computer communication and other electronic equipment manufacturing industries mainly engaged
in the R&D design production sales and services of computer vision and biometric technology and related products.IV. Preparation Basis for Financial Statements
1. Basis of preparation
The Financial Statements of the Company are prepared on the basis of the going-concern assumption in accordance with actual
transactions and events and complying with the Accounting Standards for Enterprises - Basic Standards various specific accounting
standards application guides of accounting standards for business enterprises interpretation of accounting standards for business
enterprises and disclosure rules of other relevant provisions (hereinafter refer to "Accounting Standards for Enterprises") issued by the
Ministry of Finance as well as the disclosure rules of the "Preparation Rules for Information Disclosure by Companies Offering
Securities to the Public No. 15 - General Provisions on Financial Reports (revised in 2023)" issued by the China Securities Regulatory
Commission.
2. Going concern
The Company has no events or circumstances that cause material doubts about the going-concern assumption within 12 months from
the end of the reporting period.V. Important Accounting Policies and Estimates
Tips of specific accounting policies and estimates:
The Company and its subsidiaries have based on their actual production and operation characteristics and in accordance with the
relevant provisions of the Accounting Standards for Enterprises designated several specific accounting policies and accounting
estimates for transactions and events such as revenue recognition depreciation of fixed assets and amortization of intangible assets.For specific accounting policies please refer to the relevant explanations in Section V(34) Section V(23) Section V(26) etc. of this
chapter.1. Declaration of compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company meet the requirements of the Accounting Standards for Enterprises and
authentically and completely reflect financial position business performance cash flow and other relative information on the Company.
2. Accounting period
The accounting year shall begin on January 1 and end on December 31 on the Gregorian calendar.
3. Operating cycle
The normal operating cycle refers to the period from the time when the Company purchases the assets for processing to the time when
the cash or cash equivalents are realized. The Company takes 12 months as its operating cycle and adopts it as its liquidity division
criteria for assets and liabilities.
4. Recording currency
Renminbi is adopted as the recording currency of the Company and the domestic subsidiaries. Overseas subsidiaries of the Company
use the currency of the main economic environment in which they operate as the recording currency and convert it into RMB when
preparing financial statements.the Company's financial statements are prepared by using RMB as currency.
5. Method for recognizing significance criteria and selection basis
□Applicable □ Not applicable
Item Significance criteria
The amount of individual construction in progress exceeds 1%
Important construction in progress
of the total assets
The amount of individual receivables exceeds 1% of the total
Receivables with individual provision for significant items
assets
Other important payables with an aging of over one year Other individual payables exceeding 1% of total assets
The amount of individual accounts payable exceeds 1% of the
Important accounts payable with an aging of over one year
total assets
Important partly-owned subsidiaries The proportion of total revenue and total profit exceeds 10%
The amount of individual prepayments exceeds 1% of the total
Important prepayments with an aging of over one year
assets
The amount of individual contract liabilities exceeds 1% of the
Important contract liabilities with an aging of over one year
total assets
The book value of long-term equity investment exceeds 5% of
Important joint ventures or associates
the total assets
The amount of cash flows from individual investing activities
Significant cash flows from investing activities
exceeds 1% of the total assets
6. Accounting treatment methods of business merger under the common control and merger under
different control
Business combination refers to the transactions or events which merger two or more than two separate businesses into one
reporting entity. Business merger involves entities under common control and not under common control.1. Accounting treatment methods for business merger under common control
The enterprises involved in the combination are subject to the same party or ultimate parties before and after the merger
meanwhile the control is not temporary this business combination is under the same control.In a business combination the assets and liabilities of the combined party except for adjustments made due to differences in
accounting policies shall be measured at their book values as reflected in the consolidated financial statements of the ultimate controller
on the combination date. The difference between the share of the book value of the owner's equity of the combined party in the
consolidated financial statements of the ultimate controller and the book value of the consideration paid for the consolidation (or the
total par value of the shares issued) shall be adjusted to the capital reserve; if the capital reserve is insufficient to offset the retained
earnings shall be adjusted.When a business combination under common control is achieved through multiple transactions in steps the difference between
the sum of the book value of the investment held before the combination and the book value of the new consideration paid on the
combination date and the book value of the net assets acquired in the combination shall be adjusted to the capital reserve (share
premium). If the capital reserve is insufficient to offset the difference the retained earnings shall be adjusted. For the long-term equity
investment held by the combining party before obtaining control of the combined party the gains or losses other comprehensive
income and other changes in owners' equity are recognized from the later date of the date on which the original equity was obtained
and the date on which both the combining party and the combined party were under the ultimate control of the same party until the
combination date. The opening retained earnings or current profits and losses of the comparative reporting period shall be offset
respectively except for other comprehensive income from the remeasurement of the net liability or net asset of the defined benefit plan
of the investee.
2. Accounting treatment methods for business merger not under common control
The enterprises involved in the combination are not subject to the same party or ultimate parties before and after the merger this
business combination is not under the same control.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.If on the date of acquisition or at the end of the consolidation period due to various factors it is impossible to reasonably
determine the fair value of each asset paid as the consolidation consideration or the fair value of each identifiable asset and liability
obtained from the acquiree in the consolidation the Company will account for the business combination based on temporarily
determined values at the end of the consolidation period. If further information is obtained within 12 months from the date of acquisition
indicating that the originally provisionally determined value needs to be adjusted it shall be treated as if it occurred on the date of
acquisition and retroactive adjustments shall be made. At the same time relevant adjustments shall be made to the comparative
statement information provided on the basis of the provisional value. Adjustments to the cost of the business combination or the value
of identifiable assets and liabilities acquired in the combination made after 12 months from the date of acquisition shall be handled in
accordance with the principles set forth in "Accounting Standards for Enterprises No. 28 - Explanation of Changes in Accounting
Policies Accounting Estimates and Corrections of Errors".The deductible temporary differences of the acquiree obtained by the Company in a business combination that do not meet the
recognition conditions for deferred tax assets on the date of acquisition shall not be recognized. Within 12 months after the date of
acquisition where the temporary deductible difference of the acquiree obtained by the acquirer was not recognized due to inconformity
with the recognition conditions of deferred tax assets if new or further information can prove the existence of related information at
the date of acquisition within 12 months after the date of acquisition and the expected economic benefits of the acquiree on the date of
acquisition arising from the temporary deductible difference can be achieved relevant deferred tax assets can be recognized and the
goodwill shall be reduced at the same time. If the goodwill is insufficient for offset the difference shall be recognized as the current
profits and losses. Except for above situations the deferred tax assets recognized to be related to enterprise merger shall be recorded
into the current profits and losses.For business merger not under common control that is achieved through multiple transactions in steps it shall be determined in
accordance with the Accounting Standards for Enterprises whether such multiple transactions constitute a "package deal". The terms
conditions and economic impact of multiple transactions meet one or more of the following situations which typically indicate that the
multiple transaction matters should 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
one transaction depends on the occurrence of at least another transaction; (4) A separate transaction is not economical but is economical
when being considered together with other transactions.If the transaction belongs to a "package deal" each transaction shall be treated as a transaction to obtain control for accounting
treatment. If the transaction is not a "package deal" the equity in the acquiree held before the date of acquisition in the consolidated
financial statements shall be remeasured at its fair value as of the date of acquisition and the difference between the fair value and the
book value shall be recognized in the current investment income or retained earnings. The portion of equity in the acquiree held before
the date of acquisition involving other comprehensive income and other changes in the owner' equity shall be converted into the current
income on the date of acquisition except for other comprehensive income from the remeasurement of the net liability or net asset of
the defined benefit plan of the investee.
3. Treatment of transaction costs in business combinations
The agency fees and other related administrative expenses of the auditing legal services assessment consulting incurred for the
business combination shall be included in current profits and losses when incurred. The transaction costs of the equity securities or
debt securities as consideration for the merger shall be included in the initial recognition amount of the equity securities or debt
securities.
7. Judgment criteria for control and preparation methods for consolidated financial statements
1. Judgment criteria for control and consolidation scope
The scope of consolidation of the consolidated financial statement is determined by whether the Company has the power to
control over other entities. Control refers to the control power of the Company over the investee. Through the control the Company
can obtain variable return by participating in relevant activities of the investee and can affect the return amount by using the control
power over the investee. The consolidation scope includes the Company and its subsidiaries. A subsidiary refers to an entity (including
enterprises separable parts of an investee structured entities etc.) that is controlled by the Company.
2. Preparation methods for consolidated statements
The Company prepares consolidated statements based on the financial statements of itself and its subsidiaries and other relevant
information. The Company prepares consolidated financial statements treating the entire enterprise group as one accounting entity. In
accordance with the recognition measurement and presentation requirements of relevant Accounting Standards for Enterprises and
in accordance with unified accounting policies we reflect the overall financial position operating results and cash flows of the
Company.When consolidated financial statements we offset the impact of internal transactions between the Company and its subsidiaries as
well as between subsidiaries on the consolidated balance sheet consolidated income statement consolidated cash flow statement
and the consolidated statement of changes in equity. If the recognition of the same transaction from the perspective of the
consolidated financial statements of the enterprise group is different from that of the accounting entity of the Company or its
subsidiaries the transaction shall be adjusted from the perspective of the enterprise group.During the reporting period subsidiaries and businesses added due to the merger of enterprises under the same control are treated
as having been included in the Company's consolidation scope since the date they were under the control of the ultimate controller.Their operating results and cash flows since that date are respectively incorporated into the consolidated income statement and
consolidated cash flow statement. During the reporting period the opening balances of the consolidated balance sheet are adjusted
simultaneously and the relevant items of the comparative statements are also adjusted. This is treated as if the consolidated statement
entity had existed since the time when the ultimate controller began to exercise control.In the current period if a subsidiary is added due to a business merger not under common control the opening balance of the
consolidated balance sheet shall not be adjusted. Adjustments shall be made to the financial statements according to the fair values of
the identifiable assets on the date of acquisition. The income expenses and profits of subsidiaries from the date of acquisition to the
end of the reporting period are incorporated into the consolidated income statement; the cash flows of subsidiaries from the date of
acquisition to the end of the reporting period are included in the consolidated cash flow statement.The minority shareholders' equity profit or loss and current comprehensive income of subsidiaries shall be separately presented
under the owner's equity items in the consolidated balance sheet the net profit item in the consolidated income statement and the total
comprehensive income item respectively. If the current losses shared by a minority shareholder of a subsidiary exceed the balances
arising from the shares enjoyed by the minority shareholder in the owners' equity of the subsidiary at the beginning of the period non-
controlling interests will be offset accordingly.
3. Partial disposal of subsidiary equity in the acquisition of minority shareholders' equity without loss of control
For the difference between the newly increased long-term equity investment from the acquisition of minority equity of the
Company and the share of net assets in subsidiaries calculated constantly from the date of acquisition or the combination date as per
the newly increased equity ratio as well as the difference between the disposal price obtained from the partial disposal of equity
investment in subsidiaries without loss of control and the share of net assets continuously calculated by subsidiaries from the date of
acquisition or the combination date corresponding to the disposal of long-term equity investment shall be adjusted for the share
premium in the capital reserve in the consolidated balance sheet. If the share premium in the capital reserve is insufficient to offset the
retained earnings shall be adjusted.
4. Disposal of subsidiary equity with loss of control
In the current period if the Company disposed of a subsidiary the income expenses and profits of the subsidiary from the
beginning of the period to the disposal date were included in the consolidated income statement; the cash flow of the subsidiary from
the beginning of the period to the disposal date is included in the consolidated cash flow statement. In the event the Company loses the
right of control over the original subsidiary due to disposal of partial equity investment or other reasons the remaining equity
investment shall be re-measured at the fair value on the date of loss of control. The difference by using the sum of value received from
disposal of equity and fair value of the residual equity to deduct the difference between the share of net assets and the sum of goodwill
continually counted from the date of acquisition of the original subsidiary (calculated as per original share proportion) shall be recorded
into the investment income of the current period in which the control right is lost. While losing of the control right other comprehensive
income related to the equity investment of the original subsidiary shall be subject to the accounting treatment (i.e. except for the changes
caused by the original subsidiary remeasuring the net liabilities or net assets outside the defined benefit plan the rest shall be converted
to the current investment income together) by adopting the same basis used by acquiree for direct disposal of relevant assets or liabilities.Thereafter the follow-up measurement for the remaining equity in this portion shall be carried out according to the Accounting
Standards for Enterprises No. 2 - Long-term Equity Investments or Accounting Standards for Business Enterprises No. 22 -
Recognition and Measurement of Financial Instruments and other related provisions. Refer to "Main Accounting Policies and
Accounting Estimates - Long-term Equity Investments" or "Main Accounting Policies and Accounting Estimates - Financial
Instruments" for details.
5. Treatment of step-by-step disposal of equity investment in subsidiaries until control is lost
Where the Company disposes the equity of the subsidiaries through several transactions by steps until it loses the right of control
it is necessary to distinguish whether all transactions for disposal of the equity of the subsidiaries and losing the right of control are the
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.For these transactions not belonging to package deal the accounting treatment for each transaction shall be conducted in
accordance with the applicable principles of "Disposal of Partial Long-Term Equity Investment to Subsidiary under the Condition of
Not Losing Control Right" and "Losing Control Right over the Original Subsidiary due to Disposal of Partial Equity Investment or
Other Reasons" (see previous paragraph for details). That is before losing control the difference between each disposal price and the
share of the book value of the net asset of the subsidiary continuously calculated from the date of acquisition corresponding to the
disposed investment shall be treated as an equity transaction and recorded in capital reserve (share premium). It shall not be transferred
to the profit or loss of the period when control is lost.
8. Classification of joint venture arrangement and accountant treatment method of joint operation
A joint venture arrangement is an arrangement jointly controlled by two or more participants. The Company classifies joint
venture arrangements as joint operations or joint ventures based on the rights and obligations it enjoys and assumes in the joint venture
arrangements.A joint venture refers to a joint venture arrangement in which the Company has rights only to the net assets of the arrangement.The Company accounts for its investment in the joint venture using the equity method in accordance with the accounting policies for
"Long-term equity investment calculated by using the equity method" as described in the section "Main Accounting Policies and
Accounting Estimates - Long-term Equity Investments".Joint operation refers to the joint venture arrangement in which the Company enjoys the assets related to the arrangement and
undertakes the liabilities related to the arrangement. The Company confirms the following items related to the share of interests in joint
operations and conducts accounting treatment in accordance with the relevant Accounting Standards for Enterprises:
1. The Company shall recognize the assets held alone and the jointly held assets according to the Company's share;
2. The Company shall recognize the liabilities borne alone and the jointly borne assets according to the Company's share;
3. The Company shall recognize the income generated from the sale of shares in joint operation;
4. The Company shall recognize the income generated from the sale of joint operation output according to the Company's share;
5. The Company shall recognize the expenses incurred alone and the expenses incurred from joint operation according to the
Company's share.When the Company as a joint venture contributes or sells assets to a joint operation (such assets do not constitute a business the same
below) or purchases assets from a joint operation before such assets are sold to a third party the Company only recognizes the portion
of the gains or losses arising from such transactions that belong to the other participating parties of the joint operation. In the event that
such assets suffer losses from impairment of assets in accordance with the provisions of "Accounting Standards for Enterprises No. 8
- Asset Impairment" and other relevant regulations for the situation where the Company invests or sells assets to a joint operation the
Company shall fully recognize the loss. For the situation where the Company purchases assets from the joint operation the Company
recognizes the loss based on its share of the undertaking.
9. Recognition criteria of cash and cash equivalents
When preparing the cash flow statement the Company recognizes the cash on hand and deposits that can be used for payment at any
time as cash. Cash equivalents refer to investments held by enterprises with short term (generally due within 3 months from the date
of acquisition) strong liquidity easy conversion to a known amount of cash and small risk of value change.10. Foreign currency transactions and foreign currency statement translation
1. Foreign currency transaction
For foreign currency transactions that occur the spot exchange rate on the transaction date (usually referring to the middle rate
of the foreign exchange rate announced by the People's Bank of China on that day the same below) is used to convert them into the
recording currency for accounting purposes. However for foreign currency exchange transactions or transactions involving foreign
currency exchange that occur within the Company they should be converted into the amount of the recording currency based on the
actual exchange rate adopted.
2. Translation methods of foreign currency monetary items and non-monetary items
The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange
differences resulting from the translation shall be included into the current profits and losses except that: (1) the exchange difference
arising from special borrowing in foreign currency related to the purchase of assets that meet the capitalization conditions shall be
handled in accordance with the principle of borrowing cost capitalization; (2) the exchange differences of hedging instruments used
for effective hedging of net investments in foreign operations (such differences are included in other comprehensive income and are
recognized in current profits and losses only when the net investment is disposed of); and (3) the exchange difference arising from
changes in the book balance of foreign currency monetary items measured at fair value with the changes included in other
comprehensive income other than amortized costs shall be included in other comprehensive income.Non-monetary items denominated in foreign currencies that are measured at historical cost shall still be measured at the functional
currency amount translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary items measured at
fair value shall be translated at the spot exchange rate on the date when the fair value is determined. After conversion the difference
between the amount of recording currency and the amount of the original recording currency shall be included in current profits and
losses or other comprehensive income.
3. Foreign currency statement translation
The asset items and liability items in the balance sheet shall be translated at the exchange rate of the balance sheet date; the
owner's equity items except for "undistributed profits" shall be translated at the spot rate when incurred; the income and expense items
in the Income Statement are translated at the average spot exchange rate; the undistributed profits at the beginning of the year are the
undistributed profits at the end of the previous year after conversion; the undistributed profits at the end of the year are calculated and
presented based on the converted profit distribution items; 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. When disposing
of overseas operation and losing the control it is required to transfer the differences in foreign currency statement translation listed
under the shareholders' equity in the balance sheet and related to the overseas operation completely or as per the proportion of disposal
of such overseas operation into the current profits and losses. If the reduction of the proportion of interests held overseas but not losing
control over overseas operations is resulted from the disposing of partial equity investment or other reasons the translation balance of
foreign currency financial statements related to such overseas operations shall be vested in minority interests and will not be transferred
to current profits and losses.The cash flow statement is translated at the average exchange rate of the period in which the cash flows occur. The impact of
exchange rate changes on cash is taken as a reconciliation item and the item "impact of exchange rate changes on cash and cash
equivalents" is separately presented in the Statement of Cash Flows.
11. Financial instruments
Financial instruments refer to contracts that create a financial asset for one party and a financial liability or an equity instrument
for another party. Financial instruments include financial assets financial liabilities and equity instruments.
1. Classification recognition basis and measurement method of financial instruments
(1) Recognition and initial measurement of financial assets and financial liabilities
A financial asset or financial liability is recognized when the Company becomes a party to a financial instrument contract. For the
purchase of financial assets in the conventional way the Company recognizes the assets to be received and the liabilities to be assumed
on the trading day.Financial assets and financial liabilities are measured at fair value at initial recognition. For financial assets measured at fair value and
whose changes are included in the current profits and losses transaction costs shall be directly included in current profits and losses.For financial assets and financial liabilities classified into other categories transaction costs shall be included into the initial recognized
amounts. For accounts receivable that do not have a significant financing component at initial recognition they are initially measured
at the transaction price determined in accordance with the revenue recognition method described in the "Main Accounting Policies and
Accounting Estimates - Revenue".
(2) Classification and subsequent measurement of financial assets
According to the business model of the financial assets under management and the contractual cash flow characteristics of the financial
assets the Company divides the financial assets into three categories: financial assets measured at amortized cost financial assets
measured at fair value and whose changes are included in other comprehensive income and financial assets measured at fair value and
whose changes are included in the current profits and losses.
1) Financial assets measured at amortized cost.
Financial assets measured at amortized cost refer to financial assets that simultaneously meet the following conditions: * The
business model of the Company's management of the financial assets is aimed at collecting contractual cash flows; * The contract
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.This type of financial asset is measured at the amortized cost using the effective interest rate method after initial recognition. Any
gains or losses arising therefrom are included in current profits and losses upon derecognition amortization in accordance with the
effective interest rate method or impairment recognition.The amortized cost of a financial asset shall be determined by adjusting the initial recognition amount of the financial asset as
follows: * deducting the principal repaid; * plus or minus the accumulated amortization amount formed by amortizing the difference
between the initial recognition amount and the maturity amount using the effective interest rate method; * deducting the accumulated
loss provisions.The effective interest rate method refers to the method of calculating the amortized cost of financial assets or financial liabilities
and allocating interest income or interest expenses to each accounting period. Actual interest rate refers to the interest rate used to
discount the estimated future cash flows of a financial asset or financial liability over its expected lifespan into the book balance of the
financial asset or the amortized cost of the financial liability. When determining the actual interest rate the Company estimates the
expected cash flow based on all contract terms of financial assets or liabilities (such as early repayment extension call options or
other similar options) but does not consider expected credit losses.The interest income is calculated and determined by multiplying the book balance of the financial asset by the effective interest
rate by the Company except for the following circumstances: * For the purchased or originated financial asset with credit impairment
the interest income is calculated and determined according to the amortized cost of the financial asset and the effective interest rate
after credit adjustment from the initial recognition. * For the financial asset purchased or originated without credit impairment but
with credit impairment in the subsequent period the interest income shall be calculated and determined according to the amortized cost
and the effective interest rate of the financial asset. If the credit risk of the financial instrument improves in subsequent periods and no
longer has credit impairment and this improvement can be objectively linked to an event that occurs after the application of the above
provisions interest income shall be determined by multiplying the actual interest rate by the book balance of the financial asset.
2) Financial assets measured at fair value and whose changes are included in other comprehensive income
Financial assets measured at fair value and whose changes are included in other comprehensive income refer to the financial
assets that simultaneously meet the following conditions: * The financial asset is managed by the Company within a business model
whose objective is both to collect the contractual cash flows and to sell the financial asset. * The contractual terms of the financial
asset provide that the only cash flows generated on a particular date are payments of principal and interest based on the principal
amount outstanding.This type of financial asset is subsequently measured at fair value after initial recognition. Interest impairment losses or gains
and exchange gains and losses calculated using the effective interest rate method are included in current profits and losses while other
gains or losses are included in other comprehensive income. At the derecognition the accumulated gains or losses previously included
in other comprehensive incomes are transferred and included in current profits and losses.For non-trading equity instrument investments the Company may irrevocably designate them as financial assets measured at fair
value and whose changes are included in other comprehensive income at initial recognition. This designation is made on the basis of a
single non-trading equity instrument investment and the relevant investment conforms to the definition of an equity instrument from
the perspective of the issuer of the instrument. Such investments after their initial designation have all gains or losses (including
exchange gains and losses) other than dividends received that are included in current profits and losses (except for the portion that
represents the recovery of the investment cost) included in other comprehensive income. At the derecognition the accumulated profits
and losses previously included in other comprehensive incomes are transferred from there to the retained earnings.
3) Financial assets measured at fair value and whose changes are included in the current profits and losses
Financial assets other than above 1) and 2) are classified by the Company 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 irrevocably 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. Where the contingent consideration recognized by the Company in a business
combination not under the same control constitutes a financial asset the financial asset shall be classified as a financial assets measured
at fair value and whose changes are included in the current profits and losses.This type of financial asset is subsequently measured at fair value after initial recognition and the gains or losses are included in
current profits and losses.
(3) Classification and subsequent measurement of financial liabilities
The Company classifies financial liabilities into financial liabilities measured at fair value and whose changes are included in the
current profits and losses financial liabilities arising from the transfer of financial assets where the conditions for derecognition are
not met or where the Company continues to be involved in the transferred financial assets financial guarantee contracts and financial
liabilities measured at amortized costs.
1) Financial liabilities measured at fair value and whose changes are included in the current profits and losses
Financial liabilities measured at fair value and whose changes are included in the current profits and losses include trading
financial liabilities (including derivatives belonging to financial liabilities) and financial liabilities measured at fair value and whose
changes are included in the current profits and losses. In a business combination not under common control if the Company as the
acquirer recognizes contingent consideration as a financial liability such financial liability shall be accounted for at fair value with
changes included in current profits and losses.Financial liabilities measured at fair value and whose changes are included in the current profits and losses are subsequently
measured at fair value after initial recognition and the resulting gains or losses are included in current profits and losses.The changes in the fair value of financial liabilities measured at fair value and whose changes are included in the current profits
and losses due to changes in the Company's own credit risk are included in other comprehensive income unless such treatment would
cause or increase an accounting mismatch in profit or loss. Other changes in fair value of the financial liabilities are included in current
profits and losses. At the derecognition the accumulated profits and losses previously included in other comprehensive incomes are
transferred from there to the retained earnings.
2) The transfer of financial assets does not meet the conditions for derecognition or continues to involve financial liabilities
formed by the transferred financial assets.This type of financial liabilities is measured in accordance with the method described in "Recognition basis and measurement
method of financial asset transfer" of the "Main Accounting Policies and Accounting Estimates - Financial Instruments".
3) Financial guarantee contract
A financial guarantee contract refers to a contract in which the Company is required to pay a specific amount to the contract
holder who has suffered losses when the specific debtor is unable to pay its debts at maturity in accordance with the terms of the
original or revised debt instrument.Financial guarantee contracts that do not fall under either of the above circumstances 1) or 2) shall be subsequently measured
after initial recognition at the higher of the following two amounts: * the loss allowance amount determined in accordance with the
"Impairment of Financial Instruments" in the "Main Accounting Policies and Accounting Estimates - Financial Instruments"; * the
balance after deducting the accumulated amortization amount determined in accordance with the revenue recognition method described
in the "Main Accounting Policies and Accounting Estimates - Revenue" from the initial recognition amount.
4) Financial liabilities measured at amortized costs
Except for the situations described in 1) 2) and 3) above the Company classifies all other financial liabilities as financial
liabilities measured at amortized costs.This type of financial liabilities is measured at the amortized cost using the effective interest rate method after initial recognition.Any gains or losses arising therefrom are included in current profits and losses upon derecognition or amortization in accordance with
the effective interest rate method.
(4) Equity instruments
Equity instrument refers to a contract that can prove that the Company has the remaining equity in the assets after deducting all
liabilities. The Company's issuance (including refinancing) repurchase sale or cancellation of equity instruments shall be treated as
changes in equity. Transaction costs related to equity transactions are deducted from equity. Any distribution of interests (exclusive of
dividends) paid to equity holders by the Company is deducted from shareholders' equity. The Company does not recognize changes in
the fair value of equity instruments.
2. Recognition basis and measurement method of financial asset transfer
The transfer of financial assets refers to the act of the Company assigning or delivering financial assets (or their cash flows) to a
party other than the issuer of such financial assets. The derecognition of financial assets refers to the removal of previously recognized
financial assets from the Company's balance sheet.Financial assets that meet one of the following conditions shall be derecognized by the Company: (1) The contractual right to
receive the cash flow of the financial asset is terminated; (2) The financial asset has been transferred and almost all risks and rewards
of the ownership of the financial asset have been transferred to the transferee; (3) The financial asset has been transferred. Although
the Company has neither transferred nor retained almost all the risks and rewards of the ownership of the financial asset it has given
up control of the financial asset.If the Company neither transfers nor retains almost all the risks and rewards of the ownership of financial assets and does not
give a control of the financial assets the relevant financial assets shall be recognized according to the degree of continued involvement
in the transferred financial assets and the relevant liabilities shall be recognized accordingly. The degree of continued involvement in
the transferred financial assets refers to the level of risk faced by the enterprise due to changes in the value of the financial assets.If the entire transfer satisfies the derecognition criteria the difference between the following amounts shall be included in current
profits and losses: (1) The book value of the transferred financial asset on the date of derecognition; (2) The sum of the consideration
received for the transfer of financial assets and the amount corresponding to the derecognized part of the cumulative fair value changes
originally recognized in other comprehensive income. Where the partial transfer of financial assets meets the conditions for
derecognition the book value of the transferred financial assets as a whole shall be apportioned between the derecognized part and the
non-derecognized part according to their respective relative fair values and the difference between the following two amounts shall be
included in current profits and losses: (1) The book value of the derecognized part on the date of derecognition; (2) The sum of the
consideration received from the derecognized part and the amount corresponding to the derecognized part of the cumulative fair value
changes originally recognized in other comprehensive income. For non-trading equity instruments designated by the Company as
measured at fair value with changes included in other comprehensive income if the transfer of the entire or part of such instruments
meets the conditions for derecognition the difference calculated by the above method shall be included in retained earnings.
3. Conditions for derecognition of financial liabilities
If the current obligation of a financial liability (or part of it) has been discharged the recognition of the financial liability (or part
of it) shall be terminated by the Company. When the Company (the borrower) enters into an agreement with the lender to replace an
existing financial liability with a new one and the contract terms of the new financial liability are substantially different from those of
the original one the original financial liability shall be derecognized and a new financial liability shall be recognized simultaneously.When the Company makes substantive modifications to the contract terms of the original financial liability (or a portion thereof) it
derecognizes the original financial liability and simultaneously recognizes a new financial liability in accordance with the modified
terms.Where a financial liability (or part thereof) is derecognized the Company shall include the difference between its book value and
the consideration paid (including non-cash assets transferred out or liabilities assumed) in current profits and losses. If the Company
repurchases a portion of its financial liabilities the overall book value of the financial liability shall be allocated based on the proportion
of the fair value of the continuously recognized part and the derecognized part on the repurchase date to the overall fair value. The
difference between the book value distributed to the derecognized part and the consideration paid (including non-cash assets transferred
out or liabilities undertaken) shall be included in current profits and losses.
4. Determination of fair value of financial instruments
The methods for determining the fair value of financial assets and financial liabilities are described in the "Main Accounting
Policies and Accounting Estimates - Fair Value".
5. Impairment of financial instruments
The Company performs impairment and recognizes loss provisions on financial assets measured at amortized cost contract assets
debt instrument investments measured at fair value with changes recognized in other comprehensive income lease receivables and
financial guarantee contracts as described in "Classification and subsequent measurement of financial liabilities" of the "Main
Accounting Policies and Accounting Estimates - Financial Instruments" based on expected credit losses. Expected credit losses refer
to the weighted average value of credit losses of financial instruments weighted by the risk of default. Credit loss refers to the difference
between all contractual cash flows receivable from the contract and all cash flows expected to be received by the Company at the
original effective interest rate that is the present value of all cash shortages.For financial assets purchased or originated by the Company that have suffered credit impairment only the cumulative changes
in expected credit losses during the whole duration after initial recognition are recognized as loss reserves on the balance sheet date.For receivables or contract assets that do not contain significant financing components and are generated in transactions as
specified in the "Accounting Standards for Enterprises No. 14 - Revenue" the Company uses a simplified measurement method to
measure loss preparations based on the amount of expected credit losses equivalent to the entire duration of the life.For financial instruments other than those measured by the above-mentioned methods the Company measures loss provisions in
accordance with the general approach and assesses at each balance sheet date whether the credit risk has significantly increased since
initial recognition. If the credit risk of a financial instrument has not significantly increased since initial recognition and is in the first
stage the Company measures the loss provisions at an amount equal to the expected credit losses over the next 12 months. If the credit
risk has significantly increased since initial recognition but no credit impairment has occurred and the asset is in the second stage the
Company measures the loss provisions at the amount of expected credit losses over the entire duration. If a financial asset has
experienced credit impairment since its initial recognition and is in the third stage the Company measures the loss provisions at the
amount of expected credit losses over the entire duration.Expected credit losses over the entire remaining term refer to the expected credit losses resulting from all possible default events
that may occur throughout the entire duration of a financial instrument. The expected credit loss in the next 12 months refers to the
expected credit loss caused by the possible default of financial instruments within 12 months after the balance sheet date (if the expected
duration of financial instruments is less than 12 months it is the expected duration) which is part of the expected credit losses for the
whole duration.Considering all reasonable and well-grounded information including forward-looking information the Company determines the
relative changes of default risk of the financial instrument that occurred in the duration by comparing the risk of default of the financial
instrument on the balance sheet date with the risk of default on the initial recognition date to assess whether credit risk of the financial
instrument has been increased significantly since the initial recognition. For financial instruments where sufficient evidence regarding
a significant increase in the credit risk cannot be obtained at a reasonable cost at the individual instrument level the Company considers
and assesses whether the credit risk has significantly increased on a portfolio basis. If the Company determines that a financial
instrument has only a low credit risk as of the balance sheet date it is assumed that the credit risk of the financial instrument has not
significantly increased since its initial recognition.The Company re-measures expected credit losses on each balance sheet date. The increase or reversal amount of the loss provision
formed thereby is included in current profits and losses as impairment loss or gain. For financial assets measured at amortized cost the
loss provision offsets the book value of the financial asset as presented on the balance sheet. For debt instrument investments measured
at fair value with changes recognized in other comprehensive income the Company recognizes loss provisions in other comprehensive
income and does not reduce the book value of the financial asset as presented in the balance sheet.
6. Offset of financial assets and financial liabilities
When the Company has the legal right to offset the recognized financial assets and financial liabilities and is currently capable of
executing such legal rights and the Company plans to settle the financial assets and liquidate the financial liabilities at the same time.the financial assets and the amount of financial liabilities are shown in the balance sheet after the offsetting. In addition financial assets
and financial liabilities are listed separately in the balance sheet and are not offset against each other.
12. Fair value
Fair value refers to the price receivable by the market participant from selling an asset or transferring a liability in an ordered
transaction on the date of measurement. The Company measures the relevant assets or liabilities at fair value assuming that the orderly
transactions for the sale of assets or transfer of liabilities take place in the principal market for the relevant assets or liabilities. If there
is no main market the Company assumes that the transaction is conducted in the most favorable market for the relevant assets or
liabilities. The principal market (or the most advantageous market) is the trading market that the Company can access on the
measurement date.The Company adopts valuation techniques that are applicable under the current circumstances and supported by sufficient
available data and other information. The Company considers the ability of market participants to generate economic benefits by using
the asset for its best use or by selling it to other market participants who can use it for its best use. Priority is given to using relevant
observable input values. Only when observable input values cannot be obtained or it is not feasible to obtain them do we use
unobservable input values.Assets and liabilities measured or disclosed at fair value in the financial statements are classified into fair value levels based on
the lowest level input value that is significant to the overall fair value measurement: The first level input value is an unadjusted quote
for the same asset or liability that can be obtained on the measurement date in an active market; the second level input value is an input
value that is directly or indirectly observable for related assets or liabilities other than the first level input value including quotes for
similar assets or liabilities in an active market; observable inputs other than quoted prices including interests and yield curves that are
observable during the normal quote interval; the third level input value is an unobservable input for the relevant assets or liabilities
including interest rates stock volatility future cash flows of the abandonment obligations assumed in business combinations and
financial forecasts made using one's own data which cannot be directly observed or verified by observable market data. On each
balance sheet date the Company re-evaluates the assets and liabilities that are recognized in the financial statements and measured at
fair value on a continuing basis to determine whether there has been a transfer between fair value measurement levels.13. Notes receivable
1. Determination method and accounting treatment method of expected credit losses of notes receivable
The Company determines the expected credit losses of notes receivable and makes accounting treatment in accordance with the
simplified measurement method as described in "Impairment of Financial Instruments" of the "Main Accounting Policies and
Accounting Estimates - Financial Instruments". On the balance sheet date the credit loss of the notes receivable is measured at the
present value of the difference between the contractual cash flows receivable and the expected cash flows to be received. The Company
conducts separate impairment tests on notes receivable with significantly different credit risk characteristics and estimates expected
credit losses. The remaining notes receivable are classified into several groups based on credit risk characteristics. The expected credit
losses are estimated on the portfolio basis with reference to the historical credit loss experience based on the current situation and
considering forward-looking information.
2. Combination categories for bad debt reserves based on credit risk characteristics and the determination basis
Portfolio Name Basis for determining portfolio
The acceptor has a high credit rating has not defaulted on bills in history has extremely
Bank acceptance bill portfolio low credit loss risk and has a strong ability to fulfill its cash flow obligations under
payment contracts in the short term
Commercial acceptance bill portfolio According to the credit rating of the acceptor.
3. Calculation method of aging of the credit risk characteristic combination confirmed by aging
The Company calculates the aging of notes receivable based on the principle of first in first out.
4. Criteria for determining the bad debt reserve made individually
The Company conducts separate impairment tests on notes receivable with significantly different credit risk characteristics such
as a marked deterioration in the debtor's credit status a low possibility of future collection and the occurrence of credit impairment.
14. Accounts receivable
1. Determination method and accounting treatment method of expected credit losses of accounts receivable
The Company determines the expected credit losses of accounts receivable and makes accounting treatment in accordance with
the simplified measurement method as described in "Impairment of Financial Instruments" of the "Main Accounting Policies and
Accounting Estimates - Financial Instruments". On the balance sheet date the credit loss of the accounts receivable is measured at the
present value of the difference between the contractual cash flows receivable and the expected cash flows to be received. The Company
conducts separate impairment tests on accounts receivable with significantly different credit risk characteristics and estimates expected
credit losses. The remaining accounts receivable are classified into several groups based on credit risk characteristics. The expected
credit losses are estimated on the portfolio basis with reference to the historical credit loss experience based on the current situation
and considering forward-looking information.
2. Combination categories for bad debt reserves based on credit risk characteristics and the determination basis
Portfolio Name Basis for determining portfolio
Accounts receivable from related parties within the scope of the Company's consolidated
Related party portfolio
financial statements
Aging portfolio Including accounts receivable other than the above portfolio
3. Calculation method of aging of the credit risk characteristic combination confirmed by aging
The Company calculates the aging of accounts receivable based on the principle of first in first out.
4. Criteria for determining the bad debt reserve made individually
The Company conducts separate impairment tests on accounts receivable with significantly different credit risk characteristics
such as a marked deterioration in the debtor's credit status a low possibility of future collection and the occurrence of credit impairment.15. Other receivables
Determination methods and accounting treatment methods of expected credit losses of other receivables
1. Determination method and accounting treatment method of expected credit losses of other receivables
The Company determines the expected credit losses of other accounts receivable and makes accounting treatment in accordance
with the general method as described in "Impairment of Financial Instruments" of the "Main Accounting Policies and Accounting
Estimates - Financial Instruments". On the balance sheet date the credit loss of other accounts receivable is measured at the present
value of the difference between the contractual cash flows receivable and the expected cash flows to be received. The Company
conducts separate impairment tests on other accounts receivable with significantly different credit risk characteristics and estimates
expected credit losses. The remaining accounts receivable are classified into several groups based on credit risk characteristics. The
expected credit losses are estimated on the portfolio basis with reference to the historical credit loss experience based on the current
situation and considering forward-looking information.
2. Combination categories for bad debt reserves based on credit risk characteristics and the determination basis
Portfolio Name Basis for determining portfolio
Aging portfolio Other receivables classified by age with similar credit risk characteristics.
(1) All kinds of security deposit and cash pledge related to production and operation
projects and can be recovered at the expiration of the period;
Portfolio of deposits security deposits
(2) Employee provisions and collection and payment on behalf of others;
employee loans export tax refunds etc.
(3) Taxes and fees for the goods to be recovered when declared for export
according to the tax policy.This portfolio includes accounts receivable from subsidiaries within the
Related party portfolio
consolidation scope.
3. Calculation method of aging of the credit risk characteristic combination confirmed by aging
The Company calculates the aging of other accounts receivable based on the principle of first in first out.
4. Criteria for determining the bad debt reserve made individually
The Company conducts separate impairment tests on other accounts receivable with significantly different credit risk
characteristics such as a marked deterioration in the debtor's credit status a low possibility of future collection and the occurrence of
credit impairment.
16. Contract assets
1. Methods and standards for the recognition of contract assets
Contract assets refer to the right of the Company to receive consideration for the transfer of goods to customers and the right
depends on other factors other than the passage of time. The Company's unconditional (i.e. only depending on the time lapses) right
to collect consideration from the customers shall be listed as receivables.The Company offsets contract assets and contract liabilities under the same contract and presents them on a net basis.
2. Impairment of contract assets
(1) Determination methods and accounting treatment methods of the expected credit losses of contract assets
The Company determines the expected credit losses of contract assets and makes accounting treatment in accordance with the
simplified measurement method as described in "Impairment of Financial Instruments" of the "Main Accounting Policies and
Accounting Estimates - Financial Instruments". On the balance sheet date the credit loss of the contract assets is measured at the
present value of the difference between the contractual cash flows receivable and the expected cash flows to be received. The Company
conducts separate impairment tests on contract assets with significantly different credit risk characteristics and estimates expected
credit losses. The remaining contract assets are classified into several groups based on credit risk characteristics. The expected credit
losses are estimated on the portfolio basis with reference to the historical credit loss experience based on the current situation and
considering forward-looking information.
(2) Combination categories for impairment provisions based on credit risk characteristics and the determination basis
Portfolio Name Basis for determining portfolio
Other accounts receivable classified by age with similar credit
Aging portfolio
risk characteristics
(3) Calculation method of aging of the credit risk characteristic combination confirmed by aging
The Company calculates the aging of contract assets based on the principle of first in first out.
(4) Criteria for determining the impairment provisions made individually
The Company conducts separate impairment tests on contract assets with significantly different credit risk characteristics such
as a marked deterioration in the debtor's credit status a low possibility of future collection and the occurrence of credit impairment.
17. Inventories
1. Inventory category valuation method for issuing inventory inventory taking system amortization method for low value
consumables and packaging materials
(1) Inventories include finished products or commodities held by the Company for sale in daily activities products in process of
production materials consumed in the process of production or provision of labor services in-transit materials consigned processing
materials and contract performance costs.
(2) Enterprises measure inventories at actual cost. 1) The cost of purchased inventory is the procurement cost of such inventory.
The cost of inventory obtained through further processing consists of the procurement cost and processing cost. 2) In debt restructuring
when the debtor uses inventory to settle debts the entry value of the inventory should be determined based on the fair value of the
creditor's claim waived and the directly attributable taxes and fees incurred to bring the inventory to its current location and condition.
3) On the premise that the non-monetary asset exchange has commercial substance and the fair value of the assets received or exchanged
can be reliably measured the entry value of the inventory received from the non-monetary asset exchange is usually determined based
on the fair value of the exchanged assets unless there is conclusive evidence that the fair value of the exchanged assets is more reliable;
for non-monetary asset exchanges that do not meet the above conditions the book value of the exchanged assets and the relevant taxes
and fees payable shall be used as the cost for the inventory received. 4) The entry value of the inventory obtained by absorption and
merger of enterprises under the same control shall be determined according to the book value of the combined party; the entry value
of the inventory obtained by absorption and merger of enterprises not under the same control shall be determined at fair value.
(3) The cost of inventory issued by the enterprise is measured by the weighted average method.
(4) Amortization method for low value consumables and packaging materials
* Low value consumables are amortized by the one-off write-off method;
* Packaging materials are amortized by the one-off write-off method;
* Other turnover materials are amortized using the one-off write-off method.
(5) Inventory taking system of the company is a perpetual inventory system.
2. Provision for inventory write-down
Recognition criteria and accrual method of inventory falling price reserves
On the balance sheet date inventories are measured at the lower of their costs and net realizable value. The net realizable value
of the inventory is based on the amount that the estimated selling price of the inventory subtracts the estimated cost selling expenses
and relevant taxes and fees occurring in the future. Confirmation of net realizable value should be based on the strong evidence for
acquisition and ownership of the inventory while taking into consideration the purpose of holding inventories as well as the effects of
the event after the balance sheet date. Except where there is clear evidence that the market price on the balance sheet date is abnormal
the net realizable value of inventory items at the end of the current period is determined based on the market price on the balance sheet
date among which:
1) For goods inventories directly used for sale such as finished products goods and materials for sale during the normal
production and operation process the net realizable value shall be recognized by the estimated selling expenses of the inventory minus
the estimated selling and distribution expenses and related taxes;
2) For material inventories to be processed during the normal production and operation process the net realizable value shall
be recognized by the estimated selling price of the finished products produced minus the estimated costs to be incurred upon completion
estimated selling expenses and relevant taxes. 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.At the end of the period the inventory falling price reserves are accrued according to individual inventory items; however for
the inventory with large quantity and low unit price the inventory falling price reserves shall be accrued according to the inventory
category; and for inventories that are related to product series produced and sold in the same region have the same or similar end use
or purpose and are difficult to be measured separately from other items the inventory falling price reserves shall be accrued on a
consolidated basis.After the provision for inventory write-down if the factors causing any write-down of the inventories do not exist any more and
the net realizable value of inventory is higher than its book value it shall be reversed in the amount of original provision for inventory
write-down. The reversed amount shall be included in the current profits and losses.
18. Held-for-sale assets
1. Criteria for classification as held-for-sale assets
If the Company recovers the book value mainly by selling (including non-monetary assets exchange with commercial essence
the same below) rather than continuously using one non-current asset or disposal group it shall divide it into the held-for-sale category
when the following conditions are met:
(1) In accordance with the practice of selling such assets or disposal groups in similar transactions they can be sold immediately
under current conditions;
(2) Their sales are very likely to happen that is the Company has already made a resolution on a sales plan and obtained a certain
purchase commitment and their sales are expected to be completed within one year. The sale shall be approved by relevant authorities
or regulator according to the requirements of pertinent regulations has been approved. The determined purchase commitment refers to
the legally binding purchase agreement signed between the Company and other parties which contains important clauses such as
transaction price time and sufficiently severe penalty for breach of contract so that the possibility of major adjustment or cancellation
of the agreement is extremely small.If the Company loses control over a subsidiary due to the sale of its investment in the subsidiary or other reasons 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.When non-current assets or disposal groups held for sale no longer meet the classification criteria for held-for-sale assets the
Company ceases to classify them as held-for-sale assets. If some assets or liabilities are removed from a disposal group held for sale
and the remaining assets or liabilities in the disposal group form a new disposal group that still meets the classification criteria for held-
for-sale assets the Company will classify the new disposal group as held-for-sale assets. Otherwise non-current assets that meet the
classification criteria for held-for-sale assets will be classified as held-for-sale assets individually.For non-current assets or disposal groups that first meet the classification criteria for held-for-sale assets in the current period
the balance sheet of comparable accounting periods shall not be adjusted.2. Initial measurement and subsequent measurement of held-for-sale non-current assets or disposal groups
For non-current assets or disposal groups that are classified as held for sale on the acquisition date the initial measurement
amount and the net amount of fair value (assuming that they are not classified as held for sale) minus selling expenses shall be compared
and the lower amount shall be measured at the initial measurement. Except for non-current assets or disposal groups obtained in a
business combination the difference arising from the initial measurement amount being the net amount of fair value minus selling
expenses of non-current assets or disposal groups is included in current profits and losses.Before the Company initially classifies a non-current asset or a disposal group as held for sale it measures the book values of the
individual assets and liabilities within the non-current asset or disposal group in accordance with the relevant accounting standards.When the Company initially measures or remeasures the non-current assets or disposal groups held for sale on the balance sheet date
if the book value is higher than the net value of fair value minus selling expenses the book value shall be written down to the net value
of fair value minus selling expenses and the amount written down shall be recognized as losses from impairment of assets and included
in current profits and losses. At the same time provision for impairment of held-for-sale assets shall be made. The non-current assets
held for sale or the non-current assets of the disposal group are not depreciated or amortized and the interest on debt and other fees of
the disposal group held for sale shall be recognized further.For the amount of losses from impairment of assets 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 for Business Enterprises No. 42 - Non-Current Assets
Held for Sale Disposal Group and Termination of Business of the Disposal Group" (hereinafter referred to as No. 42 Standard) in the
disposal group. When the Company remeasures the disposal group held for sale on the balance sheet date it first measures the book
values of the assets and liabilities in the disposal group that are not subject to the measurement provisions of No. 42 Standard in
accordance with the relevant accounting standards and then conducts accounting treatment in accordance with the above-mentioned
relevant provisions.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 losses from impairment of
assets recognized after being classified as held for sale and the reversed amount shall be included in current profits and losses. The
losses from impairment 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 losses from impairment of
assets recognized for non-current assets to which the measurement provisions of No. 42 Standard are applicable after being classified
as held for sale and the reversed amount shall be proportionally increased to the book value of each non-current asset in the disposal
group excluding goodwill in accordance with the proportion of the book value of such assets to the total book value of the disposal
group as measured under the applicable provisions of No. 42 Standard and the reversed amount shall be included in current profits
and losses. The book value of goodwill that has been offset and the losses from impairment of assets shall not be reversed before they
are classified as held for sale.
3. Derecognition and measurement of non-current assets or disposal groups classified as held for sale
When non-current assets or disposal groups are no longer classified as held for sale categories or non-current assets are removed
from the disposal groups held for sale because they no longer meet the classification conditions of held for sale categories they shall
be measured according to the lower of the following two: (1) The book value before being divided into held-for-sale category should
have been recognized to be the amount after adjustments such as depreciation amortization or impairment based on the situation in
case it is not divided into the held-for-sale category; (2) Recoverable amount.When the Company terminates the recognition of non-current assets or disposal groups held for sale the unrecognized gains or
losses shall be included in the current profits and losses.
4. Conditions for discontinued operations
Discontinued operations are components that meet one of the following conditions and can be distinguished separately and have
been disposed of or classified as held for sale:
(1) This component represents an independent main business or a separate main business area;
(2) This component is part of an associated plan to dispose an independent main business or a separate main business area;
(3) This component is a subsidiary acquired exclusively for resale.
5. Presentation of discontinued operations
Disposal groups intended for disposal by ceasing use rather than by sale that meet the definition of discontinued operations in
terms of components shall be presented as discontinued operations from the date of cessation of use. When the Company loses control
over a subsidiary due to the sale of its investment in the subsidiary or other reasons and the subsidiary meets the definition of
discontinued operations the relevant gains or losses from discontinued operations shall be presented in the consolidated financial
statements. In the Income Statement the adjustment amount of the gain or loss from the disposal of discontinued operations shall be
presented as the gain or loss from discontinued operations.When non-current assets or disposal groups are no longer classified as held for sale or when non-current assets are removed from
a disposal group classified as held for sale the Company reports the adjustment amount of the book value of the non-current assets or
disposal groups in the current income statement as a component of continuing operations. When the Company's investments in
subsidiaries joint operations joint ventures associates or certain investments in joint ventures or associates are no longer classified
as held for sale or removed from a disposal group classified as held for sale the Company adjusts the comparative data of the
comparable accounting periods in the current financial statements accordingly after such classification as held for sale.Impairment losses or reversals and gains or losses from disposal of non-current assets or disposal groups held for sale that do not
meet the definition of discontinued operations are presented as part of continuing operations. Operating profit and loss and disposal
profit and loss such as impairment loss and reversal amount of discontinued operations are presented as discontinued operating profit
and loss.For the discontinued operations presented in the current period the Company will represent the information originally presented
as the profit and loss from continuing operations as the profit and loss from discontinued operations in the comparable accounting
period in the current financial statements. If the discontinued operation no longer meets the classification criteria for the held-for-sale
assets the Company shall in the current financial statements reclassify the information previously presented as discontinued operation
gains or losses as continuing operation gains or losses for the comparable accounting periods.
19. Debt investment
The Company determines the expected credit losses of debt investments and makes accounting treatment in accordance with the
general method as described in "Impairment of Financial Instruments" of the "Main Accounting Policies and Accounting Estimates -
Financial Instruments". On the balance sheet date the Company measures the credit loss of debt investments by the present value of
the difference between the contractual cash flows receivable from each individual debt investment and the expected cash flows to be
received.
20. Long-term receivables
The Company determines the expected credit losses of lease receivables and long-term receivables with significant financing
components formed by transactions regulated by the "Accounting Standards for Enterprises No. 14 - Revenue" in accordance with the
simplified measurement method described in "Impairment of Financial Instruments" of the "Main Accounting Policies and Accounting
Estimates - Financial Instruments". For other long-term receivables the expected credit losses are determined and accounted for in
accordance with the general method described in "Impairment of Financial Instruments" of the "Main Accounting Policies and
Accounting Estimates - Financial Instruments". On the balance sheet date the Company measures the credit loss of long-term
receivables based on the present value of the difference between the contractual cash flows receivable and the expected cash flows
receivable for each individual long-term receivables.
21. Long-term equity investment
The long-term equity investment referred to in this section means the long-term equity investment of the Company in the investee
over which the Company has control joint control or significant impact including equity investments in subsidiaries joint ventures
and associates.
1. Judgment standard for common control and significant impact
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. Where the
Company and other joint parties have common control over an investee and are entitled to the net assets of the investee such investee
shall be a joint venture of the Company. When determining whether there is joint control the protective rights enjoyed are not taken
into account.Significant impact refers to the situation where the Company has the power to participate in the financial and operating decisions
of an enterprise but cannot control individually or jointly with other parties the formulation of these policies. Where the Company is
able to have material influences on an investee such investee shall be its associates. When determining whether it can exert significant
impact on the investee the impact of the investor's direct or indirect holding of the voting shares of the investee and the current
enforceable potential voting rights held by the investor and other parties on the assumption of conversion into equity of the investee
including the impact of the current convertible warrants share options and convertible corporate bonds issued by the investee.
2. Determination of the initial investment cost of long-term equity investment
(1) In case of a business combination under the same control if the combining party pays cash transfers non-cash assets assumes
debts or issues equity securities as the combination consideration the initial investment cost shall be the share of the book value of the
owner's equity of the combined party in the ultimate controller's consolidated financial statements on the combination date. The
difference between the initial investment cost of long-term equity investment and the cash paid the book value of non-cash assets
transferred the book value of debts assumed or the total par value of shares issued shall be adjusted to the capital reserve. If the capital
reserve is insufficient to offset the retained earnings shall be adjusted. If the equity of the combined party under common control is
obtained step by step through multiple transactions and the business merger under common control is finally formed whether it belongs
to a "package deal" shall be dealt with respectively: if it belongs to a "package deal" each transaction shall be accounted for as a
transaction to obtain control. If it does not belong to the "package deal" on the combination date the initial investment cost of the
long-term equity investment shall be the share of the book value of the shareholders' equity of the combined party in the consolidated
financial statements of the ultimate controller. The capital reserve shall be adjusted according to the difference between the initial
investment cost of the long-term equity investment and the sum of the book value of the long-term equity investment before the merger
plus the book value of the new payment consideration for the shares further obtained on the combination date; if the capital reserve is
insufficient to offset the retained earnings shall be adjusted. Other comprehensive income recognized for equity investment held before
the combination date due to equity method accounting or other equity instrument investments is not subject to accounting treatment
for the time being.
(2) In case of a business combination under different control the Company recognizes the combination cost recognized on the
date of acquisition as the initial investment cost of long-term equity investment. The combination cost refers to the fair value of the
assets paid liabilities incurred or assumed and equity securities issued by the acquirer on the date of acquisition for the purpose of
acquiring the control over the acquiree. The agency fees and other related administrative expenses of the auditing legal services
assessment consulting incurred by the acquirer for the business combination shall be included in current profits and losses when
incurred. The transaction costs of the equity securities or debt securities issued by the acquirer as consideration for the merger shall be
included in the initial recognition amount of the equity securities or debt securities. The Company treats the contingent consideration
stipulated in the combination agreement as part of the consideration transferred in the business combination and includes it in the cost
of the business combination at its fair value on the date of acquisition. For business merger not under common control that is achieved
through multiple transactions in steps it shall be determined in accordance with the Accounting Standards for Enterprises whether such
multiple transactions constitute a "package deal". If the transaction belongs to a "package deal" each transaction shall be treated as a
transaction to obtain control for accounting treatment. If it does not belong to the "package deal" the sum of the book value of the
equity investment originally held by the acquiree and the new investment cost shall be used as the initial investment cost of the long-
term equity investment calculated by the cost method. If the originally held equity is accounted for by the equity method the relevant
other comprehensive income will not be accounted for temporarily. For equity investments that were previously classified as other
equity instruments the difference between their fair value and book value as well as the accumulated fair value changes previously
recorded in other comprehensive income shall be directly transferred to retained earnings.
(3) For other equity investments except long-term equity investments formed through business combinations they are initially
measured at cost: If they are acquired by paying cash the actual purchase price paid shall be taken as the initial investment cost. If they
are acquired by issuing equity securities the fair value of the equity securities issued shall be taken as the initial investment cost. The
expenses directly related to the issuance of equity securities shall be determined in accordance with the relevant provisions of the
"Accounting Standards for Business Enterprises No. 37 - Presentation of Financial Instruments". On the premise that the non-monetary
asset exchange has commercial substance and the fair value of the assets received or exchanged and the tariffs payable can be reliably
measured the initial investment cost of the long-term equity investment received from the non-monetary asset exchange is determined
based on the fair value of the exchanged assets unless there is conclusive evidence that the fair value of the exchanged assets is more
reliable; for non-monetary asset exchanges that do not meet the above conditions the book value of the exchanged assets and the
relevant taxes and fees payable shall be used as the initial investment cost for the long-term equity investment received. The initial
investment cost of long-term equity investments obtained through debt restructuring shall be determined based on the fair value of the
creditor's rights given up. Costs taxes and other necessary expenses directly related to the acquisition of long-term equity investments
are also included in the cost of investment.If the investment can be added for material influence or common control on the investee but without control the cost of long-
term equity investment shall be the sum of the fair value of the originally held equity investment determined as per the "Accounting
Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments" and the additional investment cost. It shall
be used as the initial investment cost accounted for using the equity method. For equity investments that were previously classified as
other equity instruments the difference between their fair value and book value as well as the accumulated fair value changes
previously recorded in other comprehensive income shall be directly transferred to retained earnings.
3. Subsequent measurement and profit or loss recognition methods for long-term equity investments
(1) Long-term equity investments accounted for using the cost method
Long-term equity investments of subsidiaries of the Company are accounted for using the cost method. Except the declared but
not released cash dividends or profits which are included in actual amount or consideration paid for acquiring investments the profit
distribution or cash dividends declared by the investees are recognized as the investment income for current period.
(2) Long-term equity investment accounted for using equity method
Long-term equity investments in associates and joint ventures are accounted for using the equity method.When equity method is adopted in accounting if the cost of initial investment of long-term equity investment exceeds identifiable
fair value of net assets of investees sharable at investment the initial investment cost of long-term equity investment shall not be
adjusted. If the initial investment cost of long-term equity investment is less than the fair value share of the identifiable net assets of
the investee at the time of investment the difference shall be included in current profits and losses and the cost of long-term equity
investment shall be adjusted accordingly. After the long-term equity investment is acquired if the accounting policies and accounting
periods adopted by the investee entity are inconsistent with the Company the financial statements of the investee shall be adjusted
according to the accounting policies and accounting periods of the Company and the investment profits and losses and other
comprehensive income shall be recognized. The investment income and other comprehensive income shall be recognized respectively
according to the share of net profit and loss and other comprehensive income realized by the investee that should be enjoyed or shared
and the book value of the long-term equity investment shall be adjusted. In recognition of the share of the net profit or loss of the
investee entity the net profit of the investee shall be adjusted and confirmed on the basis of the fair value of the identifiable assets of
the investee entity when the investment is made. The Company shall calculate the attributable part according to the profits or cash
dividends declared to be distributed by the investee and reduce the book value of long-term equity investment accordingly; the
Company shall adjust the book value of long-term equity investment and include it in the owner's equity for other changes in the
owner's equity of the investee other than net profits and losses other comprehensive income and profit distribution. The unrealized
profits or losses arising from the intra-company transactions amongst the Company and its associates and joint ventures are eliminated
in proportion to the Company's equity interest in the associates and joint ventures and then based on which the investment income is
recognized. The internal trading losses incurred but not realized between the Company and the investees belonging to losses from
impairment of assets shall be recognized in full amount.When the Company confirms that it shall share the losses incurred by the investee it shall handle them in the following order:
firstly offset the book value of long-term equity investments. Secondly if the book value of long-term equity investments is not
sufficient to offset investment losses shall be recognized to the extent of other long-term equity book values that essentially constitute
net investments in the investee and the book value of long-term accounts receivable shall be offset. Finally after the above processing
if the enterprise still bears additional obligations as stipulated in the investment contract or agreement the expected liabilities shall be
recognized based on the expected obligations and included in the current investment loss. If the investee entity realizes the net profit
in the later period the Company will resume the recognition of the revenue after the unrecognized loss share has been made up by the
revenue share.During the holding period of the investment if the investee prepares consolidated financial statements the calculation shall be
based on the amount attributable to the investee in the net profit other comprehensive income and other changes in owner's equity in
the consolidated financial statements.If the assets invested by the Company to the joint venture or associate constitute the business and the investor obtains the long-
term equity investment but does not obtain the control right the fair value of the investment business shall be taken as the initial
investment cost of the new long-term equity investment and the difference between the initial investment cost and the book value of
the investment business shall be fully included in current profits and losses. If the assets sold by the Company to joint ventures or
associates constitute a business the difference between the consideration obtained and the book value of the business shall be included
in current profits and losses. If the assets acquired by the Company from associates or joint ventures constitute a business the
accounting treatment shall be carried out in accordance with the "Accounting Standards for Business Enterprises No. 20 – Business
Combinations" and the gains or losses related to the transaction shall be recognized in full.
4. Disposal of long-term equity investments
When disposing of long-term equity investment the balance between the book value and actual price for acquisition shall be
included into the current profits and losses.
(1) Disposal of long-term equity investment accounted for using the equity method
For long-term equity investments accounted for using the equity method if the remaining equity is still accounted for using the
equity method after disposal the accounting treatment for the portion originally recognized in other comprehensive income shall be
carried out on the same basis as the direct disposal of relevant assets or liabilities by the investee in a corresponding proportion when
the investment is disposed of. The owner's equity which is recognized by the fluctuation of the investee's other owner's equity except
for the net profit or loss other comprehensive income and profit distribution shall be carried over into the current profits and losses as
per the proportion.If the Company loses joint control or significant influence on the investee due to the disposal of part of the equity investment
the remaining equity after the disposal shall be accounted for in accordance with the financial instrument recognition and measurement
standards. The difference between the fair value and the book value on the day when the joint control or significant influence is lost is
included in current profits and losses. The other comprehensive income recognized by the original equity investment due to the equity
method is used for accounting treatment on the same basis as the direct disposal of related assets or liabilities by the investee when the
equity method is terminated. All the owner's equity recognized due to the changes in the owner's equity of the investee other than net
profit or loss other comprehensive income and profit distribution shall be transferred to the current profits and losses in full when the
equity method of accounting is no longer adopted.
(2) Disposal of long-term equity investment accounted for using the cost method
For long-term equity investments that are accounted for by the cost method and the remaining equity is still accounted for by the
cost method after disposal other comprehensive income recognized by the equity method accounting or the Recognition and
Measurement of Financial Instruments before obtaining the control over the invested company shall be accounted for on the same basis
as the direct disposal of related assets or liabilities by the investee and shall be carried forward to the current profits and losses in
proportion. Changes in other owner's equity other than net profit or loss other comprehensive income and profit distribution in the net
assets of the investee recognized by the equity method shall be carried forward to the current profits and losses in proportion.Where the Company's shareholding ratio decreases due to capital increase by other investors resulting in the loss of control but
the ability to exercise joint control or significant influence over the investee the Company shall recognize its share of the increase in
the investee's net assets resulting from the capital increase based on the new shareholding ratio. The difference between this amount
and the book value of the long-term equity investment corresponding to the decreased shareholding ratio shall be included in current
profits and losses. Then adjustments shall be made as if the equity method had been applied since the acquisition of the investment in
accordance with the new shareholding ratio.If the Company loses control over a subsidiary due to the disposal of part of its equity investment or other reasons and the
remaining equity after disposal can jointly control or exert significant influence over the investee it shall be accounted for using the
equity method. The remaining equity shall be adjusted as if it had been accounted for using the equity method since the date of
acquisition. The other comprehensive income and other owner's equity recognized due to the equity method accounting for the equity
investment held before the date of acquisition shall be carried forward proportionally; if the remaining equity after disposal cannot
exercise joint control or have a significant impact on the investee in the preparation of individual financial statements the accounting
treatment shall be carried out in accordance with the relevant provisions of the "Accounting Standards for Enterprises No. 22 -
Recognition and Measurement of Financial Instruments". The difference between the fair value and the book value on the date of loss
of control shall be included in current profits and losses. Other comprehensive income and owner's equity shall be carried forward to
the current profits and losses.The Company disposes of equity investment in subsidiaries step by step through multiple transactions until the loss of control. If
the above transactions belong to a package deal each transaction shall be accounted for as a transaction to dispose of equity investment
in subsidiaries and lose control. Before the loss of control the difference between each disposal price and the book value of long-term
equity investment corresponding to the disposed equity shall be recognized as other comprehensive income when the control right is
lost it will be transferred to the current profits and losses of the control right.
22. Investment real estate
Measurement model of investment real estate
Cost method measurement
Depreciation or amortization method
1. Investment real estate refers to the assets held for capital appreciation or lease earning as well as the aims of both including
the land use right which has already been leased out land use right which is held for transfer after its appreciation and buildings which
have already been leased out (including buildings that have been constructed or developed for the purpose of leasing and buildings that
are being constructed or developed for the purpose of leasing).
2. Investment real estate is initially measured at cost and subsequently measured using the cost model. Expenditures related to
investment real estate can be incorporated into their cost if the potential economic benefits related to them are likely to flow into the
Company and their cost can be reliably measured. Otherwise subsequent expenditures should be recognized in current profits and
losses in which they are incurred.
3. For investment real estate measured under the cost model depreciation or amortization is provided for using the same methods
as those for fixed assets and intangible assets.
4. When the use of investment real estate changes to self-use from the date of change the investment real estate shall be converted
into fixed assets or intangible assets and the book value before conversion shall be taken as the entry value after conversion. When the
use of self-used real estate or inventory changes to earning rents or capital appreciation from the date of change fixed assets intangible
assets or inventory shall be converted into investment real estate and the book value before conversion shall be taken as the entry value
after conversion.The impairment test method and impairment provision method for investment real estate are detailed in "Long-term assets
impairment" of the "Main Accounting Policies and Accounting Estimates".
5. If the investment real estate is disposed or permanently withdrawn from use and is expected to be unable to obtain economic
benefits from its disposal the confirmation of the investment real estate shall be terminated. The amount of proceeds on sale transfer
retirement or damage of any investment real estate net of the book value of the investment real estate and the relevant taxes shall be
accounted as current profits and losses.
23. Fixed assets
(1) Recognition conditions
Fixed assets refer to tangible assets that simultaneously possess the following characteristics: (1) Held for the production of
commodities the provision of labor services the rental or operation and management; (2) With a useful life of more than one fiscal
year.No fixed asset may be recognized unless it simultaneously satisfies the following conditions: (1) The economic benefits relating to the
fixed asset are likely to flow into the enterprise; and (2) Cost of such fixed assets can be measured reliably. Subsequent expenditures
related to fixed assets that meet the recognition criteria shall be included in the cost of fixed assets; expenditures that do not meet the
above conditions shall be included in current profits and losses when incurred.
(2) Depreciation methods
Annual depreciation
Category Depreciation method Depreciation period Residual value rate
rate
Houses and buildings Straight-line method 20-50 years 0%-5% 2.00%-5.00%
Machinery equipment Straight-line method 5-10 years 0%-5% 10.00%-20.00%
Transportation vehicles Straight-line method 4-10 years 0%-5% 10.00%-25.00%
Electronic equipment
Straight-line method 3-5 years 0%-5% 20.00%-33.33%
and others
Descriptions:
(1) For the decoration expenses of fixed assets that meet the capitalization conditions depreciation is separately accrued using
the straight-line method over the shorter period between the intervals of two renovations and the remaining useful life of the fixed
assets.
(2) The depreciation rate of fixed assets with provision for impairment shall also be calculated and determined by deducting the
cumulative amount of provision for impairment of fixed assets.(3) The Company shall at least review the useful life and estimated net residual value and depreciation method of fixed assets at
the end of year. Any change shall be accounted for as the change in accounting estimate.
24. Construction in progress
1. Construction in progress is recognized when it is probable that economic benefits will flow in and the cost can be measured
reliably. Construction in progress is measured at the actual cost incurred before the asset reaches its expected conditions for use.
2. 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.
3. The impairment test method and impairment provision method for construction in progress are detailed in "Long-term assets
impairment" of the "Main Accounting Policies and Accounting Estimates".
25. Borrowing costs
Borrowing costs are loan interests amortization of depreciation or appreciation auxiliary expenses and exchange differences
from foreign currency borrowings etc.
1. Recognition principles for capitalization of borrowing costs
Borrowing costs of the Company which can be classified directly as expenses for the acquisition construction or production
activities for preparing an asset eligible for capitalization shall be capitalized and booked into cost of capital; other borrowing costs
shall be defined upon occurred as expenses on the basis of the amount and accounted to current profits and losses.
2. Capitalization period of borrowing costs
(1) The borrowing costs shall be capitalized when all of the following conditions are satisfied: 1) Asset expenditure has already
incurred; 2) The borrowing costs have already incurred; 3) Acquisition construction or production activities necessary to bring the
asset to reach expected conditions for use or sale are in progress.
(2) Suspension of capitalization: If the construction or production of an asset that meets the capitalization conditions is interrupted
abnormally and the interruption lasts for more than three consecutive months the capitalization of borrowing costs shall be suspended.Borrowing costs incurred during the interruption period are recognized as current expenses until the construction or production
activities of the asset resume; if the interruption is a necessary step for making the eligible assets under acquisition construction or
production reach the expected conditions for use or marketing the capitalization of the borrowing costs shall be continued.
(3) Cease of capitalization: When the acquisition construction or production of assets that meet the capitalization conditions is
ready for its expected conditions for use or sale the capitalization of borrowing costs will cease. When a portion of the assets that meet
the capitalization conditions are completed and can be used separately the capitalization of the borrowing costs for that portion of the
assets shall cease. If each part of the purchased or produced asset is completed separately but can only be used or sold to the outside
world after the overall completion the capitalization of borrowing costs shall be stopped when the entire asset is completed.
3. Calculation methods for capitalization rate and capitalized amount of borrowing costs
Where a special loan is borrowed for the purchase and construction or production of assets eligible for capitalization the amount
of interest to be capitalized is determined by subtracting the interest income from depositing the unused loan funds in the bank or the
investment income from temporary investments from the actual interest expenses incurred during the current period of the specific loan
(including the amortization of discount or premium determined by the effective interest rate method). For the acquisition or production
of assets that meet the capitalization conditions and have occupied general borrowings the amount of interest on general borrowings
that should be capitalized is determined by multiplying the weighted average of the asset expenditures exceeding the asset expenditures
of specific borrowings by the capitalization rate (weighted average interest rate) of the occupied general borrowings. During the
capitalization period 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. The exchange differences arising from the principal and interest of foreign currency-
specific borrowings are capitalized during the capitalization period. Auxiliary expenses incurred for specific borrowings shall be
capitalized if they occur before the assets being constructed or produced which meet the capitalization conditions reach the expected
conditions for use or sale. Expenses incurred after the assets reach the expected conditions for use or sale are included in current profits
and losses. The auxiliary expenses incurred in general borrowings are included in current profits and losses when incurred. 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.
26. Intangible assets
(1) Useful life and its determination basis estimated situation amortization method or review procedure
1) Initial measurement of intangible assets
Initial recognition of intangible assets is determined by acquisition costs. Costs of purchased intangible assets include purchase
price related taxes as well as other expenditures directly attributable to making such assets ready for intended use. Where the payment
of the acquisition price for intangible assets is delayed beyond the normal credit terms for those with financing nature the cost of
intangible assets is determined at the present value of the acquisition price. When an intangible asset is obtained from a debtor in debt
restructuring as debt settlement its entry value shall be determined based on the fair value of the abandoned claim and other costs
directly attributable to bringing the asset to its intended use such as taxes. On the premise that a non-monetary asset exchange has
commercial substance and the fair value of the assets exchanged in or out can be reliably measured the cost of the intangible assets
acquired in a non-monetary asset exchange shall be the fair value of the assets given up and the relevant taxes and fees payable unless
there is conclusive evidence that the fair value of the assets acquired is more reliable; for non-monetary asset exchanges that do not
meet the above conditions the book value of the exchanged assets and the relevant taxes and fees payable shall be used as the cost for
the intangible asset received and no profit or loss shall be recognized.Expenditures related to intangible assets are concluded into cost of intangible assets only if relevant economic benefits are likely
to flow to the entity and the cost can be measured reliably; all other expenditures shall be included in current profits and losses.Acquired land-use rights are usually recognized as intangible assets. Regarding self-constructed land or buildings relevant land-
use rights expenditures and construction costs of buildings shall be recognized as intangible assets and fixed assets separately.Regarding purchased plant and buildings expenditures shall be distributed into land-use rights and buildings. Whereas it is difficult to
reasonably distribute it shall be wholly recognized as fixed assets.
2. Useful life and its determination basis estimated situation amortization method or review procedure of intangible assets
Based on a comprehensive assessment of factors such as the contractual or statutory rights of intangible assets industry conditions
historical experience and expert opinions if it can be reasonably determined that an intangible asset will bring economic benefits to
the Company for a certain period it is classified as an intangible asset with a limited useful life; otherwise it is regarded as an intangible
asset with an indefinite useful life.For intangible assets with a limited useful life the following factors are typically considered when estimating their useful lives:
(1) The normal life cycle of the products produced by using the asset and information on the useful lives of similar assets; (2) The
current situation and future development trends in technology and processes; (3) The market demand for the products or services
provided by the asset; (4) The expected actions of current or potential competitors; (5) The expected maintenance expenditures to
maintain the asset's ability to generate economic benefits and the Company's ability to pay such expenditures; (6) Relevant legal
provisions or similar restrictions on the control period of the asset such as the term of a license or lease; (7) The correlation with the
useful lives of other assets held by the Company etc. The estimated useful lives of intangible assets with a limited useful life are as
follows:
Basis for estimated useful
Item Period (year)
life
Software Benefit period 2-10
From obtaining the land use right to the termination
Land use rights Benefit period
date of the land use right
Patents and patented technology Benefit period 8
Customer relations Benefit period 10
Intangible assets with a finite useful life are amortized systematically and reasonably within their useful lives in accordance with
the expected realization method of the economic benefits related to such intangible assets. If the expected realization method cannot
be reliably determined the straight-line method is adopted for amortization. Intangible assets with an indefinite useful life are not
amortized but their useful lives are reviewed annually and impairment tests are conducted.At the end of each year the Company reviews the useful life and amortization method of intangible assets with limited useful
life. If it is different from previous estimates the original estimates shall be adjusted and changed according to accounting estimates.If the Company expects that certain intangible assets cannot bring future economic benefits to it the book value of the intangible asset
shall be all transferred into the current profits and losses.
(2) The scope of R&D expenditure collection and related accounting treatment methods
The expenditures of internal research and development projects of the Company are divided into research expenditures and
development expenditures. Specific standards for dividing the research stage and development stage of the Company's internal research
and development projects: The planned investigation stage carried out to acquire new technologies and knowledge etc. shall be
identified as the research stage which is characterized by planning and exploration. The stage of applying research results or other
knowledge to a plan or design before commercial production or use in order to produce new or substantially improved materials
devices products etc. shall be identified as the development stage. This stage is characterized by its targeted nature and a relatively
high possibility of achieving results.Expenditures of internal research and development projects during research stage are included in current profits and losses upon
occurrence. Expenses incurred during the development phase of internal research and development projects are recognized as intangible
assets when the following conditions are met: (1) Complete such intangible asset to make it usable or salable with technical feasibility;
(2) Having the intent to finish and use or sell the intangible asset; (3) The ways in which intangible assets generate economic benefits
include proving that there is a market for the products produced by using the intangible assets or for the intangible assets themselves
and that the intangible assets will be used internally their usefulness shall be proved; (4) There are sufficient technical financial and
other resources to complete the development of the intangible assets and is the ability to use or sell the intangible assets; (5) The
expenditures attributable to development stage of such intangible assets shall be measured reliably. Expenditures that do not meet the
above conditions shall be included in current profits and losses when incurred. If expenditure in research stage and expenditure in
development stage fail to be divided generated R&D expenditure shall be concluded in current profits and losses when they are incurred.
27. Long-term assets impairment
Long-term assets such as long-term equity investments investment real estate measured at cost fixed assets construction in
progress right-of-use assets intangible assets and goodwill etc. may indicate that impairment has occurred if any of the following
signs are present:
1. The market price of the asset has dropped significantly in the current period and the decline is much greater 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 or the market in which the asset is located
has undergone or will undergo major changes in the current period or in the near future which will have an adverse impact on the
enterprise.
3. The market interest rate or other market investment return rate has increased in the current period affecting the discount rate
used by the enterprise to calculate the present value of the expected future cash flows of the asset resulting in a significant reduction
in the recoverable amount of the asset.
4. There is evidence that the asset has become outdated or its physical entity has been damaged.
5. The asset has been or will be idle discontinued or planned for early disposal.
6. Internal reports of the enterprise indicate that the economic performance of the asset has been or will be lower than expected
such as the net cash flow or operating profit (or loss) generated by the asset being far lower (or higher) than the expected amount.
7. Other indications that the asset may have suffered impairment.
If there are indications of impairment of the above-mentioned long-term assets as of the balance sheet date impairment tests shall
be conducted. If the result of the impairment test indicates that the recoverable amount of the asset is lower than its book value an
impairment provision shall be made according to the difference and included in the impairment loss. The recoverable amount is the
higher of the fair value of the asset less disposal costs and the present value of the asset's estimated future cash flows. The methods for
determining the fair value are described in the "Main Accounting Policies and Accounting Estimates - Fair Value". 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 provision for asset impairment shall be calculated and recognized on an individual basis. If it is difficult to estimate the
recoverable amount of any individual asset its recoverable amount shall be determined based on the asset group to which the concerned
asset belongs. The group of assets is the minimum group of assets forming a cash-generating unit.During the impairment test the book value of the goodwill shown separately in financial statements is dividing to the asset group
or combination of group assets that are expected benefit from the enterprise merger synergies. In case that the test results show that the
recoverable amount of assets group or combination of assets groups including the allocated goodwill is lower than the book value the
corresponding impairment loss is recognized accordingly. The amount of the impairment loss shall be offset by the book value of such
goodwill apportioned to the asset group or the combination of asset groups then offset the book value of other assets proportionally
based on the proportion of the book value of other assets other than goodwill in the asset group or the combination of asset groups.Goodwill and intangible assets with indefinite useful lives shall be subject to impairment tests at least annually at the end of each
fiscal year.Once the above losses from impairment of assets are recognized they will not be reversed for the value recovered in the
subsequent periods.
28. 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 profits and losses.29. Contract liabilities
Contract liabilities refer to the obligation of the Company to transfer goods to customers for consideration received or receivable
from customers. The Company offsets contract assets and contract liabilities under the same contract and presents them on a net basis.
30. Employee compensation
(1) Accounting treatment methods for short-term compensation
During the accounting period when employees of the Company provide services the actual employee wages and bonuses as well
as the social insurance premiums including medical insurance work-related injury insurance and maternity insurance and housing
fund paid by the Company in accordance with the prescribed standards and ratios are recognized as liabilities and included in current
profits and losses or the cost of related assets. Employee benefits that are non-monetary benefits shall be measured at fair value if they
can be reliably measured. If the liability is expected not to be fully settled within twelve months after the end of the annual reporting
period in which the employee provides the related services and the financial impact is significant the liability shall be measured at its
discounted amount.
(2) Accounting treatment method for post-employment welfare
The post employment welfare plan includes a defined contribution plan and a defined benefit plan. Where the defined contribution
plan is a post employment welfare plan in which the enterprise will no longer assume further payment obligations after paying fixed
fees to an independent fund; a defined benefit plan refers to a post employment welfare plan other than a defined contribution plan.The Company contributes to the basic endowment insurance and unemployment insurance for its employees in accordance with
the relevant regulations of the current government. During the accounting period when the employees provide services to the Company
the amount to be contributed as calculated based on the defined contribution plan is recognized as a liability and included in current
profits and losses or the cost of related assets. After the Company regularly pays the above-mentioned funds in accordance with national
standards it has no further payment obligations.
(3) Accounting treatment method for dismission welfare
The employee compensation liabilities arising from dismission welfare shall be recognized and included in current profits and
losses when the Company cannot unilaterally withdraw the dismission welfare provided by the labor relationship termination plan or
the reduction proposal and the Company confirms the costs or expenses related to the reorganization involving the payment of
dismission welfare whichever is earlier. However if the termination benefits are not expected to be fully paid within twelve months
after the end of the annual reporting period they shall be accounted for as other long-term employee benefits.
(4) Accounting treatment of other long-term employee benefits
31. Estimated liabilities
When the obligation related to contingent matters meets the following conditions simultaneously they shall be recognized as
estimated liabilities: 1. The obligation is the current obligation of the Company; 2. Performance of this obligation will probably cause
outflow of economic interest of the Company; 3. The amount of such obligation can be measured reliably.The estimated liabilities are initially measured according to the best estimate of the expenditure required to fulfill the relevant
current obligations and factors such as risks uncertainties and time value of money related to contingencies are taken into account. If
the time value of money has a significant impact the best estimate is determined by discounting the relevant future cash outflows.The best estimate is handled in the following situations: If there is a continuous range (or interval) of required expenses and the
likelihood of various outcomes occurring within that range is the same the best estimate is determined based on the average of the
upper and lower limits of the range. If there is no continuous range (or interval) of required expenses or although there is a continuous
range the likelihood of various outcomes occurring within that range is different in the event that there is a contingency involving a
single item the best estimate shall be determined based on the amount most likely to occur; if the contingency involves multiple items
the best estimate shall be determined based on various possible outcomes and related probabilities.If all or part of the expenditures to pay off estimated liabilities by the Company are expected to be compensated by third parties
once it is basically certain that compensation amount can be received that amount can be recognized as asset individually but will not
exceed book value of estimated liabilities.The book value of the estimated liabilities is reviewed on each balance sheet date. Where there is concrete evidence proving that
the book value cannot truly reflect the current best estimate the book value of estimated liabilities shall be adjusted according to the
current best estimate.
32. Share-based payment
1. Types of share-based payments
The Company's share-based payments are transactions that grant equity instruments or assume liabilities based on equity
instruments to obtain services provided by employees or other parties. 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; (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
On each balance sheet date during the waiting period the best estimate is made by the Company based on the latest changes in
the number of eligible employees and subsequent information and the estimated number of eligible equity instruments is revised. On
the vesting date the final estimated number of exercisable equity instruments is consistent with the actual number of exercisable equity
instruments.
4. Accounting treatment for share-based payments
(1) Equity settled share-based payments
For share-based payments settled in equity that are made in exchange for services provided by employees if the rights are
immediately exercisable after grant the fair value of the equity instrument on the grant date is recognized as an expense in the relevant
cost or expense account and the capital reserve is adjusted accordingly. If the rights are exercisable only after the completion of a
service period or the achievement of a performance condition on each balance sheet date during the waiting period the fair value of
the equity instrument on the grant date is recognized as an expense in the relevant cost or expense account based on the best estimate
of the number of equity instruments that will be exercisable and the capital reserve is adjusted accordingly. No further adjustments are
made to the recognized cost or expense and the total owner's equity after the vesting date.For share-based payments settled in equity that are made in exchange for services provided by other parties if the fair value of
the services provided by the other parties can be reliably measured it shall be measured at the fair value of the services on the acquisition
date. If the fair value of the services provided by the other parties cannot be reliably measured but the fair value of the equity instrument
can be reliably measured it shall be measured at the fair value of the equity instrument on the acquisition date and it is included in the
relevant cost or expense with the owner's equity increased accordingly.
(2) Cash settled share-based payments
For share-based payments settled in cash that are made in exchange for employee services if they are immediately exercisable
upon grant the fair value of the liability assumed by the Company on the grant date is recognized as an expense in the relevant cost or
expense and the liability is increased accordingly. For cash settled share-based payment that can be exercised only after completing
the services in the waiting period or meeting the prescribed performance conditions 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. On
each balance sheet date and settlement date before the settlement of relevant liabilities the fair value of liabilities shall be re-measured
and the changes shall be included in the current profits and losses.
(3) Modification and termination of share-based payment plans
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 equity-settled share-based payment is cancelled it is treated as accelerated vesting on the cancellation date and the
unrecognized amount is immediately recognized (the amount that should be recognized during the remaining waiting period is
immediately included in current profits and losses and capital reserve is recognized at the same time). If the employee or other parties
are able to meet the non-vesting conditions but fail to do so during the waiting period it is treated as the cancellation of the equity-
settled share-based payment. However if new equity instruments are granted and it is determined on the grant date of the new equity
instruments that they are intended to replace the cancelled equity instruments the new equity instruments are treated in the same way
as if the terms and conditions of the original equity instruments were modified.
5. Share-based payment transactions involving enterprises within the scope of the Company's consolidation the Company and
its actual controller or other shareholders or the Company and other enterprises within the same group shall be handled in
accordance with the relevant provisions of Article 7 of the Interpretation No. 4 of the Accounting Standards for Business Enterprises
on share-based payments within a group.
33. Share repurchase
When the Company acquires its own shares due to reduction of registered capital or rewarding employees etc. the actual payment
amount shall be treated as treasury shares and recorded for reference. If the repurchased shares are cancelled the difference between
the total par value of the cancelled shares (calculated based on the par value per share and the number of cancelled shares) and the
actual payment amount for the repurchase shall be offset against the capital reserve. If the capital reserve is insufficient to cover the
offset the retained earnings shall be offset. If the repurchased shares are awarded to the Company's employees they shall be treated as
share-based payments settled in equity. When the employees exercise their rights to purchase the Company's shares and the Company
receives the payment the cost of the treasury shares delivered to the employees and the accumulated amount of the capital reserve
(other capital reserves) during the waiting period shall be written off and the difference shall be adjusted to the capital reserve (share
premium).34. Revenue
Accounting policies adopted for disclosing revenue recognition and measurement according to business types
1. General principle for revenue recognition
The Company's revenue mainly comes from the sale of goods. The Company uses the transfer of control as the criterion for
determining the timing of revenue recognition. The Company recognizes the revenue when performance obligations under the contract
are performed i.e. the consumer obtains the control power over relevant goods.When any of the following conditions is satisfied it will be deemed as that the Company fulfills its performance obligations
during certain period otherwise as that the Company fulfills its performance obligations at a certain time point: (1) Customers obtain
and consume the economic benefits brought by the Company's performance at the same time as the Company's performance; (2)
Customers can control the goods under construction in the process of performance of the Company; (3) The goods produced in the
process of performance by the Company have irreplaceable uses and the Company has the right to collect payments for the accumulated
performance so far during the whole contract period.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. When the performance
of the performance cannot be reasonably determined if the cost incurred by the Company is expected to be compensated the revenue
will be recognized according to the amount of cost incurred until the performance of the performance can be reasonably determined.For the performance obligations performed at a certain time point the Company recognizes revenue at the time when the customer
obtains control over the relevant goods. In the judgment of whether the customer has obtained the control over the goods the Company
will consider the following indications: (1) The Company enjoys the current collection right in respect of the goods that is the customer
has the current payment obligation in respect of the goods; (2) The Company has transferred the legal title of the goods to the customer
that is the customer already owns the legal title of the goods; (3) The Company has transferred the physical goods to the customer
that is the customer has possessed the physical goods; (4) The Company has transferred the main risks and rewards of ownership of
the goods to the customer that is the customer has obtained the main risks and rewards of ownership of the goods; (5) The customer
has accepted the product; (6) Other signs that customers have gained control of the goods.If the contract contains two or more performance obligations the Company shall on the commencement date of the contract
apportion the transaction price to each individual performance obligation according to the relative proportion of the individual selling
price of the goods promised by each individual performance obligation and measure the income according to the transaction price
apportioned to each individual performance obligation. The transaction price is the amount of consideration that the Company is
expected to be entitled to receive for the transfer of goods to customers. Amounts collected by the Company on behalf of third parties
and amounts that the Company expects to refund to customers are accounted for as liabilities and are not included in the transaction
price. Where there is variable consideration in a contract 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. 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. On the commencement date of the contract if the Company expects that the interval between the customer's acquisition
of control over the goods and the customer's payment of the price shall not exceed one year the significant financing component of the
contract shall not be taken into account.
2. Specific principles for recognizing the Company's revenue
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 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.
3. Principles for income processing of specific transactions
1) A contract with quality assurance clauses attached
The Company shall assess whether the quality assurance provides a separate service beyond ensuring that the products sold meet
established standards to customers. If the Company provides additional services it shall be treated as a single performance obligation
and subject to accounting treatment in accordance with the income standards; otherwise the quality assurance responsibility shall be
accounted for in accordance with the accounting standards for contingencies.
2) Main responsible persons and agents
The Company determines whether it the main responsible person or agent when engaging in transactions based on whether it has
control over the goods or services before transferring them to customers. If the Company is able to control the goods or services before
transferring them to customers it is the main responsible person and recognizes revenue based on the total amount of consideration
received or receivable; otherwise the Company acts as an agent and recognizes revenue based on the expected amount of commission
or handling fees entitled to receive. This amount is determined by deducting the total amount of consideration received or receivable
from the amount payable to other relevant parties.The adoption of different business models for similar businesses involves different revenue recognition methods and measurement
methods
35. Contract cost
1. Recognition conditions for contract costs
Contract costs include contract acquisition costs and contract performance costs.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. Other expenditures incurred by the Company for the purpose of obtaining the contract other
than the incremental costs expected to be recovered are included in current profits and losses when incurred except those expressly
borne by the customer.Cost incurred by the Company for the performance of the contract which does not fall within the scope of other Accounting
Standards for Enterprises other than the revenue standards and meets the following conditions at the same time is recognized as an
asset as the contract performance cost: (1) The cost is directly related to a current or expected contract including direct labor direct
materials manufacturing expenses (or similar expenses) costs clearly borne by the customer and other costs incurred solely as a result
of the contract; (2) This cost increases the resources that the Company will use to fulfill its performance obligations in the future; (3)
The cost is expected to be recovered.
2. Amortization of assets related to contract costs
The assets recognized at the cost of contract acquisition and the assets recognized at the contract performance costs (hereinafter
referred to as the assets related to contract costs) are amortized on the same basis as the recognition of goods or services related to the
assets and included in current profits and losses. For amortization periods of contract acquisition costs not exceeding one year they are
included in current profits and losses when incurred.
3. Impairment of assets related to contract costs
When determining the impairment loss of assets related to contract costs the Company first determines the impairment loss of
other assets related to the contract that are recognized in accordance with other Accounting Standards for Enterprises. Then the
Company determines the impairment loss of the assets related to the contract costs. If the book value of the assets related to contract
costs is higher than the difference between the expected remaining consideration for the transfer of goods related to the asset and the
estimated cost to be incurred for the transfer of the related goods of the Company the excess shall be subject to provision for impairment
and recognized as losses from impairment of assets.After impairment provisions have been made if the factors that led to the impairment in previous periods change and the
difference between the expected remaining consideration that the Company can obtain from the transfer of the goods related to the
asset and the estimated costs to be incurred for the transfer of such goods exceeds the book value of the asset the previously recognized
impairment provisions shall be reversed and included in current profits and losses. However the book value of the asset after the
reversal shall not exceed the book value that would have been recorded if no impairment provision had been made.
36. Government subsidies
1. Classification of government subsidies
Government subsidies refer to monetary and non-monetary assets acquired by the Company from the government for free. It is
divided into government subsidies related to incomes and those related to income.Government subsidies related to assets refer to the governmental subsidies that are obtained by the Company and used for
constructing long-term assets or forming the long-term assets in other ways including fiscal grants for the purchase of fixed assets or
intangible assets and fiscal subsidies for the interest on specific borrowings for fixed assets etc. The government subsidies related to
income refer to other government subsidies other than those related to assets. For the governmental 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 government subsidies related to incomes in whole.The specific criteria adopted by the Company for classifying government subsidies are as follows:
(1) If the government subsidy document stipulates that the subsidy target uses the subsidy to purchase construct or otherwise
form long-term assets or if the subsidy target's expenditure is mainly used for purchasing constructing or otherwise forming long-
term assets it is classified as government subsidies related to assets.
(2) If the government subsidy obtained based on the government subsidy document is entirely or mainly used to compensate for
expenses or losses that will occur in the future or have already occurred it is classified as government subsidies related to income.
(3) If the government document does not clearly specify the subsidy target the government subsidy will be classified as either a
government subsidies related to assets or a government subsidies related to income in the following ways: 1) If the government
document clearly specifies the particular project the subsidy is intended for the classification is made based on the relative proportion
of the expenditure amount that will form assets and the expenditure amount that will be recorded as expenses in the budget of that
particular project. This classification ratio needs to be reviewed on each balance sheet date and changed if necessary; 2) If the
government document only makes a general statement about the purpose and does not specify a particular project it is classified as a
government subsidies related to income.
2. Recognition time point for government subsidies
The Company usually confirms and measures government subsidies based on the actually received amount when they are actually
received. However at the end of the period there is conclusive evidence showing that it can meet the relevant conditions stipulated by
the financial support policy. The government subsidies measured according to the receivable amount shall meet all the following
requirements:
(1) The subsidy is based on the financial support project officially issued and actively publicized by local finance department in
accordance with the provisions of the "Regulations on the Disclosure of Government Information" and its financial fund management
method which shall be inclusive (any enterprise which meets the specified requirements may apply) rather than dedicated to specific
enterprise;
(2) The amount of subsidy receivable has been recognized by government authority departments via issuance of documents or
the amount can be reasonably calculated according to relevant regulations in the financial fund management method officially issued
and no significant uncertainty is expected for such amount;
(3) The appropriation period has been specified in relevant approved subsidy document and there is corresponding financial
budget for the appropriation of such subsidy so it is reasonable certain that the subsidy can be received within specified period;
(4) Any other relevant requirements which shall be met according to the specific conditions of the Company and the subsidy.
3. Accounting treatment of government subsidies
If government subsidies are monetary assets they 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.Based on the essence of economic transactions the Company determines whether a certain type of government subsidy business
shall be accounted for using the gross price method or the net amount method.Item Accounting content
Government subsidy categories accounted for using the gross Other government subsidies except for government interest
price method subsidies
Government subsidy categories accounted for using the net
Government interest subsidies
amount method
Government subsidies related to assets shall be used to offset the book value of the related assets or recognized as deferred
incomes. Government subsidies related to assets are recognized as deferred income and included in the profits and losses in stages
within the useful life of the assets constructed or purchased in a reasonable and systematic way.Government subsidies related to income used to compensate related costs or losses in later periods shall be recognized as deferred
income and included in current profits and losses or to write off related costs during the period of recognition of related costs or losses.Relevant costs or losses incurred for compensation shall be directly included in current profits and losses or to write off related costs.The government subsidies related to the enterprise's daily activities shall be included in other income or offset against relevant
costs; and the government subsidies unrelated to the enterprise's daily activities shall be included in non-operating income and
expenditure.The policy-based preferential loan discount obtained by the Company will be accounted according to the following two conditions:
(1) Where the finance allocates the discount fund to the lending bank and the lending bank provides a loan at the policy-based
preferential interest rate for the enterprise the Company includes 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) Where the finance directly allocates the discount fund to the Company the Company uses the corresponding discount to
offset relevant borrowing costs.If the recognized government subsidies need to be returned the Company will conduct accounting treatment for the current
period when they need to be returned:
(1) If the book value of the relevant assets is offset at the time of initial recognition the book value of the assets shall be adjusted.
(2) If there is relevant deferred income the book balance of relevant deferred income shall be offset and the excess shall be
included in current profits and losses.
(3) If it belongs to other circumstances it shall be directly included in current profits and losses.
The principle for distinguishing government subsidies recorded in different profit and loss items is: The governmental subsidies
related with the Company's daily activities shall be included in other income or write down related costs according to the economic
business essence. Government subsidies unrelated to the Company's daily activities are included in non-operating income and
expenditure.
37. Deferred tax assets/deferred tax liabilities
1. Recognition and measurement of deferred tax assets and deferred tax liabilities
The Company adopts the balance sheet liabilities method to recognize deferred income tax based on the temporary difference
between the book value of assets/liabilities and tax basis at the balance sheet date. The current income tax and deferred income tax of
the Company are included in current profits and losses as income tax expense or income except for the income tax arising from the
following circumstances: (1) Business combination; (2) Transactions or events directly recognized in owner's equity; (3) Dividend
expenditures on financial instruments classified as equity instruments in accordance with the "Accounting Standards for Business
Enterprises No. 37 - Presentation of Financial Instruments" etc. can be deducted before corporate income tax in accordance with tax
policies provided that the distributed profits are derived from transactions or events previously recognized in the owner's equity.For any deductible temporary difference any deductible loss or tax credit that can be carried forward to future years the
corresponding deferred tax assets shall be recognized to the extent that the amount of future taxable income to be offset by the
deductible temporary difference deductible loss or tax deduction to be likely obtained unless the said deductible temporary difference
is generated in the following transactions:
(1) This transaction is not a business combination. At the time of the transaction it neither affects accounting profit nor taxable
income (or deductible losses) and the initially recognized assets and liabilities will not generate equivalent taxable temporary
differences and deductible temporary differences.
(2) For deductible temporary differences related to the investments of subsidiaries associates and joint ventures the
corresponding deferred tax assets are recognized if the following conditions are met: the temporary differences are likely to be reversed
in the foreseeable future and the taxable income amount used to offset the deductible temporary differences is likely to be obtained in
the future.Deferred tax liabilities shall be recognized for all taxable temporary difference unless the said taxable temporary difference is
generated in the following transactions:
(1) The initial recognition of the goodwill or the initial recognition of the assets or liabilities caused in the dealing with the
following feature: This transaction is not a business combination. At the time of the transaction it neither affects accounting profit nor
taxable income (or deductible losses) and the initially recognized assets and liabilities will not generate equivalent taxable temporary
differences and deductible temporary differences.
(2) The temporary taxable difference related to the subsidiaries joint ventures and associates whose time of the reverse can be
controlled and which is unlikely to be reversed in the excepted future.Based on the differences between the book value and the tax base of assets and liabilities (for items not recognized as assets or
liabilities the differences between their tax bases determined in accordance with tax laws and their book values) deferred tax assets
or deferred tax liabilities are recognized by calculating at the applicable tax rate during the period expected to recover the asset or settle
the liability.For individual transactions that are not business combinations and do not affect accounting profits or taxable income (or
deductible losses) at the time of occurrence and where the initial recognition of assets and liabilities results in equal amounts of taxable
temporary differences and deductible temporary differences (including lease transactions where the lessee initially recognizes lease
liabilities and includes them in right-of-use assets on the commencement date of the lease term and transactions where estimated
liabilities are recognized due to the existence of disposal obligations for fixed assets and other assets and included in the cost of the
relevant assets etc.) the Company recognizes the corresponding deferred tax liabilities and deferred tax assets for the taxable temporary
differences and deductible temporary differences arising from the initial recognition of assets and liabilities at the time of the transaction.The recognition of deferred tax assets is limited to the extent that it is probable that sufficient taxable income will be available in
future periods to utilize the deductible temporary differences. On the balance sheet date if there is conclusive evidence that it is
probable that sufficient taxable income will be available in future periods to utilize the deductible temporary differences the Company
recognizes deferred tax assets that were not recognized in previous accounting periods. The book value of deferred tax assets is
reviewed. If it is probable that sufficient taxable income will not be available in future periods to utilize the benefit of deferred tax
assets the book value of deferred tax assets is reduced. When it is probable that sufficient taxable income will be available the reduction
is reversed.
2. The current income tax assets and liabilities of the Company shall be presented as the net amount after being offset when the
Company has the legal right to carry out net settlement and intends to carry out net settlement or when the assets are acquired at the
same time when liabilities are paid off.When the Company has the legal right to settle current income tax assets and current income tax liabilities on a net basis and the
deferred tax assets and deferred tax liabilities are related to income taxes levied by the same tax authority on the same taxable entity or
on different taxable entities but during each significant period in which the deferred tax assets and liabilities are reversed in the future
the taxable entities involved intend to settle the current income tax assets and liabilities on a net basis or to acquire assets and settle
liabilities simultaneously the Company presents the deferred tax assets and deferred tax liabilities at the net amount after offsetting.
38. Leasing
(1) Accounting treatment method for leasing as a lessee
(1) Right-of-use assets
On the commencement date of the lease term the Company recognizes the right-of-use assets for leases other than short-term
leases and low value asset leases. The right-of-use asset is initially measured at cost which includes: the initial measurement amount
of the lease liability; lease payments made before or on the commencement date of the lease term (net of any lease incentives received);
initial direct expenses incurred; 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.The Company depreciates the right-of-use assets using the straight-line method. For leased assets where it is reasonably certain
that the ownership of the leased assets can be obtained at the end of the lease term the Company depreciates the assets over the
remaining useful life of the leased assets. If it is not reasonably certain that the ownership of the leased assets can be obtained at the
end of the lease term the leased assets shall be depreciated over the shorter of the lease term and the remaining useful life of the leased
assets.
(2) Lease liabilities
On the commencement date of the lease term the Company recognizes the lease liability for leases other than short-term leases
and low value asset leases. Lease liabilities are initially measured according to the present value of the unpaid lease payments. Lease
payments include: Fixed payment and substantial fixed payment. If there is lease incentive the relevant amount of lease incentive shall
be deducted; the variable lease payment amount which depends on the index or ratio. It is determined at the initial measurement based
on the index or ratio on the commencement date of the lease term; the exercise price of the purchase option provided that the Company
reasonably determines that the option will be exercised; 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; the amount expected to be paid
according to the residual value of the guarantee provided by the Company. The Company adopts the embedded interest rate of the lease
as the discount rate. if the embedded interest rate of the lease cannot be determined the incremental borrowing rate of the Company
shall be used as the discount rate.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 or the cost of relevant assets. The amount of variable lease payments not
included in the measurement of lease liabilities shall be included in the current profits and losses or relevant asset costs when actually
incurred.After the commencement date of the lease term the Company remeasures the lease liability based on the present value of the
revised lease payments in the following circumstances: The Company's assessment of the purchase option renewal option or
termination option changes or the actual exercise of the renewal option or termination option is inconsistent with the original
assessment; the expected amount payable for the residual value guarantee changes; or the index or rate used to determine the lease
payments changes. When remeasuring the lease liability the Company adjusts the book value of the right-of-use asset accordingly.Where the book value of the right-of-use asset has been reduced to zero but the lease liability still needs to be further reduced the
Company will include the remaining amount in the current profits and losses.
(3) Basis for judgment and accounting treatment for simplified processing of short-term leases and leases of low-value assets
The Company chooses not to recognize the right-of-use assets and lease liabilities for short-term leases and low-value asset leases
and the relevant lease payments are included in the current profits and losses or relevant asset costs according to the straight-line
method in each period of the lease term. Short-term lease refers to a lease with a lease term of no more than 12 months and excluding
the purchase option on the commencement date of the lease term. Low value asset lease refers to the lease with lower value when the
single leased asset is a brand-new asset. Where the Company sublets or expects to sublet the leased assets the original lease does not
belong to the lease of low value assets.
(4) Lease change
If the lease is changed and the following conditions are met at the same time the Company shall treat the change of the lease as
a separate lease for accounting treatment: The change of the lease expands the scope of the lease or extends the lease term by adding
the right to use one or more leased assets. The increased consideration is equivalent to the amount adjusted according to the conditions
of the contract at the separate price for most of the expansion of the lease scope.Where the lease change is not accounted for as a separate lease on the effective date of the lease change the Company re-
allocates the consideration of the contract after the change re-determines the lease term and re-measures the lease liability according
to the present value calculated by the lease payment after the change and the revised discount rate.
(2) Accounting treatment method for leasing as a lessor
On the lease commencement date the Company divides the lease into financial lease and operating lease. Finance lease refers to
a lease that essentially transfers almost all the risks and rewards related to the ownership of leased assets regardless of whether the
ownership is finally transferred or not. Operating leases refer to leases other than finance leases.When the Company is the sublessee lessor the sublease is classified based on the right-of-use assets generated from the original
lease. If the original lease is a short-term lease and the Company elects not to recognize a right-of-use asset and lease liability for the
original lease the Company classifies the sublease as an operating lease.
(1) Accounting treatment of operating lease
The lease receipts from operating leases are recognized as rental income on a straight-line method in each period of the lease
term. The Company capitalizes the initial direct expenses related to operating leases and allocates them into the current profits and
losses on the same basis as the recognition of rental income during the lease term. The amount of variable lease payments not included
in the lease receipts shall be included in the current profits and losses when actually incurred.
(2) Accounting treatment of financial lease
On the lease commencement date the Company recognizes the finance lease receivables for the finance lease and terminates the
recognition of the finance lease assets. When the Company initially measures the finance lease receivables the net amount of the lease
investment is taken as the entry value of the finance lease receivables. The net lease investment is the sum of the unguaranteed residual
value and the present value of the lease receipts not received on the commencement date of the lease term discounted at the interest
rate embedded in the lease.The Company calculates and recognizes the interest income of each period within the lease term according to the fixed periodic
interest rate. The derecognition and impairment of finance lease receivables shall be accounted for in accordance with "Main
Accounting Policies and Accounting Estimates - Financial Instruments". The amount of variable lease payments not included in the
measurement of net lease investment shall be included in the current profits and losses when it actually occurs.
39. Restricted Shares
Under the equity incentive plan the Company grants restricted shares to the incentive objects. The incentive objects first subscribe
for the shares. If the unlocking conditions stipulated in the equity incentive plan are not met subsequently the Company will repurchase
the shares at the pre-agreed price. If the restricted shares issued to employees have completed the registration and other capital increase
procedures in accordance with relevant regulations on the grant date the Company recognizes the share capital and capital reserve
(share premium) based on the subscription proceeds received from the employees; at the same time it recognizes treasury shares and
other payables for the repurchase obligation.
40. Other important accounting policies and estimates
In the application of accounting policies due to the inherent uncertainties in operating activities the Company needs to make
judgments estimates and assumptions regarding the book values of certain items in the financial statements that cannot be accurately
measured. These judgments estimates and assumptions are based on the past experience of the Company's management and are made
after considering other relevant factors. These judgments estimates and assumptions can affect the reported amounts of revenue
expenses assets and liabilities as well as the disclosure of contingent liabilities as of the balance sheet date. However the actual results
resulting from the uncertainties of these estimates may differ from the current estimates of the Company's management which may
lead to significant adjustments to the book values of affected assets or liabilities in the future. The Company regularly reviews the
aforementioned judgments estimates and assumptions on a going concern basis. Changes in accounting estimates that only affect the
current period are recognized in the period of change; changes that affect both the current period and future periods are recognized in
both the period of change and future periods. As of the balance sheet date the significant areas where the Company needs to make
judgments estimates and assumptions regarding the amounts of financial statement items are as follows:
1. Classification of leases
When the Company acts as a lessor in accordance with the "Accounting Standards for Enterprises No. 21 - Leases" leases are
classified as operating leases and finance leases. In making the classification management needs to analyze and judge whether all the
risks and rewards related to the ownership of the leased assets have been substantially transferred to the lessee.
2. Impairment of financial instruments
The Company assesses the impairment of accounts receivable measured at amortized cost debt investments contract assets and
receivable financing measured at fair value and included in other comprehensive income as well as other debt investments using the
expected credit loss model. The application of the expected credit loss model involves significant judgments and estimates by
management. Key parameters for measuring expected credit losses include probability of default loss given default and exposure at
default. The Company establishes models for probability of default loss given default and exposure at default based on quantitative
analysis of historical data and forward-looking information. Differences between the actual impairment results of financial instruments
and the original estimates will affect the book value of the financial instruments and the recognition or reversal of losses from credit
impairment in the period when the estimates are changed.
3. Provision for inventory write-down
The Company measures inventories at the lower of cost and net realizable value in accordance with its inventory accounting
policy. Provision for inventory write-down is made for inventories with costs higher than net realizable value and for obsolete and
slow-moving inventories. The impairment of inventories to net realizable value is based on an assessment of the marketability of the
inventories and their net realizable value. The identification of inventory impairment requires management to make judgments and
estimates based on conclusive evidence and taking into account factors such as the purpose of holding the inventories and the impact
of events after the balance sheet date. Differences between the actual results and the original estimates will affect the book value of the
inventories and the recognition or reversal of the provision for inventory write-down in the period when the estimates are changed.
4. Impairment of non-financial non-current assets
On the balance sheet date the Company assesses whether there are indications of possible impairment for non-current assets
other than financial assets. For intangible assets with indefinite useful lives in addition to the annual impairment test an impairment
test is also performed when there are indications of impairment. Other non-current assets excluding financial assets are subject to an
impairment test when there are indications that their book value is not recoverable.When the book value of an asset or a cash-generating unit exceeds its recoverable amount which is the higher of its fair value
less costs to sell and the present value of its estimated future cash flows an impairment is indicated.Fair value less costs to sell is determined by reference to the selling price in a binding sale agreement for a similar asset or
observable market prices in an arm's length transaction less the incremental costs directly attributable to the disposal of the asset. In
estimating the present value of future cash flows significant judgments are required regarding the output selling prices related
operating costs of the asset (or cash-generating unit) and the discount rate used to calculate the present value. The Company uses all
available relevant information when estimating the recoverable amount including forecasts of output selling prices and related
operating costs based on reasonable and supportable assumptions.The Company assesses whether goodwill is impaired at least annually which requires estimating the value in use of the cash-
generating units to which goodwill has been allocated. When estimating value in use the Company needs to estimate the future cash
flows from the cash-generating unit and select an appropriate discount rate to calculate the present value of those future cash flows.
5. Depreciation and amortization
The Company depreciates and amortizes investment real estate fixed assets and intangible assets measured at cost over their
useful lives taking into account their residual values using the straight-line method. The Company reviews the useful lives of these
assets regularly to determine the amount of depreciation and amortization to be recognized in each reporting period. The useful lives
are determined by the Company based on its past experience with similar assets and expectations of technological updates. If there are
major changes in previous estimates adjustments will be made to the depreciation and amortization expenses in future periods.
6. Deferred tax assets
The Company recognizes deferred tax assets for all unused tax losses to the extent that it is probable that there will be sufficient
taxable profits in the future to offset these losses. This requires management of the Company to make significant judgments to estimate
the timing and amount of future taxable profits taking into account tax planning strategies to determine the amount of deferred tax
assets to be recognized.
7. Income tax
In the normal course of operating activities there is a certain degree of uncertainty regarding the final tax treatment and
calculation of some transactions. Whether certain items can be deducted before tax requires the approval of the tax authorities. If the
final determination of these tax matters differs from the initially estimated amount such differences will affect the current income tax
and deferred income tax for the period in which the final determination is made.
8. Fair value measurement
Some of the Company's assets and liabilities are measured at fair value in the financial statements. When estimating the fair value
of an asset or liability the Company uses observable market data available; if the first level input values cannot be obtained it engages
a qualified third-party valuation agency to conduct the valuation during which the Company's management closely cooperates with it
to determine the appropriate valuation techniques and input values for the relevant models. Information on the valuation techniques
and input values used in determining the fair value of various assets and liabilities is detailed in "Disclosure of Fair Value" of this note.
41. Explanation of Important Accounting Estimates and Judgments
None
42. Changes of material accounting policies and accounting estimates
(1) Significant accounting policy changes
□Applicable □ Not applicable
Unit: RMB
Contents and reasons for changes in Name of report items that are
Affected amount
accounting policies significantly affected
The Company implemented the
"Interpretation No. 19 of the Accounting
Standards for Business Enterprises" (CK Note 1 0.00
[2025] No. 32) issued by the Ministry of
Finance from January 1 2026.The Company implemented the
"Interpretation No. 20 of the Accounting
Standards for Business Enterprises" (CK Note 2 0.00
[2026] No. 7) issued by the Ministry of
Finance from June 4 2026.Note: 1. The Company implemented the "Interpretation No. 19 of Accounting Standards for Business Enterprises" from January 1
2026. The implementation of this notice has no significant impact on the financial statements for the current reporting period.
2. The Company implemented the "Interpretation No. 20 of Accounting Standards for Business Enterprises" from June 4 2026. The
implementation of this notice has no significant impact on the financial statements for the current reporting period.
(2) Changes in significant accounting estimates
□ Applicable □Not applicable
(3) Implementation of new accounting standards adjustment for the first time starting from 2026. Relevant project
information on financial statements at the beginning of the year
□ Applicable □Not applicable
43. Others
None.VI. Taxation
1. Main tax types and tax rates
Tax Type Tax Basis Tax rates
Taxable value added amount is the
difference of VAT output calculated 13.00%、9.00%、6.00%、5.00%、
based on the revenue from sales of goods 3.00% and applicable value-added tax
VAT
and rendering of taxable services in rate for overseas subsidiaries in their
accordance with tax laws less deductible registered location
VAT input of current period
Urban maintenance and construction tax Actual amount of turnover tax paid 7.00%、5.00%
Please refer to the disclosure statement in
Corporate income tax Taxable income
the table below.Education surcharge Actual amount of turnover tax paid 3.00%
Local education surcharges Actual amount of turnover tax paid 2.00%
Based on 70% of the original value of
Property tax the property (or rental income) as the tax 1.20%、12.00%
benchmark
Disclosure of information on taxpayers with different corporate income tax rates
Name of Taxpayer Income tax rate
ZKTECO CO. LTD. 15.00%
Xiamen Zkteco Biometric Identification Technology Co. Ltd. 20.00%
Shenzhen ZKTeco Biometric Identification Technology Co.
20.00%
Ltd.ZK INVESTMENTS INC. 21.00%
ZK TECHNOLOGY LLC Please refer to the note in Note VI 3 (1).ZKTeco Sales Co. Ltd. 25.00%
Hangzhou ZKTeco Hanlian E-commerce Co. Ltd. 20.00%
ZKCserv Technology Limited Co. Ltd. 20.00%
Dalian ZKTeco Co. Ltd. 20.00%
XIAMEN ZKTECO CO. LTD. 15.00%
ZKTECO VIETNAM TECHNOLOGY COMPANY LIMITED 20.00%
ZKTeco (Guangdong) Co. Ltd. 15.00%
Xi'an ZKTeco Co. Ltd. 20.00%
ZKTECO CO. LIMITED 16.50%、8.25%
ZKTECO TURKEY ELEKTRONIK SANAYI VE TICARET
25.00%
LIMITED SIRKETI.ZKTECO LATAM S.A. DE C.V. 30.00%
ZK SOFTWARE DE MEXICO S.A. DE C.V. 30.00%
ZKTECO COLOMBIA SAS 35.00%
ZKTECO (M) SDN. BHD. 24.00%
ZKTECO BIOMETRICS INDIA PRIVATE LIMITED 25.6256%
ZKTECO EUROPE SL 25.00%
ZKTECO IRELAND LIMITED 12.50%
ZKTeco Deutschland GmbH 31.225%
ZKTECO UK LTD 19.00%、25.00%
ZKTECO PERU SOCIEDAD ANONIMA CERRADA 29.50%
ZKTECO THAI CO. LTD. 20.00%、15.00%、0.00%
ZKTeco Chile SpA 27.00%
SOLUCIONES INTEGRALES Y SISTEMAS SpA 27.00%
ZKTECO SECURITY L.L.C 0.00%、9.00%
ZKTECO ARGENTINA S.A. 25.00%、30.00%、35.00%
ZKTECO Investment Inc. 21.00%
ZKTECO USA LLC Please refer to the note in Note VI 3 (1).ARMATURA LLC Please refer to the note in Note VI 3 (1).Armatura Co. Ltd. 25.00%、22.00%、20.00%、10.00%
RALVIE AI INC. 26.50%
ZKTeco Japan Co. Ltd. 23.20%
PT. ZKTECO BIOMETRICS INDONESIA 22.00%、11.00%
ZK INVESTIMENTOS DO BRASIL LTDA. 25.00%
ZKTECO DO BRASIL S.A. 25.00%
NGTECO CO. LIMITED 16.50%
ZKTECO BIOMETRIC LIMITED 30.00%
ZKTECO PANAMA S.A. 5.00%
ZK INTELLIGENT SOLUTIONS (PTY) LTD 27.00%
ZKTECO BIOMETRICS KENYA LIMITED 30.00%
Hubei ZKTeco Co. Ltd. 20.00%
ZKTECO SG INVESTMENT PTE. LTD. 4.25%、8.50%、17.00%
ZKTECO SINGAPORE PTE.LTD. 4.25%、8.50%、17.00%
ZKDIGIMAX PTE. LTD. 4.25%、8.50%、17.00%
ZKDIGIMAX PANAMA S.A. 25.00%
Armatura Tech Co. Ltd. 20.00%、15.00%、0.00%
ZKDIGIMAX (PTY) LTD 27.00%
PT. ZKDIGIMAX EXCEL NOBLE 22.00%、11.00%
ZKTeco Yunlian (Xiamen) Technology Co. Ltd. 20.00%
ZKDIGIMAX COLOMBIA SAS 35.00%
ZK TECHNOLOGY MOROCCO 35.00%、20.00%
ZKTECO EGYPT LLC 0.00%
ZKTECO BUSINESS SOLUTIONS COMPANY 20.00%
NUR ALTTKNWLWJIA COMPANY 20.00%
ZKTeco Polska Sp. z o.o. 19.00%、9.00%
ZKTeco Cloud Brain-Computer (Hangzhou) Technology Co.
20.00%
Ltd.Shenzhen Longzhiyuan Technology Co. Ltd. 15.00%
Shenzhen Wojiaobao Intelligent Technology Co. Ltd. 20.00%
Wohome Technology Co. Ltd. 8.25%
Technos Technology Co. Ltd. 16.50%、8.25%
Haosong Technology Co. Ltd. 16.50%、8.25%
Haofan Technology Co. Ltd. 16.50%、8.25%
RICHFULL COMPANY LIMITED 0.00%
OPTICSLIFE INC 21.00%
Wotong Technology Co. Ltd. 8.25%
Woze Technology Co. Ltd. 8.25%
Tonghao Technology Co. Ltd. 8.25%
Zechen Technology Co. Ltd. 8.25%
Shanxing Technology Co. Ltd. 8.25%
Teyu Technology Co. Ltd. 8.25%
LONGZY PET.LTD. 4.25%、8.50%、17.00%
NEXTGEN TECO INC 21.00%
Anonova Display Tech Co. Ltd. 20.00%、15.00%、0.00%
2. Tax incentives
(1) Article 28 of the "Law of the People's Republic of China on Enterprise Income Tax" stipulates that high-tech enterprises that require
key support from the state shall be subject to corporate income tax at a rate of 15.00%.
1) In November 2024 the Company obtained a high-tech enterprise certificate (No. GR202444001492) which is valid for three years.
2) In November 2025 Xiamen ZKTeco Co. Ltd. successfully passed the re-evaluation for a high-tech enterprise certificate (No.
GR202535100573) which is valid for three years.3) In December 2025 Zkteco (Guangdong) Co. Ltd. successfully passed the re-evaluation for a high-tech enterprise certificate (No.
GR202544002332) which is valid for three years.
4) In December 2025 Shenzhen Longzhiyuan Technology Co. Ltd. successfully passed the re-evaluation for a high-tech enterprise
certificate (No. GR202544200341) which is valid for three years.
(2) According to the relevant provisions of the "Notice of the Ministry of Finance and the State Administration of Taxation on Value-
added Tax Policies for Software Products" (CS [2011] No. 100) and the "Notice on Questions of Policies on Encouraging the
Development of the Software and Integrated Circuit Industries" (CS [2000] No. 25) from January 1 2011 for general taxpayers of
value-added tax who sell software products developed and produced by themselves after value-added tax is levied at the applicable
tax rate a policy of taxation and drawback has been implemented for the portion of its actual value-added tax burden exceeding 3.00%.
(3) According to the "Announcement on Further Supporting the Development of Micro and Small Enterprises and Individual Industrial
and Commercial Households" (Announcement No. 12 of the State Administration of Taxation of the Ministry of Finance 2023) from
January 1 2023 to December 31 2027 small-scale value-added tax taxpayers small and micro profit enterprises and individual
industrial and commercial households can reduce resource tax by half (excluding water resource tax) urban maintenance and
construction tax property tax urban land use tax stamp duty (excluding securities transaction stamp duty) farmland occupation tax
education surcharge and local education surcharge. The policy of reducing the taxable income of small and micro profit enterprises by
25% and paying corporate income tax at a rate of 20.00% will continue to be implemented until December 31 2027. This policy is
applicable to Xiamen Zkteco Biometric Identification Technology Co. Ltd. Shenzhen ZKTeco Biometric Identification Technology
Co. Ltd. Hangzhou ZKTeco Hanlian E-commerce Co. Ltd. ZKCserv Technology Limited Co. Ltd. Dalian ZKTeco Co. Ltd. Xi'an
ZKTeco Co. Ltd. Hubei ZKTeco Co. Ltd. ZKTeco Yunlian (Xiamen) Technology Co. Ltd. ZKTeco Cloud Brain-Computer
(Hangzhou) Technology Co. Ltd. and Shenzhen Wojiaobao Intelligent Technology Co. Ltd.
3. Others
(1) 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.
(2) For ZKTECO ARGENTINA S.A. the annual taxable income between ARS 0 and ARS 133514185.74 is taxed at 25.00%. For the
portion exceeding ARS 133514185.74 but not exceeding ARS 1335141857.38 the tax rate is 30.00%. Any amount exceeding ARS
1335141857.38 is taxed at 35.00%.
(3) The corporate income tax rate of ZKTECO BIOMETRICS INDIA PRIVATE LIMITED for the year 2026 was 25.6256%.
(4) The corporate income tax rate for ZKTeco Deutschland GmbH in 2026 is 31.225%.
(5) ZKTECO THAI CO. LTD. ARMATURA TECH CO.LTD and Anonova Display Tech Co. Ltd. are small and medium-sized
enterprises (SMEs) that meet the following two conditions: 1) Paid-up capital does not exceed THB 5 million as of the last day of the
accounting cycle; 2) Total annual revenue from sales of goods or provision of services does not exceed THB 30 million. The applicable
tax rates are 20.00% 15.00% and 0.00% specifically: for accounting profit below THB 300000.00 the tax rate is 0.00%; for
accounting profit between THB 300000.00 and THB 3000000.00 the tax rate is 15.00%; for accounting profit above THB
3000000.00 the tax rate is 20.00%. If the above two conditions are not met the tax rate is applicable at 20.00%.
(6) The corporate income tax rate of ZKTECO TURKEY ELEKTRONIK SANAYI VE TICARET LIMITED SIRKETI for the year
2026 was 25.00%.
(7) PT.ZKTECO BIOMETRICS INDONESIA and PT. ZKDIGIMAX EXCEL NOBLE apply the corporate income tax rate for the
year 2026 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%.
(8) 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.
(9)For ZKTECO CO. LIMITED NGTECO CO. LIMITED Wohome Technology Co. Ltd. Technos Technology Co. Ltd. Haosong
Technology Co. Ltd. Haofan Technology Co. Ltd. Wotong Technology Co. Ltd. Woze Technology Co. Ltd. Tonghao Technology
Co. Ltd. Zechen Technology Co. Ltd. Shanxing Technology Co. Ltd. and Teyu Technology Co. Ltd. the applicable income tax
rates are 8.25% and 16.50%; the portion of taxable income within HKD 2 million is subject to an 8.25% tax rate while the portion
exceeding HKD 2 million is subject to a 16.50% tax rate.
(10) ZKTECO PANAMA S.A. obtained an SEM license on March 3 2022 and from March 2022 the corporate income tax rate for
sales revenue within Panama was 5.00%.
(11) The applicable income tax rates for ZKTECO SG INVESTMENT PTE. LTD. ZKTECO SINGAPORE PTE. LTD. ZKDIGIMAX
PTE.LTD. and LONGZY PET.LTD. for the year 2026 are 4.25% 8.50% and 17.00%; the taxable income rate was 4.25% for those
within SGD 10000 8.50% for those between SGD 10000 and SGD 200000 and 17.00% for the excess.
(12) The applicable corporate income tax rate for ZKTECO UK LTD in 2026 is as follows: Starting from April 2023 if the profit
exceeds GBP 250000 the income tax rate is 25.00%; if the profit is below GBP 50000 19.00% still applies; if the profit is between
GBP 50000 and GBP 250000 25.00% applies and marginal relief is implemented.
(13) The applicable corporate income tax rate for RALVIE AI INC. in 2026 is as follows: The basic tax rate for federal income tax is
38.00%. After deducting the tax exemption items specified in Section 149 (1) (t) of the "Law on Enterprise Income Tax" enterprises
can enjoy a 10.00% federal tax credit for income obtained in various provinces (or territories) of Canada. At the same time the general
corporate income tax rate is reduced by 13% resulting in a 15.00% federal income tax rate. Additionally Ontario's tax rate for general
corporations is 11.50%. The combined federal and Ontario income tax rate is 26.50%.
(14) The applicable corporate income tax rate of ZKTeco Japan Co. Ltd. for the year 2026 is 23.20%.
(15) The corporate tax of ZKTECO SECURITY L.L.C. is levied on taxable income at the following rates:
1) For enterprises with taxable income not exceeding the tax threshold stipulated in the Cabinet decision (375000 dirhams) the
applicable tax rate is 0.00%;
2) For enterprises with taxable income exceeding the tax threshold the applicable tax rate is 9.00%;
3) For the compliant income portion of free zone compliant enterprises the applicable tax rate is 0.00%;
4) For the non-compliant income portion of free zone compliant enterprises the applicable tax rate is 9.00%.
(16) RICHFULL COMPANY LIMITED enjoys an income tax preferential policy of exemption for two years and a 50% reduction for
five years starting from the first year of obtaining taxable income.
(17) For OPTICSLIFEINC the applicable tax rate is 21.00%.
(18) For ZKTeco Polska Sp. z o.o. a tax rate of 9.00% applies when it meets the conditions for a small taxpayer and its total sales
revenue for the previous year and the current year does not exceed 2 million Euros; otherwise a tax rate of 19.00% applies.
(19) The applicable corporate income tax rate for ZKTECO EGYPT LLC in 2026 is as follows: If the operating revenue for the current
year does not exceed EGP 20 million the tax rate is 0.00%.
(20) The applicable corporate income tax rate for ZK TECHNOLOGY MOROCCO in 2026 is as follows: If the taxable income for
the current year is less than 100 million Dirhams the applicable tax rate is 20.00%; if it is greater than DNS 100 million the tax rate
is 35.00%.VII. Notes to Consolidated Financial Statements
1. Monetary fund
Unit: RMB
Item Ending Balance Beginning Balance
Cash on hand 982709.60 733770.10
Cash in bank 1186724651.68 1147554338.71
Other monetary funds 113627431.98 94831302.42
Total 1301334793.26 1243119411.23
Including: total amount deposited
608949452.07 569128467.85
abroad
Other explanations:
Note 1: As of June 30 2026 the bank deposits included the principal ending balance of time deposits with a maturity of more than
three months and intended to be held to maturity amounting to RMB 129184541.91 (December 31 2025: RMB 66843214.28) and
the amount of interest receivable that has not yet matured was RMB 944327.19 (December 31 2025: RMB 1133019.32) which are
not classified as cash and cash equivalents. Please refer to the explanation in Note VII (61) "Supplementary information of cash flow
statement".Note 2: For details of funds with restricted ownership or usage rights such as those mortgaged pledged seized frozen or detained
please refer to the explanation in Note VII (23) "Assets with restricted ownership or use rights".
2. Trading financial assets
Unit: RMB
Item Ending Balance Beginning Balance
Financial assets measured at fair value
and whose changes are included in the 612775635.56 800444410.21
current profits and losses
Including:
Financial products 612775635.56 800444410.21
Including:
Total 612775635.56 800444410.21
Other explanations:
3. Notes receivable
(1) Notes receivable listed by category
Unit: RMB
Item Ending Balance Beginning Balance
Banker's acceptance 129198.80 538349.21
Total 129198.80 538349.21
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Category
Book balance Bad debt reserve Book value Book balance Bad debt reserve Book value
Accrual Accrual
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Including:
Notes
receivable
for bad debt
129198.80 100.00% 129198.80 538349.21 100.00% 538349.21
reserve
made by
portfolio
Including:
Bank
acceptance 129198.80 100.00% 129198.80 538349.21 100.00% 538349.21
bill
Total 129198.80 100.00% 129198.80 538349.21 100.00% 538349.21
If the bad debt reserve of notes receivable is made according to the general model of expected credit losses:
□ Applicable □Not applicable
(3) Bad debt reserves withdrawn recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category Return or Redeem/redem Ending Balance Balance Provision Others
reversal ption
The amount of bad debt reserves recovered or reversed in the current period is significant:
□ Applicable □Not applicable
4. Accounts receivable
(1) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 634655378.53 658880610.73
1-2 years 38310722.99 54791886.63
2-3 years 20697685.52 20611068.86
Over 3 years 21239348.95 18905552.45
3-4 years 14500586.93 13870879.43
4-5 years 2800242.68 2734742.66
Over 5 years 3938519.34 2299930.36
Total 714903135.99 753189118.67
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category
Accrual Book value Accrual Book value
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Accounts
receivable with
bad debt reserve 54604268.53 7.64% 36889842.47 67.56% 17714426.06 35430368.32 4.70% 33419021.18 94.32% 2011347.14
made
individually
Including:
Accounts
receivable with
insignificant
single amount
54604268.53 7.64% 36889842.47 67.56% 17714426.06 35430368.32 4.70% 33419021.18 94.32% 2011347.14
and bad debt
reserve
withdrawn
separately
Accounts
receivable with
bad debt reserve 660298867.46 92.36% 39393521.45 5.97% 620905346.01 717758750.35 95.30% 43386887.35 6.04% 674371863.00
made by
portfolio
Including:
Aging portfolio 660298867.46 92.36% 39393521.45 5.97% 620905346.01 717758750.35 95.30% 43386887.35 6.04% 674371863.00
Total 714903135.99 100.00% 76283363.92 10.67% 638619772.07 753189118.67 100.00% 76805908.53 10.20% 676383210.14
Category name of bad debt reserve made individually single item provision
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Bad debt Accrual Reasons for
Book balance Book balance
reserve reserve proportion provision
ZKTECO
Expected non-
SOLUTIONS 20621883.09 4479689.09 21.72%
recoverable
INC.AREEJ
SECURTECH Expected non-
13205816.61 13205816.61 12817877.57 12817877.57 100.00%
TRADING recoverable
LLC
DIYTECH Expected non-
4647805.39 4647805.39 4503718.66 4503718.66 100.00%
S.R.L recoverable
Expected non-
Euroclima LLC 3154368.07 2486632.07 3056579.35 2474247.40 80.95%
recoverable
Hainan Jialing
Digital Expected non-
2032000.00 2032000.00 2032000.00 2032000.00 100.00%
Technology recoverable
Co. Ltd.MegaSoft Expected non-
1445015.64 1445015.64 1400218.67 1400218.67 100.00%
Panamá S.A recoverable
Nobus Comtec 1327159.23 1327159.23 1328422.39 1328422.39 100.00% Expected non-
SA de CV recoverable
YECORE Expected non-
1238002.32 247600.41 1237375.15 247475.03 20.00%
CONSTEC recoverable
Idem Secure Expected non-
749343.42 749343.42 748939.21 748939.21 100.00%
SA de CV recoverable
MAYRA
ISABEL Expected non-
710686.06 710686.06 710326.04 710326.04 100.00%
MARTINEZ recoverable
MARTINEZ
VI KHANG
TRADING
SERVICE
Expected non-
EQUIPMENT 683012.61 683012.61 661838.52 661838.52 100.00%
recoverable
TECHNOLOG
Y COMPANY
LIMITED
GLOBAL
INGENIER Expected non-
545817.96 192608.73 186637.73 186637.73 100.00%
ELECTRONIC recoverable
S.A.C
Expected non-
BBT (Naira) 475843.65 475843.65
recoverable
Noble IT
Expected non-
Solutions Co. 412323.82 412323.82 399541.36 399541.36 100.00%
recoverable
Ltd
Zicom
Expected non-
Electronic 368625.42 368625.42 357197.65 357197.65 100.00%
recoverable
Securit
Al Asma Expected non-
348734.82 348734.82 338490.25 338490.25 100.00%
Technology recoverable
TIMEWATCH
Expected non-
INFOCOM 298434.84 298434.84 289183.05 289183.05 100.00%
recoverable
PVT. LTD.Shenzhen
Xuhui
Expected non-
Information 270358.32 270358.32 270358.32 270358.32 100.00%
recoverable
Technology
Co. Ltd.Aisino Expected non-
232200.00 232200.00 232200.00 232200.00 100.00%
Corporation recoverable
Gansu Fourth
Expected non-
Construction 224676.00 224676.00 124676.00 124676.00 100.00%
recoverable
Group Co. Ltd.VENDEMMIA
COMERCIO Expected non-
199488.03 199488.03 193303.69 193303.69 100.00%
INTERNACIO recoverable
NAL LTDA
WIPAQ
Expected non-
TRADING 184354.49 184354.49 178938.82 178938.82 100.00%
recoverable
LLC
ASIA
IDENTIFICATI
ON AND
Expected non-
SECURITY 166587.48 166587.48 161423.10 161423.10 100.00%
recoverable
TECHNOLOG
Y COMPANY
LIMITED
Wanqiao
Information Expected non-
165900.00 165900.00 165900.00 165900.00 100.00%
Technology recoverable
Co.Ltd.Tianjin Eagle
Eye Expected non-
162281.00 162281.00 162281.00 162281.00 100.00%
Biotechnology recoverable
Co. Ltd.One Network Expected non-
155420.83 155420.83 150602.62 150602.62 100.00%
(PVT) Ltd. recoverable
Baoneng Urban
Development
Expected non-
and 155292.00 155292.00 155292.00 155292.00 100.00%
recoverable
Construction
Group Co. Ltd.WESTGATE
Expected non-
TECHNOLOGI 138733.61 138733.61 134432.73 134432.73 100.00%
recoverable
ES LIMITED
TELVIS
Expected non-
TECHNOLOGI 138615.84 138615.84
recoverable
ES
Jiangsu
Xingyun Grid
Expected non-
Information 133983.00 133983.00 133983.00 133983.00 100.00%
recoverable
Technology
Co. Ltd.Hainan
Zhongkong
Expected non-
IOT 122173.74 122173.74 122173.74 122173.74 100.00%
recoverable
Technology
Co. Ltd.Ditec Solutions Expected non-
116918.30 116918.30
SA de CV USD recoverable
Control de
Operacion de Expected non-
106127.93 106127.93
Inmuebles SA recoverable
de CV USD
PONTO RHJ Expected non-
99300.15 99300.15 96221.74 96221.74 100.00%
EIRELI - ME recoverable
SECUZAA
SECURITY
Expected non-
SOLUTIONS 97477.37 97477.37 94455.47 94455.47 100.00%
recoverable
LAB PRIVATE
LIMITED
Shanghai Leqi
Automation Expected non-
81950.00 81950.00 1950.00 1950.00 100.00%
Technology recoverable
Co. Ltd.Expected non-
U.S. Plast 81182.64 81182.64 78665.90 78665.90 100.00%
recoverable
Qianxinan
Mengku
Expected non-
Business 74672.00 74672.00 74672.00 74672.00 100.00%
recoverable
Service Co.Ltd.Especialistas Expected non-
74162.26 74162.26
Nacionales en recoverable
Tecnologia e
Innovacio
INTELLISMA
RT Expected non-
73928.92 73928.92
TECHNOLOG recoverable
Y INC.Rahat Telecom Expected non-
72801.43 72801.43 70544.51 70544.51 100.00%
LLC recoverable
True Security
Expected non-
Consultant 70791.19 70791.19 68596.59 68596.59 100.00%
recoverable
Limited
RBB
Expected non-
Technologies 57167.16 57167.16 52597.19 52597.19 100.00%
recoverable
Private Limited
Yichang Anlian
Intelligent
Expected non-
Technology 56085.00 56085.00
recoverable
Development
Co. Ltd.Expected non-
(?) ???? 654880.07 654880.07 100.00%
recoverable
?????? ????????? ? Expected non-
181214.44 181214.44 100.00%
?????????? ? ???? recoverable
ICOD PERU Expected non-
97663.11 97663.11 100.00%
S.A.C. recoverable
Expected non-
Others 274749.77 274749.77 257013.80 257013.81 100.00%
recoverable
Total 35430368.32 33419021.18 54604268.53 36889842.47
Category name of bad debt reserve made by portfolio: aging portfolio
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Aging portfolio 660298867.46 39393521.45 5.97%
Total 660298867.46 39393521.45
Explanation of the basis for determining the portfolio:
If the bad debt reserve of accounts receivable is made according to the general model of expected credit losses:
□ Applicable □Not applicable
(3) Bad debt reserves withdrawn recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category
Balance Return or Redeem/redem
Ending Balance
Provision Others
reversal ption
Bad debt
reserve made 33419021.18 5487021.35 392544.76 910964.41 -712690.89 36889842.47
individually
Bad debt
reserve made 43386887.35 -2458013.05 878934.59 -656418.26 39393521.45
by portfolio
Total 76805908.53 3029008.30 392544.76 1789899.00 -1369109.15 76283363.92
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
(4) Actual verification of accounts receivable in the current period
Unit: RMB
Item Write-off amount
Accounts receivable actually written off 1789899.00
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-party
been performed
transactions
Explanation of accounts receivable verification:
(5) Accounts receivable and contract assets from top five borrowers classified based on the ending balance
Unit: RMB
Ending balance of
Proportion in the
bad debt reserves
Ending balance of total ending
Ending balance of for accounts
Ending balance of accounts balance of
Company name accounts receivable and
contract assets receivable and accounts
receivable impairment
contract assets receivable and
provision for
contract assets
contract assets
Customer 1 106801112.33 106801112.33 14.94% 5340055.61
Customer 2 51878876.55 51878876.55 7.26% 3108916.68
Customer 3 28538993.21 28538993.21 3.99% 1542471.99
Customer 4 20621883.09 20621883.09 2.88% 4479689.09
Customer 5 20545024.95 20545024.95 2.87% 1053692.61
Total 228385890.13 228385890.13 31.94% 15524825.98
5. Contract assets
(1) Contract asset situation
Unit: RMB
Ending Balance Beginning Balance
Item
Book balance Bad debt reserve Book value Book balance Bad debt reserve Book value
Quality guarantee
85844.98 50899.05 34945.93 79475.48 52525.70 26949.78
deposit receivable
Total 85844.98 50899.05 34945.93 79475.48 52525.70 26949.78
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category
Accrual Book value Accrual Book value
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Bad debt
reserve made 0.00 0.00% 0.00 0.00% 0.00 0.00 0.00% 0.00 0.00% 0.00
individually
Including:
Bad debt
reserve made 85844.98 100.00% 50899.05 59.29% 34945.93 79475.48 100.00% 52525.70 66.09% 26949.78
by portfolio
Including:
Aging
85844.98 100.00% 50899.05 59.29% 34945.93 79475.48 100.00% 52525.70 66.09% 26949.78
portfolio
Total 85844.98 100.00% 50899.05 59.29% 34945.93 79475.48 100.00% 52525.70 66.09% 26949.78
Category number of bad debt reserve made by portfolio: 1
Category name of bad debt reserve made by portfolio: aging portfolio
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Aging portfolio 85844.98 50899.05 59.29%
Total 85844.98 50899.05
Explanation of the basis for determining the portfolio:
Provision for bad debt reserve based on a general model of expected credit losses
□ Applicable □Not applicable
(3) Bad debt reserves withdrawn recovered or reversed in the current period
Unit: RMB
Provision in current Recovery or reversal in Charged or written off
Item Reasons
period the current period in current period
Provision of bad debts
Aging portfolio -1626.65 0.00 0.00
by aging portfolio
Total -1626.65 0.00 0.00 ——
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
Other explanations:
6. Other receivables
Unit: RMB
Item Ending Balance Beginning Balance
Other receivables 48763695.94 52567928.29
Total 48763695.94 52567928.29
(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 1177135.37 19891847.25
Guarantee deposit 13662059.98 14360258.11
Reserve funds and loans 5893700.39 2341571.03
Collection and payment on behalf of
4079065.63 2285006.39
others
Withholding and remitting of social
1696374.40 1916617.74
security and housing fund
Export tax refund 24686931.22 14757353.57
Others 707220.18 1337560.44
Total 51902487.17 56890214.53
2) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 35720553.51 40933480.25
1-2 years 1726138.01 1504592.56
2-3 years 985870.00 924612.53
Over 3 years 13469925.65 13527529.19
3-4 years 1401029.63 1622827.53
4-5 years 1522488.41 2231478.89
Over 5 years 10546407.61 9673222.77
Total 51902487.17 56890214.53
3) Disclosure by bad debt accrual method
□Applicable □ Not applicable
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category
Accrual Book value Accrual Book value
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Bad debt
reserve
1579016.96 3.04% 1579016.96 100.00% 0.00 1996093.75 3.51% 1996093.75 100.00% 0.00
made
individually
Including:
Single item
1579016.96 3.04% 1579016.96 100.00% 0.00 1996093.75 3.51% 1996093.75 100.00% 0.00
provision
Bad debt
reserve
50323470.21 96.96% 1559774.27 3.10% 48763695.94 54894120.78 96.49% 2326192.49 4.24% 52567928.29
made by
portfolio
Including:
Aging
2663231.34 5.13% 1559774.27 58.57% 1103457.07 18947788.82 33.30% 2326192.49 12.28% 16621596.33
portfolio
Portfolio of
deposits
security
47660238.87 91.83% 0.00 0.00% 47660238.87 35946331.96 63.19% 0.00 0.00% 35946331.96
deposits
employee
loans etc.Total 51902487.17 100.00% 3138791.23 6.05% 48763695.94 56890214.53 100.00% 4322286.24 7.60% 52567928.29
Category name of bad debt reserve made individually single item provision
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Bad debt Accrual Reasons for
Book balance Book balance
reserve reserve proportion provision
CNB
Expected non-
TECHNOLOG 1279698.47 1279698.47 1240026.51 1240026.51 100.00%
recoverable
Y INC.Expected non-
New bio 330395.28 330395.28 338990.45 338990.45 100.00%
recoverable
Expected non-
Wang Jiaju 386000.00 386000.00
recoverable
Total 1996093.75 1996093.75 1579016.96 1579016.96
Category name of bad debt reserve made by portfolio: aging portfolio
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year 375790.67 18789.55 5.00%
1-2 years 409552.37 40955.24 10.00%
2-3 years 539798.32 161939.50 30.00%
Over 3 years 1338089.98 1338089.98 100.00%
Total 2663231.34 1559774.27
Explanation of the basis for determining the portfolio:
Provision for bad debt reserve based on a general model of expected credit losses:
Unit: RMB
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Bad debt reserve Expected credit loss in within whole duration within whole duration Total
the future 12 months (no credit impairment (credit impairment has
occur) occurred)
Balance as of January
849351.22 1476841.27 1996093.75 4322286.24
1 2026
Balance as of January
1 2026 in the current
period
Provision in current
-830561.69 110639.08 0.00 -719922.61
period
Reversals in the current
217566.95 217566.95
period
Write-off in current
168433.05 168433.05
period
Other changes -46495.61 -31076.79 -77572.40
Balance as of June 30
18789.53 1540984.74 1579016.96 3138791.23
2026
Classification basis and bad debt reserve provision ratio for each stage
Changes in book balance with major changes in loss reserves during the current period
□ Applicable □Not applicable
4) Bad debt reserves withdrawn recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category
Balance Return or Write-off or
Ending Balance
Provision Others
reversal cancellation
Bad debt
reserve made 1996093.75 0.00 217566.95 168433.05 -31076.79 1579016.96
individually
Bad debt
reserve made
2326192.49 -719922.61 -46495.61 1559774.27
by aging
portfolio
Total 4322286.24 -719922.61 217566.95 168433.05 -77572.40 3138791.23
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
5) Other accounts receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Other receivables actually written off 168433.05
Other major receivable written off:
Unit: RMB
Whether the
Verification and
Nature of other payment is
cancellation
Company name accounts Write-off amount Write-off reason incurred due to
programs that have
receivable related-party
been performed
transactions
Description for writing off other receivables:
6) Other accounts receivable with the top five ending balances collected by the debtor
Unit: RMB
Proportion to the
total ending
Ending balance of
Company name Nature of payment Ending Balance Aging balance of other
bad debt reserve
accounts
receivable
Export tax refund Export tax refund 24686931.22 Within 1 year 47.56% 0.00
Zhangmutou
Branch of
Guarantee deposit 4800000.00 Over 5 years 9.25% 0.00
Dongguan Finance
Bureau
ADVANNOTECH Reserve funds and 1-3 years more
1389171.73 2.68% 1345241.43
PTY LTD loans than 4 years
CNB
Reserve funds and
TECHNOLOGY 1240026.51 Over 5 years 2.39% 1240026.51
loans
INC.Deposit -
Within 1 year 4-5
Bangalore Office Guarantee deposit 780123.06 1.50% 0.00
years
& Factory
Total 32896252.52 63.38% 2585267.94
7. Prepayments
(1) Prepayments listed by aging
Unit: RMB
Ending Balance Beginning Balance
Aging
Amount Proportion Amount Proportion
Within 1 year 38611701.24 97.51% 16900286.41 93.72%
1-2 years 805471.47 2.03% 1040685.63 5.77%
2-3 years 138986.01 0.35% 82129.71 0.46%
Over 3 years 43276.40 0.11% 9188.30 0.05%
Total 39599435.12 18032290.05
Explanation of the reasons why prepayments with an aging of over 1 year and significant amounts were not settled in a timely
manner:
(2) Prepayments of the top five ending balances collected by prepayment object
Unit: RMB
Proportion of the total amount of
Company name Ending Balance
prepayments at the end of the period
Supplier 1 3129000.00 7.90%
Supplier 2 3049907.39 7.70%
Supplier 3 2288554.95 5.78%
Supplier 4 2054545.93 5.19%
Supplier 5 1983980.73 5.01%
Total 12505989.00 31.58%
Other explanations:
8. Inventories
Whether the Company needs to comply with disclosure requirements in the real estate industry
No
(1) Inventory classification
Unit: RMB
Ending Balance Beginning Balance
Inventory Inventory
Item depreciation depreciation
Book balance Book value Book balance Book value
reserves or reserves or
contract contract
performance performance
cost cost
impairment impairment
reserves reserves
Raw materials 301890426.67 6690422.48 295200004.19 173992123.30 4519908.43 169472214.87
Products in
8519202.27 0.00 8519202.27 8569231.40 0.00 8569231.40
process
Inventory
351220284.05 34398276.05 316822008.00 294308801.06 25742661.42 268566139.64
goods
Sending goods 22420709.66 347758.42 22072951.24 17059101.34 492151.34 16566950.00
Consigned
processing 15976991.72 0.00 15976991.72 5662528.21 0.00 5662528.21
materials
Total 700027614.37 41436456.95 658591157.42 499591785.31 30754721.19 468837064.12
(2) Inventory depreciation reserves and contract performance cost impairment reserves
Unit: RMB
Increase in current period Decrease in current period
Beginning
Item
Balance Reversal or
Ending Balance
Provision Others Others
reselling
Raw materials 4519908.43 2663074.58 350872.61 141687.92 6690422.48
Products in
0.00 0.00
process
Inventory
25742661.42 18405258.10 9163827.58 585815.89 34398276.05
goods
Sending goods 492151.34 311457.20 455559.19 290.93 347758.42
Total 30754721.19 21379789.88 9970259.38 727794.74 41436456.95
Provision for inventory depreciation made by portfolio
Unit: RMB
End of the period Opening
Portfolio Name Provision ratio Provision ratio Revaluation Beginning Revaluation
Ending Balance for inventory for inventory
reserve Balance reserve
depreciation depreciation
Provision standards for inventory depreciation reserves made by portfolio
9. Non-current assets due within one year
Unit: RMB
Item Ending Balance Beginning Balance
Long-term receivables due within one
2709767.95 2320265.60
year
Total 2709767.95 2320265.60
(1) Debt investment due within one year
□ Applicable □Not applicable
10. Other current assets
Unit: RMB
Item Ending Balance Beginning Balance
Cost of returning products receivable 937798.19 986678.05
Advance payment of income tax 7048553.38 6039262.75
Value added tax deduction amount 27930207.28 24139297.30
Other prepaid taxes 1875688.99 1221681.27
Financial product investments 29755823.92 72181060.30
Total 67548071.76 104567979.67
Information related to compensatory assets
Other explanations:
11. Debt investment
(1) Information on debt investment
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Bank CD -
27843037.82 27843037.82 28073846.19 28073846.19
Principal
Bank CD -
1747851.69 1747851.69 903485.13 903485.13
Interest
Total 29590889.51 29590889.51 28977331.32 28977331.32
Changes in provision for depreciation of debt investments in the current period
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
12. Long-term receivables
(1) Information on long-term receivables
Unit: RMB
Ending Balance Beginning Balance Discount rate
Item
Book balance Bad debt reserve Book value Book balance Bad debt reserve Book value range
Receivables from 1144751.76 187594.12 957157.64 1343415.06 407692.43 935722.63 26.16%
finance leases
Employee long-
21480338.36 21480338.36 19317083.29 19317083.29 3.50%-4.30%
term borrowings
Long-term
receivables due -2725073.61 -15305.66 -2709767.95 -2334485.10 -14219.50 -2320265.60 3.50%-4.30%
within one year
Total 19900016.51 172288.46 19727728.05 18326013.25 393472.93 17932540.32
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category
Accrual Book value Accrual Book value
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Including:
Bad debt
reserve made 22625090.12 100.00% 187594.12 0.83% 22437496.00 20660498.35 100.00% 407692.43 1.97% 20252805.92
by portfolio
Including:
Aging
22625090.12 100.00% 187594.12 0.83% 22437496.00 20660498.35 100.00% 407692.43 1.97% 20252805.92
portfolio
Total 22625090.12 100.00% 187594.12 0.83% 22437496.00 20660498.35 100.00% 407692.43 1.97% 20252805.92
Category name of bad debt reserve made by portfolio:
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Aging portfolio 22625090.12 187594.12 0.83%
Total 22625090.12 187594.12
Explanation of the basis for determining the portfolio:
Provision for bad debt reserve based on a general model of expected credit losses
Unit: RMB
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Bad debt reserve Expected credit loss in within whole duration within whole duration Total
the future 12 months (no credit impairment (credit impairment has
occur) occurred)
Balance as of January
1 2026 in the current
period
Classification basis and bad debt reserve provision ratio for each stage
(3) Bad debt reserves withdrawn recovered or reversed in the current period
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance Balance Provision Others
reversal cancellation
Bad debt
reserve made 407692.43 206604.49 -13493.82 187594.12
by portfolio
Total 407692.43 206604.49 -13493.82 187594.12
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
Other explanations:
13. Long-term equity investment
Unit: RMB
Increase or decrease in the current period
Beginning Cash
Beginning Investment profits Other Ending balance
balance of Changes dividends Ending balance
Investee balance (book Additional Reduced and losses comprehensive Impairment of impairment
impairment in other or profits Others (book value)
value) investment investment recognized under income provision provision
provision equities declared
equity method adjustments
to pay
I. Joint ventures
II. Associates
CV SquaredInc. 0.00 1155606.35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1155606.35
ZKTECO
SMART CITY
1472964.32 0.00 0.00 0.00 -247098.48 0.00 0.00 0.00 0.00 -42320.69 1183545.15 0.00
(THAILAND)
CO. LTD.Xiamen Xingniu
Yunyu Venture
Capital
Partnership 23639890.26 0.00 0.00 0.00 -1144067.36 0.00 0.00 0.00 0.00 0.00 22495822.90 0.00
Enterprise
(Limited
Partnership)
NeuroSky
ZKTeco
Brainscape
0.00 0.00 2450000.00 0.00 74883.34 0.00 0.00 0.00 0.00 0.00 2524883.34 0.00
Technology
(Shenzhen) Co.Ltd.Subtotal 25112854.58 1155606.35 2450000.00 0.00 -1316282.50 0.00 0.00 0.00 0.00 -42320.69 26204251.39 1155606.35
Total 25112854.58 1155606.35 2450000.00 0.00 -1316282.50 0.00 0.00 0.00 0.00 -42320.69 26204251.39 1155606.35
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable □Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable □Not applicable
Reasons for significant discrepancies between the above information and the information or external information used in impairment
tests of previous years
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the actual
situation of that year
Other explanations:
14. Investment real estate
(1) Investment real estate adopting cost measurement model
□Applicable □ Not applicable
Unit: RMB
Construction in
Item Houses and buildings Land use rights Total
progress
I. Original book value
1. Beginning
34416026.15 34416026.15
Balance
2. Increase in
current period
(1)
Outsourcing
(2)
Transferred from
inventory fixed assets
and construction in
progress
(3) Increase
in business merger
3. Decrease in
current period
(1) Disposal
(2) Other
transfers out
4. Ending balance 34416026.15 34416026.15
II. Accumulated
depreciation and
accumulated
amortization
1. Beginning
14552881.46 14552881.46
Balance
2. Increase in
820586.04 820586.04
current period
(1) Provision
820586.04 820586.04
or amortization
3. Decrease in
current period
(1) Disposal
(2) Other
transfers out
4. Ending balance 15373467.50 15373467.50
III. Provision for
impairment
1. Beginning
Balance
2. Increase in
current period
(1) Provision
3. Decrease in
current period
(1) Disposal
(2) Other
transfers out
4. Ending balance
IV. Book value
1. Ending book
19042558.65 19042558.65
value
2. Beginning book
19863144.69 19863144.69
value
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable □Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable □Not applicable
Reasons for significant discrepancies between the above information and the information or external information used in impairment
tests of previous years
None
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the actual
situation of that year
Other explanations:
(2) Investment real estate adopting fair value measurement model
□ Applicable □Not applicable
(3) Converted to investment real estate and measured at fair value
Unit: RMB
Accounting Impact on other
Conversion Approval Impact on
Item subject before Amount comprehensive
reason procedure profit and loss
conversion income
(4) Investment real estate without completed property ownership certificate
Unit: RMB
Reasons for not completing the property
Item Book value
ownership certificate
Other explanations:
15. Fixed assets
Unit: RMB
Item Ending Balance Beginning Balance
Fixed assets 764216256.81 723300476.82
Total 764216256.81 723300476.82
(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
711956953.27 66308739.34 17170465.94 133704631.86 929140790.41
Balance
2. Increase in
51502890.65 4120112.19 31150.85 6625384.44 62279538.13
current period
(1)
4670097.75 119910.67 8116866.76 12906875.18
Purchase
(2) 63172891.99 100104.96 511726.21 63784723.16
Transferred from
construction in
progress
(3)
Increase in
business merger
(4) Other increases 120165.68 65491.40 185657.08
(5) Differences in
foreign currency
-11790167.02 -650090.52 -88759.82 -2068699.93 -14597717.29
statement
translation
3. Decrease in
256000.00 513375.05 34366.72 1211958.03 2015699.80
current period
(1)
Disposal or 256000.00 513375.05 34366.72 1156387.19 1960128.96
retirement
(2) Other
55570.84 55570.84
decreases
4. Ending
763203843.92 69915476.48 17167250.07 139118058.27 989404628.74
balance
II. Accumulated
depreciation
1. Beginning
66425077.11 37526596.89 11248976.02 90639663.57 205840313.59
Balance
2. Increase in
9204960.33 2806481.24 988791.74 7573262.47 20573495.78
current period
(1)
10006047.21 3228348.52 1090874.16 8987541.35 23312811.24
Provision
(2) Other increases 84968.80 84968.80
(3) Differences in
foreign currency
-801086.88 -421867.28 -102082.42 -1499247.68 -2824284.26
statement
translation
3. Decrease in
117546.49 405185.73 33768.38 668936.84 1225437.44
current period
(1)
Disposal or 117546.49 405185.73 33768.38 613365.99 1169866.59
retirement
(2) Other
55570.85 55570.85
decreases
(3) Differences in
foreign currency
statement
translation
4. Ending
75512490.95 39927892.40 12203999.38 97543989.20 225188371.93
balance
III. Provision for
impairment
1. Beginning
Balance
2. Increase in
current period
(1)
Provision
3. Decrease in
current period
(1)
Disposal or
retirement
4. Ending
balance
IV. Book value
1. Ending
687691352.97 29987584.08 4963250.69 41574069.07 764216256.81
book value
2. Beginning
645531876.16 28782142.45 5921489.92 43064968.29 723300476.82
book value
(2) Temporarily idle fixed assets
Unit: RMB
Original book Accumulated Impairment
Item Book value Remarks
value depreciation provision
(3) Fixed assets leased out through operating leases
Unit: RMB
Item Ending book value
(4) Fixed assets without completed property ownership certificate
Unit: RMB
Reasons for not completing the property
Item Book value
ownership certificate
Other explanations:
(5) Impairment test of fixed assets
□ Applicable □Not applicable
(6) Disposal of fixed assets
Unit: RMB
Item Ending Balance Beginning Balance
Other explanations:
Notes:
1. The original value of fixed assets that have been fully depreciated at the end of the period but are still in use is RMB 54578386.01.
2. At the end of the period no obvious signs of impairment of fixed assets were found so no impairment provision was made.
3. At the end of the period there were no fixed assets for which property ownership certificates had not yet been obtained.
4. At the end of the period there was no fixed asset subject to any restrictions on ownership or use rights such as mortgage pledge
seizure freezing or detention.
16. Construction in progress
Unit: RMB
Item Ending Balance Beginning Balance
Construction in progress 74260468.75 113147627.97
Total 74260468.75 113147627.97
(1) Construction in progress
Unit: RMB
Ending Balance Beginning Balance
Project Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Multimodal
Biometrics
Digitalization
67606871.00 67606871.00 62028920.17 62028920.17
Industrial Base
Construction
Project
American
Manufacturing
Factory 49690642.68 49690642.68
Construction
Project
European
regional
headquarters 6042887.59 6042887.59 1428065.12 1428065.12
construction
project
Hybrid
Biometrics IoT
Intelligent 610710.16 610710.16 0.00 0.00
Industrial Base
Project
Total 74260468.75 74260468.75 113147627.97 113147627.97
(2) Current changes in important construction in progress
Unit: RMB
Proportion
Amount Other Accumulated Including: Current
of
Beginning Increase in transferred to decreases in Ending Engineering amount of current interest Source of
Project Name Budget amount accumulated
Balance current period fixed assets in the current Balance progress interest interest capitalization Funds
project
the current period capitalization capitalized rate
investment
period to budget amount
Multimodal
Biometrics
Digitalization Raised
Under
Industrial 284566264.91 62028920.17 5577950.83 67606871.00 70.67% funds
construction
Base others1
Construction
Project
American
Manufacturing Raised
Under
Factory 74418500.00 49690642.68 14362411.65 63784723.16 268331.17 0.00 86.07% funds
construction
Construction others1
Project
European
regional Raised
Under
headquarters 61011637.39 1428065.12 4862298.59 247476.12 6042887.59 10.31% funds
construction
construction others1
project
Total 419996402.30 113147627.97 24802661.07 63784723.16 515807.29 73649758.59
Note: 1. Own funds
(3) Current provision for impairment of construction in progress
Unit: RMB
Increase in the Decrease in the Reason for
Item Beginning Balance Ending Balance
current period current period provision
Other explanations:
(4) Impairment test of construction in progress
□ Applicable □Not applicable
(5) Engineering materials
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Other explanations:
17. Right-of-use assets
(1) Information on right-of-use assets
Unit: RMB
Item Houses and buildings Transportation vehicles Total
I. Original book value
1. Beginning Balance 106052750.38 3674038.83 109726789.21
2. Increase in current
5637269.44 541510.73 6178780.17
period
(1) New lease 8695735.24 777690.54 9473425.78
(2) Foreign currency
-3058465.80 -236179.81 -3294645.61
translation difference
3. Decrease in current
11575220.28 713063.91 12288284.19
period
(1) Expiration of lease
9810686.12 311780.33 10122466.45
contract
(2) Lease change 44149.88 44149.88
(3) Termination of lease 1720384.28 401283.58 2121667.86
4. Ending balance 100114799.54 3502485.65 103617285.19
II. Accumulated depreciation
1. Beginning Balance 52045063.65 1892268.98 53937332.63
2. Increase in current
13778332.95 462444.97 14240777.92
period
(1) Provision 15644503.43 572844.92 16217348.35
(2) Foreign currency
-1866170.48 -110399.95 -1976570.43
translation difference
3. Decrease in current
10823580.46 713063.91 11536644.37
period
(1) Disposal
(2) Expiration of lease
9595483.85 311780.33 9907264.18
contract
(3) Lease change 0.00
(4) Termination of lease 1228096.61 401283.58 1629380.19
4. Ending balance 54999816.14 1641650.04 56641466.18
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 value 45114983.40 1860835.61 46975819.01
2. Beginning book value 54007686.73 1781769.85 55789456.58
(2) Impairment test of right-of-use assets
□ Applicable □Not applicable
Other explanations:
18. Intangible assets
(1) Intangible assets
Unit: RMB
Non-
Land use Customer
Item Patent rights patent Software Trademark Others Total
rights relations
technology
I. Original
book value
1.
Beginning 85610940.13 19900000.00 43183495.22 57800000.00 94600000.00 193473.28 301287908.63
Balance
2.
Increase in
-1706764.09 -70215.13 36310.46 -1740668.76
current
period
(1)
133654.55 180226.97 313881.52
Purchase
(2)
Internal
R&D
(3)
Increase in
business
merger
(4) Other
33488.15 33488.15
increases
(5)
Differences
in foreign
-1840418.64 -250442.10 2822.31 -2088038.43
currency
statement
translation
3.
Decrease in
743864.16 743864.16
current
period
(1)
710377.36 710377.36
Disposal
(2) Other
33486.80 33486.80
decreases
4.
Ending 83904176.04 19900000.00 42369415.93 57800000.00 94600000.00 229783.74 298803375.71
balance
II.Accumulated
amortization
1.
13829289.25 207291.67 14917935.07 788333.33 79991.07 29822840.39
Beginning
Balance
2.
Increase in
621076.95 1243750.00 1616996.90 4730000.00 34011.15 8245835.00
current
period
(1)
621076.95 1243750.00 1841806.36 4730000.00 30791.75 8467425.06
Provision
(2)
Differences
in foreign
-224809.46 3219.40 -221590.06
currency
statement
translation
3.
Decrease in
current
period
(1)
Disposal
4.
Ending 14450366.20 1451041.67 16534931.97 5518333.33 114002.22 38068675.39
balance
III. Provision
for
impairment
1.
Beginning
Balance
2.
Increase in
current
period
(1)
Provision
3.
Decrease in
current
period
(1)
Disposal
4.
Ending
balance
IV. Book
value
1.
Ending book 69453809.84 18448958.33 25834483.96 57800000.00 89081666.67 115781.52 260734700.32
value
2. 71781650.88 19692708.33 28265560.15 57800000.00 93811666.67 113482.21 271465068.24
Beginning
book value
The proportion of intangible assets formed through internal research and development of the company to the balance of intangible
assets at the end of this period is 0.00%
(2) Impairment test for intangible assets
□ Applicable □Not applicable
19. 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
Balance Exchange rate Exchange rate
Ending Balance
forming business Disposals fluctuations fluctuations
goodwill merger
Shenzhen
Longzhiyuan
238889857.56 238889857.56
Technology
Co. Ltd.ZKTECO (M)
171831.39 5326.95 166504.44
SDN. BHD.ZK
INVESTIMEN
TOS DO 329130.72 10203.38 318927.34
BRASIL
LTDA.Total 239390819.67 15530.33 239375289.34
(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 Exchange rate Exchange rate Ending Balance Balance
forming Provision Disposals fluctuations fluctuations
goodwill
Shenzhen
Longzhiyuan
32535806.82 32535806.82
Technology
Co. Ltd.ZK
INVESTIMEN
TOS DO 329130.72 10203.38 318927.34
BRASIL
LTDA.Total 329130.72 32535806.82 10203.38 32854734.16
(3) Information related to the asset group or portfolio of asset groups where goodwill is located
Composition and basis of the
Is it consistent with previous
Name asset group or portfolio to Operating segments and basis
years
which it belongs
Composition of the asset
group: Goodwill fixed assets
right-of-use assets intangible
assets and long-term deferred
expenses of Shenzhen
Shenzhen Longzhiyuan Longzhiyuan Technology Co.Not applicable Yes
Technology Co. Ltd. Ltd. The asset group of
Shenzhen Longzhiyuan
Technology Co. Ltd. can
independently generate cash
flows and can be identified as
a separate asset group.An asset group or portfolio of
asset groups that can
independently generate cash
flow taking into account the
ZKTECO (M) SDN. BHD. synergistic effects of business Not applicable Yes
mergers and the
management's management or
monitoring of production and
operating activities.An asset group or portfolio of
asset groups that can
independently generate cash
flow taking into account the
ZK INVESTIMENTOS DO
synergistic effects of business Not applicable Yes
BRASIL LTDA
mergers and the
management's management or
monitoring of production and
operating activities.Changes in asset group or asset portfolio
Objective facts and basis that
Name Composition before change Composition after change
lead to changes
Other explanations:
None
(4) Specific method for determining the recoverable amount
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable □Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□Applicable □ Not applicable
Unit: RMB
Duration Key Basis for
Recoverable Impaired Key parameters
Item Book value of the parameters determining
amount amount of the forecast
forecast of the stable key
period period period parameters
of the stable
period
From 2027
onwards:
Operating
Annual revenue
revenue Determined
growth rates
growth rate based on the
Shenzhen are: 24.01%
of the stable forecast data
Longzhiyuan 15.54% 5.87%
618756012.39 559600000.00 59156012.39 5 period: 0%; of the last
Technology 1.00% 1.00%;
Profit rate of period of the
Co. Ltd. 13.75% (after-
the stable forecast
tax discount
period: period
rate) 16.56%
14.95%
(pre-tax
discount rate)
Total 618756012.39 559600000.00 59156012.39
Reasons for significant discrepancies between the above information and the information or external information used in impairment
tests of previous years
Not applicable
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the actual
situation of that year
Not applicable
(5) Completion of performance commitments and corresponding impairment of goodwill
When goodwill is formed there is a performance commitment and the reporting period or the previous period in the reporting period
is within the performance commitment period
□Applicable □ Not applicable
Unit: RMB
Impaired amount of
Achievement in performance commitments
goodwill
Item Current period Previous period
Current Previous
Committed Actual Completion Committed Actual Completion period period
performance performance rate performance performance rate
Shenzhen
Longzhiyuan
100000000.00 28225929.57 28.23% 90000000.00 72662590.94 80.74% 32535806.82 0.00
Technology
Co. Ltd.Other explanations:
Note: The actual performance refers to the net profit attributable to shareholders of the parent company under the scope of
Longzhiyuan's consolidated financial statements after deducting non-recurring profits and losses and excluding the impact of share-
based payment.Longzhiyuan is the asset group or asset group combination to which the goodwill belongs. The performance commitment period
is three consecutive fiscal years starting from the year the transaction is completed namely 2025 2026 and 2027. Longzhiyuan
commits that the net profit attributable to shareholders of the parent company after deducting non-recurring profits and losses and
excluding the impact of share-based payment shall not be less than RMB 90 million for the year 2025 not less than RMB 100 million
for the year 2026 and not less than RMB 110 million for the year 2027. The cumulative total for the three years shall not be less than
RMB 300 million. After the expiration of the performance commitment period if the cumulative net profit achieved by Longzhiyuan
during the performance commitment period is less than the total committed net profit then the performance obligor shall provide
performance compensation to the Company.
20. 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 6497410.95 203385.81 1115493.16 169284.40 5416019.20
Deferred interest
on employee long- 2806881.60 630674.47 354231.78 0.00 3083324.29
term borrowings
Others 1061136.17 436332.20 420853.29 301.10 1076313.98
Total 10365428.72 1270392.48 1890578.23 169585.50 9575657.47
Other explanations:
None
21. Deferred tax assets/deferred tax liabilities
(1) Deferred tax assets not offset
Unit: RMB
Ending Balance Beginning Balance
Item Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
difference difference
Provision for
63271547.29 9231544.02 62307992.74 8818471.30
impairment of assets
Unrealized profits from
85035006.97 17976812.09 89056795.08 21049010.51
internal transactions
Deductible losses 296736996.50 44490502.71 286902533.99 43015333.33
Withholding rebates 6708877.80 953535.48 12220750.79 1642105.29
Share-based payments 9439360.34 1411801.13 20233716.76 3040239.17
Provision for inventory
26427972.13 4590876.75 20780358.70 3585619.59
write-down
Deferred income 1342816.00 201422.40 1364769.40 204715.41
Lease liabilities 39852103.16 6824786.39 49421980.64 9378780.02
Employee benefits
285000.00 42750.00 275000.00 41250.00
payable
Contract liabilities 28621742.77 6010565.99 0.00 0.00
Total 557721422.96 91734596.96 542563898.10 90775524.62
(2) Non-offsetting deferred tax liabilities
Unit: RMB
Ending Balance Beginning Balance
Item Taxable temporary Taxable temporary
Deferred tax liabilities Deferred tax liabilities
difference difference
Valuation and
appreciation of assets
in the business merger 170319143.06 25701533.62 178996559.49 26779049.84
not under the same
control
Changes in fair value
of trading financial 2329560.72 385518.21 3289828.26 522179.78
instruments
Accelerated
depreciation of fixed 17676227.87 2651434.17 17359438.68 2603915.80
assets
Right-of-use assets 20405462.48 6190288.43 55789456.58 8328889.12
Total 210730394.13 34928774.43 255435283.01 38234034.54
(3) Deferred tax assets or liabilities listed at net amount after offset
Unit: RMB
Amount of mutual
Amount of mutual
Ending balance of offset between deferred Beginning balance of
offset between deferred
Item deferred tax assets and tax assets and liabilities deferred tax assets and
tax assets and liabilities
liabilities after offset at the beginning of liabilities after offset
at the end of period
period
Deferred tax assets 8906472.58 82828124.38 8242366.70 82533157.92
Deferred tax liabilities 8906472.58 26022301.85 8242366.70 29991667.84
(4) Details of unconfirmed deferred tax assets
Unit: RMB
Item Ending Balance Beginning Balance
Deductible temporary difference 33841550.41 31081738.63
Deductible losses 137299776.24 126941014.17
Total 171141326.65 158022752.80
(5) The deductible losses of unrecognized deferred tax assets will expire in the following years
Unit: RMB
Year Closing amount Opening amount Remarks
2026 305821.43 1197473.12
2027 4096106.20 5414110.56
2028 14993794.70 15923121.88
2029 14301083.06 18201514.72
2030 14747614.83 18134925.79
2031 and beyond 88855356.02 68069868.10
Total 137299776.24 126941014.17
Other explanations:
22. Other non-current assets
Unit: RMB
Ending Balance Beginning Balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Prepaid
equipment 30848318.62 30848318.62 423995.07 423995.07
payment
Total 30848318.62 30848318.62 423995.07 423995.07
Information related to compensatory assets
Other explanations:
23. Assets with restricted ownership or use right
Unit: RMB
End of the period Opening
Item Restricted Restricted Restricted Restricted
Book balance Book value Book balance Book value
type situation type situation
Bill deposit: Bill deposit:
RMB RMB
77396316.22 86849030.32
other deposits: other deposits:
Deposits
Deposits RMB RMB
funds in
funds in 28125.61 26081.66
Monetary transit
108627765.09 108627765.09 transit frozen funds in 89424045.15 89424045.15 funds in
funds frozen
litigation transit: RMB transit: RMB
litigation
funds 9826862.82 2465563.17
funds
frozen frozen
litigation litigation
funds: RMB funds: RMB
21376460.44 83370.00
Total 108627765.09 108627765.09 89424045.15 89424045.15
Other explanations:
24. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB
Item Ending Balance Beginning Balance
Bill discounting 90134231.92 51713359.30
L/C discounting 29387828.70 29387828.70
Total 119522060.62 81101188.00
Explanation of short-term borrowings classification:
The short-term borrowings for the current period was obtained by discounting bank acceptance bills and letters of credit with the
bank.
25. Trading financial liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Including:
Financial liabilities measured at fair
value and whose changes are included in 126147273.71 208175000.00
the current profits and losses
Including:
Financial liabilities measured at fair
value and whose changes are included in 126147273.71 208175000.00
the current profits and losses
Total 126147273.71 208175000.00
Other explanations:
26. Notes payable
Unit: RMB
Category Ending Balance Beginning Balance
Bank acceptance bill 366761718.28 239870823.79
Total 366761718.28 239870823.79
The total amount of unpaid notes payable at the end of this period is RMB 0.00.
27. Accounts payable
(1) Listing of accounts payable
Unit: RMB
Item Ending Balance Beginning Balance
Material payment 347192203.00 369260477.12
Equipment payment 4450538.80 4482272.79
Service fee 8024393.65 9686370.21
Project payment 14510369.31 15129483.60
Others 3740123.11 5891418.20
Total 377917627.87 404450021.92
28. Other payables
Unit: RMB
Item Ending Balance Beginning Balance
Dividends payable 838914.16 556900.00
Other payables 62301104.78 70922462.71
Total 63140018.94 71479362.71
(1) Dividends payable
Unit: RMB
Item Ending Balance Beginning Balance
Common stock dividend 838914.16 556900.00
Total 838914.16 556900.00
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:
(2) Other payables
1) List of other payables by nature of money
Unit: RMB
Item Ending Balance Beginning Balance
Employee reimbursement 1614927.11 2336100.94
Payment to be settled 4496674.71 7355965.12
Withholding and remitting of social
68376.98 99189.00
security and housing fund
Current account 6189342.20 7086493.99
Collection and payment on behalf of
1184390.24 1698462.16
others
Guarantee deposit 2374916.98 2503691.10
Liabilities recognized for repurchase
obligations under share-based payment 9940665.00 14200950.00
arrangements
Others 36431811.56 35641610.40
Total 62301104.78 70922462.71
29. Contract liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Advances on sales 100194437.29 76516595.89
Total 100194437.29 76516595.89
Significant contract liabilities with an aging of over 1 year
Unit: RMB
Reasons for non-repayment or carry-
Item Ending Balance
forward
Amount and reasons for significant changes in book value during the reporting period
Unit: RMB
Change
Item Reasons for changes
amount
30. Employee benefits payable
(1) List of employee benefits payable
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
I. Short-term
60613233.34 259003656.01 279239273.36 40377615.99
compensation
II. Post-employment
welfare - defined 787415.35 13998519.78 14429475.65 356459.48
contribution plan
III. Dismission welfare 860845.38 983685.58 508645.53 1335885.43
Total 62261494.07 273985861.37 294177394.54 42069960.90
(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
58781688.22 237003909.67 257017075.07 38768522.82
allowance and subsidy
2. Employee benefits 238424.55 4287706.24 4524504.69 1626.10
3.Social insurance 340998.26 14519359.96 14494255.42 366102.80
Including:
medical insurance 228865.16 13920359.11 13890070.71 259153.56
premium
Work-
related injury insurance 112133.10 363442.14 368626.00 106949.24
premium
Maternity
0.00 235558.71 235558.71 0.00
insurance premium
4. housing fund 68628.72 3004719.87 3013155.56 60193.03
5. Labor union
expenditure and
1183493.59 187960.27 190282.62 1181171.24
personnel education
fund
Total 60613233.34 259003656.01 279239273.36 40377615.99
(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
782973.21 13500419.82 13928840.31 354552.72
insurance expense
2.Unemployment
4442.14 498099.96 500635.34 1906.76
insurance
Total 787415.35 13998519.78 14429475.65 356459.48
Other explanations:
31. Taxes payable
Unit: RMB
Item Ending Balance Beginning Balance
VAT 7072351.34 8243828.16
Corporate income tax 25699798.36 20613197.70
Individual income tax 3400114.75 6106955.58
Urban maintenance and construction tax 116642.99 460901.65
Property tax 2339356.23 503954.36
Stamp duty 327335.09 407063.41
Education surcharge 91919.32 449465.31
Others 314764.19 2092649.06
Total 39362282.27 38878015.23
Other explanations:
32. Non-current liabilities due within one year
Unit: RMB
Item Ending Balance Beginning Balance
Long-term borrowings due within one
134144.96 6807107.58
year
Lease liabilities due within one year 20753109.53 24051906.28
Total 20887254.49 30859013.86
Other explanations:
33. Other current liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Sales rebates payable 7114353.59 14700793.42
Tax to be transferred to output tax 2728842.54 2118948.99
Estimated payments for goods return 747301.16 1951399.89
Total 10590497.29 18771142.30
Changes in short-term bonds payable:
Unit: RMB
Accruing Amortization Whether it
Bond Coupon Bond Issue Beginning Current Current Ending
Face value Issue Date interest at of excess and is a breach
name rate duration amount Balance issue repayment Balance
face value discount of contract
Total
Other explanations:
34. Long-term borrowings
(1) Classification of long-term borrowings
Unit: RMB
Item Ending Balance Beginning Balance
Credit borrowings 230036.23 6946978.66
Long-term borrowings due within one
-134144.96 -6807107.58
year
Total 95891.27 139871.08
Explanation of long-term borrowings classification:
As of June 30 2026 the credit borrowings included an amount of RMB 7040.00 for accrued but unpaid interest (December 31
2025: RMB 7276.50).
Other explanations including interest rate range:
None
35. Lease liabilities
Unit: RMB
Item Ending Balance Beginning Balance
Lease payment amount 45088174.97 55610475.47
Unrecognized financing charges -5236071.81 -6188494.83
Lease liabilities due within one year -20753109.53 -24051906.28
Total 19098993.63 25370074.36
Other explanations:
36. Long-term payables
Unit: RMB
Item Ending Balance Beginning Balance
Special accounts payables 550000.00
Total 550000.00
(1) Long-term payables listed by nature of payment
Unit: RMB
Item Ending Balance Beginning Balance
Special Fund for Cultivating High-Value
550000.00
Government Patents
Other explanations:
None
(2) Special payables
Unit: RMB
Increase in the Decrease in the
Item Beginning Balance Ending Balance Cause of formation
current period current period
Provincial
Special Fund for Intellectual
Cultivating High- Property Special
550000.00 550000.00
Value Government Fund (Promotion
Patents Projects) Grant for
2026
Total 550000.00 550000.00
Other explanations:
None
37. Deferred income
Unit: RMB
Increase in the Decrease in the
Item Beginning Balance Ending Balance Cause of formation
current period current period
Government Financial
1364769.40 871100.00 45079.95 2190789.45
subsidies allocation
Total 1364769.40 871100.00 45079.95 2190789.45
Other explanations:
38. Share capital
Unit: RMB
Beginning Increase/decrease in this change (+ -)
Ending Balance
Balance Issue new Bonus Share Others Subtotal
shares transferred
from capital
reserve
Total Shares 235351550.00 235351550.00
Other explanations:
None
39. Capital reserve
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Capital premium (share
1981407399.98 20590037.48 19631243.04 1982366194.42
premium)
Other capital reserves 87413995.04 10917606.21 12791826.96 85539774.29
Total 2068821395.02 31507643.69 32423070.00 2067905968.71
Other descriptions including changes in current period and reasons for changes:
(1) The decrease in capital reserve - share premium for the current period is mainly due to: The first attribution period of the Company's
Restricted Share Incentive Plan has been achieved in accordance with the "Proposal on Adjusting the Granting Price and Quantity of
2025 Restricted Share Incentive Plan" the "Proposal on Cancelling Some Granted but Not Affiliated Restricted Shares" and the
"Proposal on the Achievement of the Attribution Conditions for the First Attribution Period of the 2025 Restricted Share Incentive
Plan" all approved at the Second Session of the Fourth Board Meeting. Employees exercised their rights to subscribe for 733604
shares. As of May 20 2026 the Company's designated special bank account had received equity subscription funds of RMB
7798210.52 which were recorded in capital reserve. The source of shares is shares repurchased from the Company's dedicated
securities account for share repurchases. Based on the average repurchase price the amount to be offset against treasury shares and
capital reserve is RMB 19631243.04.
(2) The increase of RMB 10917606.21 in capital reserve - other capital reserve is due to share-based payment fees recognized under
the 2025 Equity Incentive Plan. For detailed information please refer to "Note XV".
(3)The decrease of RMB 12791826.96 in capital reserve - other capital reserve is due to the first batch of employee stock ownership
plan and restricted shares exercise in 2025 with the corresponding share-based payment fees transferred from other capital reserve to
share premium.
40. Treasury stock
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Reduce registered
44078890.10 23891528.04 20187362.06
capital repurchase
Total 44078890.10 23891528.04 20187362.06
Other descriptions including changes in current period and reasons for changes:
The decrease in treasury shares for the current period is mainly due to: * The first attribution period of the Company's Restricted
Share Incentive Plan has been achieved in accordance with the "Proposal on Adjusting the Granting Price and Quantity of 2025
Restricted Share Incentive Plan" the "Proposal on Cancelling Some Granted but Not Affiliated Restricted Shares" and the "Proposal
on the Achievement of the Attribution Conditions for the First Attribution Period of the 2025 Restricted Share Incentive Plan" all
approved at the Second Session of the Fourth Board Meeting. Employees exercised their rights to subscribe for 733604 shares. The
source of shares is shares repurchased from the Company's dedicated securities account for share repurchases. Based on the average
repurchase price the amount to be offset against treasury shares is RMB 19631243.04. * The first lockup period of the Company's
employee stock ownership plan expired on May 22 2026 and the unlock conditions have been met. The number of shares that can be
unlocked is 400968 shares. The Company's share repurchase business decreased requiring a reduction in treasury stock by RMB
4260285.00.
41. Other comprehensive income
Unit: RMB
Amount incurred in the current period
Less: the net
Less: Profit and
amount that is
loss included in
included in other
other
Amount incurred comprehensive
Beginning comprehensive Attributable to Attributable to
Item before income tax income of prior Less: income Ending Balance
Balance income at early parent company minority
in the current period and tax expenses
stage and after tax shareholder after tax
period retained earnings
transferred in
transferred into
the current
the current
period
profits and loss
I. Other
comprehensive
income to be 39799829.67 -49794497.73 -49029630.31 -764867.42 -9229800.64
reclassified into
profits and losses
Translation
difference of
foreign currency 39799829.67 -49794497.73 -49029630.31 -764867.42 -9229800.64
financial
statements
Total of other
comprehensive 39799829.67 -49794497.73 -49029630.31 -764867.42 -9229800.64
income
Other explanations including adjusting the effective portion of cash flow hedging gains and losses to the initial recognition amount
of the hedged item:
Not applicable
42. Surplus reserves
Unit: RMB
Increase in the current Decrease in the current
Item Beginning Balance Ending Balance
period period
Legal surplus reserve 67458631.43 67458631.43
Total 67458631.43 67458631.43
Description of surplus reserve including changes in current period and reasons for changes:
None
43. Undistributed profit
Unit: RMB
Item Current period Previous period
Undistributed profits before adjustment
1114135904.69 1000479479.18
at end of the previous period
Undistributed profit at the end of the
1114135904.69 1000479479.18
adjustment period
Plus: Net profits attributable to parent
79664695.17 214710432.41
company in this period
Less: withdrawal of legal surplus
3455944.40
reserves
Dividends payable on ordinary
112785097.92 97598062.50
shares
Undistributed profit at the end of the
1081015501.94 1114135904.69
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.
Details of using capital reserve to cover losses:
None
44. Operating revenue and operating cost
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Item
Income Cost Income Cost
Main business 1075018748.18 526066478.12 925627146.27 453345313.12
Other businesses 23408336.51 15403222.02 3631613.23 820586.04
Total 1098427084.69 541469700.14 929258759.50 454165899.16
Breakdown information of operating revenue and operating costs:
Unit: RMB
Division 1 Division 2 Total
Contract
classification Operating Operating Operating Operating Operating Operating Operating cost Operating cost
revenue cost revenue cost revenue revenue
Business type
Including:
Smart office 176961566.09 44218776.69 176961566.09 44218776.69
Smart space 689104180.56 362764913.12 689104180.56 362764913.12
Digital
identity 35961507.55 22803812.22 35961507.55 22803812.22
authentication
Smart
28244235.25 21283227.15 28244235.25 21283227.15
business
Smart living 144747258.73 74995748.94 144747258.73 74995748.94
Other
23408336.51 15403222.02 23408336.51 15403222.02
products
Classification
by region of
operation
Including:
Domestic
234560784.30 159519150.23 234560784.30 159519150.23
sales
Overseas
863866300.39 381950549.91 863866300.39 381950549.91
sales
Market or
customer type
Including:
Distribution 628666597.77 352077535.54 628666597.77 352077535.54
Direct sales 446352150.41 173988942.58 446352150.41 173988942.58
Others 23408336.51 15403222.02 23408336.51 15403222.02
Type of
contract
Including:
Classification
by time of
transfer of
goods
Including:
Classification
by contract
term
Including:
Classification
by sales
channel
Including:
Total 1098427084.69 541469700.14 1098427084.69 541469700.14
Information related to performance obligations:
Types of
Nature of goods Expected quality
Time for
that the Is it the main refunds to assurance
fulfilling Important
Item Company responsible customers provided by the
performance payment terms
promises to person borne by the Company and
obligations
transfer Company related
obligations
Other explanations:
Information related to variable consideration in the contract:
Significant contract changes or significant transaction price adjustments
Unit: RMB
Item Accounting treatment method Amount of impact on income
Other explanations:
45. Tax and surcharges
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Urban maintenance and construction tax 1640452.94 1081144.01
Education surcharge 928349.12 640116.95
Property tax 2544864.07 1516598.02
Land use tax 53192.27 53192.27
Stamp duty 609319.41 592617.78
Local surcharges 618899.35 426744.56
Other taxes and fees for overseas
5394768.84 7778404.67
companies
Others 55069.69 12120.88
Total 11844915.69 12100939.14
Other explanations:
46. Administrative expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee benefits 35433295.24 23662952.00
Office allowance 1875048.69 1497450.76
Travel expense 981604.06 625145.17
Low value consumables 634159.96 216174.14
Share-based payments 2035613.97 801317.95
Car expenses 502385.70 512186.16
Software usage fee 746276.43 815514.18
Depreciation and amortization of right-
3488411.82 2762201.05
of-use assets
Taxes 817005.84 274580.42
Communications fee 390188.23 377946.79
Repair fee 255445.53 192877.31
Business entertainment expenses 869129.75 949272.01
Depreciation and amortization 12989400.90 9119447.66
Agency fees 4998505.72 3907439.27
Others 7430385.81 11622902.03
Total 73446857.65 57337406.90
Other explanations:
47. Selling expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee benefits 131288471.99 130371321.56
Travel expense 10849805.22 10064633.43
Depreciation and amortization of right-
9675941.08 9099763.94
of-use assets
Advertising expenses 12595312.85 7734351.84
Service fees and commissions 17782048.50 7635393.54
Agency fees 6713013.31 7003206.27
Exhibition and conference fees 9781573.32 6039204.97
Office allowance 5837386.35 4778609.60
Depreciation and amortization 7564581.04 2970776.05
Share-based payments 5182406.21 2923688.14
Rental expenses 2665422.48 2799483.37
Insurance premium 3342092.77 2587046.52
Maintenance and testing fees 1909769.95 2543660.51
Software usage fee 1096106.30 1970852.76
Business entertainment expenses 1436705.00 1895840.13
Others 10827695.54 9231909.18
Total 238548331.91 209649741.81
Other explanations:
48. R&D expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee benefits 64318083.50 75869647.82
Office allowance 348135.28 869093.76
Travel expense 931716.24 1429082.97
Share-based payments 3351689.02 1373315.54
Software and technical service fees 6435408.92 9290419.57
Depreciation and amortization of right-
661844.49 894401.61
of-use assets
R&D material costs 3355877.66 3100377.47
Depreciation and amortization 3967480.04 4036414.77
Others 5451559.29 7204429.70
Total 88821794.44 104067183.21
Other explanations:
49. Financial expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Interest expense 1700552.10 1322384.38
Including: interest expenses on lease
1319752.33 1677473.84
liabilities
Less: interest income 13227169.06 18677549.88
Exchange gains and losses 28480462.22 -10706325.87
Handling fee expenditure 1083990.33 1183331.50
Others 20435.64 -38295.32
Total 18058271.23 -26916455.19
Other explanations:
50. 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
1464872.55 1640887.62
activities of the enterprise
Refund of individual income tax
272370.49 247010.14
handling fee
Value added tax credit additional
deduction and immediate collection and 1736888.38 5049440.08
refund
Total 3474131.42 6937337.84
51. Gains from changes in fair value
Unit: RMB
Sources of gains from changes in fair
Amount incurred in the current period Amount incurred in the previous period
value
Trading financial assets 5575993.58 7977831.68
Trading financial liabilities 43636660.50
Total 49212654.08 7977831.68
Other explanations:
This period's profits and losses from fair value changes - trading financial liabilities represents the reduction in contingent
consideration from equity acquisitions during this period. According to the "Equity Acquisition Agreement for Shenzhen Longzhiyuan
Technology Co. Ltd." signed by the Company Longzhiyuan and its former shareholders the Company fully considered Longzhiyuan's
actual and estimated completion of Longzhiyuan's performance commitments to estimate the fair value of the contingent consideration
resulting in profits and losses from fair value changes - trading financial liabilities of: RMB 43636660.50.
52. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Long-term equity investment income
-1682929.06 1265201.27
accounted by equity method
Investment income from disposal of
-26026.74
long-term equity investment
Investment income obtained from
2607570.53 1334460.15
financial products
Forward foreign exchange settlement and
285803.23
sales contract
Total 898614.73 2885464.65
Other explanations:
53. Losses from credit impairment
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Bad debt losses on accounts receivable -2636463.54 -3861576.89
Bad debt losses on other receivables 937489.56 7909.04
Bad debt losses on long-term receivables 206604.49
Total -1492369.49 -3853667.85
Other explanations:
54. Losses from impairment of assets
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Inventory depreciation loss and
contract performance cost impairment -16022046.32 -9406692.74
loss
II. Loss from goodwill impairment -32535806.82
III. Impairment loss from contract assets 1626.65 76805.70
Total -48556226.49 -9329887.04
Other explanations:
55. Gains from disposal of assets
Unit: RMB
Source of gains from disposal of assets Amount incurred in the current period Amount incurred in the previous period
Gain recognized on disposal of non-
current assets not classified as held for 41981.41 141757.67
sale
Including: fixed assets 3689.21 161769.11
Right-of-use assets 38292.20 -20011.44
56. Non-operating revenue
Unit: RMB
Amount included in current
Amount incurred in the Amount incurred in the
Item non-recurring profits and
current period previous period
losses
Gains from impairment and
retirement of non-current 30333.70
assets
Others 373285.67 269602.66 373285.67
Total 373285.67 299936.36 373285.67
Other explanations:
57. Non-operating expenditure
Unit: RMB
Amount included in current
Amount incurred in the Amount incurred in the
Item non-recurring profits and
current period previous period
losses
External donations 1292431.27 904338.66 1292431.27
Asset retirement damage and
347337.35 328890.25 347337.35
loss
Extraordinary losses 23972.06 23972.06
Inventory loss 109857.07 109857.07
Penalty expenses 152911.39 120359.15 152911.39
Others 899869.92 383979.81 899869.92
Total 2826379.06 1737567.87 2826379.06
Other explanations:
58. 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 25161206.72 17559381.01
Deferred income tax expenses -5629888.12 -6862631.95
Total 19531318.60 10696749.06
(2) Accounting profit and income tax expense adjustment process
Unit: RMB
Item Amount incurred in the current period
Total profits 127362905.90
Income tax expenses calculated based on statutory/applicable
19104435.88
tax rates
-4994898.26
The impact of different tax rates applicable to subsidiaries
The impact of adjusting previous period income tax -17860.98
The impact of non-taxable income -9541144.25
7051028.90
The impact of non-deductible costs expenses and losses
The impact of deductible losses on unrecognized deferred tax
-2150168.05
assets in the prior period of use
The impact of deductible temporary differences or deductible
20056569.84
losses on unrecognized deferred tax assets in the current period
The impact of additional deductions on R&D expenses -9972400.88
Salary paid for the placement of disabled individuals with
-12836.76
additional deductions
The impact of tax rate changes on the beginning deferred
8593.16
income tax
Income tax expenses 19531318.60
Other explanations:
59. Other comprehensive income
Please refer to Note 41.
60. Cash flow statement items
(1) Cash relating to operating activities
Other cash received relating to operating activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Interest income 12702755.89 14539538.96
Government subsidies 2290892.57 1607568.98
Current account 19326590.25 5778367.31
Restricted funds such as restricted bill
deposit guarantee deposit and funds in 27156551.15 53841815.00
transit
Others 3572313.11 3455431.72
Total 65049102.97 79222721.97
Description of other cash received relating to operating activities:
Other cash paid relating to operating activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Expense payment 96040929.13 90471076.32
Current account 56181914.21 46699693.62
Restricted funds such as restricted bill
deposit guarantee deposit and funds in 51881571.20 62372488.73
transit
Others 7069879.35 5149391.76
Total 211174293.89 204692650.43
Description of other cash paid relating to operating activities:
(2) Cash relating to investing activities
Other cash received related to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Expiration of forward foreign exchange
285803.23
settlement
Total 285803.23
Significant cash received relating to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Time deposit and wealth management 1723239510.07 909643512.57
Expiration of forward foreign exchange
25167850.00
settlement
Total 1723239510.07 934811362.57
Description of other cash received relating to investing activities:
Other cash paid relating to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Significant cash paid relating to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Time deposit and wealth management 1563781842.32 1290085319.16
Forward foreign exchange settlement
0.00 25167850.00
purchase
Investment amount 2450000.00
Total 1566231842.32 1315253169.16
Description of other cash paid relating to investing activities:
(3) Cash relating to financing activities
Other cash received related to financing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Incentive equity subscription payment 7798210.52 14757850.00
Proceeds from discounting notes
90670229.78 74552050.16
receivable received
Total 98468440.30 89309900.16
Description of other cash received relating to financing activities:
Other cash paid in connection with financing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Lease liability payment amount 16479091.59 15293492.76
Repayment of discounted bill proceeds 52249357.16
Others 5186.01
Total 68733634.76 15293492.76
Description of other cash paid relating to financing activities:
Information on changes in liabilities arising from financing activities
□Applicable □ Not applicable
Unit: RMB
Increase in the current period Decrease in the current period
Beginning
Item Non cash Non cash Ending Balance Balance Cash changes Cash changes
changes changes
Short-term
81101188.00 90670229.78 0.00 52249357.16 0.00 119522060.62
borrowings
Non-current
liabilities due 30859013.86 0.00 14207101.78 21524758.74 2654102.41 20887254.49
within one year
Long-term
139871.08 0.00 112654.83 44293.05 112341.59 95891.27
borrowings
Lease liabilities 25370074.36 0.00 13549150.30 1631932.01 18188299.02 19098993.63
Total 137470147.30 90670229.78 27868906.91 75450340.96 20954743.02 159604200.01
(4) Description of cash flows presented as net amount
Basis for reporting net
Item Related facts Financial impact
amount
(5) Significant activities and financial impacts that do not involve current cash inflows and outflows but affect
the financial position of the enterprise or may affect the cash flow of the enterprise in the future
61. 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 107831587.30 111478500.85
Plus: provision for asset impairment 50048595.98 13183554.89
Depreciation of fixed assets
consumption of oil and gas assets and 24133397.28 19929071.02
productive biological assets
Depreciation of right-of-use
16217348.35 14799863.10
assets
Amortization of intangible assets 8467425.06 2098172.80
Amortization of long-term
1890578.23 1232527.55
deferred expenses
Loss from disposal of fixed
assets intangible assets and other long- -41981.41 -141757.67
term assets (gains expressed with "-")
Loss on retirement of fixed assets
347337.35 298556.55
(gains expressed with "-")
Loss from changes in fair value
-49212654.08 -7977831.68
(gains expressed with "-")
Financial expenses (gains
30181014.32 -9383947.15
expressed with "-")
Investment loss (gains expressed
-1265261.29 -1876543.53
with "-")
Decrease of deferred tax assets -1660522.13
-7000471.64
(increase expressed with "-")
Increases of deferred tax -3969365.99
137839.69
liabilities (decrease expressed with "-")
Decrease of inventory (increase
-205323524.44 -30924354.73
expressed with "-")
Decreases of operational
-19599817.99 6325505.21
receivables (increase expressed with "-")
Increases of operating accounts
80759285.59 51431165.34
payable (decrease expressed with "-")
Others 11688824.95 5573302.96
Net cash flows from operating
50492267.08 169183153.56
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 9473425.78 19573007.34
3. Net change of cash and cash
equivalents:
Ending balance of cash 1062578159.07 904168425.70
Less: beginning balance of cash 1085719132.48 1214344327.43
Plus: ending balance of cash
equivalents
Less: beginning balance of cash
equivalents
Net increase in cash and cash
-23140973.41 -310175901.73
equivalents
(2) Net cash paid for acquiring subsidiaries in the current period
Unit: RMB
Amount
Including:
Including:
Cash or cash equivalents paid for business combinations in
38391065.79
previous periods
Including:
Shenzhen Longzhiyuan Technology Co. Ltd. 38391065.79
Net cash paid for acquiring subsidiaries 38391065.79
Other explanations:
(3) Net cash received from disposal of subsidiaries in the current period
Unit: RMB
Amount
Including:
Including:
Including:
Other explanations:
(4) Composition of cash and cash equivalents
Unit: RMB
Item Ending Balance Beginning Balance
I. Cash 1062578159.07 1085719132.48
Including: Cash on hand 982709.60 733770.10
Bank deposit available for
1056595782.58 1079578105.11
payment at any time
Other monetary funds available
4999666.89 5407257.27
for payment at any time
II. Ending balance of cash and cash
1062578159.07 1085719132.48
equivalents
(5) Information on reporting assets with limited scope of use but still classified as cash and cash equivalents
Unit: RMB
Reasons for still being
Item Amount in current period Amount of previous period classified as cash and cash
equivalents
(6) Monetary funds that do not belong to cash and cash equivalents
Unit: RMB
Reasons for not being
Item Amount in current period Amount of previous period classified as cash and cash
equivalents
Principal of time deposits and
Please refer to the note in
outstanding interest 130128869.10 67976233.60
Note VII 1 Monetary funds.receivable
Not available for use at any
Bank Acceptance Bill Margin 77396316.22 86849030.32
time
Not actually credited to the
Funds in transit 9826862.82 2465563.17
account
Not available for use at any
Judicial freezing of funds 21376460.44 83370.00
time
Not available for use at any
Other restricted funds 28125.61 26081.66
time
Total 238756634.19 157400278.75
Other explanations:
(7) Other significant activity explanations
62. Notes to items in the statement of changes in owner's equity
Explain the names and adjusted amounts of "other" items that have been adjusted to the ending balance of the previous year:
None
63. Foreign currency monetary items
(1) Foreign currency monetary items
Unit: RMB
Ending foreign currency Ending equivalent RMB
Item Conversion rate
balance Balance
Monetary funds 920319881.31
Including: USD 116935233.75 6.8109 796434183.55
EUR 4432027.09 7.7671 34423997.61
HKD 1990400.92 0.8685 1728663.20
GBP 47265.12 9.0145 426071.42
MYR 2290861.70 1.6734 3833527.97
INR 14803355.63 0.0720 1065841.61
COP 146271082.09 0.0020 292542.16
MXN 2740537.14 0.3897 1067987.32
PEN 27711.11 1.9963 55319.69
TRL 4166389.10 0.1458 607459.53
ZAR 33348731.43 0.4144 13819714.30
THB 16904239.58 0.2042 3451845.72
AED 22810051.31 1.8511 42223685.98
IDR 14712835227.57 0.0004 5885134.09
CLP 284229456.00 0.0074 2103297.97
ARS 10498056.82 0.0046 48291.06
UYU 714.00 0.1697 121.17
KRW 106788478.00 0.0044 469869.30
BRL 1016650.69 1.3165 1338420.63
SGD 180041.05 5.2605 947105.94
KES 1766626.66 0.0526 92924.56
PYG 118000.00 0.0011 129.80
NGN 61254311.60 0.0049 300146.13
VND 16769486591.00 0.0003 5030845.98
AUD 6585.59 4.6804 30823.20
JPY 79411065.00 0.0420 3335264.73
DZD 11400.00 0.0511 582.54
RSD 110.00 0.0662 7.28
MAD 298853.16 0.7257 216877.74
EGP 108479.39 0.1384 15013.55
CAD 5462.61 4.7847 26136.95
PLN 482224.68 1.8121 873839.34
SAR 96226.96 1.8104 174209.29
Accounts receivable 637229412.34
Including: USD 72912601.66 6.8109 496600438.65
EUR 2491937.73 7.7671 19355129.54
HKD 449.00 0.8685 389.96
AED 21751868.27 1.8511 40264883.35
MXN 35451300.71 0.3897 13815371.89
INR 157073002.02 0.0720 11309256.15
THB 58266201.32 0.2042 11897958.31
KRW 1418807117.00 0.0044 6242751.31
BRL 1756906.41 1.3165 2312967.29
ZAR 11986140.70 0.4144 4967056.71
JPY 135853931.21 0.0420 5705865.11
CLP 196150911.00 0.0074 1451516.74
SGD 915.60 5.2605 4816.51
MYR 3712647.05 1.6734 6212743.57
TRL 12989784.51 0.1458 1893910.58
COP 890299590.51 0.0020 1780599.18
NGN 418726825.18 0.0049 2051761.44
IDR 18555021240.00 0.0004 7422008.50
VND 402068273.00 0.0003 120620.48
ARS 8038654.39 0.0046 36977.81
PLN 1209678.67 1.8121 2192058.72
GBP 167073.08 9.0145 1506080.28
EGP 32510.52 0.1384 4499.46
CAD 16567.57 4.7847 79270.85
SEK 685.35 0.7003 479.95
Other receivables 12838981.79
USD 734290.59 6.8109 5001179.78
THB 2705600.00 0.2042 552483.52
INR 15855310.19 0.0720 1141582.33
MXN 3269143.03 0.3897 1273985.04
EUR 77754.19 7.7671 603924.57
COP 112383809.88 0.0020 224767.62
JPY 11291114.00 0.0420 474226.79
BRL 347771.13 1.3165 457840.69
KRW 106137500.00 0.0044 467005.00
AED 142231.96 1.8511 263285.58
CLP 43038395.00 0.0074 318484.12
SGD 61767.86 5.2605 324929.83
PLN 26490.52 1.8121 48003.47
MYR 74763.31 1.6734 125108.92
VND 1884184637.00 0.0003 565255.39
NGN 16178432.94 0.0049 79274.32
ARS 14310780.54 0.0046 65829.59
ZAR 151798.61 0.4144 62905.34
KES 477500.00 0.0526 25116.50
SAR 21403.50 1.8104 38748.90
IDR 335652600.00 0.0004 134261.04
EGP 123056.00 0.1384 17030.95
HK$ 206188.00 0.8685 179074.28
PHP 180000.00 0.1112 20016.00
BDT 1181986.48 0.0554 65482.05
XOF 24022959.00 0.0119 285873.21
KZT 1664783.00 0.0140 23306.96
Accounts payable 203889056.65
USD 22780033.79 6.8109 155152532.14
THB 6091115.77 0.2042 1243805.84
INR 5848472.79 0.0720 421090.04
MXN 16335901.02 0.3897 6366100.63
EUR 104997.80 7.7671 815528.41
COP 19738848.83 0.0020 39477.70
BRL 540856.56 1.3165 712037.66
AED 183770.72 1.8511 340177.98
CLP 44043471.00 0.0074 325921.69
MAD 19200.00 0.7257 13933.44
MYR 24568.75 1.6734 41113.35
VND 125965407045.77 0.0003 37789622.11
NGN 24186592.62 0.0049 118514.30
ARS 18869873.23 0.0046 86801.42
ZAR 207993.13 0.4144 86192.35
TRL 4843.73 0.1458 706.22
IDR 838753424.07 0.0004 335501.37
Other payables 10375315.73
USD 941955.68 6.8109 6415565.97
THB 3261296.59 0.2042 665956.76
INR 1634778.07 0.0720 117704.02
MXN 314304.66 0.3897 122484.53
EUR 126180.20 7.7671 980054.23
JPY 4056333.00 0.0420 170365.99
KRW 25028623.00 0.0044 110125.94
CLP 18487364.00 0.0074 136806.49
SGD 69761.54 5.2605 366980.58
MAD 62726.66 0.7257 45520.74
PLN 66104.44 1.8121 119787.86
MYR 61336.27 1.6734 102640.11
VND 666692998.00 0.0003 200007.90
NGN 53955499.19 0.0049 264381.95
ARS 11231553.42 0.0046 51665.15
ZAR 9189.99 0.4144 3808.33
KES 86950.01 0.0526 4573.57
TRL 76514.99 0.1458 11155.89
EGP 2103817.11 0.1384 291168.29
HK$ 32914.49 0.8685 28586.23
CAD 644.10 4.7847 3081.83
GBP 18070.15 9.0145 162893.37
Long-term borrowings 95890.33
Including: USD
EUR
HKD
MYR 46634.71 1.6734 78038.52
ZAR 43078.69 0.4144 17851.81
Other explanations:
(2) The nature of currency inconvertibility and its financial impact the spot exchange rate used and its
estimation process and the risks faced by enterprises due to currency inconvertibility.□ Applicable □Not applicable
(3) 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
Name Main business Recording Selection basis
place currency
ZKTECO CO. LIMITED Hong Kong USD Sales and procurement are mainly
priced in USD
ARMATURA TECH CO.LTD. Thailand THB Currency used in the place of
operation
ZKTECO SECURITY L.L.C Dubai AED Currency used in the place of
operation
ZKTECO EUROPE SL Spain EUR Currency used in the place of
operation
ZK TECHNOLOGY LLC America USD Currency used in the place of
operation
ZKTECO USA LLC America USD Currency used in the place of
operation
ZKTECO BIOMETRICS INDIA India INR Currency used in the place of
PRIVATE LIMITED operation
ZKTECO PANAMA S.A. Panama USD Sales and procurement are mainly
priced in USD
ZKTECO LATAM S.A DE C.V. Mexico MXN Currency used in the place of
operation
ZK INTELLIGENT SOLUTIONS (PTY) LTD South Africa ZAR Currency used in the place of
operation
NGTECO CO.LIMITED Hong Kong USD Sales and procurement are mainly
priced in USD
(4) Situations where there is a lack of convertibility between recording currency for overseas operations and
the currency reported by the enterprise
□ Applicable □Not applicable
64. Lease
(1) The Company as lessee
□Applicable □ Not applicable
Variable lease payments not included in the measurement of lease liabilities
□ Applicable □Not applicable
Simplified rental fees for short-term leases or low value asset leases
□Applicable □ Not applicable
(a) Interest expenses on lease liabilities
Item Amount in the Current Period
Interest on lease liabilities included in financial expenses 1319752.33
Total 1319752.33
(b) Simplified rental fees for short-term leases or low value asset leases
Item Amount in the Current Period
Short-term lease fee 2010125.43
Low-value asset lease fee 2932173.01
Total 4942298.44
(c) Total cash outflows related to the lease
Item Amount in the Current Period
Cash paid for repayment of principal and interest on lease liabilities 16479091.59
Simplified short-term lease payments and low-value asset lease payments made 4942298.44
Total 21421390.03
Sale and leaseback transactions
None
(2) The Company as lessor
Operating lease as the lessor
□Applicable □ Not applicable
Unit: RMB
Including: revenue related to variable
Item Rental income lease payments not included in lease
receivables
Houses and buildings 2794471.46
Total 2794471.46
Financing lease as the lessor
□ Applicable □Not applicable
Undiscounted lease receivables for each of the next five years
□Applicable □ Not applicable
Unit: RMB
Annual undiscounted lease receivables
Item
Closing amount Opening amount
1st year 5875877.57 4233691.26
2nd year 3945001.97 3120329.53
3rd year 2786532.77 2945250.85
4th year 2786532.77 2794474.94
5th year 2786532.77 2786532.72
Total undiscounted lease receivables
2786532.77 4179799.08
after five years
Reconciliation table of undiscounted lease receivables and net investment in leases
(3) Gains or losses from finance lease sales recognized as a manufacturer or dealer
□ Applicable □Not applicable
VIII. R&D expenditures
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Employee benefits 64318083.50 75869647.82
Office allowance 348135.28 869093.76
Travel expense 931716.24 1429082.97
Share-based payments 3351689.02 1373315.54
Software and technical service fees 6435408.92 9290419.57
Depreciation and amortization of right-
661844.49 894401.61
of-use assets
R&D material costs 3355877.66 3100377.47
Depreciation and amortization 3967480.04 4036414.77
Others 5451559.29 7204429.70
Total 88821794.44 104067183.21
Including: Expensed R&D expenditures 88821794.44 104067183.21
IX. Changes to the scope of consolidation
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:
Establishment/Cancellation Registered Shareholding ratio Reason for
S/N Company Name
Date Capital (%) Change
New
1 NEXTGEN TECO INC March 10 2026 USD 100000.00 100%
establishment
THB New
2 Anonova Display Tech Co. Ltd. May 29 2026 51%
5000000.00 establishment
Wuhan ZKTeco Perception RMB
3 June 2 2026 51% Cancellation
Technology Co. Ltd. 1000000.00
Limited Liability Company "ZKTeco RUB
4 March 19 2026 100% Cancellation
biometrics and security" 17850554.80
5 ZKTECO ITALIAS.R.L. January 8 2026 EUR 350000.00 75.54% Cancellation
2. Others
None
X. Equity in other entities
1. Equity in subsidiaries
(1) Composition of the enterprise group
Unit: RMB
Main Percentage of shares
Registration Nature of Acquisition
Name of Subsidiaries Registered Capital business
place business
place Direct Indirect
method
1. Xiamen Zkteco
Software
Biometric Identification 38500000.00 Xiamen Xiamen 100.00% Acquisition
development
Technology Co. Ltd.
2. Shenzhen ZKTeco
Sales of
Biometric Identification 1000000.00 Shenzhen Shenzhen 100.00% Acquisition
goods
Technology Co. Ltd.
2.1.ZK INVESTMENTS
100.001 America America Investment 100.00% Establishment
INC.
2.1.1.ZK TECHNOLOGY 28 Sales of America America 70.00% Establishment
LLC goods
Sales of
3. ZKTeco Sales Co. Ltd. 50000000.00 Dongguan Dongguan 100.00% Establishment
goods
4. Hangzhou ZKTeco
Hanlian E-commerce Co. 2000000.00 Hangzhou Hangzhou E-commerce 100.00% Establishment
Ltd.
5. ZKCserv Technology Software
1000000.00 Shenzhen Shenzhen 51.00% Establishment
Limited Co. Ltd. development
Software
6. Dalian ZKTeco Co. Ltd. 3000000.00 Dalian Dalian development 100.00% Establishment
and sales
Software
7. XIAMEN ZKTECO
100000000.00 Xiamen Xiamen development 100.00% Establishment
CO. LTD.and sales
7.1.ZKTECO VIETNAM
23 Sales of TECHNOLOGY 4550000000.00 Vietnam Vietnam 100.00% Establishment
goods
COMPANY LIMITED
Production
8. ZKTeco (Guangdong)
800000000.00 Dongguan Dongguan and sales of 100.00% Establishment
Co. Ltd.goods
Sales of
9. Xi'an ZKTeco Co. Ltd. 1060000.00 Xi'an Xi'an 100.00% Acquisition
goods
10. ZKTeco Cloud Brain-
Software
Computer (Hangzhou) 20000000.00 Hangzhou Hangzhou 100.00% Establishment
development
Technology Co. Ltd.
11. ZKTECO CO. 1Hong Kong Hong Kong Sales of 15000000.00 100.00% Establishment
LIMITED China China goods
11.1.ZKTECO TURKEY
ELEKTRONIK SANAYI Sales of
1200000.0017 Turkey Turkey 90.26% Establishment
VE TICARET LIMITED goods
SIRKETI.
11.2.ZKTECO LATAM 8 Sales of 4426000.00 Mexico Mexico 100.00% Establishment
S.A. DE C.V. goods
11.3.ZK SOFTWARE DE Sales of
3748688.008 Mexico Mexico 100.00% Establishment
MEXICO S.A. DE C.V. goods
11.4.ZKTECO 968393000.007 Columbia Columbia Sales 100.00% Establishment
COLOMBIA SAS services
11.5.ZKTECO (M) SDN. 20 Sales of 1000000.00 Malaysia Malaysia 51.00% Acquisition
BHD. goods
11.6.ZKTECO R&D and
BIOMETRICS INDIA 132765240.0016 India India sales of 99.15% Establishment
PRIVATE LIMITED goods
11.7.ZKTECO EUROPE 2 Sales of 658600.00 Spain Spain 80.12% Acquisition
SL goods
11.7.1.ZKTECO Sales
60000.002 Ireland Ireland 80.12% Establishment
IRELAND LIMITED services
11.7.2.ZKTeco
100000.002
Sales of
Germany Germany 80.12% Establishment
Deutschland GmbH goods
Sales of
11.7.3.ZKTECO UK LTD 1500000.003 UK UK 80.12% Establishment
goods
11.7.4.ZKTeco Polska Sp. Sales of
2131500.0011 Poland Poland 80.12% Establishment
z o.o. goods
11.8.ZKTECO PERU
Sales
SOCIEDAD ANONIMA 1274336.0022 Peru Peru 100.00% Acquisition
services
CERRADA
11.9.ZKTECO 5 Sales of 10000000.00 Thailand Thailand 99.80% Acquisition
THAICO.LTD. goods
Sales
11.10.ZKTeco Chile SpA 146370000.009 Chile Chile 100.00% Establishment
services
11.10.1.SOLUCIONES
Sales
INTEGRALES Y 60000000.009 Chile Chile 100.00% Establishment
services
SISTEMAS SpA
11.11.ZKTECO Sales of
300000.0014 Dubai Dubai 100.00% Acquisition
SECURITY L.L.C goods
11.12.ZKTECO
4000000.0026
Sales of
Argentina Argentina 98.00% Acquisition
ARGENTINA S.A. goods
11.13.ZKTECO
100000.001 America America Investment 100.00% Establishment
Investment Inc.
11.13.1.ZKTECO USA 28 Sales of America America 80.00% Establishment
LLC goods
Sales of
11.13.2.ARMATURA LLC 28 America America 100.00% Establishment
goods
R&D and
11.13.3.RALVIE AI INC. 10000.001 Canada Canada sales of 100.00% Establishment
goods
11.13.4.NEXTGEN TECO Sales of
100000.001 America America 100.00% Establishment
INC goods
11.14. PT. ZKTECO
Sales of
BIOMETRICS 2657200000.006 Indonesia Indonesia 95.00% Establishment
goods
INDONESIA
11.15. ZK
INVESTIMENTOS DO 611440.0010 Brazil Brazil Investment 99.68% Acquisition
BRASIL LTDA.
11.15.1 ZKTECO DO 10 Sales of 1085403.06 Brazil Brazil 74.76% Acquisition
BRASIL S.A. goods
11.16.NGTECO 4Hong Kong Hong Kong Sales of 10000.00 100.00% Establishment
CO.LIMITED China China goods
11.17. ZKTECO
100000000.0015
Sales of
Nigeria Nigeria 60.00% Establishment
BIOMETRIC LIMITED goods
11.18. ZKTECO 1 Sales of 360000.00 Panama Panama 99.86% Establishment
PANAMA S.A. goods
11.19. ZK INTELLIGENT 28 Sales of South Africa South Africa 100.00% Establishment
SOLUTIONS (PTY) LTD goods
11.20. ZKTECO
Sales
BIOMETRICS KENYA 10910000.0012 Kenya Kenya 100.00% Establishment
services
LIMITED
11.21 ZKTECO
Sales
BUSINESS SOLUTIONS 1000000.0019 Saudi Arabia Saudi Arabia 100.00% Establishment
services
COMPANY
11.22 NUR Production
ALTTKNWLWJIA 5625000.0019 Saudi Arabia Saudi Arabia and sales of 60.00% Establishment
COMPANY goods
Sales of
11.23 Armatura Co.Ltd. 118960000.0024 Korea Korea 90.00% Acquisition
goods
11.24 ZKTeco Japan Sales of
100000000.0025 Japan Japan 100.00% Establishment
Co.Ltd. goods
12. Hubei ZKTeco Co. Sales of
10000000.00 Wuhan Wuhan 100.00% Establishment
Ltd. goods
13. ZKTECO SG
1000000.001 Singapore Singapore Investment 100.00% Establishment
INVESTMENT PTE. LTD.
13.1. ZKTECO Sales of
500000.0027 Singapore Singapore 100.00% Establishment
SINGAPORE PTE. LTD. goods
Production
13.2. ARMATURA TECH
602983200.005 Thailand Thailand and sales of 99.99% Acquisition
CO.LTD.goods
Production
13.2.1 Anonova Display
5000000.005 Thailand Thailand and sales of 51.00% Establishment
Tech Co. Ltd.goods
13.3. ZKDIGIMAX PTE. Sales of
20000000.001 Singapore Singapore 80.00% Establishment
LTD. goods
13.3.1. ZKDIGIMAX 1 Sales of 10000.00 Panama Panama 80.00% Establishment
PANAMA S.A. goods
13.3.2. ZKDIGIMAX Sales of
10000000.007 Columbia Columbia 80.00% Establishment
COLOMBIA SAS goods
13.3.3.ZKDIGIMAX(PTY) 28 Sales of South Africa South Africa 80.00% Establishment
LTD goods
13.3.4. PT. ZKDIGIMAX 6 Sales of 10010000000.00 Indonesia Indonesia 56.00% Establishment
EXCEL NOBLE goods
13.3.5 ZKTeco Yunlian
Sales of
(Xiamen) Technology Co. 300000.001 Xiamen Xiamen 80.00% Establishment
goods
Ltd.
13.3.6. ZK
TECHNOLOGY 1515000.0013
Sales
Morocco Morocco 100.00% Establishment
services
MOROCCO
13.3.7 ZKTECO EGYPT Sales
120000.001 Egypt Egypt 100.00% Establishment
LLC services
Production
14. Shenzhen Longzhiyuan
30231030.00 Shenzhen Shenzhen and sales of 55.00% Acquisition
Technology Co. Ltd.goods
14.1 Shenzhen Wojiaobao
Sales of
Intelligent Technology Co. 1000000.00 Shenzhen Shenzhen 55.00% Acquisition
goods
Ltd.
14.2 Wohome Technology Hong Kong Hong Kong Sales of
1000000.004 55.00% Acquisition
Co. Ltd. China China goods
14.2.1 Technos Technology Hong Kong Hong Kong Sales of
10000.004 55.00% Acquisition
Co. Ltd. China China goods
14.2.2 Haosong 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Technology Co. Ltd. China China goods
14.2.3 Haofan Technology 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Co. Ltd. China China goods
Production
14.2.3.1RICHFULL
500000.001 Vietnam Vietnam and sales of 55.00% Acquisition
COMPANY LIMITED
goods
Sales of
14.2.4 OPTICSLIFE INC 1000.001 America America 55.00% Acquisition
goods
14.2.5 Wotong Technology 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Co. Ltd. China China goods
14.2.6 LONGZY PET.LTD 100000.001 Singapore Singapore Investment 55.00% Acquisition
14.2.7 Woze Technology 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Co. Ltd. China China goods
14.2.7.1 Tonghao 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Technology Co. Ltd. China China goods
14.2.7.2 Zechen 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Technology Co. Ltd. China China goods
14.2.7.3 Shanxing Hong Kong Hong Kong Sales of
10000.004 55.00% Acquisition
Technology Co. Ltd. China China goods
14.2.7.4 Teyu Technology 4Hong Kong Hong Kong Sales of 10000.00 55.00% Acquisition
Co. Ltd. China China goods
Notes:
1 USD
2 EUR
3 GBP
4 HKD
5 THB
6 IDR
7 COP
8 MXN
9 CLP
10 BRL
11 PLN
12 KES
13 MAD
14 AED
15 NGN
16 Rs
17 TRL
18 RUB
19 SAR
20 MYR
22 PEN
23 VND
24 KRW
25 JPY
26 ARS
27 SGD
28 N/A
Explanation of the fact that shareholding percentage is different from the proportion of voting rights in the subsidiaries:
Not applicable
Basis for holding half or less of the voting rights but still controlling the investee and holding more than half of the voting rights but
not controlling the investee:
Not applicable
For important structured entities included in the consolidation scope the basis for control is:
Not applicable
Basis for determining whether the Company is an agent or principal:
Not applicable
Other explanations:
Not applicable
(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 interests
period current period
ZK TECHNOLOGY
30.00% 22218503.99 8285160.00 24378835.87
LLC
Shenzhen Longzhiyuan
45.00% 8698630.93 0.00 157742863.22
Technology Co. Ltd.Explanation of the fact that shareholding percentage is different from the proportion of voting rights for minority shareholders in the
subsidiaries:
Other explanations:
(3) Main financial information of important partly-owned subsidiaries
Unit: RMB
Ending Balance Beginning Balance
Name of
Non-current Current Non-current Non-current Current Non-current
Subsidiaries Current assets Total assets Total liabilities Current assets Total assets Total liabilities
assets liabilities liabilities assets liabilities liabilities
ZK
TECHNOLOGY 121451192.50 2678177.87 124129370.37 40422309.61 1545851.17 41968160.78 89942491.04 3452252.48 93394743.52 53990104.25 1896837.80 55886942.05
LLC
Shenzhen
Longzhiyuan
Technology Co. 396263226.81 187296510.43 583559737.24 203533566.47 27416702.31 230950268.78 290817153.30 194978224.91 485795378.21 124981030.75 29604942.38 154585973.13
Ltd. and its
subsidiaries
Unit: RMB
Name of Amount incurred in the current period Amount incurred in the previous period
Subsidiaries Total Cash flow from Total
Operating Operating
Net profit comprehensive operating Net profit comprehensive Cash flow from operating activities
revenue revenue
income activities income
ZK
TECHNOLOGY 109202514.23 74061680.09 72270608.13 73550948.65 104110346.53 62899983.41 62687863.49 63050126.83
LLC
Shenzhen
Longzhiyuan
Technology Co. 144825225.94 19330290.96 19007975.46 739088.81
Ltd. and its
subsidiaries
Other explanations:
(4) Significant restrictions on the use of enterprise group assets and the repayment of enterprise group debts
(5) Financial or other support provided to structured entities included in the scope of consolidated financial statements
Other explanations:
2. Transactions resulting in change of owners' equity in subsidiaries and the subsidiaries still being under
control
(1) Change of owners' equity in subsidiaries
(2) Effect of transactions on minority interests and owners' equity attributable to the parent company
Unit: RMB
Acquisition cost/disposal consideration
--Cash
-- Fair value of non-cash assets
Total cost/disposal consideration
Less: Net assets of the subsidiaries calculated based on the
proportion of assets acquired/disposed
Difference
Including: Adjustment to the capital reserves
Adjustment to surplus reserve
Adjustment to undistributed profit
Other explanations:
3. Equity in joint ventures or associates
(1) Important joint ventures or associates
Percentage of shares Accounting
treatment
Name of joint
Main business Registration Nature of methods for
venture or
place place business Direct Indirect investments in associate
joint ventures
or associates
Explanation of the fact that shareholding percentage is different from the proportion of voting rights in the joint ventures or
associates:
Basis for holding less than 20% of voting rights but having significant impact or holding 20% or more of voting rights but not
having significant impact:
(2) Main financial information of important joint ventures
Unit: RMB
Beginning balance/amount incurred in
Ending balance/current amount incurred
the previous period
Current assets
Including: Cash and cash equivalents
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Minority interests
Shareholders' equity attributable to the
parent company
Net asset share calculated based on
shareholding ratio
Adjustment matters
--Goodwill
--Unrealized profits from internal
transactions
--Others
Book value of equity investment in joint
ventures
Fair value of equity investment in joint
ventures with public offer
Operating revenue
Financial expenses
Income tax expense
Net profit
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from joint ventures
of current year
Other explanations:
(3) Main financial information of important associates
Unit: RMB
Beginning balance/amount incurred in
Ending balance/current amount incurred
the previous period
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Minority interests
Shareholders' equity attributable to the
parent company
Net asset share calculated based on
shareholding ratio
Adjustment matters
--Goodwill
--Unrealized profits from internal
transactions
--Others
Book value of equity investment in
associates
Fair value of equity investments in
associates with public offers
Operating revenue
Net profit
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from associates this
year
Other explanations:
(4) Summary financial information of unimportant joint ventures and associated enterprises
Unit: RMB
Beginning balance/amount incurred in
Ending balance/current amount incurred
the previous period
Joint venture:
The total number of the following items
calculated based on shareholding ratio
Associates:
Total investment book value 26204251.39 25112854.58
The total number of the following items
calculated based on shareholding ratio
-- Net profit -1366365.95 -389620.58
-- Other comprehensive income -63836.76 33632.60
--Total comprehensive incomes -1430202.71 -355987.98
Other explanations:
(5) Description of significant limitations on the ability of joint ventures or associates to transfer funds to the
Company
(6) 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)
ZKTECO SOLUTIONS INC. -1977900.21 -569808.67 -2547708.88
PT. ZKTECO SECURITY
-583193.24 -99321.29 -682514.53
INDONESIA
Other explanations:
(7) Unrecognized commitments related to joint venture investments
(8) Contingent liabilities related to investments in joint ventures or associates
4. Important joint operations
Name of Joint Main business Shareholding Ratio / Shares Held
Registration place Nature of business
Operation place Direct Indirect
Description of why the shareholding ratio or number of shares held in the joint operation is different from the proportion of voting
rights:
Basis for classifying a joint operation as such when the joint operation is a separate entity:
Other explanations:
5. Equity in structured entities not included in the scope of consolidated financial statements
Description of structured entities not included in the scope of consolidated financial statements:
6. Others
XI. Government Subsidies
1. Government subsidies recognized by accounts receivable at the end of the reporting period
□ Applicable □Not applicable
Reasons for not receiving the expected amount of government subsidies at the expected time point
□ Applicable □Not applicable
2. Liability items involving government subsidies
□Applicable □ Not applicable
Unit: RMB
Accounting Beginning Newly added Amount Amount of Other Ending Assets/Incom
Subject Balance subsidy included in other income changes in Balance e-related
amount in non- transferred in the current
current operating the current period
period revenue for period
the current
period
Deferred Assets-
1364769.40 871100.00 0.00 45079.95 0.00 2190789.45
income related
3. Government subsidies included in current profits and losses
□Applicable □ Not applicable
Unit: RMB
Accounting Subject Amount incurred in the current period Amount incurred in the previous period
Other income 1464872.55 1640887.62
Other explanations:
XII. Risks Related to Financial Instruments
1. Various risks arising from financial instruments
(I) Various risks arising from financial instruments
The Company faces various risks related to financial instruments during its operation mainly including credit risk market risk
and liquidity risk. The Company's main financial instruments include cash and cash equivalents equity investments debt investments
borrowings accounts receivable accounts payable etc. For detailed information on each type of financial instrument please refer to
the relevant items in Note VII. The risks associated with these financial instruments and the risk management policies adopted by the
Company to mitigate these risks are as follows:
The Board of Directors is responsible for planning and establishing the Company's risk management framework specifying the
Company's risk management policies and relevant guidelines and supervising the implementation of risk management measures. The
Company has formulated risk management policies to identify and analyze the risks faced by the Company. These risk management
policies specify specific risks and cover many aspects such as market risk credit risk and liquidity risk management. The Company
regularly evaluates changes in the market environment and the Company's operating activities to decide whether to update the risk
management policies and systems. The risk management of the Company is carried out in accordance with the policies approved by
the Board of Directors. Our internal audit department conducts regular audits on risk management controls and procedures and reports
the audit results to the Company's Audit Committee.The Company diversifies its exposure to financial instruments through an appropriately diversified portfolio of investments and
businesses and reduces the risk of concentration in a single industry a specific region or a specific counterparty by formulating
corresponding risk management policies.
1. Market risk
Market risk associated with financial instruments refers to the risk that fair value or future cash flows of financial instruments
fluctuate due to variations in market prices and it includes foreign exchange rate risk interest rate risk and other price risks.
(1) Exchange rate risk
Exchange rate risk refers to the risk that fair value or future cash flows of financial instruments fluctuates due to variations in
foreign exchange rate. The main business of the Company is operated within the territory of China which is settled in RMB. However
there are still foreign exchange risks in the foreign currency assets and liabilities recognized and future foreign currency transactions
of the Company (the valuation currency for foreign currency assets and liabilities as well as foreign currency transactions is mainly
USD). The relevant foreign currency assets and liabilities include: monetary funds denominated in foreign currencies accounts
receivable other receivables accounts payable other payables non-current liabilities due within one year and long-term borrowings.The amounts of foreign currency financial assets and foreign currency financial liabilities converted into RMB are presented in Note
VII (63) "Foreign currency monetary items".The Company closely monitors the impact of exchange rate fluctuations on our exchange rate risk. The Company has not taken
any measures to hedge against exchange rate risks at present. However the management is responsible for monitoring such risks and
will consider hedging significant exchange rate risks when necessary. At the end of this period the foreign exchange risks faced by the
Company mainly arise from financial assets and financial liabilities denominated in foreign currencies. The amounts of foreign currency
financial assets and foreign currency financial liabilities converted into RMB are presented in Note VII (63) "Foreign currency
monetary items".
(2) 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 risk of changes in market interest rates faced by the Company is mainly related to the borrowings of the
Company that are interest-bearing at floating rates. The interest rate risk of the Company mainly arises from long-term bank borrowings
and other long-term interest-bearing debts. Floating-rate financial liabilities expose the Company to cash flow interest rate risk while
fixed-rate financial liabilities expose the Company to fair value interest rate risk. The Company determines the relative proportion of
fixed-rate and floating-rate contracts based on the prevailing market conditions at that time and maintains an appropriate mix of fixed-
and floating-rate instruments through regular review and monitoring.The Finance Department of the Company continuously monitors the Company's interest rate level. The increases in interest rate
will increase the costs of the new interest-bearing debts and the interest expenses of interest-bearing debts failing to be paid up by the
Company and subject to the interest calculation at floating interest rate and will significantly and adversely affect the Company's
financial results; the management will make an adjustment according to the latest market conditions to reduce the interest rate risks.
(3) Other price risks
The Company does not hold equity investments in other listed companies and is not exposed to other price risks.
2. Credit risk
Credit risk refers to the risk of financial loss to the Company caused by the counterparty's failure to perform its contractual
obligations. Credit risk of the Company mainly arises from bank deposits and accounts receivable.The Company has adopted a policy of only trading with reputable counterparties. In addition the Company evaluates the credit
qualifications of customers based on their financial position the possibility of obtaining guarantees from third parties credit records
and other factors such as current market conditions and sets corresponding credit periods. The Company continuously monitors the
notes receivable accounts receivable balance and collection. For customers with poor credit records the Company will use written
reminders shorten or cancel credit periods etc. to ensure that the Company does not face significant credit losses. In addition the
Company reviews the recovery of financial assets on each balance sheet date to ensure that sufficient provisions for expected credit
losses have been made for the relevant financial assets.The credit risk of other financial assets of the Company including monetary funds other receivables debt investments etc. arises
from counterparty defaults and the maximum credit risk exposure is the book value of each financial asset on the balance sheet. The
Company has not provided any other guarantee that may expose the Company to credit risk.The monetary funds held by the Company are mainly deposited in state-owned holding banks and other large and medium-sized
commercial banks and other financial institutions. The management believes that these commercial banks have a high reputation and
good asset status there is no significant credit risk and there will be no significant losses caused by the default of the counterparty.The Company's policy is to control the amount of deposits held in deposits based on the market reputation business scale and financial
background of well-known financial institutions in order to limit the credit risk amount to any individual financial institution.As part of the Company's credit risk asset management the Company uses aging to assess impairment losses on accounts
receivable and other receivables. The Company's accounts receivable and other receivables involve a large number of customers and
the aging information can reflect the solvency and bad debt risk of these customers for accounts receivable and other receivables. The
Company calculates the historical actual bad debt rate for different aging periods based on historical data and takes into account current
and future economic forecasts such as forward-looking information like national GDP growth rate total infrastructure investment and
national monetary policy to adjust the expected loss rate. For long-term receivables the Company takes into account the settlement
period payment period stipulated in the contract the financial position of the debtor and the economic situation of the debtor's industry
and adjusts the expected credit loss based on the forward-looking information mentioned above.The Company's maximum credit risk exposure is the book value of each financial asset in the balance sheet.For the bank financial products invested by the Company the counterparty must have a credit rating higher than or equal to that
of the Company. Given the good credit rating of the counterparty the Company's management does not anticipate that the counterparty
will be unable to fulfill its obligations.
3. Liquidity risk
The liquidity risk refers to the risk of capital shortage of an enterprise taking place in the course of cash payment or settlement via
other financial assets. The policy of the Company is to ensure that there is sufficient cash for the payment of the matured debts. Each
member enterprise of the Company is responsible for its cash flow forecast. The Finance Department under the Company continuously
monitors the Company's short-term and long-term funding needs at the company level based on the cash flow forecast results of each
member enterprise to ensure the maintenance of sufficient cash reserves; simultaneously the Finance Department continuously
monitors whether it complies with the provisions of the loan agreement and obtain commitments from major financial institutions to
provide sufficient reserve funds to meet short-term and long-term funding needs. In addition the Company has entered into financing
and credit agreements with major correspondent banks to provide support for the Company's obligations related to commercial bills.The financial liabilities and off-balance sheet guarantee items held by the Company are analyzed by the maturity of the remaining
undiscounted contractual cash flows as follows (in RMB):
Ending balance
Item
Within 1 year 1-5 years Over 5 years Total
Short-term
119522060.62 119522060.62 borrowings
Trading financial
126147273.71 126147273.71 liabilities
Notes payable 366761718.28 - - 366761718.28
Accounts payable 377917627.87 - - 377917627.87
Other payables 63140018.94 - - 63140018.94
Non-current
liabilities due 20887254.49 - - 20887254.49
within one year
Other current
7861654.75 - - 7861654.75
liabilities
Lease liabilities - 24335065.44 - 24335065.44
Long-term
- 95891.27 - 95891.27
borrowings
Total 1082237608.66 24430956.71 - 1106668565.37
Continued:
Opening balance
Item
Within 1 year 1-5 years Over 5 years Total
Short-term borrowings 81101188.00 81101188.00
Trading financial
liabilities 208175000.00 208175000.00
Notes payable 239870823.79 - - 239870823.79
Accounts payable 404450021.92 - - 404450021.92
Other payables 71479362.71 - - 71479362.71
Non-current liabilities
due within one year 30859013.86 - - 30859013.86
Other current
liabilities 16652193.31 - - 16652193.31
Lease liabilities - 31558569.19 - 31558569.19
Long-term borrowings - 139871.08 - 139871.08
Total 1052587603.59 31698440.27 - 1084286043.86
4. Capital management
The objective of the Company's capital management policy is to ensure the Company's sustainable operation thereby providing returns
to shareholders and benefiting other stakeholders while maintaining an optimal capital structure to minimize the cost of capital. To
maintain or adjust the capital structure the Company may adjust the amount of dividends paid to shareholders return capital to
shareholders issue new shares or sell assets to reduce debt. The Company monitors the capital structure based on the asset liability
ratio (that is total liabilities divided by total assets). As of June 30 2026 the Company's asset liability ratio was 26.66% (December
31 2025: 26.61%).
XIII. Disclosure of Fair Value
1. Ending fair value of assets and liabilities measured at fair value
Unit: RMB
Fair value at the end of the period
Item First level fair value Second level fair value Third level fair value
Total
measurement measurement measurement
I. Continuous fair value
-- -- -- --
measurement
(I) Trading financial
612775635.56 612775635.56
assets
(II) Financial liabilities
measured at fair value
and whose changes are 126147273.71 126147273.71
included in current
profits and losses
Total liabilities
continuously measured 126147273.71 126147273.71
at fair value
II. Discontinuous fair
-- -- -- --
value measurement
2. 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.
3. Qualitative and quantitative information on valuation techniques and important parameters used for
continuous and non-continuous third level fair value measurement items
For contingent consideration arising from business merger not under common control within trading financial liabilities the Company
continuously monitors the operating and financial conditions of the investee company. Its fair value is calculated and determined based
on the actual completion of performance commitments or the estimated completion of performance commitments taking into account
relevant estimated risk factors in accordance with the terms of the Equity Transfer Agreement.XIV. Related Parties and Related-Party Transactions
1. Information of the parent company of the enterprise
Share proportion Proportion of
Name of the parent held by parent voting rights of the
Registration place Nature of business Registered Capital
company company in the parent company to
enterprise the Company
Shenzhen ZKTeco
Times Investment Shenzhen Investment RMB 9 million 29.83% 29.83%
Co. Ltd.Explanation of the parent company of the enterprise
The situation of the Company's subsidiaries is detailed in Note X (1) Equity in subsidiaries.The ultimate controller of this enterprise is Che Quanhong.Other explanations:
None
2. Subsidiaries of the enterprise
The situation of the Company's subsidiaries is detailed in Note X (1) Equity in subsidiaries.
3. Information of joint ventures and associates of the enterprise
Important joint ventures or associates of the Company are detailed in 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. Associates
PT. ZKTECO SECURITY INDONESIA Associates
ZKTECO SOLUTIONS INC. Associates
CV Squared Inc. Associates
Xiamen Xingniu Yunyu Venture Capital Partnership Enterprise
Associates
(Limited Partnership)
NeuroSky ZKTeco Brainscape Technology (Shenzhen) Co.Associates
Ltd.Other explanations:
None
4. Conditions of other affiliated parties
Names of other related parties Relationship between other related parties and the enterprise
Sibolan (Xiamen) Life Science and Technology Co. Ltd. A company controlled by the actual controller
Dongguan LX Investment Partnership Enterprise (Limited
Holding a 5.04% stake in the Company.Partnership)
Che Quanhong Chairman
Che Quanzhong Younger brother of Chairman Che Quanhong
Lei Shuai the brother-in-law of director Fu Zhiqian holds
Huludao Jinjun IoT Smart Technology Co. Ltd. 100% of the shares and serves as the legal representative
executive director and manager.A shareholder holding 49.00% equity in subsidiary Shenzhen
Shenzhen Huijiang Industrial Group Co. Ltd.Zhongjiang Intelligent Technology Co. Ltd.Shenzhen Zhongjiang Intelligent Technology Co. Ltd. Subsidiaries in the process of compulsory liquidation
Yang Xianfeng Former Supervisor
He Yanting Spouse of former supervisor Wang Huineng
Mu Wenting Deputy General Manager
Other explanations:
None
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
Related party Content of related- Amount incurred Approved Does it exceed the Amount incurred
party transaction in the current transaction limit transaction limit in the previous
period period
ZKTECO SMART
CITY
Purchasing goods 7406.30 0.00 Yes 24752.62
(THAILAND)
CO. LTD.PT. ZKTECO
Marketing
SECURITY 75215.22 0.00 Yes 124235.43
expenses
INDONESIA
NeuroSky ZKTeco
Brainscape
Technology Purchasing goods 297029.70 0.00 Yes 0.00
(Shenzhen) Co.Ltd.Selling goods/rendering labor service
Unit: RMB
Content of related-party Amount incurred in the Amount incurred in the
Related party
transaction current period previous period
PT. ZKTECO SECURITY
Selling goods 1559048.80 1176633.58
INDONESIA
ZKTECO SMART
CITY(THAILAND) CO. Selling goods 127530.10 906213.51
LTD.ZKTECO SOLUTIONS INC. Selling goods 4362836.91 3657871.22
Huludao Jinjun IoT Smart
Selling goods 495294.00 0.00
Technology Co. Ltd.Description of related-party transactions for purchasing and selling goods providing and receiving labor services
Note: The expected daily related-party transaction limit of the Company is the maximum amount that both parties may sign a contract
and the actual amount incurred is determined based on the business development of both parties resulting in a certain difference
between the actual amount incurred and the expected amount. The difference in amount is relatively small and does not meet the criteria
for review by the Board of Directors. The daily related-party transactions of the Company in 2026 were based on the normal production
and operation needs of the Company. The related-party transactions comply with the principles of fairness openness and impartiality
and there is a certain difference between the actual amount incurred and the expected amount. This is mainly due to the Company's
appropriate adjustments based on business conditions and there is no situation that damages the Company and shareholders' rights and
interests which will not affect the independence of the Company.
(2) Related 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 127484.13 94118.54
INDONESIA
Sibolan (Xiamen) Life
Science and Technology Co. Houses and buildings 11009.16 11009.16
Ltd.Dongguan LX Investment Houses and buildings 5963.32 2293.60
Partnership Enterprise
(Limited Partnership)
The Company as lessee:
Unit: RMB
Simplified rental fees for Variable lease payments not
short-term leases and low included in the measurement Interest expense on lease
Rent paid Increased right-of-use assets
value asset leases (if of lease liabilities (if liabilities assumed
Name of Types of applicable) applicable)
lessor leased assets Amount Amount Amount Amount Amount
Amount Amount Amount Amount Amount
incurred in the incurred in the incurred in the incurred in the incurred in the
incurred in the incurred in the incurred in the incurred in the incurred in the
previous previous previous previous previous
current period current period current period current period current period
period period period period period
Che Houses and
0.00 361933.99 0.00 0.00 466880.40 542901.00 27281.42 0.00 1782710.75 0.00
Quanhong buildings
Che Houses and
15000.00 15000.00 0.00 0.00 30000.00 30000.00 0.00 0.00 0.00 0.00
Quanzhong buildings
Information of related leasing situation
(3) Compensation for key management personnel
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Remuneration of key management
2990213.57 3345620.95
personnel
6. Accounts receivable and payable to related parties
(1) Accounts receivable
Unit: RMB
Ending Balance Beginning Balance
Item Related party
Book balance Bad debt reserve Book balance Bad debt reserve
PT. ZKTECO
Accounts
SECURITY 5037361.53 354928.21 4949677.22 332509.39
receivable
INDONESIA
ZKTECO SMART
Accounts
CITY(THAILAN 62935.33 3146.80 401550.32 27013.85
receivable
D) CO. LTD.ZKTECO
Accounts
SOLUTIONS 20621883.09 4479689.09 24632726.74 1545892.86
receivable
INC.Sibolan (Xiamen)
Life Science and
Other receivables 14000.00 0.00 2000.00 0.00
Technology Co.Ltd.Other receivables Che Quanhong 60322.00 0.00 510322.00 0.00
Other receivables He Yanting 51078.05 0.00 0.00 0.00
Prepayments Che Quanzhong 15000.00 0.00 0.00 0.00
(2) Accounts payable
Unit: RMB
Item Related party Closing book balance Opening book balance
ZKTECO SMART
Accounts payable CITY(THAILAND) CO. 277.11 297.62
LTD.NeuroSky ZKTeco
Accounts payable Brainscape Technology 0.00
(Shenzhen) Co. Ltd. 297029.70
PT. ZKTECO SECURITY
Other payables 18879.81 0.00
INDONESIA
Other payables Yang Xianfeng 0.00 1048.71
Dongguan LX Investment
Other payables Partnership Enterprise 0.00 500.00
(Limited Partnership)
Other payables Che Quanhong 0.00 142245.06
ZKTECO SMART
Other payables 0.00 143781.30
CITY(THAILAND). LTD.Other payables Mu Wenting 2736.14
Huludao Jinjun IoT Smart
Contract liabilities 73075.00 0.00
Technology Co. Ltd.
7. Commitments of related parties
None
8. Others
None
XV. Share-based Payment
1. Overall information of share-based payment
□Applicable □ Not applicable
Unit: RMB
Grant object Current grant Current exercise Unlocked in current period Expired in current period
category Quantity Amount Quantity Amount Quantity Amount Quantity Amount
ZKTeco
equity
incentives:
Directors
senior
management
733604.00 9058997.42 400968.00 3485080.20 106881.00 1372074.26
middle
management
and core
employees of
the company
(including
branches and
subsidiaries)
Longzhiyuan
equity
incentives:
Directors
216880.00 2728492.38 575582.00 7053867.97
senior
management
and core
employees of
Longzhiyuan
950484.00 11787489.80 400968.00 3485080.20 682463.00 8425942.23
Total
Outstanding stock options or other equity instruments at the end of the period
□Applicable □ Not applicable
Outstanding other equity instruments at the period
Outstanding stock options at the period end
end
Grant object category
Remaining term of the Remaining term of the
Range of exercise price Range of exercise price
contract contract
The remaining
unlocking period for
the Company's
outstanding 2025
restricted share
Directors senior The exercise price for contract is March 28
management middle both the restricted 2025 - March 27 2028.management and core shares granted by the The remaining
employees of the Company and the unlocking period of the
Company (including its employee stock Company's employee
branches and ownership plan was stock ownership plan
subsidiaries) RMB 13.25/share. will vest in three
tranches with vesting
dates on May 22 2026
May 22 2027 and
May 22 2028
respectively.Other explanations:
1. 2025 Restricted Share Incentive Plan
On January 23 2025 the Company held the 15th Session of the Third Board Meeting and the 14th Session of the Third
Supervisory Board Meeting. On February 11 2025 the Company held the First Extraordinary General Meeting of 2025 deliberated
and approved the "Proposal on the Company's Restricted Share Incentive Plan 2025 (Draft) and Its Abstract" the "Proposal on the
Company's Restricted Share Incentive Plan Implementation Assessment Management Measures 2025" and the "Proposal on
Submitting to the Company's General Meetings to Authorize the Board of Directors to Handle Matters Related to Equity Incentive".On March 28 2025 the Company held the 16th Session of the Third Board Meeting and the 15th Session of the Third Supervisory
Board Meeting deliberated and approved the "Proposal on Adjusting the List of Incentive Objects of Restricted Share Incentive Plan
in 2025 and the Number of Granted Objects" and the "Proposal on Granting Restricted Shares to the Incentive Objects of 2025
Restricted Share Incentive Plan". The Board of Supervisors verified the list of incentive objects for this grant of restricted shares and
issued verification opinions.
2. 2025 Employee Stock Ownership Plan
On January 23 2025 the Company held the 15th Session of the Third Board Meeting and the 14th Session of the Third
Supervisory Board Meeting. On February 11 2025 the Company held the First Extraordinary General Meeting of 2025 deliberated
and approved the "Proposal on the Company's 2025 Employee Stock Ownership Plan (Draft) and Its Abstract" the "Proposal on the
Company's 2025 Employee Stock Ownership Plan Management Measures" and the "Proposal on Submitting the Company's General
Meetings to Authorize the Board of Directors to Handle Matters Related to the 2025 Employee Stock Ownership Plan" and agreed to
implement the 2025 Employee Stock Ownership Plan. The Board of Supervisors verified matters related to the Company's 2025
Employee Stock Ownership Plan and issued verification opinions. The 1113800 shares of company stock held in the Company's
dedicated securities account for share repurchases were transferred by way of non-trading transfer to the Company's 2025 employee
stock ownership plan securities account on May 22 2025.
3. Equity incentive implemented by Longzhiyuan a subsidiary of the Company
An employee stock ownership platform consisting of directors senior management and core employees of Longzhiyuan made
capital contributions to Longzhiyuan which constituted share-based payment with a total of 3639560 shares granted.
2. Equity settled share-based payments
□Applicable □ Not applicable
Unit: RMB
For the Company's employee stock ownership plan the fair
value is determined by the closing price of the Company's
Method for determining the fair value of equity instruments on
shares on the grant date. For restricted shares the fair value of
the grant date
stock options is calculated using the Black-Scholes model (B-S
model).Important parameters of the fair value of equity instruments on
None
the grant date
On each balance sheet date during the waiting period the
Basis for Determining the Number of Exercisable Equity Company predicts based on the latest number of exercisable
Instruments rights completion of performance indicators personal
assessment status and other subsequent information
Reasons for significant differences between the current
None
estimate and the previous estimate
Accumulated amount of equity settled share-based payments
30440833.62
recognized in capital reserve
The total amount of expenses recognized for equity settled
11688824.95
share-based payments in this period
Other explanations:
3. Cash settled share-based payments
□ Applicable □Not applicable
4. Share-based payment fees in the current period
□Applicable □ Not applicable
Unit: RMB
Grant object category Equity settled share-based payment fees Cash settled share-based payment fees
ZKTeco equity incentives: Directors
senior management middle 9296737.02
management and core employees of the
company (including branches and
subsidiaries)
Longzhiyuan equity incentives:
Directors senior management and core 2392087.93
employees of Longzhiyuan
Total 11688824.95
Other explanations:
5. Modification and termination of share-based payment
None
6. Others
None
XVI. Commitments and Contingencies
1. Significant commitments
Significant commitments on the balance sheet date
None
2. Contingencies
(1) Significant contingencies on the balance sheet date
None
(2) The Company shall also provide a description if there are no important contingencies that need to be
disclosed
There are no significant contingencies that need to be disclosed by the Company.
3. Others
None
XVII. Events after the Balance Sheet Date
1. Important non adjustment matters
Unit: RMB
Number of impacts on The reason for the inability to
Item Content
financial position and estimate the number of
operating results impacts
2. Profit distribution
3. Sales return
None
4. Description of other events after the balance sheet date
None
XVIII. Other Important Events
1. Other important transactions and matters that have an impact on investors' decisions
None
2. Others
None
XIX. Notes to Main Items in the Financial Statements of the Parent Company
1. Accounts receivable
(1) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 249919599.84 340765550.28
1-2 years 60299927.92 66578618.90
2-3 years 33503190.79 18453746.80
Over 3 years 30294207.35 19031140.84
3-4 years 13413912.67 16967115.14
4-5 years 12722674.31 1763673.68
Over 5 years 4157620.37 300352.02
Total 374016925.90 444829056.82
(2) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Category
Book balance Bad debt reserve Book value Book balance Bad debt reserve Book value
Accrual Accrual
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Accounts
receivable with
bad debt reserve 12850504.39 3.44% 9253752.81 72.01% 3596751.58 9219944.92 2.07% 8552208.92 92.76% 667736.00
made
individually
Including:
Accounts
receivable with
insignificant
single amount
12850504.39 3.44% 9253752.81 72.01% 3596751.58 9219944.92 2.07% 8552208.92 92.76% 667736.00
and bad debt
reserve
withdrawn
separately
Accounts
receivable with
bad debt reserve 361166421.51 96.56% 6697866.77 1.85% 354468554.74 435609111.90 97.93% 8051664.14 1.85% 427557447.76
made by
portfolio
Including:
Related party
281899616.90 75.37% 281899616.90 334785556.59 75.26% 334785556.59
portfolio
Aging portfolio 79266804.61 21.19% 6697866.77 8.45% 72568937.84 100823555.31 22.67% 8051664.14 7.99% 92771891.17
Total 374016925.90 100.00% 15951619.58 4.26% 358065306.32 444829056.82 100.00% 16603873.06 3.73% 428225183.76
Category name of bad debt reserve made individually single item provision
Unit: RMB
Beginning Balance Ending Balance
Name Bad debt Bad debt Accrual Reasons for
Book balance Book balance
reserve reserve proportion provision
ZKTECO
Expected non-
SOLUTIONS 0.00 0.00 4054943.27 1040523.64 25.66%
recoverable
INC.Expected non-
Euroclima LLC 3154368.07 2486632.07 3056579.35 2474247.40 80.95%
recoverable
Hainan Jialing
Digital Expected non-
2032000.00 2032000.00 2032000.00 2032000.00 100.00%
Technology recoverable
Co. Ltd.VI KHANG
TRADING
SERVICE
Expected non-
EQUIPMENT 683012.61 683012.61 661838.52 661838.52 100.00%
recoverable
TECHNOLOG
Y COMPANY
LIMITED
Noble IT
Expected non-
Solutions Co. 412323.82 412323.82 399541.36 399541.36 100.00%
recoverable
Ltd
Zicom
Expected non-
Electronic 368625.42 368625.42 357197.65 357197.65 100.00%
recoverable
Securit
Shenzhen
Xuhui
Expected non-
Information 270358.32 270358.32 270358.32 270358.32 100.00%
recoverable
Technology
Co. Ltd.Aisino Expected non-
232200.00 232200.00 232200.00 232200.00 100.00%
Corporation recoverable
VENDEMMIA
COMERCIO Expected non-
199488.03 199488.03 193303.69 193303.69 100.00%
INTERNACIO recoverable
NAL LTDA
Wanqiao
Information Expected non-
165900.00 165900.00 165900.00 165900.00 100.00%
Technology recoverable
Co.Ltd.Tianjin Eagle
Eye Expected non-
162281.00 162281.00 162281.00 162281.00 100.00%
Biotechnology recoverable
Co. Ltd.Baoneng Urban
Development
Expected non-
and 155292.00 155292.00 155292.00 155292.00 100.00%
recoverable
Construction
Group Co. Ltd.One Network Expected non-
155420.83 155420.83 150602.62 150602.62 100.00%
(PVT) Ltd. recoverable
WESTGATE
Expected non-
TECHNOLOGI 138733.61 138733.61 134432.73 134432.73 100.00%
recoverable
ES LIMITED
Jiangsu
Xingyun Grid
Expected non-
Information 133983.00 133983.00 133983.00 133983.00 100.00%
recoverable
Technology
Co. Ltd.Gansu Fourth
Expected non-
Construction 224676.00 224676.00 124676.00 124676.00 100.00%
recoverable
Group Co. Ltd.Hainan
Zhongkong
Expected non-
IOT 98773.74 98773.74 98773.74 98773.74 100.00%
recoverable
Technology
Co. Ltd.PONTO RHJ Expected non-
99300.15 99300.15 96221.74 96221.74 100.00%
EIRELI - ME recoverable
Expected non-
U.S. Plast 81182.64 81182.64 78665.90 78665.90 100.00%
recoverable
Qianxinan
Mengku
Expected non-
Business 74672.00 74672.00 74672.00 74672.00 100.00%
recoverable
Service Co.Ltd.Rahat Telecom Expected non-
72801.43 72801.43 70544.51 70544.51 100.00%
LLC recoverable
True Security
Expected non-
Consultant 70791.19 70791.19 68596.59 68596.59 100.00%
recoverable
Limited
KWK 37220.38 37220.38 36066.51 36066.51 100.00% Expected non-
CELLPHONE recoverable
AND
ACCESSORIE
S
Nanjing Xianji
Expected non-
Technology 15570.00 15570.00 15570.00 15570.00 100.00%
recoverable
Co. Ltd.ELECTRONIC
Expected non-
A GHANA 15708.31 15708.31 15221.34 15221.34 100.00%
recoverable
LIMITED
Rhythm Expected non-
9383.45 9383.45 9092.55 9092.55 100.00%
Technologies recoverable
Shanghai Leqi
Automation Expected non-
81950.00 81950.00 1950.00 1950.00 100.00%
Technology recoverable
Co. Ltd.INTELLISMA
RT Expected non-
73928.92 73928.92 0.00 0.00
TECHNOLOG recoverable
Y INC.Total 9219944.92 8552208.92 12850504.39 9253752.81
Category name of bad debt reserve made by portfolio: aging portfolio
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Within 1 year 69004911.06 3450245.58 5.00%
1-2 years 6124993.47 612499.34 10.00%
2-3 years 2145397.48 643619.25 30.00%
Over 3 years 1991502.60 1991502.60 100.00%
Total 79266804.61 6697866.77
Explanation of the basis for determining the portfolio:
If the bad debt reserve of accounts receivable is made according to the general model of expected credit losses:
□ Applicable □Not applicable
(3) Bad debt reserves withdrawn recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category
Balance Return or Redeem/redem
Ending Balance
Provision Others
reversal ption
Bad debt
reserve made 8552208.92 1040523.64 253928.92 -85050.83 9253752.81
individually
Bad debt
reserve made 8051664.14 -2247875.64 894078.27 6697866.77
by portfolio
Total 16603873.06 -1207352.00 253928.92 0.00 809027.44 15951619.58
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
(4) Actual verification of accounts receivable in the current period
Unit: RMB
Item Write-off amount
Accounts receivable actually written off 0.00
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-party
been performed
transactions
Explanation of accounts receivable verification:
(5) Accounts receivable and contract assets from top five borrowers classified based on the ending balance
Unit: RMB
Ending balance of
Proportion in the
bad debt reserves
Ending balance of total ending
Ending balance of for accounts
Ending balance of accounts balance of
Company name accounts receivable and
contract assets receivable and accounts
receivable impairment
contract assets receivable and
provision for
contract assets
contract assets
No. 1 144573016.66 144573016.66 38.65%
No. 2 60123671.39 60123671.39 16.07%
No. 3 19584761.02 19584761.02 5.24%
No. 4 10696422.17 10696422.17 2.86%
No. 5 8034934.65 8034934.65 2.15% 401746.73
Total 243012805.89 243012805.89 64.97% 401746.73
2. Other receivables
Unit: RMB
Item Ending Balance Beginning Balance
Interest receivable 46922.03 46922.03
Dividends receivable 8000000.00
Other receivables 22750801.53 31272024.39
Total 30797723.56 31318946.42
(1) Interest receivable
1) Classification of interest receivable
Unit: RMB
Item Ending Balance Beginning Balance
Interest on related party loans 46922.03 46922.03
Total 46922.03 46922.03
2) Significant overdue interest
Unit: RMB
Whether impairment
Borrower Ending Balance Overdue time Overdue reason occurred and its
judgment basis
Other explanations:
3) Disclosure by bad debt accrual method
□ Applicable □Not applicable
4) Bad debt reserves withdrawn recovered or reversed in the current period
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance Balance Provision Other changes
reversal cancellation
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
Other explanations:
5) Interests receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Information on important interests receivable verification
Unit: RMB
Whether the
Verification and
payment is
cancellation
Company name Payment nature Write-off amount Write-off reason incurred due to
programs that have
related-party
been performed
transactions
Explanation of writing off:
Other explanations:
(2) Dividends receivable
1) Classification of dividends receivable
Unit: RMB
Item (or the investee) Ending Balance Beginning Balance
XIAMEN ZKTECO CO. LTD. 8000000.00 0.00
Total 8000000.00
2) Important dividends receivable with an aging of over 1 year
Unit: RMB
Whether impairment
Item (or the investee) Ending Balance Aging Reasons for unrecovery occurred and its
judgment basis
3) Disclosure by bad debt accrual method
□ Applicable □Not applicable
4) Bad debt reserves withdrawn recovered or reversed in the current period
Unit: RMB
Current period change amount
Beginning
Category
Balance Return or Write-off or
Ending Balance
Provision Other changes
reversal cancellation
The amount of bad debt reserves recovered or reversed in the current period is significant:
Unit: RMB
The basis and
rationality for
Accounts recovered or
Company name Reason for reversal Recovery method determining the
transferred back
provision ratio of
original bad debt
reserves
Other explanations:
5) Dividends receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Information on important dividends receivable verification
Unit: RMB
Whether the
Verification and
payment is
cancellation
Company name Payment nature Write-off amount Write-off reason incurred due to
programs that have
related-party
been performed
transactions
Explanation of writing off:
Other explanations:
(3) Other receivables
1) Classification of other receivables based on nature of payment
Unit: RMB
Payment nature Closing book balance Opening book balance
Current account 6575292.75 24850391.28
Guarantee deposit 1107825.04 1535580.19
Reserve funds and loans 1236346.85 1276794.46
Collection and payment on behalf of
1846642.02 1297439.64
others
Withholding and remitting of social
495492.99 512420.85
security and housing fund
Export tax refund 11524371.21 2120766.74
Others 77032.68 102031.90
Total 22863003.54 31695425.06
2) Disclosure by aging
Unit: RMB
Aging Closing book balance Opening book balance
Within 1 year (including 1 year) 15014133.99 24360083.45
1-2 years 3995674.82 3434342.81
2-3 years 458134.53 201703.90
Over 3 years 3395060.20 3699294.90
3-4 years 101685.30 52753.00
4-5 years 50833.00 563755.71
Over 5 years 3242541.90 3082786.19
Total 22863003.54 31695425.06
3) Disclosure by bad debt accrual method
Unit: RMB
Ending Balance Beginning Balance
Book balance Bad debt reserve Book balance Bad debt reserve
Category
Accrual Book value Accrual Book value
Amount Proportion Amount Amount Proportion Amount
proportion proportion
Bad debt
reserve
386000.00 1.22% 386000.00 100.00% 0.00
made
individually
Including:
Other
receivables
with
significant
individual
amounts 386000.00 1.22% 386000.00 100.00% 0.00
and
separate
provision
for bad debt
reserves
Bad debt
reserve
22863003.54 100.00% 112202.01 0.49% 22750801.53 31309425.06 98.78% 37400.67 0.12% 31272024.39
made by
portfolio
Including:
Related
party 6575292.75 28.76% 6575292.75 24850391.28 78.40% 0.00% 24850391.28
portfolio
Portfolio of
deposits
security
deposits
employee 15765418.65 68.96% 15765418.65 6085027.07 19.20% 0.00% 6085027.07
loans
export tax
refunds
etc.Aging
522292.14 2.28% 112202.01 21.48% 410090.13 374006.71 1.18% 37400.67 10.00% 336606.04
portfolio
Total 22863003.54 100.00% 112202.01 0.49% 22750801.53 31695425.06 100.00% 423400.67 1.34% 31272024.39
Category name of bad debt reserve made individually: other receivables with significant individual amounts and separate provision
for bad debt reserves
Unit: RMB
Name Beginning Balance Ending Balance
Bad debt Bad debt Accrual Reasons for
Book balance Book balance
reserve reserve proportion provision
Wang Jiaju 386000.00 386000.00
Total 386000.00 386000.00
Category name of bad debt reserve made by portfolio: related party portfolio deposits security deposits employee loans and other
portfolios and aging portfolios
Unit: RMB
Ending Balance
Name
Book balance Bad debt reserve Accrual proportion
Related party portfolio 6575292.75
Portfolio of deposits security
15765418.65
deposits employee loans etc.Aging portfolio 522292.14 112202.01 21.48%
Total 22863003.54 112202.01
Explanation of the basis for determining the portfolio:
Provision for bad debt reserve based on a general model of expected credit losses:
Unit: RMB
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Bad debt reserve Expected credit loss in within whole duration within whole duration Total
the future 12 months (no credit impairment (credit impairment has
occur) occurred)
Balance as of January
37400.67 386000.00 423400.67
1 2026
Balance as of January
1 2026 in the current
period
Provision in current
74801.34 74801.34
period
Reversals in the current
217566.95 217566.95
period
Write-off in current
168433.05 168433.05
period
Balance as of June 30
112202.01 0.00 112202.01
2026
Classification basis and bad debt reserve provision ratio for each stage
Changes in book balance with major changes in loss reserves during the current period
□ Applicable □Not applicable
4) Bad debt reserves withdrawn recovered or reversed in the current period
Provision for bad debt reserves in current period:
Unit: RMB
Current period change amount
Beginning
Category Return or Write-off or Ending Balance Balance Provision Others
reversal cancellation
Other
receivables
with significant
individual
amounts and 386000.00 217566.95 168433.05 0.00
separate
provision for
bad debt
reserves
Other
receivables
with provision
for bad debt
reserves based 37400.67 74801.34 112202.01
on a
combination of
credit risk
characteristics
Total 423400.67 74801.34 217566.95 168433.05 112202.01
The significant amount of bad debt reserves reversed or recovered in the current period:
Unit: RMB
The basis and
rationality for
Accounts recovered or determining the
Company name Reason for reversal Recovery method
transferred back provision ratio of
original bad debt
reserves
5) Other accounts receivable actually written off in the current period
Unit: RMB
Item Write-off amount
Other receivables actually written off 168433.05
Other major receivable written off:
Unit: RMB
Whether the
Verification and
Nature of other payment is
cancellation
Company name accounts Write-off amount Write-off reason incurred due to
programs that have
receivable related-party
been performed
transactions
Description for writing off other receivables:
6) Other accounts receivable with the top five ending balances collected by the debtor
Unit: RMB
Proportion to the
total ending
Ending balance of
Company name Nature of payment Ending Balance Aging balance of other
bad debt reserve
accounts
receivable
Export tax refund Export tax refund 11524371.21 Within 1 year 50.41% 0.00
ZKTeco
(Guangdong) Co. Current account 3303276.24 1-2 years 14.45% 0.00
Ltd.Headquarters
withholding and Withholding and
paying social remitting of social
2240698.77 Within 1 year 9.80% 0.00
security and security and
housing fund on housing fund
behalf of others
ZKCserv
Technology Current account 1780000.00 Over 5 years 7.79% 0.00
Limited Co. Ltd.Within 1 year 4-5
Hubei ZKTeco
Current account 565273.75 years more than 5 2.47% 0.00
Co. Ltd.years
Total 19413619.97 84.92% 0.00
7) Being reported as other receivables due to centralized fund management
Unit: RMB
Other explanations:
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
1846881289.71 2651727.65 1844229562.06 1813674231.01 0.00 1813674231.01
subsidiaries
Investment in
affiliated and joint 22495822.90 0.00 22495822.90 23639890.26 0.00 23639890.26
ventures
Total 1869377112.61 2651727.65 1866725384.96 1837314121.27 0.00 1837314121.27
(1) Investment in subsidiaries
Unit: RMB
Beginning Increase or decrease in the current period
Beginning Ending balance
balance of Ending balance
Investee balance (book Additional Reduced Impairment of impairment
impairment Others (book value)
value) investment investment provision provision
provision
Shenzhen
ZKTeco
Biometric
12636751.01 0.00 0.00 0.00 0.00 15253.91 12652004.92 0.00
Identification
Technology
Co. Ltd.Hangzhou
ZKTeco
Hanlian E- 2107229.51 0.00 0.00 0.00 0.00 2840.91 2110070.42 0.00
commerce Co.Ltd.ZKTECO CO.
241912932.31 0.00 21688259.25 0.00 0.00 89138.83 263690330.39 0.00
LIMITED
XIAMEN
ZKTECO CO. 109346776.49 0.00 0.00 0.00 0.00 1229013.95 110575790.44 0.00
LTD.Xiamen Zkteco
Biometric
Identification 38986734.80 0.00 0.00 0.00 0.00 0.00 38986734.80 0.00
Technology
Co. Ltd.ZKCserv
Technology
510000.00 0.00 0.00 0.00 0.00 0.00 510000.00 0.00
Limited Co.Ltd.ZKTeco
(Guangdong) 812136784.59 0.00 0.00 0.00 0.00 3176859.85 815313644.44 0.00
Co. Ltd.Dalian ZKTeco
4311958.91 0.00 0.00 0.00 0.00 42710.93 4354669.84 0.00
Co. Ltd.Xi'an ZKTeco
660671.06 0.00 0.00 0.00 0.00 58583.55 719254.61 0.00
Co. Ltd.Hubei ZKTeco
3636683.78 0.00 0.00 0.00 0.00 64066.39 3700750.17 0.00
Co. Ltd.ZKTeco Sales
21579821.16 0.00 0.00 0.00 0.00 0.00 21579821.16 0.00
Co. Ltd.ZKTeco Cloud
Brain-
Computer
8848449.18 0.00 6750000.00 0.00 0.00 57964.83 15656414.01 0.00
(Hangzhou)
Technology
Co. Ltd.Shenzhen
Longzhiyuan
416350000.00 0.00 0.00 0.00 2651727.65 0.00 413698272.35 2651727.65
Technology
Co. Ltd.ZKTECO SG
INVESTMENT 140649438.21 0.00 0.00 0.00 0.00 32366.30 140681804.51 0.00
PTE. LTD.Total 1813674231.01 0.00 28438259.25 0.00 2651727.65 4768799.45 1844229562.06 2651727.65
(2) Investment in affiliated and joint ventures
Unit: RMB
Increase or decrease in the current period
Beginning Cash Ending
Beginning Investment profits Other
balance of Changes in dividends or Ending balance balance of
Investor balance (book Additional Reduced and losses comprehensive Impairment
impairment other profits Others (book value) impairment
value) investment investment recognized under income provision
provision equities declared to provision
equity method adjustments
pay
I. Joint ventures
II. Associates
Xiamen
Xingniu
Yunyu
Venture
Capital 23639890.26 0.00 0.00 0.00 -1144067.36 0.00 0.00 0.00 0.00 0.00 22495822.90 0.00
Partnership
Enterprise
(Limited
Partnership)
Subtotal 23639890.26 0.00 -1144067.36 22495822.90 0.00
Total 23639890.26 0.00 0.00 0.00 -1144067.36 0.00 0.00 0.00 0.00 0.00 22495822.90 0.00
The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value
□ Applicable □Not applicable
The recoverable amount is determined based on the present value of expected future cash flows
□ Applicable □Not applicable
Reasons for significant discrepancies between the above information and the information or external information used in impairment
tests of previous years
Reasons for significant discrepancies between the information used in the Company's impairment tests of previous year and the actual
situation of that year
(3) Other descriptions
4. Operating revenue and operating cost
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Item
Income Cost Income Cost
Main business 294742404.92 219149806.37 389272089.20 270233983.91
Other businesses 27582123.57 18125444.46 10336194.99 4165603.22
Total 322324528.49 237275250.83 399608284.19 274399587.13
Breakdown information of operating revenue and operating costs:
Unit: RMB
Division 1 Division 2 Total
Contract
Operating Operating Operating Operating
classification Operating cost Operating cost Operating cost Operating cost
revenue revenue revenue revenue
Business type
Including:
Digital identity
26137540.94 22759213.90 26137540.94 22759213.90
authentication
Smart office 15955881.34 10025321.36 15955881.34 10025321.36
Smart space 248158795.21 182321360.16 248158795.21 182321360.16
Smart business 4076028.14 3926700.12 4076028.14 3926700.12
Smart living 414159.29 117210.83 414159.29 117210.83
Others 27582123.57 18125444.46 27582123.57 18125444.46
Classification
by region of
operation
Including:
Domestic sales 132330717.89 109007403.36 132330717.89 109007403.36
Overseas sales 189993810.60 128267847.47 189993810.60 128267847.47
Market or
customer type
Including:
Distribution 253191139.24 185941936.36 253191139.24 185941936.36
Direct sales 41551265.68 33207870.01 41551265.68 33207870.01
Others 27582123.57 18125444.46 27582123.57 18125444.46
Type of contract
Including:
Classification
by time of
transfer of
goods
Including:
Classification
by contract term
Including:
Classification
by sales channel
Including:
Total 322324528.49 237275250.83 322324528.49 237275250.83
Information related to performance obligations:
Item Time for Important Nature of goods Is it the main Expected Types of
fulfilling payment terms that the responsible refunds to quality
performance Company person customers assurance
obligations promises to borne by the provided by the
transfer Company Company and
related
obligations
Other explanations:
Significant contract changes or significant transaction price adjustments
Unit: RMB
Item Accounting treatment method Amount of impact on income
Other explanations:
5. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Income from long-term equity
8000000.00 19000000.00
investment accounted with cost method
Long-term equity investment income
-1144067.36 44575.58
accounted by equity method
Financial products 1352916.72 881314.46
Forward foreign exchange settlement and
285803.23
sales contract
Total 8208849.36 20211693.27
6. Others
XX. 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-
-305355.94
current assets
Government subsidies included in
current profits and losses (except those
closely related to the normal business of
1450253.14
the Company which are in line with
national policies and regulations enjoyed
according to determined standards and
have a continuous impact on the
Company's profits and losses)
Profits and losses from fair value Mainly the gains from changes in fair
changes arising from the holding of value - trading financial liabilities of
financial assets and financial liabilities RMB 43636660.50 recognized in the
by non-financial enterprises as well as current period which is an estimation of
51514708.53
the gains and losses arising from the the fair value of contingent consideration
disposal of financial assets and financial based on the acquisition agreement of
liabilities except for effective hedging Longzhiyuan taking full account of
business related to the normal operation Longzhiyuan's actual and estimated
of the Company performance commitment completion.Reversal of the provision on receivables
610111.71
with impairment test conducted on an
individual basis
Share-based payment fees recognized in
a lump sum due to the cancellation or -1793200.00
modification of the equity incentive plan
Other non-operating revenues and
-2105756.04
expenses other than the above items
Less: income tax impact 634446.71
Minority interests impact (after tax) -532771.52
Total 49269086.21 --
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
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 2.29% 0.3399 0.3370
Company
Net profit attributable to
ordinary shareholders of the
Company after deducting 0.87% 0.1297 0.1272
non-recurring profits and
losses
3. Differences in accounting data between domestic and foreign accounting standards
(1) Differences in net profit and net assets in financial reports disclosed in accordance with international
accounting standards and Chinese accounting standards
□ Applicable □Not applicable
(2) Differences in net profit and net assets in financial reports disclosed in accordance with foreign accounting
standards and Chinese accounting standards
□ Applicable □Not applicable
(3) Explanation of the reasons for differences in accounting data between domestic and foreign accounting
standards. If differences in data audited by an overseas audit institution have already been adjusted the
name of the overseas institution shall be indicated
□ Applicable □Not applicable
4. Others
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