Company: LICN
Filing Date: 2025-04-29
Form Type: 20-F
Source: 0001213900-25-036244
Chunk: 112

Company: Lichen International Ltd
Filing Date: 2025-04-29
Form: 20-F
Item: Item 19
Chunk 112
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 ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions,
and other factors that may affect the Company’s ability to collect from customers. There was no allowance for credit losses set
up by the Company as of December 31, 2024 and 2023, respectively.

F-12

Contract assets

Contract assets represent the Company’s right to consideration
in exchange for goods and service performed, which invoice has not been issued.

Inventories

Inventories are stated at the lower of cost and
net realizable value. Cost elements of inventories comprise the purchase price of products, shipping charges to receive products from
the suppliers when they are embedded in the purchase price. Cost is determined using the weighted average method. Provisions are made
for excessive, slow moving, expired and obsolete inventories as well as for inventories with carrying values in excess of market. Certain
factors could impact the realizable value of inventory, so the Company continually evaluates the recoverability based on assumptions about
customer demand and market conditions. The evaluation may take into consideration historical usage, inventory aging, expiration date,
expected demand, anticipated sales price, product obsolescence and other factors. The reserve or write-down is equal to the difference
between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.
If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be
required that could negatively impact the Company’s gross margin and operating results. If actual market conditions are more favorable,
the Company may have higher gross margin when products that have been previously reserved or written down are eventually sold. As of December
31, 2024 and 2023, management compared the cost of inventories with their net realizable value and determined no inventory write-down
was necessary.

Prepayments, deposits, and other current assets

Represents cash due from the investors, prepaid
service fee. The deposits are refundable and bear no interest pursuant to terms of contract. The cash due from the investors was received
in January 2025.

Long-term investments

The Company’s long-term investments primarily
consist of equity investments accounted for using the equity method and other investments accounted for at fair value.

Equity investments accounted for using the equity method

The Group applies the equity method of accounting
to account for equity investments and limited partnership in a private equity fund, according to ASC 323 Investment - Equity Method
and Joint