Company: XTKG
Filing Date: 2025-04-25
Form Type: 20-F
Source: 0001213900-25-035626
Chunk: 236

Company: X3 Holdings Co., Ltd.
Filing Date: 2025-04-25
Form: 20-F
Item: Item 19
Chunk 236
---
2023 the balance of deferred revenue amounted to $1,855,313and $2,175,896, respectively.

Government subsidies

Government subsidies mainly
represent amounts granted by local government authorities as an incentive for companies to promote development of the local technology
industry. The Group receives government subsidies related to government sponsored projects, and records such government subsidies as a
liability when it is received. The Group records government subsidies as other income when there is no further performance obligation.

Advertising expenditures

Advertising expenditures are
expensed as incurred and such expenses were minimal for the periods presented. Advertising expenditures have been included as part of
selling and marketing expenses. For the years ended December 31, 2024, 2023 and 2022, the advertising expense amounted to $1,725, $44,120and $25,373, respectively.

Operating leases

The Group adopted Topic 842
on January 1, 2022 using the modified retrospective transition approach. The Group has lease contracts for factory and office space
under operating leases. The Group determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use
assets on its consolidated balance sheets at lease commencement. The Group measures its lease liabilities based on the present value of
the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental
borrowing rate, which is the estimated rate the Group would be required to pay for a collateralized borrowing equal to the total lease
payments over the term of the lease. The Group estimates its incremental borrowing rate based on an analysis of weighted average interest
rate of its own bank loans. The Group measures right-of-use assets based on the corresponding lease liability adjusted for payments made
to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Group begins recognizing lease
expense when the lessor makes the underlying asset available to the Group.

For leases with lease term
less than one year (short-term leases), the Group records operating lease expense in its consolidated statements of operations on a straight-line
basis over the lease term and record variable lease payments as incurred.

F-18

X3 HOLDINGS CO., LTD.

Note 2 - Summary of significant accounting
policies(continued)

Income taxes

The Group accounts for current
income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences
exist between the tax bases of assets and liabilities and their reported