Stock Code:3596

ARCADYAN TECHNOLOGY CORPORATION

Parent Company Only Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2020 and 2019

Address: 8F., No. 8, Sec. 2, Guangfu Rd., East Dist., Hsinchu City, Taiwan Telephone: (03)572-7000

The independent auditors’ report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and parent company only financial statements, the Chinese version shall prevail.

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses Due to Major Disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 9. List of major account titles	Page
	1 2 3 4 5 6 7 8 8 8～9 9～27 27 28～63 63～68 68 68 68 68 68～69 69～72 73～74 74 75 75 76～82

Contents
1. Cover Page
2. Table of Contents
3. Independent Auditors’ Report
4. Balance Sheets
5. Statements of Comprehensive Income
6. Statements of Changes in Equity
7. Statements of Cash Flows
8. Notes to the Financial Statements
(1)
Company history
(2)
Approval date and procedures of the financial statements
(3)
New standards, amendments and interpretations adopted
(4)
Summary of significant accounting policies
(5)
Significant accounting assumptions and judgments, and major sources
of estimation uncertainty
(6)
Explanation of significant accounts
(7)
Related-party transactions
(8)
Pledged assets
(9)
Commitments and contingencies
(10) Losses Due to Major Disasters
(11) Subsequent Events
(12) Other
(13) Other disclosures
(a) Information on significant transactions
(b) Information on investees
(c) Information on investment in mainland China
(d) Major shareholders
(14) Segment information
9. List of major account titles

Page

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KPMG

台北市110615信義路5段7號68樓(台北101大樓) Telephone 電話 + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Fax 傳真 + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) Internet 網址 home.kpmg/tw

Independent Auditors’ Report

To the Board of Directors of Arcadyan Technology Corporation:

Opinion

We have audited the financial statements of Arcadyan Technology Corporation(“ the Company” ), which comprise the balance sheets as of December 31, 2020 and 2019, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

1. Inventory valuation

Please refer to Note (4)(g) and Note (5) for the accounting policy of inventory valuation, as well as the estimation and assumption uncertainly of the valuation of inventory, respectively. Information regarding the inventory is shown in Note (6)(f) of the financial statements.

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

3-1

Description of key audit matters:

Inventory is measured at the lower of cost and net realizable value. The Company is primarily engaged in the research, development, manufacture and sale of wireless networking products, integrated access devices, digital home multimedia devices and mobile broadband products. The significant change in supply and competitive market of demand may cause fluctuation in product price. Consequently, the book value of inventory may exceed its net realizable value. Therefore, the valuation of inventory is one of the key audit matters.

How the matter was addressed in our audit:

Our principal audit procedures included : assessing the rationality of the Company’s accounting policies, such as the policy of provision for inventory loss due to price decline, obsolete, and slow moving inventories; inspecting the Company’ s inventory aging reports’ accuracy and analyzing the changes of inventory aging which are in accordance with the Company’s accounting policies; sampling and inspecting the Company’s sales price, as well as verifying the calculation of the lower of cost or net realizable value; and assessing the disclosure of provision for inventory valuation and obsolescence was appropriate.

2. Provisions

Please refer to Note (4)(n) and Note (5) for the accounting policy of provisions, as well as the estimation and assumption uncertainly of provisions, respectively. Information regarding the provisions is shown in Note (6)(n) of the financial statements.

Description of key audit matters:

Assessment of provisions is subject to significant judgment and estimation from management. Accounting assumption is based on the historical experience of provision expenses as a percentage of sales.

How the matter was addressed in our audit:

Our principal audit procedures included : understanding the method of estimation of provision, the sources of the data; confirming the policy of Company whether it is in accordance with the accounting principles; confirming whether the accounting estimates were conducted and the disclosure of provision was appropriate; performing retrospective testing for the amount of provision, testing the method of estimation, and recalculating the rationality of amount of provision.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’ s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

3-2

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

3-3

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Szu-Chuan Chien and Hsin-Fu Yen.

KPMG

Taipei, Taiwan (Republic of China) March 17, 2021

Notes to Readers

The accompanying parent company only financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such parent company only financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ audit report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and parent company only financial statements, the Chinese version shall prevail.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Balance Sheets

December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note (6)(a)) 1110 Current financial assets at fair value through profit or loss (note (6)(b)) 1139 Current financial assets for hedging (note (6)(d)) 1170 Notes and account receivables, net (notes (6)(e) and (t)) 1180 Account receivables from related parties, net (note (7)) 1200 Other receivables 1210 Other receivables from related parties (note (7)) 1310 Inventories (note (6)(f)) 1410 Prepayments 1470 Other current assets (note (8)) Non-current assets: 1550 Investments accounted for using equity method (note (6)(g)) 1511 Non-current financial assets at fair value through profit or loss (note (6)(b)) 1517 Non-current financial assets at fair value through other comprehensive income (note (6)(c)) 1600 Property, plant and equipment (note (6)(h)) 1755 Right-of-use assets (note (6)(i)) 1780 Intangible assets (note (6)(j)) 1840 Deferred income tax assets (note (6)(p)) 1900 Other non-current assets Total assets	December 31, 2020 Amount % $ 7,707,957 31 6,034 - - - 4,888,924 20 1,397,881 6 71,155 - 467,141 2 4,946,818 20 23,584 - 85,360 - 19,594,854 79 3,447,526 14 42,840 - 31,135 - 1,471,239 6 59,450 - 71,428 - 189,473 1 25,653 - 5,338,744 21 $ 24,933,598 100	December 31, 2019 Amount % 4,460,976 21 12,400 - 61 - 3,355,418 16 3,765,782 17 80,819 - 523,513 2 4,106,296 19 45,763 - 89,744 1 16,440,772 76 3,157,057 15 44,262 - 49,500 - 1,455,271 7 79,200 1 63,761 - 245,703 1 19,866 - 5,114,620 24 21,555,392 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note (6)(k)) 2120 Current financial liabilities at fair value through profit or loss (note (6)(b)) 2126 Current financial liabilities for hedging (note (6)(d)) 2170 Accounts payable 2180 Accounts payable to related parties (note (7)) 2200 Other payables (note (7)) 2230 Current tax liabilities 2250 Current provisions (note (6)(n)) 2280 Current lease liabilities (note (6)(m)) 2300 Other current liabilities Non-Current liabilities: 2530 Bonds payable (note (6)(1)) 2570 Deferred income tax liabilities (note (6)(p)) 2580 Non-current lease liabilities (note (6)(m)) 2640 Non-current net defined benefit liability (note (6)(o)) 2650 Credit balance of investments accounted for using equity method (note(6)(g)) 2670 Other non-current liabilities Total liabilities Equity (notes (6)(l), (q) and (r)): 3100 Ordinary shares 3200 Capital surplus 3300 Retained earnings 3410 Exchange differences on translation of foreign financial statements 3420 Unrealized gain or loss on financial assets at fair value through other comprehensive income (note (6)(v)) 3450 Gains (losses) on hedging instrument 3490 Unearned employee benefit Total equity Total liabilities and equity	December 31, 2020		December 31, 2019 Amount % 270,180 1 5,414 - 4,932 - 3,911,744 18 3,173,637 15 1,087,821 6 388,093 2 182,737 1 86,879 - 170,447 1 9,281,884 44 966,492 4 55,716 - 1,816 - 94,911 - 249,847 1 - - 1,368,782 5 10,650,666 49 2,085,350 10 3,703,916 17 5,335,400 25 (95,172) - - - (4,871) - (119,897) (1) 10,904,726 51 21,555,392 100
			Amount %
			$ 341,760 1 46,179 - 2,192 - 5,161,935 21 3,414,606 14 2,099,040 9 331,198 1 235,477 1 2,670 - 518,933 2 12,153,990 49 980,219 4 89,378 - 1,150 - 99,119 - - - 381 - 1,170,247 4 13,324,237 53 2,084,095 8 3,661,594 15 6,106,197 25 (176,362) (1) (18,365) - (2,192) - (45,606) - 11,609,361 47 $ 24,933,598 100

Total assets $ 24,933,598 100 21,555,392 100

See accompanying notes to financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, except net income per share amounts)

4000 Operating Revenues (notes (6)(t) and (7)): 4100 Net sales revenue 4800 Other operating revenue 5000 Operating costs (notes (6)(f), (6)(o), (7) and (12)) Gross profit from operating 5910 Unrealized profit from sales Operating expenses (notes (6)(o), (7) and (12)): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses Net operating income Non-operating income and expenses: 7100 Interest income 7230 Foreign exchange gains and losses, net 7225 Gains on disposals of investments 7375 Share of profit of subsidiaries, associates and joint ventures accounted for using equity method (note (6)(g)) 7010 Other income 7510 Interest expense (note (6)(l)) 7635 Gains on financial assets (liabilities) at fair value through profit or loss (notes (6)(b) and (6)(d)) Profit from continuing operations before tax 7950 Less: Income tax expenses (note (6)(p)) Profit 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains (losses) on remeasurements of defined benefit plans (note (6)(o)) 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8349 Less:Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note (6)(p)) Components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that may be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8368 Gains (losses) on hedging instrument (note (6)(d)) 8380 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Less:Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note (6)(p)) Components of other comprehensive income that may be reclassified to profit or loss 8300 Other comprehensive income Total comprehensive income Earnings per share (note (6)(s)) 9750 Basic earnings per share 9850 Diluted earnings per share	2020 Amount % $ 30,530,274 100 173,006 - 30,703,280 100 26,446,989 86 4,256,291 14 (293,102) (1) 4,549,393 15 387,244 1 409,131 1 1,451,209 5 2,247,584 7 2,301,809 8 26,774 - 3,558 - 985 - 51,929 - 4,434 - (23,805) - (16,642) - 47,233 - 2,349,042 8 635,100 2 1,713,942 6 (6,214) - (18,365) - (1,243) - (23,336) - (102,511) (1) 2,679 - 82 - (21,239) - (78,511) (1) (101,847) (1) $ 1,612,095 5 $ 8.36 $ 7.77	2019
		Amount % 27,248,530 100 132,687 - 27,381,217 100 23,520,056 86 3,861,161 14 320,345 1 3,540,816 13 465,888 2 347,637 1 1,175,721 4 1,989,246 7 1,551,570 6 23,313 - (126,589) - - - 53,550 - 3,491 - (15,670) - 84,585 - 22,680 - 1,574,250 6 260,752 1 1,313,498 5 (8,141) - - - (1,628) - (6,513) - (51,437) - (4,871) - (101) - (10,050) - (46,359) - (52,872) - 1,260,626 5 6.85
		6.51

See accompanying notes to financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Ordinary shares	Capital surplus		Retain	d earnings			Total o	her equity inte	est	Total other equity interest	Total equity
						Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income	Gains (losses) on hedging instruments	Unearned employee benefit and others
		Legal reserve	Special reserve	Unappropriated retained earnings	Total retained earnings
$ 1,936,190 - - - - - - 150,000 - - (840) 2,085,350 - - - - - - - - - (1,255) $ 2,084,095	2,794,174	763,392	79,288	3,766,400 1,313,498 (6,513) 1,306,985 (87,152) 25,604 (580,665) - - - - 4,431,172 1,713,942 (4,971) 1,708,971 (131,350) (41,488) (938,174) - - - - 5,029,131	4,609,080	(53,684) - (41,488) (41,488) - - - - - - - (95,172) - (81,190) (81,190) - - - - - - - (176,362)	-	-	(219,616) - - - - - - - - - 99,719 (119,897) - - - - - - - - - 74,291 (45,606)	(273,300) - (46,359) (46,359) - - - - - - 99,719 (219,940) - (96,876) (96,876) - - - - - - 74,291 (242,525)	9,066,144
	- -	- -	- -				- -				1,313,498 (52,872)
	-	-	-				-				1,260,626
		87,152 - - - - - -					- - - - - - -				- - (677,443) 1,080,000 48,667 13 126,719
		850,544 - -									10,904,726 1,713,942 (101,847)
		-									1,612,095
		131,350 - - - - - -									- - (938,174) (41,696) (150) (985) 73,545
		981,894									11,609,361

See accompanying notes to financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ARCADYAN TECHNOLOGY CORPORATION

Statements of Cash Flows

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit loss (gain) Interest expense Interest income Net loss on financial assets or liabilities at fair value through profit or loss Share-based payments Share of profit of associates and joint ventures accounted for using equity method Loss (gain) on disposal of property, plant and equipment Gain on disposal of investments Unrealized profit from sales Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Net loss (gain) on financial assets or liabilities mandatorily measured at fair value through profit or loss Decrease (increase) in notes and account receivables Decrease (increase) in accounts receivable from related parties Decrease (increase) in other receivable Increase in inventories Decrease (increase) in prepayments Decrease (increase) in other current assets Increase in account payables Increase in other payables and other current liabilities Decrease in other operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through other comprehensive income Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in other non-current assets Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term loans Cash dividends paid Capital increase by cash Issuance of convertible bonds Repayment of lease principal Other financing activities Net cash flows from (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2020 $ 2,349,042 104,351 29,261 2,177 23,805 (26,774) 1,422 73,545 (51,929) 45 (985) (293,102) (138,184) 47,131 (1,535,743) 2,367,901 58,686 (840,522) 22,179 4,384 1,491,160 1,422,752 (2,006) 3,035,922 2,897,738 5,246,780 26,770 7,742 (10,257) (579,621) 4,691,414 - (298,192) (108,225) 73 (36,515) (5,787) (448,646) 71,580 (979,876) - - (87,872) 381 (995,787) 3,246,981 4,460,976 $ 7,707,957	2019 1,574,250 95,588 31,186 (4,171) 15,670 (23,313) 1,383 126,719 (53,550) (325) - 320,345
		509,532
		24,942 636,128 (1,947,562) (465,725) (929,514) (2,463) (2,387) 1,583,698 568,669 (1,796)
		(536,010)
		(26,478)
		1,547,772 21,994 57,011 (8,117) (210,432)
		1,408,228
		(49,500) (823,505) (70,487) 1,095 (39,814) (3,810)
		(986,021)
		(159,830) (677,441) 1,080,000 1,007,240 (6,933) -
		1,243,036
		1,665,243 2,795,733
		4,460,976

See accompanying notes to financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Arcadyan Technology Corporation (the “Company”) was incorporated in May 9, 2003 and merged with BroadNet Technology, Inc. on May 1, 2006.

The Company is primarily engaged in the research, development, manufacture and sale of wireless networking products, integrated access devices, digital home multimedia device and mobile broadband products.

(2) Approval date and procedures of the financial statements:

These financial statements were authorized for issuance by the Board of Directors on March 17, 2021.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2020:

●Amendments to IFRS 3 “Definition of a Business”
●Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”
●Amendments to IAS 1 and IAS 8 “Definition of Material”
●Amendments to IFRS 16 “COVID-19-Related Rent Concessions”
(b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its consolidated financial statements:

●Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”
－
●Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform Phase 2”
(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Standards or
Interpretations
Amendments to IAS 1
“Classification of Liabilities as
Current or Non-current”

Content of amendment
Effective date per
IASB
The amendments aim to promote consistency
in applying the requirements by helping
companies
determine
whether,
in
the
statement of balance sheet, debt and other
liabilities with an uncertain settlement date
should be classified as current (due or
potentially due to be settled within one year)
or non-current.
The amendments include clarifying the
classification
requirements
for
debt
a
company might settle by converting it into
equity.
January 1, 2023

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

The Company does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its parent company only financial statements:

●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”
●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”
－
●Amendments to IAS 16 “Property, Plant and Equipment Proceeds before Intended Use”
－
●Amendments to IAS 37 “Onerous Contracts Cost of Fulfilling a Contract”
●Annual Improvements to IFRS Standards 2018-2020
●Amendments to IFRS 3 “Reference to the Conceptual Framework”
●Amendments to IAS 1 “Disclosure of Accounting Policies”
●Amendments to IAS 8 “Definition of Accounting Estimates”

(4) Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

(a) Statement of compliance

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(b) Basis of preparation

(i) Basis of measurement

Except for the following significant accounts, the financial statements have been prepared on the historical cost basis:

1) Financial instruments at fair value through profit or loss are measured at fair value;
2) Financial assets at fair value through other comprehensive income are measured at fair value;
3) Hedging financial assets are measured at fair value; and
4) The defined benefit liabilities (assets) are measured at fair value of plan assets less the present value of the defined benefit obligation, and the effect of the asset ceiling as explained in note (4)(o).
(ii) Functional and presentation currencies

The functional currency of the company is determined based on the primary economic environment in which the Company operates. The financial statements are presented in New Taiwan Dollars (TWD), which is the Company’s functional currency. All financial information presented in TWD has been rounded to the nearest thousand.

(c) Foreign currencies
(i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currency of the Company at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

1) an investment in equity securities designated as at fair value through other comprehensive income;
2) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
3) qualifying cash flow hedges to the extent that the hedges are effective.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into TWD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into TWD at the average exchange rate. Exchange differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interests. When the Company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future. Exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

(d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(f) Financial instruments

Account receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a account receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

2) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Company, therefore, those receivables are measured at FVOCI. However, they are included in the "account receivables" line item.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and account receivables, other receivable, guarantee deposit paid and other financial assets).

The Company measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

‧ debt securities that are determined to have low credit risk at the reporting date; and
‧ other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’ s historical experience and informed credit assessment as well as forwardlooking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘ investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the debtor is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

‧ significant financial difficulty of the borrower or issuer;
‧ a breach of contract such as a default or being more than 90 days past due;
‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
‧ it is probable that the borrower will enter bankruptcy or other financial reorganization; or
‧ the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

5) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

(ii) Financial liabilities and equity instruments
1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

4) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

5) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(iii) Derivative financial instruments and hedge accounting

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

The Company designates certain hedging instruments (which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk) as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

At inception of designated hedging relationships, the Company documents the risk management objectives and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged items and hedging instrument are expected to offset each other.

1) Cash flow hedges

The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognized in － other comprehensive income and accumulated under ‘ other equity gains (losses) on hedging instruments’, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognized in other comprehensive income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. Furthermore, if the Company expects that some or all of the loss accumulated in other equity will not be recovered in the future, that amount is immediately reclassified to profit or loss.

If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. The discontinuation is accounted for prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in other equity remains in equity until, for a hedge of a transaction resulting in the recognition of a non-financial item, it is included in the non-financial item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are immediately reclassified to profit or loss.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using the weighted-average-cost principle and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company’s interests in the associate.

When the Company’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

(i) Investments in subsidiaries

The subsidiaries in which the Company holds controlling interest are accounted for under equity method in the non-consolidated financial statements. Under equity method, the net income, other comprehensive income and equity in the non-consolidated financial statement are the same as those attributable to the owners of the parent in the consolidated financial statements.

The changes in ownership of the subsidiaries are recognized as equity transaction.

(j) Property, plant and equipment
(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) Buildings: 50 years
2) Machinery and equipment: 3~6 years
3) Research equipment: 3~6 years
4) Modeling equipment: 2~3 years
5) Other equipment: 1~10 years

The main construction of property, plant and equipment are factory buildings and firefighting facilities. All facilities are depreciated by using the useful life depreciation method.

Depreciation methods, useful lives, and residual values are reviewed at each annual reporting date. If expectations differ from the previous estimates, the change(s) is accounted for as a change in an accounting estimate.

(k) Lease

(i) Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3) the customer has the right to direct the use of the asset throughout the period of use only if either:
the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

the relevant decisions about how and for what purpose the asset is used are predetermined and:
－ the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
－ the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and account for the lease and nonlease components as a single lease component.

(ii) As a leasee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

1) fixed payments, including in substance fixed payments;
2) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
3) amounts expected to be payable under a residual value guarantee; and
4) payments for purchase or termination options that are reasonably certain to be exercised.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

1) there is a change in future lease payments arising from the change in an index or rate; or
2) there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or
3) there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
4) there is a change of its assessment on whether it will exercise a extension or termination option; or
5) there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of factory facilities and vehicles that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(l) Intangible assets
(i) Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

1) Authorization fee: amortized over the contract period by using the straight-line method.
2) Computer software: 1~10 years

Amortization methods, useful lives and residual values are reviewed at each annual reporting date and adjusted if appropriate.

(m) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(n) Provisions

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on the historical experience of provision expenses as percentage of sales.

(o) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below.

(i) Sale of goods

The Company manufactures and sells broadband network products, wireless network products, digital home appliance. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(ii) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(p) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(q) Share-based payment

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the liability are recognized in profit or loss.

Grant date of a share-based payment award is the date which the board of directors authorized the price and approved employees can subscribe for shares.

(r)
Income Taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;
(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

Deferred tax assets and liabilities are offset if the following criteria are met:

(i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(s)

Business combination

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Company recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

For each business combination, the Company measures any non controlling interests in the acquiree either at fair value or at the non controlling interest’ s proportionate share of the acquiree’ s identifiable net assets, if the non controlling interests are present ownership interests and entitle their holders to a proportionate share of the Company’ s net assets in the event of liquidation. Other components of non controlling interests are measured at their acquisition-date fair values, unless another measurement basis is required by the IFRSs endorsed by the FSC.

In a business combination achieved in stages, the Company remeasures its previously held equity interest in the acquiree at its acquisition-date fair value, and recognizes the resulting gain or loss, if any, in profit or loss. In prior reporting periods, the Company may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income will be recognized on the same basis as would be required if the Company had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount will be reclassified to profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Company’s financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period will not exceed one year from the acquisition date.

The Company should recognized all the business combination cost as current expense except for issuance bond or equity instrument.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(t) Earnings per share

The Company discloses the basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as convertible bonds, remuneration to employees not yet approved by the directors, and employee restricted shares.

(u) Operating segments

Please refer to the Company’s consolidated financial statements for the years ended December 31, 2020 and 2019, for further details.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements in conformity with the Regulations requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

There are no critical judgments in applying the accounting policies that have significant effects on the amounts recognized in the financial statements.

Information about assumptions and estimation uncertainties made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements, and those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic, is as follows:

(a) Inventory valuation

As inventories are supposed to be measured based on the lower of cost or net realizable value, which is based on the estimated sales price; therefore, the value of inventories may vary due to the nature of the industry. Please refer to note (6)(f) of the financial statement for inventory valuation.

(b) Recognition and measurement of provisions

Provision for warranty is estimated when product revenue is recognized. The estimate has been made based on the historical experience of provision expenses as a percentage of sales. The Company reviews regularly the basis of the estimate, and if necessary, amends it as appropriate. There could be a significant impact on the provision for warranty for any changes in the basis of the estimate. Please refer to note (6)(n) of the financial statement for recognition and measurement of provisions.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(6) Explanation of significant accounts:

(a) Cash and cash Equivalents

Cash on hand Checking accounts and demand deposits Time deposits	December 31, 2020 $ 1,416 2,706,541 5,000,000 $ 7,707,957	December 31, 2019 1,690 1,459,286 3,000,000 4,460,976

Please refer to note (6)(v) for the interest rate risk and the fair value sensitivity analysis of the financial assets and liabilities of the Company.

(b) Financial assets and liabilities at fair value through profit or loss

Current financial assets mandatorily measured at fair value through profit or loss: Derivative instruments not used for hedging: Foreign exchange swaps contracts Non-current financial assets mandatorily measured at fair value through profit or loss: Non-derivative financial assets: Fund unlisted on domestic markets Held-for-trading financial liabilities: Derivative instrument not used for hedging: Foreign exchange forward contracts Foreign exchange swaps contracts	December 31, 2020 $ 6,034 $ 42,840 $ 43,896 2,283 $ 46,179	December 31, 2019
		12,400
		44,262
		5,414 -
		5,414

The Company uses derivative financial instruments to hedge the certain foreign exchange risk the Company is exposed to, arising from its operating activities. The following derivative instruments, without the application of hedge accounting, were classified as mandatorily measured at fair value through profit or loss and held-for-trading financial liabilities:

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Derivative financial assets Swap contracts: Foreign exchange swaps Derivative financial liabilities Forward contracts: Foreign exchange forward Foreign exchange forward Swap contracts: Foreign exchange swaps Derivative financial assets Swap contracts: Forward exchange swaps Derivative financial liabilities Forward contracts: Foreign exchange forward Foreign exchange forward		December 31, 2020
	Contract amount (in thousands)	Currency Maturity date B/S USD/TWD January 28, 2021~ February 26, 2021 Sell EUR/USD January 14, 2021~ April 14, 2021 Buy USD/BRL August 26, 2021 B/S USD/TWD March 12, 2021~ April 29, 2021 December 31, 2019 Currency Maturity date B/S USD/TWD February 14, 2020~ March 30, 2020 Sell EUR/USD January 14, 2020~ March 13, 2020 Buy USD/BRL September 23, 2020
	USD 20,000 EUR 37,000 USD 800 USD 30,000 Contract amount (in thousands) USD 46,000 EUR 17,000 USD 1,000

Please refer to note (6)(v) for the exposure to credit risk of the financial instruments.

As of December 31, 2020 and 2019, the Company did not provide any aforementioned financial assets as collaterals.

Equity investments at fair value through other comprehensive income: Stocks unlisted on domestic markets	December 31, 2020 $ 31,135	December 31, 2019
		49,500

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(i) The Company acquired 1,650 thousand shares of CHIMEI MOTOR ELECTRONICS CO., LTD. for $49,500 in cash in July 2019. The Company’ s investment equity instruments are long-term strategic investments not held-for-trading purpose. The Company designated as equity investment at fair value through other comprehensive income. For the year ended December 31, 2020, the above-mentioned equity was measured at fair value and was recognized an unrealized loss of $18,365 under other comprehensive income.
(ii) The Company did not dispose any strategic investments in 2020 and 2019, and accumulated gain and loss were not transferred in equity during the period.
(iii) For market risk information, please refer to note (6)(v).
(iv) As of December 31, 2020 and 2019, the Company did not provide any aforementioned financial assets as collaterals for its loans.
(d) Derivative financial instruments used for hedging
(i) Financial assets and liabilities used for hedging were as follows:

Cash flow hedge: Financial assets used for hedging: Foreign exchange forward contracts Financial liabilities used for hedging: Foreign exchange forward contracts	December 31, 2020 $ - $ 2,192	December 31, 2019
		61
		4,932

(ii) Cash flow hedge-foreign exchange risk

The Company’ s strategy is to enter into foreign exchange forward contracts to hedge its foreign currency exposure risk in relation to the forecast sales.

As of December 31, 2020 and 2019, the amounts relating to the items designated as hedging instruments were as follows:

Derivative financial assets Foreign exchange forward contracts: Foreign exchange forward		December 31, 2020	December 31, 2020
	Contract amount (in thousand) Currency EUR 6,000 Sell EUR/USD		Maturity date Average strike price April 29, 2021~ June 29, 2021 1.2192

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Derivative financial assets Foreign exchange forward contracts: Foreign exchange forward Derivative financial liabilities Foreign exchange forward contracts: Foreign exchange forward Foreign exchange forward		December 31, 2019	December 31, 2019
	Contract amount (in thousand) Currency EUR 6,000 Sell EUR/USD EUR 39,000 Sell EUR/USD USD 3,589 Buy USD/MXN		Maturity date Average strike price February 14, 2020~ June 29, 2020 1.1278 January 31, 2020~ December 29, 2020 1.1327 February 26, 2020~ March 30, 2020 19.507

(iii) Adjustments on reclassification from other comprehensive income

As of December 31, 2020 and 2019, the details of adjustments on reclassification from other comprehensive income were as follows:

Cash flow hedge Profit (loss) in current year Less: net income (loss) of adjustments On reclassification from other comprehensive income which belongs to net income (loss)	2020 $ (1,736) (4,415) $ 2,679	2019 (26,649) (21,778) (4,871)

(iv) For the years ended December 31, 2020 and 2019, the ineffective portion of cash flow hedge recognized in loss amounted of $(1,080) and $(5,934), respectively, recorded under the “Gain (losses) on financial assets (liabilities) at fair value through profit or loss”.
(v) For the years ended December 31, 2020 and 2019, gain or loss of adjustments from reclassification of other equity, deriving from the changes of fair-value hedge instruments, were recognized under operating revenues in income statement.
(e) Notes and accounts receivable

Notes receivable from operating activities Accounts receivable–measured at amortized cost Less: allowance for uncollectible accounts	December 31, 2020 $ 17,574 4,896,183 4,913,757 (24,833) $ 4,888,924	December 31, 2019 7,981 3,370,033 3,378,014 (22,596) 3,355,418

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, notes and accounts receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking macroeconomic information. The expected credit losses were determined as follows:

			December 31, 2020	December 31, 2020
		Gross	Weighted-	Loss
		carrying	average	allowance		Credit
	Credit rating	amount	loss rate	provision		impaired
Level A	$	2,085,616	0%		-	No
Level B		2,430,280	0.1%		2,472	No
Level C		379,293	1%		3,793	No
Level D		-	-		-	-
Level E		18,568	100%		18,568	Yes
Total	$	4,913,757			24,833
			December 31, 2019
		Gross	Weighted-	Loss
		carrying	average	allowance		Credit
	Credit rating	amount	loss rate	provision		impaired
Level A	$	1,643,542	0%		-	No
Level B		1,572,744	0.1%		1,602	No
Level C		142,156	1%		1,422	No
Level D~E		-	-		-	-
Level F		19,572	100%		19,572	Yes
Total	$	3,378,014			22,596
The aging	analysis of notes and accounts receivable		was as follows:
			December		31, December 31,
				2020		2019
Overdue 1~30 days			$	364,043		335,533
Overdue 31~60 days				55,096		35,637
Overdue 61~90 days				-		19,408
Overdue 91~180 days					26	1,880
Overdue over 181 days				18,568		19,771
			$	437,733		412,229

The movement in the allowance for notes and accounts receivable were as follows:

Balance at January 1 Impairment losses recognized (reversed) Balance at December 31	2020 $ 22,596 2,237 $ 24,833	2019 26,750 (4,154) 22,596

As of December 31, 2020 and 2019, the Company did not provide any aforementioned notes and accounts receivable as collaterals for its loans.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(f) Inventories

(i) A summary of the Company’s financial information for inventories at the reporting date were as follows:

Raw materials Work in progress Finished goods	December 31, 2020 $ 1,669,801 - 3,277,017 $ 4,946,818	December 31, 2019
		1,642,946 893 2,462,457
		4,106,296

(ii) Inventory cost recognized as cost of sales for the years ended December 31, 2020 and 2019 were as follows:

Cost of sales Provision for inventory valuation loss and obsolescence	2020 $ 26,205,769 241,220 $ 26,446,989	2019
		23,320,966 199,090
		23,520,056

(iii) As of December 31, 2020 and 2019, the Company did not provide any inventories as collaterals for its loans.
(g) Investments accounted for using equity method (including credit balance of investments accounted for using equity method)

A summary of the Company’s financial information for equity-accounted investees at the reporting date were as follows:

Subsidiaries Associates Add: Recorded as credit balance of investment accounted for using equity method Recorded as deduction of other receivable from related parties	December 31, 2020 $ 3,418,130 13,204 3,431,334 - 16,192 $ 3,447,526	December 31, 2019
		2,884,851 13,581
		2,898,432 249,847 8,778
		3,157,057

(i) Subsidiaries

Please refer to the 2020 consolidated financial statements for the year ended December 31, 2020. As of December 31, 2019, the credit balance of investment accounted for using equity method was due to unrealized gross profit on write off of certain subsidiaries.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Associates

The Company’s financial information for investment accounted for using equity method that are individually insignificant was as follows:

Carrying amount of the Company’s interests in all individually insignificant associates’ equity	December 31, 2020 $ 13,204	December 31, 2019
		13,581

The Company’s share of the net income (loss) of associates was as follows:

Attributable to the Company: Profit (loss) from continuing operations Other comprehensive income (loss) Total comprehensive income	2020 $ 372 4 $ 376	2019
		85 (4)
		81

(iii) As of December 31, 2020 and 2019, the Company did not provide any investment accounted for using equity method as collaterals for its loans.

(h) Property, plant and equipment

The cost, depreciation, of the property, plant and equipment and of the Company for the years ended December 31, 2020 and 2019 were as follows:

Cost or deemed cost: Balance at January 1, 2020 Additions Reclassifications Disposals and derecognitions Balance at December 31,2020 Balance at January 1, 2019 Additions Reclassifications Disposals and derecognitions Balance at December 31, 2019 Depreciation: Balance at January 1, 2020 Depreciation Disposals and derecognitions Balance at December 31, 2020 Balance at January 1, 2019 Depreciation Disposals and derecognitions Balance at December 31, 2019	Land $ 463,262 - - - $ 463,262 $ 463,262 - - - $ 463,262 $ - - - $ - $ - - - $ -	Buildings and construction 828,128 - - - 828,128 828,128 - - - 828,128 81,607 17,068 - 98,675 64,539 17,068 - 81,607	Machinery and equipment 212,768 - - (15,349) 197,419 214,279 - - (1,511) 212,768 212,216 278 (15,341) 197,153 213,312 409 (1,505) 212,216	Research and development equipment 403,086 60,763 3,960 (4,723) 463,086 345,541 57,690 4,630 (4,775) 403,086 284,653 36,288 (4,642) 316,299 257,185 31,480 (4,012) 284,653	Molding equipment 142,454 8,019 - (59,521) 90,952 143,349 873 - (1,768) 142,454 139,363 3,439 (59,492) 83,310 134,884 6,246 (1,767) 139,363	Other equipment 237,912 13,489 1,320 (10,497) 242,224 228,106 11,327 - (1,521) 237,912 130,165 24,531 (10,497) 144,199 107,729 23,957 (1,521) 130,165	Under construction and prepayment for purchase of equipment 15,665 19,048 (8,909) - 25,804 14,332 12,416 (11,083) - 15,665 - - - - - - - -	Total 2,303,275 101,319 (3,629) (90,090)
								2,310,875
								2,236,997 82,306 (6,453) (9,575)
								2,303,275
								848,004 81,604 (89,972)
								839,636
								777,649 79,160 (8,805)
								848,004

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Carrying amounts: Balance at December 31, 2020 Balance at January 1, 2019 Balance at December 31, 2019	Land $ 463,262 $ 463,262 $ 463,262	Buildings and construction 729,453 763,589 746,521	Machinery and equipment 266 967 552	Research and development equipment 146,787 88,356 118,433	Molding equipment 7,642 8,465 3,091	Other equipment 98,025 120,377 107,747	Under construction and prepayment for purchase of equipment 25,804 14,332 15,665	Total
								1,471,239
								1,459,348
								1,455,271

As of December 31, 2020 and 2019, the Company did not provide any Company’s property, plant and equipment as collaterals.

(i) Right-of-use assets

The cost, depreciation, of the right-of-use and of the Company, including machinery and equipment and vehicles, for the years ended December 31, 2020 and 2019 were as follow:

Cost: Balance at January 1, 2020 Additions Disposals Balance at December 31, 2020 Balance at January 1, 2019 Additions Balance at December 31, 2019 Depreciation: Balance at January 1, 2020 Depreciation Disposals Balance at December 31, 2020 Balance at January 1, 2019 Depreciation Balance at December 31, 2019 Carrying amount: Balance at December 31, 2020 Balance atJanuary 1, 2019 Balance atDecember 31, 2019	Machinery and Equipment $ 81,081 - - $ 81,081 $ - 81,081 $ 81,081 $ 9,459 16,216 - $ 25,675 $ - 9,459 $ 9,459 $ 55,406 $ - $ 71,622	Vehicles and Other 14,547 2,997 (6,896) 10,648 6,896 7,651 14,547 6,969 6,531 (6,896) 6,604 - 6,969 6,969 4,044 6,896 7,578	Total 95,628 2,997 (6,896) 91,729 6,896 88,732 95,628 16,428 22,747 (6,896) 32,279 - 16,428 16,428 59,450 6,896 79,200

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(j) Intangible Assets

Changes in cost and accumulated amortization of intangible assets for the years ended December 31, 2020 and 2019, were as follows:

Cost: Balance at January 1, 2020 Additions Reclassifications Disposals Balance at December 31, 2020 Balance at January 1, 2019 Additions Disposals Balance at December 31, 2019 Accumulated amortization: Balance at January 1, 2020 Amortization Disposals Balance at December 31, 2020 Balance at January 1, 2019 Amortization Disposals Balance at December 31, 2019 Book value: Balance at December 31, 2020 Balance at January 1, 2019 Balance at December 31, 2019	Goodwill $ 6,556 - - - $ 6,556 $ 6,556 - - $ 6,556 $ - - - $ - $ - - - $ - $ 6,556 $ 6,556 $ 6,556	Authorization fee 51,016 - - - 51,016 50,515 501 - 51,016 35,037 4,705 - 39,742 28,155 6,882 - 35,037 11,274 22,360 15,979	Computer software and others 86,807 36,515 413 (102) 123,633 65,401 39,313 (17,907) 86,807 45,581 24,556 (102) 70,035 39,184 24,304 (17,907) 45,581 53,598 26,217 41,226	Total 144,379 36,515 413 (102) 181,205 122,472 39,814 (17,907) 144,379 80,618 29,261 (102) 109,777 67,339 31,186 (17,907) 80,618 71,428 55,133 63,761

(i) Amortization expenses

The amortization of intangible assets is included in the statements of comprehensive income:

Operating costs Operating expenses	2020 $ 2,239 $ 27,022	2019
		3,601
		27,585

(ii) As of December 31, 2020 and 2019, the Company did not provide any intangible assets as collaterals.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(k) Short-term borrowings

Unsecured bank loans Unused credit line for short-term borrowings Annual interest rates	December 31, 2020 $ 341,760 $ 5,174,111 0.25%~2.20%	December 31, 2019
		270,180
		5,245,438
		2.10%~2.87%

For the information on the Company’s interest risk, foreign currency risk and liquidity risk, please see note (6)(v).

(l) Unsecured convertible bonds payable
(i) The Company issued the first domestic unsecured convertible bonds on June 6, 2019, the details of unsecured convertible bonds were as follows:

Total convertible corporate bonds issued Unamortized discounted on corporate bonds payable Unamortized issuance cost on corporate bonds payable Balance of bonds payable as of the reporting date Conversion options included in equity component (recognized as capital surplus - stock options) Interest expenses	December 31, 2020 $ 1,000,000 (18,527) (1,254) $ 980,219 $ 48,667 2020 $ 13,727	December 31, 2019 1,000,000 (31,383) (2,125) 966,492 48,667 2019 7,919

The effective interest rate of the first issued convertible bonds was 1.3284%.

(ii) The main terms of issuing the above-mentioned convertible bonds were as follows:
1) Coupon rate: 0%
2) Duration: three years (June 6, 2019~June 6, 2022)
3) Repayment:

Put option and call option are excluded from the issuance of convertible bonds. Except that the bondholders convert the bonds to Company’s common shares, or the bonds are repurchased and cancelled by the Company from the securities firm’s business office, the bonds will be repaid in cash at par value when the bonds expired.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

4) Terms of conversion:
a) The bondholder may opt to have its bonds converted into the Company’s common shares, with the approval of Taiwan Depository & Clearing Corporation through securities firms, at any time between three months after the issuance date (September 7, 2019) and the day before the maturity day (June 6, 2022), except for the following:
- The closing period in accordance with the applicable law;
- The period starting from the first day of the first fifteen working days prior to the date of record for determination wherein the shareholders are entitled to receive the distributions or rights to subscribe for new shares in a capital increase for cash, and ends on the date of record for the distribution of the rights/benefits;
- The period starts from the date of record of the capital decrease and ends on the date prior to the trading of the reissuance shares after the capital decrease.
b) The conversion price of NT$98.3 per share upon issuance had been adjusted to NT $93 per share after issuing cash dividends on common shares and processing cash capital increase in 2019, and adjusted to NT87.7 per share after issuing cash dividends on common shares in 2020.

(m) Lease liabilities

The details of lease liabilities were as follows:

Current Non-current For the maturity analysis, please refer to note (6)(v). The amounts recognized in profit or loss were as follows: Interest on lease liabilities Expenses relating to short-term leases The amounts recognized in the statement of cash flows for the Total cash outflow for leases	December 31, 2020 December 31, 2019 $ 2,670 86,879 $ 1,150 1,816 2020 2019 $ 82 112 $ 10,709 11,794 Company was as follows: 2020 2019 $ 98,663 18,839	December 31, 2019
		86,879
		1,816
		2019
		112
		11,794
		18,839

(i) Machinery and vehicles lease

The Company leases machinery and vehicles, with lease terms of 3 to 5 years.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Other leases

The Company leases office with contract terms of 1 years. These leases are short-term items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(n) Provisions

Balance at January 1, 2020 Provisions made Provisions used Balance at December 31, 2020 Balance at January 1, 2019 Provisions made Provisions used Balance at December 31, 2019	Warranties $ 182,737 120,185 (67,445) $ 235,477 $ 175,023 100,032 (92,318) $ 182,737

Provisions for warranty related to sales of products are assessed based on the historical experience.

(o) Employee benefits

(i) Defined benefit plans

The present value of the defined benefit obligations and the fair value adjustments of plan assets for the Company were as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability	December 31, 2020 $ 229,760 (130,641) $ 99,119	December 31, 2019 216,618 (121,707) 94,911

The Company makes defined benefit plan contributions to the pension fund account at the Bank of Taiwan that provides pensions for employees upon retirement. The plans (cover by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

1) Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $130,641 at the end of the reporting period. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.

2) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the Company were as follows:

Balance at January 1 Current service costs and interest Actuarial gains (losses) Balance at December 31	2020 $ 216,618 3,293 9,849 $ 229,760	2019
		201,154 3,834 11,630
		216,618

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Company were as follows:

Fair value of plan assets at January 1 Contributions paid by the employer Expected return on plan assets Remeasurement in net defined benefit liability (assets) Fair value of plan assets at December 31 Actual return on plan assets	2020 $ 121,707 4,079 1,220 3,635 $ 130,641 $ 4,855	2019
		112,589 4,072 1,557 3,489
		121,707
		5,046

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

Service costs Net interest of net liabilities (assets) for defined benefit obligations Expected return on plan assets Operating costs Selling expenses Administrative expenses Research and development expenses	2020 $ 1,144 2,149 (1,220) $ 2,073 $ 163 175 413 1,322 $ 2,073	2019
		1,087 2,747 (1,557)
		2,277
		172 181 447 1,477
		2,277

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

5) Actuarial gains and losses recognized in other comprehensive income

The Company’s actuarial gains and losses recognized in other comprehensive income, before taxs for the years ended December 31, 2020 and 2019, were as follows:

Cumulative amount at January 1 Recognized Cumulative amount at December 31	2020 $ 65,589 6,214 $ 71,803	2019
		57,448 8,141
		65,589

6) Actuarial assumptions
a) The following are the Company’s principal actuarial assumptions:
- i) Present value of defined benefit obligations

Discount rate as of December 31 Future salary increasing rate ii) Defined benefit plan cost Discount rate as of December 31 Future salary increasing rate	December 31, 2020 December 31, 2019 % 0.625 % 1.000 % 3.000 % 3.000 2020 2019 % 1.000 % 1.375 % 3.000 % 3.000

The expected allocation payment made by the Company to the defined benefit plans for the one year period after the reporting date was $4,122.

The weighted-average duration of the defined benefit obligation is 14 years.

7) Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2020 Discount rate Future salary increasing rate December 31, 2019 Discount rate Future salary increasing rate	Increased 0.25% Decreased 0.25% (6,020) 6,261 5,991 (5,807) (6,000) 6,253 6,015 (5,802)

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2020 and 2019.

8) There were no payment for pension made by the Company for the years ended December 31, 2020 and 2019.

(ii) Defined contribution plans

The Company allocate 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company allocates a fixed amount to the Bureau of the Labor Insurance without additional legal or constructive obligations.

The Company recognized the pension costs under the defined contribution method amounting to $38,803 and $35,261 for the years ended December 31, 2020 and 2019, respectively. Payment was made to the Bureau of Labor Insurance.

(p) Income taxes

(i) Income tax expense

The amount of income tax (benefit) for the years ended December 31, 2020 and 2019 were as follows:

2020 Current tax expense Recognized during the period $ 565,266 Additional tax on undistributed earnings 10,114 Adjustment for prior periods (52,654) 522,726 Deferred tax expense Origination and reversal of temporary differences 112,374 Income tax expense $ 635,100	2019 437,097 11,465 (60,198) 388,364 (127,612) 260,752

The amount of income tax recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows:

Foreign currency translation differences for foreign operations Defined benefit plan actuarial gains (losses)	2020 $ (21,239) (1,243) $ (22,482)	2019 (10,050) (1,628) (11,678) (Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

9) Reconciliation of income tax (benefit) and profit before tax for the years ended December 31, 2020 and 2019 were as follows:

Profit before income tax Income tax using the Company’s domestic tax rate Tax-exempt net profit and loss from investment Changes in unrecognized temporary differences Over provision in prior periods Additional tax on undistributed earnings Others	2020 $ 2,349,042 469,808 23,276 175,551 (52,654) 10,114 9,005 $ 635,100	2019 1,574,250 314,850 (13,835) 1,375 (60,198) 11,465 7,095 260,752

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax liabilities: None.
2) Unrecognized deferred tax assets:

Details of unrecognized deferred tax assets are as follows:

Tax effect of deductible temporary differences	December 31, 2020 $ 208,793	December 31, 2019
		33,242

The management considered that the temporary differences would probably not be reversed in the foreseeable future. Therefore, such temporary differences were not recognized as deferred tax assets.

3) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities were as follows:

Deferred Tax Liabilities: Balance at January 1, 2020 Recognized in profit or loss Balance at December 31, 2020 Balance at January 1, 2019 Recognized in profit or loss Balance at December 31, 2019	Investment income recognized under the equity method (overseas) $ 55,716 33,662 $ 89,378 $ 58,840 (3,124) $ 55,716

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Deferred Tax Assets: Balance at January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2020 Balance at January 1, 2019 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2019	Defined benefit plans $ 13,114 - 1,243 $ 14,357 $ 11,486 - 1,628 $ 13,114	Foreign currency translation adjustment 23,061 - 21,239 44,300 13,011 - 10,050 23,061	Loss on inventory valuation 49,391 (24,313) - 25,078 13,505 35,886 - 49,391	Unrealized exchange gains and losses, net 55,401 (14,653) - 40,748 33,762 21,639 - 55,401	Unrealized gross profit 68,146 (58,620) - 9,526 4,077 64,069 - 68,146	Others 36,590 18,874 - 55,464 33,696 2,894 - 36,590	Total 245,703 (78,712) 22,482 189,473 109,537 124,488 11,678 245,703

(iii) The ROC tax authorities have examined the income tax expenses of the Company through 2018.

(q) Capital and other equities

For the years ended December 31, 2020 and 2019, the authorized common stocks were both $3,000,000 of which 208,409 thousand shares and 208,535 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

(i) Ordinary shares

Reconciliation of shares outstanding for 2020 and 2019 were as follows:

(in thousands of shares) Balance on January 1 Issued for cash Cancellation of employee restricted shares Balance on December 31	Ordinary shares 2020 2019 208,535 193,619 - 15,000 (126) (84) 208,409 208,535
	2020 208,535 - (126) 208,409

In 2018, the Company issued its employee restricted shares amounting to $45,000, wherein the amount of $1,225 and $840, respectively, had been cancelled due to failure in meeting the vested requirements on January 1, 2020 and 2019. As of December 31, 2020, the registration procedure had been completed.

In order to enrich its working capital, the Company’ s Board of Directors resolved to issue 15,000 thousand ordinary shares with a par valued at $10, totaling of $150,000 on April 9, 2019. The issuance had been applied and was effective in accordance with the Rule No.1080314862 issued by the FSC on May 21, 2019, and extended offering period in accordance with the Rule No. 1080327573 granted by the FSC on August 19, 2019. Among the issuance, 1,500 thousand shares were reserved for employee subscription in accordance with Article 267 of Company Act.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

On September 24, 2019, The Company announced the subscription effective date as October 29, 2019. On October 16, 2019, the Company announced the issuance price as TWD72 per share. All related registration procedures had been completed.

(ii) Capital surplus

The balances of capital surplus were as follows:

Additional paid-in capital Difference between consideration and carry amount arising from acquisition or disposal of subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Issuance of convertible bonds Issuance of employee restricted shares	December 31, 2020 $ 3,488,459 3,698 5,602 48,667 115,168 $ 3,661,594	December 31, 2019
		3,436,118 3,698 6,737 48,667 208,696
		3,703,916

According to the ROC Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring paid-in capital in excess of par value should not exceed 10% of the total common stock outstanding.

The Company’s Board of Directors meeting held on March 17, 2020, approved to distribute the cash dividend of $41,696 ($0.2 per share) through capital surplus.

The resolution of shareholders’ meeting decided to distribute the cash dividends amounting to $96,778 ($0.5 per share) through capital surplus on June 25, 2019.

The Company’s Board of Directors meeting held on March 17, 2021, approved to distribute the cash dividend of $208,391 ($1.0 per share) through capital surplus. The related information can be accessed through the Market Observation Post System website after the meeting.

(iii) Retained earnings

The Company's article of incorporation, amended on June 25, 2019, stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve. The legal reserve can be exempted if it equals the paid-in capital, besides, special reserves are supposed to be set aside or reversed in accordance with the relevant regulations or as required by the government. And then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The retained earnings distributed to stockholders should be approved by the Board of Directors which is authorized by the Company’s article of incorporation. The Company authorized the Board of Directors with two-thirds or more of attendance, over half of those to approve issuing all or part of dividends, capital surplus or legal reverse by cash, and reporting to the stockholders’ meeting.

The prior Company’s article of incorporation before amended on June 25, 2019, stipulated that Company’s net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve. The legal reserve can be exempted if it equals the paid-in capital, besides, special reserves are supposed to be set aside or reversed in accordance with the relevant regulations or as required by the government. And then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

According to the Company’ s stable dividend policy, the type of dividends should be determined after considering the business environment, operating performance, financial structure, etc. If retained earnings shall be distributed to stockholders which shall not be lower than 30% of the profit and the cash dividends to stockholders shall not be lower than 10% of total cash and stock dividends.

1) Legal reserve

In accordance with the Company Act, 10 percent of net income after tax should be set aside as legal reserve, until it is equal to authorized capital. When a company incurs no loss, the distribution of the statutory earnings reserve, either by new shares or by cash, shall be decided at the shareholders meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 percent of the paid-in capital.

2) Special reserve

A portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the total net current-period reduction of other shareholders’ equity resulting from the carrying amount of special earnings reserve as stated above. Similarly, a portion of undistributed prior period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(iv) Earnings distributed

Earnings distribution for 2019 and 2018 was approved by the Board of Directors meeting held on March 17, 2020, and the shareholders during their annual meeting held on June 25, 2019, respectively. The relevant dividend distribution to shareholders were as follows:

Cash dividends distributed to common shareholders	2019 Amount per share Total amount $ 4.50 938,174	2018	2018
	Amount per share $ 4.50	Amount per share 3.0	Total amount
			580,665

The earnings distribution for year 2020 approved by the Board of Directors meeting held on March 17, 2021 was as follows:

Cash dividends distributed to commons shareholders from unappropriated earnings	2020	2020
	Amount per share (dollars) $ 5.50	Total amount
		1,146,148

The related information of the earnings distribution for year 2020, can be accessed through the Market Observation Post System website after the meeting.

(r) Share-based payment

(i) Employee restricted share

At the meeting held on June 21, 2018, the Company’s Board of Directors decided to issue 4,500 thousand shares of employee restricted shares to the Company’ s full-time employees who meet certain requirements. The restricted shares have been registered with, and approved by, the Securities and Futures Bureau of FSC. The Board of Directors decided to issue all the restricted shares on November 6, 2018, which is also the effective date of the share issuance.

3,500,000 shares of the aforementioned restricted shares are issued without consideration. 30%, 30% and 40% of the 3,500,000 restricted shares are vested when the employees continue to provide service for at least 2 year, 3 years and 4 years, respectively, from the registration and the effective date, and at the same time, meet the performance requirement. In addition, when earnings per share in two consecutive and complete fiscal years from the registration and effective date are no less than NT$ 4, and at the same time, the employees with the restricted shares meet the performance requirement, the other 1,000,000 shares of the restricted shares are vested 100% at the date the shareholders approved the financial statements for the second fiscal year. If the earnings per share in two consecutive and complete fiscal years from the registration and effective date are between NT$ 3 to NT$ 4, at the same time, the employees with the restricted shares meet the performance requirement, the restricted shares are vested 75% at the date the shareholders approved the financial statements for the second fiscal year. If the earnings per share in two consecutive and complete fiscal years from the registration and effective date are less than NT$ 3, the employees with restricted shares, whether or not they

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

meet the performance requirement, no restricted shares are vested at the date the shareholders approved the financial statements for the second fiscal year. The earnings per share mentioned above are calculated based on the profit approved by the shareholders and the weighted average number of ordinary shares outstanding at the date of the restricted shares have been approved by the authority.

After the issuance, the restricted shares are kept by a trust, which is appointed by the Company, before they are vested. These restricted shares shall not be sold, transferred, pledged, gifted, or disposed by any other means, to third parties during the custody period. The voting rights of these shares are executed by the custodian, and the custodian shall act based on the law and regulations. If the shares remain unvested after the vesting period, the Company will redeem all the unvested shares without consideration and cancel the shares thereafter. Restricted shares could be received in cash and stock dividends, or could be used to participate in cash injection. The aforementioned new shares are not considered as restricted shares.

The information of the Company’s restricted shares is as follows:

Outstanding unit at January 1 Canceled during the period Granted during the period Outstanding unit at December 31	Unit: in thousands of shares 2020 2019 4,416 4,500 (126) (84) (1,984) - 2,306 4,416

As of December 31, 2020 and 2019, the unearned employee benefit were $45,606 and $119,897, respectively.

The compensation cost related to the restricted share were $73,545 and $99,719 for the years ended December 31, 2020 and 2019.

(ii) Cash injection reserved for employees

The Company’s Board of Directors resolved to implement cash injection on April 9, 2019, of which 1,500 thousand shares were reserved for employees. The relevant information was as follows:

follows:
Grant date	2019.10.16
Number of shares granted (in thousands)	1,500
Granted recipients	(Note 1)
Vested condition	Vest immediately

(Note 1) The Company’ s full-time employees who meet certain requirements.

The compensation cost, recorded as operating expense and cost of sales related to the cash injection reversed for employees, amounted to $27,000 in 2019.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(s) Earnings per share

(i) Basic earnings per share

The calculation of basic earnings per share for 2020 and 2019 were as follows:

1) Profit attributable to ordinary shareholders of the Company

2020 Profit attributable to ordinary shareholders of the Company $ 1,713,942 2) Weighted-average number of ordinary shares (thousand shares) 2020 Weighted-average number of ordinary shares at December 31 204,955 Basic earnings per share (dollars) $ 8.36	2019
	1,313,498
	2019
	191,708
	6.85

(ii) Diluted earnings per share

The calculation of diluted earnings per share for 2020 and 2019 was as follows:

1) Profit attributable to ordinary shareholders of the Company (diluted)

		2020	2019	2019
Profit attributable to ordinary shareholders of the
Company(basic) (diluted)	$	1,727,669	1,318,031
Weighted-average number of ordinary shares (diluted)		(thousand shares)
		2020	2019
Weighted-average number of outstanding ordinary
shares (basic)	$	204,955	191,708
Effect of employee bonuses		3,327		1,914
Effect of employee restricted shares unvested		2,626		2,817
Convertible bonds payable		11,403		6,144
Weighted-average number of ordinary shares
(diluted)		222,311	202,583
Diluted earnings per share (dollars)	$	7.77		6.51

2) Weighted-average number of ordinary shares (diluted) (thousand shares)

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(t) Revenue from contracts with customers

(i) Details of revenue

Primary geographical markets Europe America Asia and others Major products: Networking products Digital Set-top-box products Materials and others	2020 Networking Product Segment $ 15,381,376 8,121,842 7,200,062 $ 30,703,280 $ 26,531,230 3,715,746 456,304 $ 30,703,280	2019
		Networking Product Segmen
		13,587,316 6,508,688 7,285,213
		27,381,217
		23,429,210 3,593,446 358,561
		27,381,217

(ii) Contract balances

Accounts receivable Less: allowance for impairment Total	December 31, 2020 $ 6,311,638 (24,833) $ 6,286,805	December 31, 2019 7,143,796 (22,596) 7,121,200	January 1, 2019 5,832,362 (26,750) 5,805,612

For details on accounts receivable and allowance for impairment, please refer to note (6)(e).

(u) Remuneration to employees and directors

Based on the Company’s articles of incorporation, if there is any profit without the remuneration of employees and directors in a fiscal year, it shall be distributed to employees as remuneration in an amount of not less than five percent (5%) and to directors as remuneration in an amount of not more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset its accumulated losses. Employees who are entitled to receive the above mentioned employee remuneration, in share or cash, include the employees of the subsidiaries of the Company who meet certain specific requirement.

For the years ended December 31, 2020 and 2019, the Company accrued employee remuneration of $262,880 and $156,863, and directors’ remuneration of $16,876 and $11,812, respectively. The estimated amounts mentioned above are based on the net profit before tax without the remuneration to employees and directors of each respective ending period, multiplied by the percentage of remuneration to employees and directors as specified under the Company’s articles. The estimations were recorded under operating expenses during 2020 and 2019.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

There is no differences between the amounts approved in the Board of Directors’ meeting and those recognized in the financial statement for the year ended December 31, 2019, the related information can be accessed through the Market Observation Post System website.

(v) Financial instruments

(i) Credit risk
1) Exposure to credit risk

The carrying amount of financial assets represents the maximum amount exposed to credit risk.

2) Concentration of credit risk

The Company’ s customers are mainly from the high-tech industry; therefore, the Company does not concentrate on a specific customer and the sales regions are widely spread, thus, there should be no concern on the significant concentrations of accounts receivable credit risk. In addition, in order to mitigate accounts receivable credit risk, the Company constantly assesses the financial status of its customers, wherein it does not require its customers to provide any collateral.

3) Receivables and debt securities

For credit risk exposure of note and trade receivables, please refer to note (6)(e).

Other financial assets at amortized cost includes other receivables and time deposits. All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. Regarding how the financial instruments are considered to have low credit risk, please refer to note (4)(f). In addition, the counterparties of the time deposits held by the Company are the financial institutions with investment grade credit ratings. Therefore, the credit risk is considered to be low.

The loss allowance provision as of December 31, 2020 and 2019 was determined as follows:

Balance at January 1, 2020 Impairment loss reversed Balance at December 31, 2020 Balance at January 1, 2019 Impairment loss reversed Balance at December 31, 2019	Other receivables $ 105 (60) $ 45 $ 122 (17) $ 105

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payments.

Carrying Amount December 31, 2020 Non-derivative financial liabilities Unsecured bank loans $ 341,760 Accounts payable (including related parties) 8,576,541 Other payables 2,099,040 Bonds Payable 980,219 Lease liability－current and non-current 3,820 Derivative financial liabilities Other foreign exchange forward contracts: 43,896 Outflow Inflow Foreign exchange swaps contracts: 2,283 Outflow Inflow Foreign exchange forward contracts used for hedging: 2,192 Outflow Inflow $ 12,049,751 December 31, 2019 Non-derivative financial liabilities Unsecured bank loans $ 270,180 Accounts payable (including related parties) 7,085,381 Other payables 1,087,821 Bonds Payable 966,492 Lease liability－current and non-current 88,695	Contractual cash flows (341,760) (8,576,541) (2,099,040) (1,000,000) (3,856) (1,317,070) 1,276,738 (854,400) 847,900 (209,640) 208,331 (12,069,338) (270,180) (7,085,381) (1,087,821) (1,000,000) (88,760)	Within a year (341,760) (8,576,541) (2,099,040) - (2,699) (1,317,070) 1,276,738 (854,400) 847,900 (209,640) 208,331 (11,068,181) (270,180) (7,085,381) (1,087,821) - (86,933)	1~ 2 years - - - (1,000,000) (1,099) - - - - - - (1,001,099) - - - - (1,827)	Over 2 years - - - - (58) - - - - - - (58) - - - (1,000,000) -

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Carrying Amount Derivative financial liabilities Other foreign exchange forward contracts: 5,414 Outflow Inflow Foreign exchange forward contracts used for hedging 4,932 Outflow Inflow $ 9,508,915	Contractual cash flows (602,004) 598,158 (1,423,089) 1,433,921 (9,525,156)	Within a year (602,004) 598,158 (1,423,089) 1,433,921 (8,523,329)	1~ 2 years - - - - (1,827)	Over 2 years - - - - (1,000,000)

The Company is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

(iii) Currency risk
1) Exposure to foreign currency risk

The Company’s significant exposure to foreign currency risk was as follows:

Unit: thousands of foreign currency

Financial assets Monetary items USD EUR Financial liabilities USD	December 31, 2020 Foreign currency Exchange rate TWD $ 333,601 USD/TWD =28.48 9,500,956 49,659 EUR/TWD =34.94 1,735,085 431,168 USD/TWD =28.48 12,279,665	December 31, 2019
	Foreign currency Exchange rate $ 333,601 USD/TWD =28.48 49,659 EUR/TWD =34.94 431,168 USD/TWD =28.48	Foreign currency Exchange rate TWD 325,422 USD/TWD =30.02 9,769,168 24,178 EUR/TWD =33.62 812,864 327,781 USD/TWD =30.02 9,839,986

2) Sensitivity analysis

The Company’ s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade and other receivables (including related parties), loans and borrowings, accounts payable (including related parties) and other payables (including related parties) that are denominated in foreign currency. The analysis assumes that all other variables remain constant. A strengthening (weakening) 5% of each foreign currency against the functional currency on December 31, 2020 and 2019 would have affected the net profit before tax as follows. The analysis is performed on the same basis for both periods:

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

USD (against the TWD) Strengthening 5% Weakening 5% EUR (against the TWD) Strengthening 5% Weakening 5%	December 31, 2020 December 31, 2019 $ (138,935) (3,541) 138,935 3,541 $ 86,754 40,643 (86,754) (40,643)

3) Exchange gains and losses of monetary items

As the Company deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. In 2020 and 2019, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $3,558 and $(126,589), respectively.

(iv) Interest rate analysis

The Company’s risk exposure to interest rate on financial assets and liabilities was as follows:

The Company’s risk exposure to interest rate on financial a	ssets and liabilities was as follows:
Fixed rate financial instrument: Financial assets Financial liabilities Variable rate financial instrument: Financial assets	Book value December 31, 2020 December 31, 2019 $ 5,000,000 3,000,000 (1,321,979) (1,236,672) $ 3,678,021 1,763,328 $ 2,706,460 1,459,194
	December 31, 2020 $ 5,000,000 (1,321,979) $ 3,678,021 $ 2,706,460

The following sensitivity analysis is based on the risk exposure to interest rate on the nonderivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25% when reporting to management internally, which also represents management of the Company’s assessment on the reasonably possible interval of interest rate change.

If the interest rate had increased or decreased by 0.25%, the net profit before tax would have increased or decreased by $6,766 and $3,648 for the years ended December 31, 2020 and 2019, respectively, which would be mainly resulted from the bank savings and borrowings with variable interest rates.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(v) Fair value information

1) The kinds of financial instruments and fair value

The fair value of financial assets and liabilities at fair value through profit or loss, financial instruments used for hedging is measured on a recurring basis. The carrying amount and fair value of the Company’ s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required :

	December 31, 2020	December 31, 2020	December 31, 2020
Book value		Fair Value
	Level 1 - - - - - - - - - - - - - - -	Level 2 6,034 - - - - - - 46,179 2,192 - - - - - -	Level 3 Total - 6,034 42,840 42,840 31,135 31,135 - - - - - - - - - 46,179 - 2,192 - - - - - - - - - - - -
$ 6,034 42,840 48,874 31,135 7,707,957 6,286,805 538,296 66,743 14,599,801 $ 14,679,810 $ 46,179 2,192 341,760 8,576,541 2,099,040 980,219 3,820 381 12,001,761 $ 12,050,132

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

	December 31, 2019	December 31, 2019	December 31, 2019
Book value		Fair Value
	Level 1 - - - - - - - - - - - - - - -	Level 2 12,400 - 61 - - - - - 5,414 4,932 - - - - -	Level 3 Total - 12,400 44,262 44,262 - 61 49,500 49,500 - - - - - - - - - 5,414 - 4,932 - - - - - - - - - -
$ 12,400 44,262 56,662 61 49,500 4,460,976 7,121,200 604,332 60,956 12,247,464 $ 12,353,687 $ 5,414 4,932 270,180 7,085,381 1,087,821 966,492 88,695 9,498,569 $ 9,508,915

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

2) Valuation techniques for financial instruments not measured at fair value

The Company’s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

a) Financial assets and financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

3) Valuation technique for financial instruments measured at fair value
a) Non-derivative financial instruments

Financial instruments trade in active markets are based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and onthe-run bonds from Taipei Exchange can be used as a basis to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market.

Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

The Company holds the unquoted equity investments of financial instruments without an active market. The measurement of fair value of the equity instruments is based on the Guideline Public Company method, which mainly assumes the evaluation by the price to book value ratio of similar public company and by the discount for lack of marketability. The estimation has been adjusted by the effect resulting from the discount for lack of marketability of the securities.

b) Derivative financial instruments

Measurement of fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate.

There were no transfers from level 2 to level 1 in 2020 and 2019.

4) Transfers between Level 1 and Level 2

There were no transfers from level 2 to level 1 in 2020 and 2019.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

5) Reconciliation of Level 3 fair values

Balance at January 1, 2020 Total gains and losses recognized In profit or loss In other comprehensive income (loss) Balance at December 31, 2020 Balance at January 1, 2019 Total gains and losses recognized In profit or loss Purchased Balance at December 31, 2019	Fair value through profit of loss Fair value through other comprehensive income Non derivation mandatorily measured at fair value through profit or loss Unquoted equity instruments $ 44,262 49,500 (1,422) - - (18,365) $ 42,840 31,135 $ 45,645 - (1,383) - - 49,500 $ 44,262 49,500

For the years ended December 31, 2020 and 2019, total gains and (losses) that were included in “gains and losses from financial assets (liabilities) at fair value through profit or loss” and “unrealized gains and losses from equity investment at fair value through other comprehensive income” were as follows:

Total gains and losses recognized: In profit or loss, and presentd in “gains and (losses) from financial assets(liabilities) at fair value through profit or loss” In other comprehensive income, and presented in “unrealized gains and losses from equity investment at fair value through other comprehensive income”	2020 $ (1,422) $ (18,365)	2019 (1,383) -

6) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company’ s financial instruments that use Level 3 inputs to measure fair value include “financial assets measured at fair value through profit or loss – investments in private equity fund” and “ fair value through other comprehensive income -equity investment”.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Most of fair value measurements categorized within Level 3 use the single and significant unobservable inputs. Equity investments without an active market contains multiple significant unobservable inputs. The significant unobservable inputs of the equity instruments are independent from each other, as a result, there is no relevance between them.

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through other comprehensive income- equity investment without an active market Financial assets at fair value through profit or loss-investment in private equity fund	Valuation technique Comparable market approach Net asset value method	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement ‧Price-Book ratio multiples (1.45~5.33 and 4.38 on December 31, 2020 and 2019, respectively) ‧Lack-of-Marketability discount rate (30% on December 31, 2020 and 2019) ‧The higher the multiple is , the higher the fair value will be. ‧The higher the Lack- of-Marketability discount rate is, the lower the fair value will be. ‧ Net asset value Inapplicable

7) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

For fair value measurements in Level 3, changing one or more of the assumptions to reflect reasonably possible alternative assumptions would have the following effects:

December 31, 2020 Financial assets at fair value through other comprehensive income December 31, 2019 Financial assets at fair value through other comprehensive income	Input Price-Book ratio multiples Lack-of- Marketability discount rae Price-Book ratio multiples Lack-of- Marketability discount rae	Move up or Other comprehensive income down Favorable Unfavorable 5% $ 1,572 1,599 5% $ 660 689 5% $ 1,912 1,911 5% $ 809 825	Other comprehensive income	Other comprehensive income
				Unfavorable
				1,599
				689
				1,911
				825

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(w) Financial risk management
(i) Briefings

The Company is exposed to the following risks arising from financial instruments:

1) Credit risk
2) Liquidity risk
3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management. For detailed information, please refer to the related notes of each risk.

(ii) Structure of risk management

The Company’s risk management policies are set for identifying and analyzing the risk that the Company confronts for setting the appropriate amount of the risk and complying with the policies. The Company continually reviews the risk management policies to reflect the market condition and the changes of the Company’s operation. The Company develops a disciplined and constructive environment and makes employees understand their rules and obligations through training, management guidelines, and operating procedures.

Audit Committee ensures that the monitoring of the management is in compliance with the Company’s risk management policies and procedures, and reviews the appropriateness of the related risk management framework. The Company’ s internal auditors assist the Audit Committee to supervise and review the control and procedures of the risk management periodically and aperiodically, and report the findings to the Audit Committee and the Board of Directors.

(iii) Credit risk

Credit risk is the risk on the financial loss to the Company if a customer or a counterparty fails to meet its contractual obligations. It rises principally from the Company’s receivables from customers and investment in debt securities.

1) Accounts receivable and other receivables

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company’s customers are mainly from the communications industry. And in order to monitor the credit risk of accounts receivable, the Company constantly assesses the financial status of the customers, and requests the customers to provide guarantee or security if necessary. The Company regularly accesses the collectability of accounts receivable and recognizes the allowance for accounts receivable. The impairment losses are always within management’s expectation.

The Company set the allowance for bad debt account to reflect the estimated losses for trade and other receivables. The allowance for bad debt account is based on extensive analysis for customers’ creditworthiness and historical collection record.

2) Investments

The credit risks exposure in the bank deposits and other financial instruments are measured and monitored by the Company’s finance department. Since the Company’s transaction counterparties and the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises the banking facilities and ensures in compliance with the terms of the loan agreements. The loans and borrowings from the bank form an important source of liquidity for the Company. As of December 31, 2020 and 2019, for the information of the unused credit lines of shortterm, please see note (6)(k).

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’ s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

In order to manage market risk, there are some financial liabilities incurred by the Company from its buying and selling of derivatives. Generally, the Company seeks to apply hedge accounting in order to manage volatility in profit or loss.

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currencies of the Company, primarily USD and EUR.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company designates the spot element of forward foreign exchange contracts to hedge its currency risk. Most of these contracts have a maturity of less than one year from the reporting date. The forward elements of forward exchange contracts are excluded from designation as the hedging instrument and are separately accounted for as a cost of hedging, which is recognized in equity in a cost of hedging reserve. The Company’s policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships, the main sources of ineffectiveness are:

the effect of the counterparty and the Company’s own credit risk on the fair value of the forward foreign exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and
changes in the timing of the hedged transactions.
2) Interest rate risk

The Company borrows funds with a stable combination of fix and variable interest rates to maintain its interest rate risk. The Company periodically assess these hedge activities to provide the best cost effect and risk assessment.

(x) Capital management

The Company maintains the capital based on the current operating characteristics of the industry, future development and changes in external environment to assure there is financial resource and operating plan to support working capital, capital expenditures, research & development expense, debt redemption and dividend payment and so on. The management decides the optimized capital structure by using the appropriate debt-to-equity ratio. To maintain a strong capital base, the Company enhances the return on equity by optimizing debt-to-equity ratio. The Company’s debt-toequity ratio at the end of the reporting date is as follows:

Total liabilities Total equity Debt-to-equity ratio	December 31, 2020 December 31, 2019 $ 13,324,237 10,650,666 11,609,361 10,904,726 % 115 % 98

As of December 31, 2020, there were no changes in the Company’s approach to capital management.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(y) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2020 and 2019 were as follow:

(i) The acquisition of right-of-use assets by lease, please see notes (6)(i).
(ii) Issuance of convertible bonds, please see notes (6)(l).

Reconciliation of liabilities arising from financing activities were as follows:

Short-term borrowings Lease liabilities Bonds payable Refundable deposits Total liabilities from financing activities Short-term borrowings Lease liabilities Bonds payable Total liabilities from financing activities	January 1, 2020 $ 270,180 88,695 966,492 - $ 1,325,367 January 1, 2019 $ 430,010 6,896 - $ 436,906	Cash flows 71,580 (87,872) - 381 (15,911) Cash flows (159,830) (6,933) 1,007,240 840,477	Non-cash changes Other December 31, 2020 - 341,760 2,997 3,820 13,727 980,219 - 381 16,724 1,326,180 Non-cash changes Other December 31, 2019 - 270,180 88,732 88,695 (40,748) 966,492 47,984 1,325,367	Non-cash changes Other December 31, 2020 - 341,760 2,997 3,820 13,727 980,219 - 381 16,724 1,326,180 Non-cash changes Other December 31, 2019 - 270,180 88,732 88,695 (40,748) 966,492 47,984 1,325,367
				270,180 88,695 966,492
				1,325,367

(7) Related-party transactions:

(a) Parent company and ultimate controlling party

Compal Electronics Inc. is both the parent company of the consolidated entity and the ultimate controlling party of the Company. It owns 35 percent of all shares outstanding of the Company, and it has issued the Consolidated Financial Statements available for public use.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(b) Name and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party	Relationship with the Company
Compal Electronics, Inc.	Parent company
Arcadyan Technology N.A. Corp. (Arcadyan	Subsidiaries
USA)
Arcadyan Germany Technology GmbH	〃
(Arcadyan Germany)
Arcadyan Holding (BVI) Corp. (Arcadyan	〃
Holding)
ZHI-BAO Technology Inc. (ZHI-BAO)	〃
Tatung Technology Inc. (TTI)	〃
AcBel Telecom Inc. (AcBel Telecom)	〃
Arcadyan Technology Corporation Korea	〃
(Arcadyan Korea)
Arcadyan do Brasil Ltda (Arcadyan Brasil)	〃
Arcadyan Technology Limited (Arcadyan UK)	〃
Arcadyan Technology Australia Pty Ltd	〃
(Arcadyan AU)
Arcadyan Technology Corporation (Russia),	〃
LLC. (Arcadyan RU)
Sinoprime Global Inc. (Sinoprime)	〃
Arcadyan Technology (Shanghai) Corp. (SVA)	〃
Arch Holding (BVI) Corp. (Arch Holding)	〃
Compal Networking (Kunshan) Co., Ltd.	〃
(CNC)
Arcadyan Technology (Vietnam) Co. Ltd	〃
(Arcadyan Vietnam)
Tatung Technology of Japan Co., Ltd. (TTJC)	〃
Quest International Group Co., Ltd. (Quest)	〃
Exquisite Electronic Co., Ltd. (Exquisite)	〃
Tatung Home Appliance (Wujiang) Co., Ltd.	〃
(TCH)
Leading Images Ltd. (Leading Images) (Note 1)	〃
Astoria Networks GmbH (Astoria GmbH)	〃
(Note 2)

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Name of related party	Relationship with the Company
Kinpo Group Management Service Company	The chairman of the entity’s ultimate parent
(Kinpo Group Management)	company is the same as that of the Company.
AcBel Polytech Inc. (AcBel)	〃
Compal Display Electronics (Kunshan) Co.,	The entity's ultimate parent company is the same.
Ltd.
Compal Electronics (Vietnam) Co., Ltd.	〃
(CVC)
LTZ Electronics (Nantong) Co., Ltd.	An associate of parent company

Note 1: The liquidation procedure has been completed in December 2020. Note 2: The liquidation procedure has been completed in October 2020.

(i) Sales

The amounts of significant sales by the Company to related parties were as follows:

Subsidiaries: Arcadyan USA Other subsidiaries Other related parties	2020 $ 5,413,289 2,272,824 - $ 7,686,113	2019
		2,992,401 3,922,186 2,490
		6,917,077

Sales prices for subsidiaries and other related parties were similar to those of the third-party customers. The collection period was 45-120 days for the aforementioned related parties.

(ii) Purchases

The amounts of significant purchases by the Company to related parties were as follows:

The amounts of significant purchases by the Company to relat	ed parties were as	follows:
Parent company Other related parties	2020 $ 3,526 16,938 $ 20,464	2019
		1,052 1,910
		2,962

The terms and pricing of purchase transactions with related parties were not significantly different from those offered by other vendors. The payment terms ranged from 60 to 120 days, which were no different from the payment terms given by other vendors.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(iii) Processing cost

Subsidiaries: CNC Arcadyan Vietnam	2020 $ 11,026,936 1,065,328 $ 12,092,264	2019
		11,451,395 1,026,793
		12,478,188

The Company sold raw materials to related parties due to the demand of processing raw materials. The related revenue and cost had been eliminated in the financial statements, had not been considered as selling raw materials and purchasing finished goods. Any revenue from selling materials is recognized in other receivables.

(iv) Other expenditures

Parent company, subsidiaries and other related parties provided technical support, professional services and other services for the Company, and the related expenses for the years ended December 31, 2020 and 2019 were as follows:

Subsidiaries Other related parties	2020 $ 118,629 999 $ 119,628	2019
		89,422 988
		90,410

(v) Lease

The Company lease machinery from other related parties-CVC with a contract term of 5 years in June 2019. The lease payment will be collected by the parent company; and the amount of $71,622 and $81,081 had each been recorded respectively as right-of-use assets and lease liabilities on December 31, 2019. The lease payment had been paid in 2020, and the balance of right-of-use assets amounted to $55,406 on December 31, 2020.

(vi) Loans to related parties

Subsidiaries: Arcadyan Brazil Arcadyan RU Less: Credit balance of investments accounted for using equity method transferred to dectuction of other receivable from related parties	December 31, 2020 $ 37,128 6,934 (16,192) $ 27,870	December 31, 2019 39,085 - (8,095) 30,990

The Company has granted loans to related parties and the interest rates were set based on the average interest rates of the unsecured short-term loans that the Company borrowed from financial institutions in the current year. All the loans are not guaranteed loans. There is $113 interest receivable for the year ended December 31, 2020, which is recognized in other receivables and no need to record a bad debt expense after assessment.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(vii) Receivable from related parties

The receivables arising from the transactions mentioned above, and others on behalf of the related parties were as follows:

Account	Related party categories	December 31, 2020 $ 1,039,758 242,935 22,357 92,831 $ 1,397,881 $ 303,959 129,953 - 5,359 439,271 - $ 439,271	December 31, 2019
Accounts receivable Subsidiaries: Arcadyan USA Arcadyan Germany Arcadyan Australia Other subsidiaries Other receivables Subsidiaries: Arcadyan Vietnam Arcadyan USA CVC Other subsidiaries Less: Credit balance of investments accounted for using equity method transferred to dectuction of other receivable from related parties			2,683,393 392,466 634,154 55,769
			3,765,782
			362,695 683 80,936 48,892
			493,206 (683)
			492,523

(viii) Payable to related parties

The payables arising from the transactions mentioned above, and others on behalf of the related parties were as follows:

Account Accounts payable Accounts payable Other payable	Related party categories	December 31, 2020 $ 1,823 3,407,485 - 5,298 $ 3,414,606 $ 19,862 - $ 19,862	December 31, 2019
	Parent company Subsidiaries: CNC Sinoprime Other related parties Subsidiaries Other related parties		519 3,117,484 54,720 914
			3,173,637
			18,287 -
			18,287

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(d) Key management personnel compensation

Key management personnel compensation comprised:

2020 Short-term employee benefits $ 107,231 Post-employment benefits 1,062 Share-based payments 19,034 $ 127,327	2019
	84,237 1,047 30,278
	115,562

Please refer to note (6)(r) for further explanations related to share-based payment transactions.

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets Other current assets	Subject Bail for court mandatory excution	December 31, 2020 $ 41,090	December 31, 2019
			41,090

(9) Commitments and contingencies: None

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(12) Other:

(a) The followings are the summary statement of current period employee benefits, depreciation and amortization expenses by function:

By function By item	2020	2020	2020	2019	2019	2019
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	49,417 2,417 1,533 - 1,178 22,518 2,239	1,331,903 78,408 39,343 16,874 37,641 81,833 27,022	1,381,320 80,825 40,876 16,874 38,819 104,351 29,261	44,260 2,514 1,566 - 1,197 18,912 3,601	1,163,387 71,329 35,972 11,812 33,818 76,676 27,585	1,207,647 73,843 37,538 11,812 35,015 95,588 31,186

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

The following are the additional information on the numbers of the Company's employees and their benefits:

Number of employees Number of directors who were not employees The average employee benefit The average salaries and wages Average salary expense adjustment Remuneration of supervisors

The Company's salary and remuneration policy (including directors, managers and employees) is as follows:

The remuneration distribution for each director depends on degree of participation and contribution to the Company, which is reviewed by the Salary and Remuneration Committee and is approved by the Board of Directors.

The remuneration of managers is according to the position held, contribution to the Company, performance indicators achieved and reference to competitors, the payment shall be reviewed by the Salary and Remuneration Committee and be approved by the Board of Directors.

The salary of employees not only refers to holiday bonus, but also refer to year end bonus and employee remuneration. Annual salary adjustment based on performance and reference to industry standards. The salary adjustment refers to competitors, employee’s education, professional technical ability and work experience.

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group for 2020:

(i) Loans to other parties:

															Unit: thou	sand dollars	sand dollars
Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower (note 1)	Transaction amount for business between two parties	Reasons for short- term financing	Allowance for bad debt	Collateral		Individual funding loan limits (note 2)	Maximum limit of fund financing (notes 2, 3, 4 and 5	Note
													Item	Value
0 0 0	The Company 〃	Arcadyan do Brasil Ltda Arcadyan do Brasil Ltda Arcadyan Technology Limited	Other receivables 〃〃	Yes Yes Yes	56,960 (USD2,000) 56,960 (USD2,000) 199,360 (USD7,000)	- 56,960 (USD2,000) -	- 37,024 (USD1,300) -	1% 1% 1%	2 2 1	- - 4,272,000 (USD150,000)	Operating demand Operating demand -	- - -	- - -	- - -	2,321,872 2,321,872 2,321,872	4,643,744 4,643,744 4,643,744

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower (note 1)	Transaction amount for business between two parties	Reasons for short- term financing	Allowance for bad debt	Collateral	Collateral	Individual funding loan limits (note 2)	Maximum limit of fund financing (notes 2, 3, 4 and 5	Note
													Item	Value
0 0 0 0 1 2 2 3	The Company 〃〃〃 ZHI-BAO Arcadyan Holding Arcadyan Holding SVA	Arcadyan Technology Limited Arcadyan Technology (Vietnam) Co. Ltd. Arcadyan Technology (Vietnam) Co. Ltd. Arcadyan Technology Corporation (Russia), LL C Arcadyan do Brasil Ltda CNC CNC CNC	〃〃〃〃〃〃〃〃	Yes Yes Yes Yes Yes Yes Yes Yes	284,800 (USD10,000) 256,320 (USD9,000) 256,320 (USD9,000) 56,960 (USD2,000) 31,328 (USD1,100) 484,160 (USD17,000) 484,160 (USD17,000) 153,020 (CNY35,000)	284,800 (USD10,000) - 256,320 (USD9,000) 56,960 (USD2,000) - - (USD17,000) 484,160 (USD17,000) 153,020 (CNY35,000)	- - - 6,925 (RUB18,000) - - (USD17,000) 484,160 (USD17,000) 139,904 (CNY32,000)	1% 1% 1% 1% 1% 1% 1% 3.85%	1 1 1 1 2 2 2 2	4,475,717 (USD157,153) 569,600 (USD20,000) 5,530,446 (USD194,187) 170,787 (USD5,997) - - - -	- - - - Operating demand Operating demand Operating demand Operating demand	- - - - - - - -	- - - - - - - -	- - - - - - - -	2,321,872 455,680 (USD16,000) 2,321,872 136,629 (USD4,797) 42,399 2,287,344 2,287,344 164,728	4,643,744 4,643,744 4,643,744 4,643,744 169,598 2,287,344 2,287,344 164,728

Note 1: Number 1 represents the business relationship with the Company; number 2 represents the short-term financing facility, if necessary.

Note 2: According to the policy of the Company on Lending Funds to Other Parties, the amount of loans to others shall not exceed 40% of the net worth of the Company. To borrowers having business relationship with the Company, the total amount of loans to the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expected amount for the current year, which shall not exceed 20% of the net worth of the Company. Also, the amount shall be combined with the Company’ s endorsements/guarantees for the borrower upon calculation. When a short-term financing facility is deemed necessary, only the investees of the Company are allowed to borrow. The total amount of loans to the borrower shall not exceed 80% of the its net worth, nor shall it exceed 20% of the net worth of the Company, and it shall be combined with the the Company’s endorsements/guarantees for the borrower upon calculation.

Note 3: According to the policy of Arcadyan Holding on Lending Funds to Others, the amount of loans to others shall not exceed the net worth of Arcadyan Holding. When a short-term financing facility with Arcadyan Holding is deemed necessary, only the investees of Arcadyan Holding are allowed to borrow. The total amount for lending the borrower shall not exceed its net worth , and it shall be combined with the Company’s endorsements/guarantees for the borrower upon calculation.
Note 4: According to ZHI-BAO’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of ZHI-BAO. To borrowers having business relationship with ZHI-BAO, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of ZHI-BAO. When a short-term financing facility is necessary, the borrower should be ZHI-BAO’s investee. The total amount for lending the borrower shall not exceed 10% of the net worth of the borrower.
Note 5: According to the policy of SVA on Lending Funds to Others, the amount of loans to others shall not exceed 40% of the net worth of SVA. To borrowers having business relationship with SVA, the total amount of loans to the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expected amount for the current year, which shall not exceed 20% of the net worth of SVA. Also, the amount shall be combined with SVA's endorsements/ guarantees for the borrower upon calculation. When a short-term financial facility is deemed necessary, only the investees of SVA are allowed to borrow. The total amount of loans to the borrower shall not exceed 80% of its net worth , nor shall it exceed 20% of the net worth of SVA, and it shall be combined with the SVA's endorsements/ guarantees for the borrower upon calculation.

Note 6: The amounts in New Taiwan Dollars were translated at the exchange rate of $28.48 (USD), $4,372(CNY) and $0.3847 (RUB) based on the year-end date.

(ii) Guarantees and endorsements for other parties:None

(Continued)

ARCADYAN TECHNOLOGY CORPORATION

Notes to the Financial Statements

(iii) Securities held as of (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand dollars/thousand shares

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares	Carrying value	Percentage of ownership	Fair value
The Company 〃〃〃〃〃〃 CNC 〃	Geo Things Inc. AirHop Communication, Inc. Adant Technologies Inc. IOT Eye, Inc. TIEF Fund, L.P. Chimei Motor Electronic Co Ltd. Golden Smart home Technology Corp. Structured deposits-SPD Bank Yield Plus Structured Deposit Sturctured deposits- Agricultural Bank of China "HuiLi Feng" customization RMB structured deposit	- - - - - - - - -	Financial assets at fair value through profit or loss-non-current 〃〃〃〃 Financial assets at fair value through other comprehensive income-non- current 〃 Financial assets at fair value through profit or loss-current 〃	200 1,152 349 60 - 1,650 1,229 - -	- - - - 42,840 31,135 - 130,875 130,799	% 7.14 % 4.60 % 12.23 % 13.75 % 7.49 % 7.17 % 8.35 % - % -	- - - - 42,840 31,135 - 130,875 130,799

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:None
(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock:

20% of the capital stock:	20% of the capital stock:	20% of the capital stock:	20% of the capital stock:	20% of the capital stock:	20% of the capital stock:	20% of the capital stock:
							(In Thousands of New Taiwan Dollars)
Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter-party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information				References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
Arcadyan Vietnam	Plant and mechanical and electrical equipment	July 28, 2020 (Note 1)	Estimated 794,885 (Note 2)	Depending on the progress of the project	Giza E&C etc.	Non-related party	Not applicable	Not applicable	Not applicable	Not applicable	Price comparison and price negotiation	Manufacturing purpose	None

Note 1: On July 28, 2020, the Board of Directors of Arcadyan Vietnam made a resolution to build on a leased land. The total contract amount is estimated to be $794,885 thousand (VND 691,204,153 thousand).

Note 2: As of December 31, 2020, the contracts for fire equipment, mechanical and electrical equipment and the renovation project have not been signed and completed.

(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Unit: In thousand dollars of TWD

Name of company	Related party	Nature of relationship		Transaction details	Transaction details	Transaction details	Transacti terms diffe othe	ons with rent from rs	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/ Sale	Amount	Percentage of total purchases/ sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company 〃〃〃〃 CNC Arcadyan Vietnam Arcadyan Germany Arcadyan USA Arcadyan AU	Arcadyan Germany Arcadyan USA Arcadyan AU CNC Arcadyan Vietnam The Company The Company The Company 〃〃	Subsidiary 〃〃〃〃 Parent company Parent company Parent company 〃〃	(Sales) (Sales) (Sales) Purchases Purchases (Sales) (Sales) Purchases Purchases Purchases	(867,017) (5,413,289) (1,394,596) 11,026,936 1,065,328 (11,026,936) (1,065,328) 867,017 5,413,289 1,394,596	(3)% (18)% (5)% 27 % 3 % (100)% (100)% 100 % 100 % 100 %	Net 150 days from delivery Net 120 days from delivery Net 60 days from the end of the month of delivery Net 120 days from delivery Net 180 days from the end of the month of delivery Net 120 days from delivery Net 180 days from the end of the months of delivery Net 150 days from delivery Net 120 days from delivery Net 60 days from the end of the month of delivery	- - - According to cost plus pricing 〃〃 - - - -	- - - - - - - - - -	242,935 1,039,758 22,357 (3,407,485) Note 2 3,407,485 Note 2 (242,935) (1,039,758) (22,357)	4 % 17 % - % (40)% - % 94 % - % (100)% (100)% (100)%	Note 1 Note 1 Note 1 Note 1

Note 1: The ending balance derived from the transactions on processing and sales of raw material. Note 2: As of December 31, 2020 the other receivables (payables) of amounted to $303,959.

(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Unit: In Thousands of TWD and USD

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequent period (note 3)	Allowance for bad debts
					Amount	Action taken
The Company 〃〃 CNC	Arcadyan Germamy Arcadyan USA Arcadyan Vietnam The Company	Subsidiary 〃〃 Parent Company	242,935 1,039,758 303,959 (note 2) 3,407,485 (note 1)	2.73 2.91 note 2 3.38	- - - -		216,165 1,019,515 7,278 3,223,397	- - - -

Note 1: The ending balance was accounts receivable derived from processing raw material.

Note 2: The ending balance was other receivable derived from purchasing on behalf of related parties.

Note 3: Balance as of February 26, 2021.

(ix) Trading in derivative instruments :Please refer to notes (6)(b) and (6)(d)

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(b) Information on investees:

The following is the information on investees for the year 2020 (excluding information on investees in Mainland China):

Unit: thousand dollars

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2020	Balance as of December 31, 2020	Balance as of December 31, 2020	Net Income (Losses) of the Investee	Investment Income (losses)	Note
				December 31, 2020	December 31, 2019	Shares (thousands)	Percentage of ownership	Carrying value
The Company The Company The Company The Company The Company and ZHI-BAO The Company The Company The Company The Company The Company The Company The Company Arcadyan Holding 〃 Sinoprime TTI TTI Quest AcBel Telecom Leading Images	Arcadyan Holding Arcadyan USA Arcadyan Germany Arcadyan Korea Arcadyan Brasil ZHI-BAO TTI AcBel Telecom Arcadyan UK Arcadyan AU Arcadyan RU CBN Sinoprime Arch Holding Arcadyan Vietnam Quest TTJC Exquisite Leading Images Astoria GmbH	British Virgin Islands USA Germany Korea Brasil Taipei City Taipei City Taipei City England Austrilia Russia Hsinchu City British Virgin Islands British Virgin Islands Vietnam Samoa Japan Samoa British Virgin Islands Germany	Investment activities Selling of wireless networking products Selling and technical support of wireless networking products Selling of wireless networking products Selling of wireless networking products Investment activities Research and development, and selling digital home appliance Investment activities Technical support of wireless networking products Selling of wireless networking products Selling of wireless networking products Manufacturing and selling of broadband network products Investment activities Investment activities Manufacturing of wireless networking products Investment activities Selling digital home appliance Investment activities Investment activities Selling of wireless networking products	2,359,732 23,055 1,125 2,879 81,593 48,000 308,726 23,000 1,988 1,161 2,492 11,925 542,544 (USD19,050) 313,593 (USD11,011) 541,120 (USD19,000) 34,176 (USD1,200) 9,626 33,322 (USD1,170) - -	2,064,032 23,055 1,125 2,879 81,593 48,000 308,726 23,000 1,988 1,161 - 11,925 257,744 (USD9,050) 313,593 (USD11,011) 256,320 (USD9,000) 34,176 (USD1,200) 4,130 33,322 (USD1,170) 1,424 (USD50) 874 (EUR25)	69,780 1 0.5 20 968 34,980 25,028 4,494 50 50 - 533 19,050 35 - 1,200 0.7 1,170 - -	100% 100% 100% 100% 100% 100% 61% 51% 100% 100% 100% 1% 100% 100% 100% 100% 100% 100% -% -%	2,240,149 91,507 76,874 13,858 (16,192) 423,997 503,434 32,700 3,555 46,106 2,142 13,204 453,544 (USD15,925) 886,668 (USD31,133) 449,357 (USD15,778) 32,776 5,947 19,908 (USD699) - -	95,019 62,073 5,667 6,446 (10,717) 9,632 (193,291) (16,432) 446 9,619 (243) 46,723 (10,815) (USD(366)) 62,526 (USD2,116) (10,815) (USD(366)) (59,064) (1,588) (59,068) (USD(1,999)) (14,432) (768) (USD(26))	95,019 62,073 5,667 6,446 (10,717) 9,632 (117,992) (8,393) 446 9,619 (243) 372 Investment gain(losses) recognized by Arcadyan Holding 〃 Investment gain(losses) recognized by Sinoprime Investment gain(losses) recognized by TTI 〃 Investment gain(losses) recognized by Quest Investment gain(losses) recognized by AcBel Telecom Investment gain(losses) recognized by Leading Images	Subsidiary 〃〃〃〃〃〃〃〃〃 Investments accounted for using equity method Sub- subsidiary 〃〃〃〃〃 note 2 note 3

(Continued)

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2020	Balance as of December 31, 2020	Balance as of December 31, 2020	Net Income (Losses) of the Investee	Investment Income (losses)	Note
				December 31, 2020	December 31, 2019	Shares (thousands)	Percentage of ownership	Carrying value
ZHI-BAO	CBN	Hsinchu City	Manufacturing and selling of broadband network products	36,272	36,272	13,140	19.63%	325,386	46,723	Investment gain (losses) recognized by ZHI-BAO	Investments accounted for using equity method by subsidiary

Note 1: The amounts in New Taiwan Dollars were translated at the exchange rate of $US29.549 / EUR$33.709 based on the yearly average exchange rate for net income(losses) of the investees, others were translated at the exchange rate of US$28.48/EUR$34.94 based on the year-end date.

Note 2: The liquidation procedures had been completed on December 7, 2020.

Note 3: The liquidation procedures had been completed on October 14, 2020.

(c) Information on investment in mainland China:

(i) The names of investees in Mainland China, the main businesses and products, and other information:

	information:	information:
										(In Thousands of New Taiwan Dollars US Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investm ent	Accumulated outflow of investment from Taiwan as of January 1, 2019	Investment flows		Accumulated outflow of investment from Taiwan as of December 31, 2020	Net income (losses) of the investee	Percentage of ownership ~~%~~	Investment income (losses)	Book value	Accumulated remittance of earnings in current period	Note
					Outflow	Inflow
SVA CNC TCH	Research and sale of wireless networking products Manufacturing of wireless networking products Manufacturing of household electronics products	373,088 (USD13,100) 354,576 (USD12,450) 95,408 (USD3,350)	note 1 〃 notes 1 and 7	(Note 4) 524,602 (USD18,420) (Note 5) 313,593 (USD11,011) 32,752 (USD1,150)	- - -	- - -	524,602 (USD18,420) 313,593 (USD11,011) 32,752 (USD1,150)	35,282 (USD1,194) 62,526 (USD2,116) (59,068) (US(1,999))	100% 100% 100%	35,282 (USD1,194) 62,526 (USD2,116) (59,068) (USD(1,999))	164,728 (USD5,784) 886,668 (USD31,133) 19,423 (USD682)	- - -	Note 3 〃〃

Note 1: Investment in Mainland China through companies registered in a third region.
Note 2: The amounts in New Taiwan Dollars were translated at the exchange rate of $US29.549 based on the yearly average exchange rate for net income(losses) of the investees, others were translated at the exchange rate of US$28.48 based on the year-end date.
Note 3: The amounts are according to the financial statements which have been audited and certified by parent company's independent external CPA.
Note 4: The Company paid US$18,420 thousands and acquired 100% shares of SVA from Accton Asia through Arcadyan Holding in 2010.
Note 5: The Company paid US$8,561 thousands and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007.
Note 6: SVA decreased its capital amounting to US$15,000 thousands to offset its accumulated losses in March 2009.

Note 7: The Company’s subsidiary, TTI, obtained control over TCH for US$1,150 thousands on February 28, 2013 (base date of stock transferring).

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2020	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
870,947 (USD30,581)	870,947 (USD30,581)	6,965,617

Note : The amounts in New Taiwan Dollars were translated at the exchange rate of $28.48 on December 31, 2020.

(iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China for the year ended December 31, 2020, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

(Continued)

ARCADYAN TECHNOLOGY CORPORATION

Notes to the Financial Statements

(d) Major shareholders:

Major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Compal Electronics Inc.	41,304,504	% 19.81

(14) Segment information:

Please refer to the consolidated financial statements for the year ended 2020.

ARCADYAN TECHNOLOGY CORPORATION

Statement of cash and cash equivalents

December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Item			Amount
Cash on hand		$	1,416
Checking accounts and demand	TWD		2,160,758
deposits
	Foreign currency (USD7,128 thousand, EUR8,306
	thousand and others)		545,783
Time deposits	TWD (Maturity date: January 14, 2021~April 14, 2021)		5,000,000
Total		$	7,707,957
Note：The exchange rate: USD1=TWD 28.48
EUR1=TWD 34.94

Statement of accounts receivable

Client Name		Amount
X Corporation	$	897,533
VI Corporation		894,609
IX Corporation		589,031
II Corporation		361,060
V Corporation		329,588
VIII Corporation		322,976
I Corporation		321,539
Other (note)		1,197,421
Total		4,913,757
Less: Impairment loss on allowance		(24,833)
Net amount	$	4,888,924
Note: The amount of each item in others does not exceed 5% of the account balance.

ARCADYAN TECHNOLOGY CORPORATION

Statement of inventories

December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Item Finished goods Raw material	Amount	Amount
	Cost (note) $ 3,277,017 1,669,801 $ 4,946,818	Net realizable value
		4,043,901 2,114,872
		6,158,773

Note: Book value is the amount that the cost less the allowance for loss on inventory valuation.

ARCADYAN TECHNOLOGY CORPORATION

Statement of changes in investment accounted for using equity method

For the year ended December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Beginning Balance Additions (Note2) Name of investee shares Amount shares Amount Arcadyan Holding 59,780 $ 1,956,802 10,000 295,700 Arcadyan USA 1 (250,530) - - Arcadyan Germany 0.5 68,318 - - Arcadyan Korea 20 7,047 - - Arcadyan Brazil 965 (8,095) - - Arcadyan UK 50 3,170 - - Arcadyan AU 50 27,970 - - ZHI-BAO 34,980 416,421 - - TTI 25,028 627,585 - - AcBel Telecom 4,494 36,163 - - CBN 533 13,581 - - Arcadyan RU - - - 2,492 Golden Smart home Technology 1,229 - - - Total $ 2,898,432 298,192 Add: Recorded as deduction of other receivable-Arcadyan Brazil	Decrease (Note3)	Decrease (Note3)	Profit or loss of investment	Profit or loss of investment		Other (Note1) (107,372) 279,964 2,889 365 2,620 (61) 8,517 (66) (1,153) 4,930 (3) (107) - 190,523	Ending Balance	Ending Balance
	shares - - - - - - - - - - - - (1,229)	Amount					shares 69,780 1 0.5 20 965 50 50 34,980 25,028 4,494 533 - -	Amount
		- - - - - - - (1,990) (5,006) - (746) - - (7,742)		95,019 62,073 5,667 6,446 (10,717) 446 9,619 9,632 (117,992) (8,393) 372 (243) - 51,929

Note1：Others are the adjustment of foreign currency exchange, the adjustment under equity method valuation and unrealized gross profit.

Note2：Capital increase by cash of subsidiaries.

Note3：Cash dividends received from subsidiaries or associates and reclassification to financial assets measured at fair value through other comprehensive income, resulting in $985 gain on disposal of investment.

ARCADYAN TECHNOLOGY CORPORATION

Statement of changes in property, plant and

equipment

For the year ended December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Please refer to note 6(h) for Property, plant and equipment.

Statement of accounts payable

December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Client Name Accounts payable Corporation A Corporation AC Corporation AB Others (Note)	Description Amount non-related parties/operating $ 1,469,776 〃 545,672 〃 249,664 2,896,823 $ 5,161,935

Note: The amount of each item in others does not exceed 5% of the account balance.

ARCADYAN TECHNOLOGY CORPORATION

Statement of other payable

December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Item Royalty payable Employees compensations payable Bonus payable Import and export fee payable Others (Note)	Description Amount $ 925,450 262,880 279,694 258,612 Employee benefits provisions, labor health insurance and others etc. 372,404 $ 2,099,040

Note: The amount of each item in others does not exceed 5% of the account balance.

Statement of operating revenue

For the year ended December 31, 2020

Item Operating revenue: Networking product Digital set-top-box product Materials and others Less: Sales returns and discounts Net operating revenue	Quantity (in thousands) Amount Note $ 26,738,141 3,721,505 456,305 (212,671) $ 30,703,280

Note: Due to multi-categories, it’s difficult to count.

ARCADYAN TECHNOLOGY CORPORATION

Statement of operating costs

For the year ended December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Item
Raw materials
Raw materials, beginning of year
Add: Purchases
Less: Raw materials, end of year
Operating expense and others
Raw material used
Processing cost, technical support fee and depreciation
Manufacturing Cost
Add: Work in progress, beginning of year
Less: Work in progress, end of year
Cost of finished goods
Add: Finished goods, beginning of year
Less: Finished goods, end of year
Operating expense and others
Cost of finished goods sold
Allowance for obsolescence loss and inventory valuation and others
Operating costs

Amount
$ 1,856,874
14,819,929
(2,147,095)
(768)
14,528,940
12,709,921
27,238,861
1,255
-
27,240,116
2,510,193
(3,437,660)
(82,229)
26,230,420
216,569
$
26,446,989

ARCADYAN TECHNOLOGY CORPORATION

Statement of selling, administrative, research and development expenses

For the year ended December 31, 2020

(Expressed in thousands of New Taiwan Dollars)

Item Salaries Service expense Warranty Depreciation Test expense Others (Note) Total	Selling expenses $ 148,698 82,525 92,031 2,495 2,539 58,956 $ 387,244	Administrative expenses 233,466 46,853 - 34,835 - 93,977 409,131	Research and development expenses
			966,613 112,034 - 44,503 84,558 243,501
			1,451,209

Note: The amount of each item in others does not exceed 5% of the account balance.

AI assistant

Arcadyan — Audit Report / Information 2020

52352_rns_2020-11-11_6d79aa27-6ef4-4545-9058-f8f6e286f378.pdf

ARCADYAN TECHNOLOGY CORPORATION

Table of contents

KPMG

Independent Auditors’ Report

Opinion

Basis for Opinion

Key Audit Matters

1. Inventory valuation

How the matter was addressed in our audit:

2. Provisions

Description of key audit matters:

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notes to Readers

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Balance Sheets

December 31, 2020 and 2019

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, except net income per share amounts)

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ARCADYAN TECHNOLOGY CORPORATION

Statements of Cash Flows

For the years ended December 31, 2020 and 2019

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2020 and 2019

(1) Company history

(2) Approval date and procedures of the financial statements:

(3) New standards, amendments and interpretations adopted:

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(4) Summary of significant accounting policies:

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(b) Basis of preparation

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Foreign operations

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(e) Cash and cash equivalents

(f) Financial instruments

(i) Financial assets

1) Financial assets measured at amortized cost

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

2) Equity instrument

3) Financial liabilities

4) Derecognition of financial liabilities

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

1) Cash flow hedges

(g) Inventories

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(h) Investment in associates

(i) Investments in subsidiaries

(ii) Subsequent expenditure

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(iii) Depreciation

(k) Lease

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) As a leasee

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(m) Impairment of non-financial assets

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(n) Provisions

(o) Revenue from contracts with customers

(i) Sale of goods

(ii) Financing components

(p) Employee benefits

(i) Defined contribution plans

ARCADYAN TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Defined benefit plans

(iii) Short term employee benefits

Arcadyan Audit Report / Information 2020