Company: XTKG
Filing Date: 2025-04-25
Form Type: 20-F
Source: 0001213900-25-035626
Chunk: 143

Company: X3 Holdings Co., Ltd.
Filing Date: 2025-04-25
Form: 20-F
Item: Item 5
Chunk 143
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 term of the service. Specified PCS
includes specified service term in the contract such as training.

Our application development
service revenues are generated primarily from contracts with PRC government or related agencies and state-owned enterprises. The contracts
contain negotiated billing terms which generally include multiple payment phases throughout the contract term and a significant portion
(30% - 50%) of contract amount usually is billed upon the completion of the related projects. Pursuant to the contract terms, the Company
has enforceable right on payments for the work performed.

We sometimes provide a warranty
for its application development service contracts. The warranty period is typically 12-36 months upon the completion of the application
development service. In accordance with ASC 606-10-25-19, the Company believes the warranty provision in the contracts generally represents
service-type warranty, which is a distinct performance obligation and the Company also provides the similar service on standalone basis
and customers can benefit from the related service-type warranty service. For the service warranty component, the customer simultaneously
receives and consumes the benefits provided by the company performance over the warranty term, therefore, the service warranty is satisfied
over time. The revenue allocated to the service warranty is recognized over the warranty period.

We assess that application
development service, PCS or specific service and service-type warranty service, if applicable, are distinct performance obligations in
the application development service contracts. The Company provides these services on standalone basis and customers are able to benefit
from each of the service on its own. In addition, the timing of delivery of these performance obligations can be separately identifiable
in the contracts. The transaction price is allocated to these identified performance obligations based on the relative standalone selling
prices. The transaction price allocated to PCS or unspecific service and service-type warranty, if applicable, on a straight-line method
over the contractual period. Revenue allocated to specified PCS is recognized as the related services are rendered. The transaction price
allocated to application development service is recognized over time as our performance creates or enhances the project controlled by
the customer and the control is transferred continuously to our customers. We use an input method based on cost incurred as the Company
believes that this method most accurately reflects our progress toward satisfaction of the performance obligation, which usually takes
less than one year. Under this method, the transaction price allocated to application development service is recognized as work is performed
based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.

Incurred costs include all
direct material