Stock Code:6674

COMPAL BROADBAND NETWORKS, INC.

Parent Company Only Financial Statements

With Independent Auditors' Report

For the Years Ended December 31, 2025 and 2024

Address: 13F.-1, No.1, Taiyuan 1st St., Zhubei City, Hsinchu County, Taiwan

Telephone: (03)560-0066

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	Page
1. Cover Page	1
2. Table of Contents	2
3. Independent Auditors’ Report	3
4. Balance Sheets	4
5. Statements of Comprehensive Income	5
6. Statements of Changes in Equity	6
7. Statements of Cash Flows	7
8. Notes to the Financial Statements
(1) Company history	8
(2) Approval date and procedures of the financial statements	8
(3) New standards, amendments and interpretations adopted	8~10
(4) Summary of material accounting policies	10~23
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty	23~24
(6) Explanation of significant accounts	24~47
(7) Related-party transactions	47~49
(8) Pledged assets	49
(9) Significant commitments and contingencies	49
(10) Losses due to major disasters	49
(11) Subsequent events	49
(12) Other	50
(13) Other disclosures
(a) Information on significant transactions	51
(b) Information on investees	51
(c) Information on investment in mainland China	51
(14) Segment information	51
List of major account titles	52~58

Independent Auditors' Report

To the Board of Directors of Compal Broadband Networks, Inc.:

Opinion

We have audited the financial statements of Compal Broadband Networks, Inc. ("the Company"), which comprise the balance sheets as of December 31, 2025 and 2024, 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 material 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, 2025 and 2024, and its financial performance and its cash flows for the years then ended December 31, 2025 and 2024, 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 Financial Statement Audit and Attestation Engagements of Certified Public Accountants and Standards on Auditing of 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 Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 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. The key audit matters we judged shall be presented in the auditors' report as follows:

Revenue recognition

For the accounting policies related to the recognition of operating revenue, please refer to Note 4(p) of the financial statements regarding revenue from contracts with customer.

Description of key audit matter:

Compal Broadband Networks, Inc. primarily engaged in the research, development, and sales of communication products such as smart gateways, digital set-top boxes, and wireless broadband routers. Operating revenue is a key indicator of whether the Company's financial targets are met. To meet investor expectations, operating revenue influences management's decision-making and may present a significant risk of material misstatement due to incorrect timing of revenue recognition. Therefore, revenue recognition is identified as a key audit matter requiring heightened attention from auditors.

3-1

How the matter was addressed in our audit:

The main audit procedures performed regarding the aforementioned key audit matter include understanding and evaluating the accounting policies for operating revenue of Compal Broadband Networks, Inc., understanding and assessing the effectiveness of internal controls related to sales revenue recognition, verifying relevant sales revenue documents, and performing cut-off tests on sales revenue transactions for specific periods before and after the balance sheet date. These procedures aim to assess whether the recognized revenue belongs to the correct period and whether the timing of revenue recognition by Compal Broadband Networks, Inc. complies with relevant standards.

Inventory valuation

Regarding the accounting policies for inventory valuation, please refer to Note 4(g) of the financial statements on inventory; for uncertainties in inventory valuation, please refer to Note 5 of the financial statements; for details on inventory, please refer to Note 6(d) of the financial statements on inventory.

Description of key audit matters:

Inventory is measured at the lower of cost and net realizable value. As Compal Broadband Networks, Inc., primarily engaged in the research, development, and sales of communication products such as smart gateways, digital set-top boxes, and wireless broadband routers, the sales prices of these products are subject to fluctuations due to changes in supply from upstream suppliers and market competition. This results in the risk that the carrying amount of inventory may exceed its net realizable value. Therefore, inventory valuation is one of the key assessment matters when auditing the financial statements.

How the matter was addressed in our audit:

The main audit procedures performed regarding the aforementioned key audit matter include evaluating the reasonableness of the inventory write-down or obsolescence policies of Compal Broadband Networks, Inc., performing sampling procedures to check the accuracy of the inventory aging reports, analyzing the changes in inventory aging over various periods, and assessing whether provisions have been made according to the established accounting policies. Additionally, relevant values in the calculations of the lower of cost and net realizable value are tested to evaluate the reasonableness of the net realizable value of inventory.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with 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 the Audit Committee or supervisors) are responsible for overseeing the Company's financial reporting process.

3-2

Auditors' Responsibilities for the Audit of the 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 auditor’s 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 Standards on Auditing of 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 the Standards on Auditing of the Republic of China, we exercise professional judgment and 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 the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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.

3-3

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 Huang, Keng-Chia and Au, Yiu-Kwan.

KPMG

Taipei, Taiwan (Republic of China)

March 11, 2026

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’ 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.

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

COMPAL BROADBAND NETWORKS, INC.

Balance Sheets

December 31, 2025 and 2024

(Expressed in Thousands of New Taiwan Dollars)

Assets		December 31, 2025		December 31, 2024
Current assets:		Amount	%	Amount	%
1100	Cash and cash equivalents (note (6)(a))	$ 343,489	29	508,571	33
1170	Accounts receivable, net (notes (6)(b) and (6)(p))	142,018	12	196,185	13
1200	Other receivables, net (notes (6)(c) and (7))	104,069	9	19,528	1
1310	Inventories (note (6)(d))	394,729	33	527,178	34
1410	Prepayments	41,363	4	65,282	4
1470	Other current assets	1,759	-	2,133	-
		1,027,427	87	1,318,877	85
Non-current assets:
1550	Investments accounted for using equity method (note (6)(e))	16,606	2	18,014	1
1600	Property, plant and equipment (note (6)(f))	109,137	9	124,520	8
1755	Right-of-use assets (note (6)(g))	14,085	1	39,915	3
1780	Intangible assets (note (6)(h))	2,969	-	1,972	-
1840	Deferred tax assets (note (6)(l))	15,305	1	38,144	3
1900	Other non-current assets (note (8))	2,391	-	4,341	-
		160,493	13	226,906	15
Liabilities and Equity		December 31, 2025		December 31, 2024
---	---	---	---	---	---
Current liabilities:		Amount	%	Amount	%
$	17,586	2	26,339	2
	100,122	8	115,108	7
	83,148	7	223,168	15
	37,998	3	75,431	5
	5,395	-	84,086	5
	7,919	1	13,928	1
	16,601	1	2,276	-
	268,769	22	540,336	35
2570	419	-	-	-
2580	6,449	1	26,683	2
	6,868	1	26,683	2
	275,637	23	567,019	37
3100	686,977	58	673,357	43
3200	318,678	27	366,459	24
3300	(76,207)	(6)	(60,856)	(4)
3410	501	-	(196)	-
3491	(17,666)	(2)	-	-
	912,283	77	978,764	63
$	1,187,920	100	1,545,783	100

Total assets

$ 1,187,920 100 1,545,783 100

See accompanying notes to parent company only financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)
COMPAL BROADBAND NETWORKS, INC.

Statements of Comprehensive Income
For the years ended December 31, 2025 and 2024
(Expressed in Thousands of New Taiwan Dollars, Except for Loss Per Common Share)

	2025		2024
		Amount	%	Amount	%
4000	Operating revenue (note (6)(p))	$ 597,888	100	941,934	100
5000	Operating costs (notes (6)(d), (7) and (12))	390,864	65	775,118	82
	Gross profit from operations	207,024	35	166,816	18
	Operating expenses: (notes (6)(h), (6)(i), (6)(j), (6)(k), (7) and (12))
6100	Selling expenses	24,104	4	77,187	8
6200	Administrative expenses	50,507	8	61,980	7
6300	Research and development expenses	200,218	34	170,211	18
6450	Expected credit impairment reversal gain (notes (6)(b) and (6)(c))	(1,706)	-	(608)	-
	Total operating expenses	273,123	46	308,770	33
	Net operating loss	(66,099)	(11)	(141,954)	(15)
	Non-operating income and expenses:
7010	Other income (note (7))	3,273	-	5,522	-
7020	Other gains and losses (note (6)(r))	5,650	1	(13,445)	(1)
7100	Interest income	6,671	1	6,160	-
7510	Interest expense (note (6)(j))	(339)	-	(583)	-
7775	Share of loss of subsidiaries and associates accounted for using equity method, net (note (6)(e))	(2,280)	-	(3,638)	-
		12,975	2	(5,984)	(1)
7900	Loss from continuing operations before tax	(53,124)	(9)	(147,938)	(16)
7950	Less: Income tax expense (note (6)(l))	23,083	4	18,000	2
	Net loss	(76,207)	(13)	(165,938)	(18)
8300	Other comprehensive income (loss):
8360	Components of other comprehensive income (loss) that may be reclassified subsequently to profit or loss
8361	Exchange differences on translation of foreign financial statements	872	-	2	-
8399	Less: income tax related to items that may be reclassified subsequently to profit or loss (note (6)(l))	175	-	-	-
	Components of other comprehensive income that may be reclassified subsequently to profit or loss	697	-	2	-
8300	Other comprehensive income	697	-	2	-
	Total comprehensive loss	$ (75,510)	(13)	(165,936)	(18)
	Loss per share (note (6)(o))
9750	Basic loss per share	$	(1.13)		(2.46)
9850	Diluted loss per share	$	(1.13)		(2.46)

See accompanying notes to parent company only financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)
COMPAL BROADBAND NETWORKS, INC.

Statements of Changes in Equity
For the years ended December 31, 2025 and 2024
(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2024
Loss for the year ended December 31, 2024
Other comprehensive income for the year ended December 31, 2024
Total comprehensive income (loss) for the year ended December 31, 2024
Legal reserve used to offset accumulated deficits
Changes in equity of associates accounted for using equity method
Share-based payment transactions
Balance at December 31, 2024
Loss for the year ended December 31, 2025
Other comprehensive income for the year ended December 31, 2025
Total comprehensive income (loss) for the year ended December 31, 2025
Legal reserve and special reserve used to offset accumulated deficits
Capital surplus used to offset accumulated deficits
Share-based payment transactions
Balance at December 31, 2025

Ordinary shares	Capital surplus	Legal reserve	Special reserve	Accumulated losses	Total	Other equity			Total equity
						Exchange differences on translation of foreign financial statements	Unearned employee benefit	Total
$ 676,381	372,404	147,010	588	(42,516)	105,082	(198)	(3,010)	(3,208)	1,150,659
-	-	-	-	(165,938)	(165,938)	-	-	-	(165,938)
-	-	-	-	-	-	2	-	2	2
-	-	-	-	(165,938)	(165,938)	2	-	2	(165,936)
-	-	(42,516)	-	42,516	-	-	-	-	-
-	315	-	-	-	-	-	-	-	315
(3,024)	(6,260)	-	-	-	-	-	3,010	3,010	(6,274)
673,357	366,459	104,494	588	(165,938)	(60,856)	(196)	-	(196)	978,764
-	-	-	-	(76,207)	(76,207)	-	-	-	(76,207)
-	-	-	-	-	-	697	-	697	697
-	-	-	-	(76,207)	(76,207)	697	-	697	(75,510)
-	-	(104,494)	(588)	105,082	-	-	-	-	-
-	(60,856)	-	-	60,856	60,856	-	-	-	-
13,620	13,075	-	-	-	-	-	(17,666)	(17,666)	9,029
$ 686,977	318,678	-	-	(76,207)	(76,207)	501	(17,666)	(17,165)	912,283

See accompanying notes to parent company only financial statements.

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

COMPAL BROADBAND NETWORKS, INC.

Statements of Cash Flows

For the years ended December 31, 2025 and 2024
(Expressed in Thousands of New Taiwan Dollars)

	2025	2024
Cash flows from (used in) operating activities:
Loss before tax	$ (53,124)	(147,938)
Adjustments:
Adjustments to reconcile loss:
Depreciation and amortization expense	60,241	62,699
Expected credit impairment reversal gain	(1,706)	(608)
Interest expense	339	583
Interest income	(6,671)	(6,160)
Compensation cost of employee share-based payment	9,029	(6,274)
Share of loss of subsidiaries and associates accounted for using equity method	2,280	3,638
Loss on disposal of property, plant and equipment	-	8,378
Gain on lease modification	(362)	(108)
Total adjustments to reconcile loss	63,150	62,148
Changes in operating assets and liabilities:
Decrease in financial assets at fair value through profit or loss	-	4,373
Decrease in accounts receivable	55,939	205,394
Increase in other receivables	(84,988)	(16,760)
Decrease in inventories	132,449	85,124
Decrease (increase) in prepayments	23,919	(16,914)
Decrease in other current assets	-	57
(Decrease) increase in contract liabilities	(8,753)	24,493
(Decrease) increase in accounts payable	(155,006)	148,009
Decrease in other payables	(37,433)	(111,515)
(Decrease) increase in provisions	(78,691)	3,488
Increase (decrease) in other current liabilities	14,325	(1,844)
Total changes in operating assets and liabilities	(138,239)	323,905
Total adjustments	(75,089)	386,053
Cash (outflow) inflow generated from operations	(128,213)	238,115
Interest received	7,052	5,917
Interest paid	(339)	(583)
Income taxes refund	374	3,291
Net cash flows (used in) from operating activities	(121,126)	246,740
Cash flows from (used in) investing activities:
Acquisition of investments accounted for using equity method	-	(6,300)
Acquisition of property, plant and equipment	(35,637)	(20,143)
Decrease (increase) in refundable deposits	1,950	(112)
Acquisition of intangible assets	(2,669)	(2,786)
Net cash flows used in investing activities	(36,356)	(29,341)
Cash flows from (used in) financing activities:
Payment of lease liabilities	(7,600)	(14,257)
Net cash flows used in financing activities	(7,600)	(14,257)
Net (decrease) increase in cash and cash equivalents	(165,082)	203,142
Cash and cash equivalents at beginning of period	508,571	305,429
Cash and cash equivalents at end of period	$ 343,489	508,571

See accompanying notes to parent company only financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)
COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

For the years ended December 31, 2025 and 2024

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

(1) Company history

Compal Broadband Networks, Inc. (“the Company”) was established on August 19, 2009, and jointly invested by Compal Electronics, Inc. (Compal Electronics) and ZHI-Bao Technology Inc. (ZHI-Bao Technology) with the shareholding ratio was 52% and 48% respectively. The parent company of the Company is Compal Electronics. As of December 31, 2025 and 2024, Compal Electronics and its subsidiaries held 63% shares in the Company.

The address of the Company’s registered office is 13F.-1, No. 1, Taiyuan 1st St., Zhubei City, Hsinchu County. The Company primarily engaged in the research, development, and sale of communication products such as smart gateways, digital set-top boxes, and wireless broadband routers.

The Company’s common shares have been publicly listed on the Taiwan Stock Exchange since November 28, 2018.

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

These financial statements were authorized for issuance by the Board of Directors on March 11, 2026.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the IFRS Accounting Standards endorsed by the Financial Supervisory Commission, R.O.C. which have already been adopted.

The Company has initially adopted the new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2025:

Amendments to IAS21 “Lack of Exchangeability”
Amendments to IFRS 9 and IFRS 7 “Amendments to the Classification and Measurement of Financial Instruments” regarding the application guidance requirements for Section 4.1 of IFRS 9 and the related disclosure requirements of IFRS 7.

(b) The impact of IFRS Accounting Standards endorsed 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, 2026, would not have a significant impact on its consolidated financial statements

IFRS 17 “Insurance Contracts” and amendments to IFRS 17 “Insurance Contracts”
Amendments to IFRS 9 and IFRS 7 “Amendments to the Classification and Measurement of Financial Instruments”
Annual Improvements to IFRS Accounting Standards—Volume 11
Amendments to IFRS 9 and IFRS 7 “Contracts Referencing Nature-dependent Electricity”

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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:

Standards or Interpretations	Content of amendment	Effective date per IASB
IFRS 18 “Presentation and Disclosure in Financial Statements”	The new standard introduces three categories of income and expenses, two income statement subtotals and one single note on management performance measures. The three amendments, combined with enhanced guidance on how to disaggregate information, set the stage for better and more consistent information for users, and will affect all the entities.

• A more structured income statement: under current standards, companies use different formats to present their results, making it difficult for investors to compare financial performance across companies. The new standard promotes a more structured income statement, introducing a newly defined ‘operating profit’ subtotal and a requirement for all income and expenses to be allocated between three new distinct categories based on a company’s main business activities.

• Management performance measures (MPMs): the new standard introduces a definition for management performance measures, and requires companies to explain in a single note to the financial statements why the measure provides useful information, how it is calculated and reconcile it to an amount determined under IFRS Accounting Standards.

• Greater disaggregation of information: the new standard includes enhanced guidance on how companies group information in the financial statements. This includes guidance on whether information is included in the primary financial statements or is further disaggregated in the notes. | January 1, 2027

Note: On September 25, 2025, the FSC issued a press release announcing that Taiwan will adopt IFRS 18 beginning in 2028. Entities that need to adopt the new standard earlier may do with the endorsement of the FSC. |

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

The Company is evaluating the impact on its consolidated financial position and consolidated financial performance upon the initial adoption of the abovementioned standards or interpretations. 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 consolidated financial statements:

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”
IFRS 19 “Subsidiaries without Public Accountability: Disclosures” and amendments to IFRS 19 “Subsidiaries without Public Accountability: Disclosures”
Amendments to IAS 21 “Translation to a Hyperinflationary Presentation Currency”

(4) Summary of material accounting policies:

The material 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.

(b) Basis of preparation

(i) Basis of measurement

Except for the financial instruments at fair value through profit or loss are measured at fair value, the financial statements have been prepared on a historical cost basis.

(ii) Functional and presentation currency

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 Dollar (NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

(c) Foreign currencies

(i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of 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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the NTD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the NTD 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 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

The Company classifies the asset as current under one of the following criteria, and all other assets are classified as non-current.

(i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;

(ii) It holds the asset primarily for the purpose of trading;

(iii) It expects to realize the asset within twelve months after the reporting period; or

(iv) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

The Company classifies the liability as current under one of the following criteria, and all other liabilities are classified as non-current.

(i) It expects to settle the liability in its normal operating cycle;

(ii) It holds the liability primarily for the purpose of trading;

(iii) The liability is due to be settled within twelve months after the reporting period; or

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(iv) It does not have the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period.

(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 account 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)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

2) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost described as above (e.g. financial assets held for trading and those that are managed and whose performance is evaluated on a fair value basis) 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, 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.

3) 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, trade receivables, other receivable, guarantee deposit paid and other financial assets).

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

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 accounts receivable and contract assets are always measured at an amount equal to lifetime ECL.

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 forward-looking information.

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.

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'.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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 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 asset is credit-impaired includes the following observable data:

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. 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.

4) 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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(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.

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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using the weighted-average method, 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.

(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 that do not result in a loss of control are accounted for as equity transactions with owners.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(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.

(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) Research equipment 2~10 years
2) Modeling equipment 2~4 years
3) Machinery and equipment 2~5 years
4) Lease improvement and others 2~10 years

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

(k) Leases

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.

(i) As a lessee

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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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:

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

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

there is a change in future lease payments arising from the change in an index or rate; or
there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or
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
there is a change of its assessment on whether it will exercise a extension or termination option; or
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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of other equipment and parking space 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.

(ii) As a lessor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

(1) Intangible assets

(i) Recognition and measurement

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.

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 of computer software for current and comparative periods ranged from 1 to 3 years.

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

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(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.

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.

(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 historical warranty data and a weighting of all possible outcomes against their associated probability.

(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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(i) Sale of goods

The Company sells communication products such as smart gateways, digital set-top boxes, and wireless broadband routers. 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.

(ii) 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)

COMPAL BROADBAND NETWORKS, INC.

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 chairman to approve the price and number of shares that employees can subscribe for.

(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.

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37.

The Company has determined that the global minimum top-up tax – which it is required to pay under Pillar Two legislation – is an income tax in the scope of IAS 12. The Company has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred.

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 at the time of the transaction (i) affects neither accounting nor taxable profits (losses) and (ii) does not give rise to equal taxable and deductible temporary difference.

(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 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.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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

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.

(s) 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 employee restricted shares.

(t) Operating segments

Please refer to the Company’s consolidated financial statements for the years ended December 31, 2025 and 2024, for further details.

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

In preparing these financial statements, management has made judgments and estimates about the future, including climate-related risks and opportunities, 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.

Estimates and underlying assumptions are reviewed on an ongoing basis and are consistent with the Company’s risk management and climate-related commitments where appropriate. Revisions to estimates are recognized prospectively in the period of the change and future periods.

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

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

As inventories are stated at the lower of cost or net realizable value, the Company estimates its net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note 6(d) for further description of the valuation of inventories.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

	December 31, 2025	December 31, 2024
Cash on hand	$ 251	320
Checking accounts and demand deposits	143,238	57,440
Time deposits	200,000	450,811
	$ 343,489	508,571

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

(b) Accounts receivable

	December 31, 2025	December 31, 2024
Accounts receivable	$ 142,289	222,414
Less: loss allowance	(271)	(26,229)
	$ 142,018	196,185

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, accounts receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The expected credit losses were determined as follows:

	December 31, 2025
	Gross carrying amount	Weighted- average loss rate	Loss allowance	Credit impaired
Level B	$ 127,945	0.10%	128	No
Level C	14,344	1.00%	143	No
	$ 142,289		271

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

	December 31, 2024
	Gross carrying amount	Weighted- average loss rate	Loss allowance	Credit impaired
Level B	$ 191,483	0.10%	193	No
Level C	4,378	0.98%	43	No
Level D	590	5.08%	30	No
Level E	25,963	100.00%	25,963	Yes
	$ 222,414		26,229

The aging analysis of overdue accounts receivable were as follows:

	December 31, 2025	December 31, 2024
Overdue 1~30 days	$ 4,505	1,877
Overdue 31~60 days	68	2,236
Overdue 61~90 days	2,031	-
Overdue 91~180 days	170	31,880
Overdue 181~270 days	-	3,854
Overdue 271~360 days	-	-
Overdue 360 days	6,574	25,963
	$ 13,348	65,810

The movements of loss allowance for accounts receivable were as follows:

	2025	2024
Balance at January 1	$ 26,229	26,841
Impairment loss reversed	(1,772)	(612)
Write-off of bad debt allowance	(24,186)	-
Balance at December 31	$ 271	26,229

As of December 31, 2025 and 2024, the Company did not provide any aforementioned accounts receivable as collaterals.

	December 31, 2025	December 31, 2024
Other receivables	$ 104,197	19,590
Less: loss allowance	(128)	(62)
	$ 104,069	19,528

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

The aging analysis of overdue other receivables were as follows:

	December 31, 2025	December 31, 2024
Overdue 1~30 days	$ -	-
Overdue 31~60 days	28	21
Overdue 61~90 days	-	-
Overdue 91~180 days	-	-
Overdue 181~270 days	-	696
Overdue 271~360 days	-	-
Overdue 360 days	-	-
	$ 28	717

The movements of loss allowance for other receivables were as follows:

	2025	2024
Balance at January 1	$ 62	58
Impairment loss recognized	66	4
Balance at December 31	$ 128	62

As of December 31, 2025 and 2024, the Company did not provide any aforementioned other receivables as collaterals.

(d) Inventories

(i) The details of the Company’s inventories were as follows:

	December 31, 2025	December 31, 2024
Raw materials	$ 390,388	506,529
Work in progress and semi-finished goods	1,902	1,204
Merchandise	2,439	19,445
	$ 394,729	527,178

(ii) Inventory costs recognized as operating costs were as follows:

	2025	2024
Cost of sales and expenses	$ 387,958	774,715
Provision for inventory valuation and obsolescence loss	2,906	403
	$ 390,864	775,118

For the years ended December 31, 2025 and 2024, the write-down of the inventories to the net realizable value was recorded as an operating cost.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(iii) As of December 31, 2025 and 2024, the Company did not provide any inventories as collaterals.

(e) Investments accounted for using equity method

A summary of the Company’s financial information for investments accounted for using the equity method at the reporting date were as follows:

	December 31, 2025	December 31, 2024
Subsidiaries	$ 11,551	11,230
Associates	5,055	6,784
	$ 16,606	18,014

(i) Subsidiaries

Please refer to the consolidated financial statement for the year ended December 31, 2025.

(ii) Associates

The Company’s equity-accounted associates that are individually insignificant and the Company’s share of the financial information are summarized as below:

	December 31, 2025	December 31, 2024
The carrying amount of individually insignificant associates equity	$ 5,055	6,784
	2025	2024
Attributable to the Company:
Net loss from continuing operations	$ (1,729)	(3,333)
Total comprehensive loss	$ (1,729)	(3,333)

(iii) As of December 31, 2025 and 2024, the Company did not provide any investment accounted for using equity method as collaterals.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(f) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Company for the years ended December 31, 2025 and 2024 were as follows:

	Research equipment	Modeling equipment	Machinery and equipment	Lease improvement and others	Equipment under acceptance	Total
Cost or deemed cost:
Balance at January 1, 2025	$ 376,121	24,225	1,650	68,184	-	470,180
Additions	17,005	10,558	-	2,050	6,024	35,637
Disposals	(7,200)	-	-	(195)	-	(7,395)
Balance at December 31, 2025	$ 385,926	34,783	1,650	70,039	6,024	498,422
Balance at January 1, 2024	$ 450,100	22,587	7,259	103,179		583,125
Additions	18,157	1,986	-	-	-	20,143
Disposals	(92,136)	(348)	(5,609)	(34,995)	-	(133,088)
Balance at December 31, 2024	$ 376,121	24,225	1,650	68,184	-	470,180
Depreciation:
Balance at January 1, 2025	$ 276,592	18,813	1,305	48,950	-	345,660
Depreciation	39,189	4,190	173	7,468	-	51,020
Disposals	(7,200)	-	-	(195)	-	(7,395)
Balance at December 31, 2025	$ 308,581	23,003	1,478	56,223	-	389,285
Balance at January 1, 2024	$ 335,978	15,723	6,644	65,202	-	423,547
Depreciation	32,750	3,438	270	10,365	-	46,823
Disposals	(92,136)	(348)	(5,609)	(26,617)	-	(124,710)
Balance at December 31, 2024	$ 276,592	18,813	1,305	48,950	-	345,660
Carrying amounts:
Balance at December 31, 2025	$ 77,345	11,780	172	13,816	6,024	109,137
Balance at January 1, 2024	$ 114,122	6,864	615	37,977	-	159,578
Balance at December 31, 2024	$ 99,529	5,412	345	19,234	-	124,520

As of December 31, 2025 and 2024, the Company did not provide any property, plant and equipment as collaterals.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(g) Right-of-use assets

The Company leases buildings and vehicles. Information about leases for which the Company has been a lessee is presented as below:

	Buildings	Vehicles	Total
Cost:
Balance at January 1, 2025	$ 118,479	2,151	120,630
Additions	-	1,590	1,590
Disposals	(59,928)	-	(59,928)
Balance at December 31, 2025	$ 58,551	3,741	62,292
Balance at January 1, 2024	$ 119,916	6,457	126,373
Additions	138	-	138
Disposals	(1,575)	(4,306)	(5,881)
Balance at December 31, 2024	$ 118,479	2,151	120,630
Depreciation:
Balance at January 1, 2025	$ 80,177	538	80,715
Depreciation	6,702	847	7,549
Disposals	(40,057)	-	(40,057)
Balance at December 31, 2025	$ 46,822	1,385	48,207
Balance at January 1, 2024	$ 67,744	3,474	71,218
Depreciation	13,425	979	14,404
Disposals	(992)	(3,915)	(4,907)
Balance at December 31, 2024	$ 80,177	538	80,715
Carrying amount:
Balance at December 31, 2025	$ 11,729	2,356	14,085
Balance at January 1, 2024	$ 52,172	2,983	55,155
Balance at December 31, 2024	$ 38,302	1,613	39,915

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(h) Intangible assets

The cost and accumulated amortization of intangible assets of the Company for the years ended December 31, 2025 and 2024 were as follows:

	Computer software
Cost:
Balance at January 1, 2025	$ 3,164
Additions	2,669
Disposals	(2,192)
Balance at December 31, 2025	$ 3,641
Balance at January 1, 2024	$ 3,099
Additions	2,786
Disposals	(2,721)
Balance at December 31, 2024	$ 3,164
Accumulated amortization:
Balance at January 1, 2025	$ 1,192
Amortization	1,672
Disposals	(2,192)
Balance at December 31, 2025	$ 672
Balance at January 1, 2024	$ 2,441
Amortization	1,472
Disposals	(2,721)
Balance at December 31, 2024	$ 1,192
Carrying amount:
Balance at December 31, 2025	$ 2,969
Balance at January 1, 2024	$ 658
Balance at December 31, 2024	$ 1,972

For the years ended December 31, 2025 and 2024, the amortization of intangible assets are included in the statements of comprehensive income as operating expenses amounted to $1,672 and $1,472, respectively.

As of December 31, 2025 and 2024, the Company did not provide any intangible assets as collaterals.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(i) Provisions

	Warranty provisions
Balance at January 1, 2025	$ 84,086
Provisions made during the period	4,239
Provisions reversed during the period	(67,914)
Provisions used during the period	(15,016)
Balance at December 31, 2025	$ 5,395
Balance at January 1, 2024	$ 80,598
Provisions made during the period	8,537
Provisions reversed during the period	(3,498)
Provisions used during the period	(1,551)
Balance at December 31, 2024	$ 84,086

The Company's provision for the warranty was for products sold. Provision for warranty and the after-service cost was estimated based on the historical warranty information for customer services. The Company expected the aforementioned provisions would occur within a year after-sales.

After negotiations with customers in 2025, the Group revised its after service policy. Accordingly, the Group adjusted and reversed the provision for warranty based on the revised after service policy and simultaneously reduced selling expenses by $56,921.

(j) Lease liabilities

The details of lease liabilities were as follows:

	December 31, 2025	December 31, 2024
Current	$ 7,919	13,928
Non-current	$ 6,449	26,683

For the maturity analysis, please refer to note (6)(s).

The amounts recognized in profit or loss were as follows:

	2025	2024
Interest expense on lease liabilities	$ 339	583
Expenses relating to short-term leases	$ 26	114
Expense relating to leases of low-value assets, excluding short-term leases of low-value assets	$ 73	102
Gain on lease modification	$ (362)	(108)

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

The amounts recognized in the statements of cash flows by the Company were as follows:

	2025	2024
Total cash outflow for leases	$ 8,038	15,056

The Company leases buildings, parking spaces, and transportation equipment, which typically run for 1 to 5 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

The Company also leases other equipment and parking spaces with contract terms of 1 to 5 years. These leases are short-term or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(k) Employee benefits - Defined contribution plans

The Company allocates 6% of each employee's monthly wages to their labor pension personal account at the Bureau of 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 Labor Insurance without additional legal or constructive obligations.

The pension expenses of the Company under the pension plan contributed to the Bureau of Labor Insurance for the years ended December 31, 2025 and 2024 were amounted to $4,544 and $5,715, respectively.

(l) Income taxes

(i) The amount of income tax expenses for the years ended December 31, 2025 and 2024 were as follows:

	2025	2024
Current tax benefit	$ -	-
Deferred tax expense
Recognition and reversal of temporary differences	23,083	18,000
Income tax expenses	$ 23,083	18,000

The amounts of income tax expenses recognized in other comprehensive income for the years ended December 31, 2025 and 2024 were as follows:

	2025	2024
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial statements	$ 175	-

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

The reconciliation of the income tax expenses and loss before tax for the years ended December 31, 2025 and 2024, was as follows:

	2025		2024
	Rate	Amount	Rate	Amount
Loss before tax	20%	$ (53,124)	20%	(147,938)
Income tax calculated based on domestic tax rate		(10,625)		(29,588)
Changes in unrecognized temporary differences		9,083		(3,161)
Current-year losses for which no deferred tax asset was recognized		28,798		50,082
Change in provision in prior periods		(4,519)		-
Others		346		667
		$ 23,083		18,000

(ii) Deferred tax assets and liabilities

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

Deferred tax assets have not been recognized in respect of the following items:

	December 31, 2025	December 31, 2024
Temporary differences can be reduced	$ 9,083	-
The carryforward of unused tax losses	167,021	138,223
	$ 176,104	138,223

The R.O.C. Income Tax Act allows net losses, as assessed by the tax authorities, to offset taxable income over a period of ten years for local tax reporting purposes. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.

As of December 31, 2025, the information of the Company's unused tax losses for which no deferred tax assets were recognized are as follows:

Year of loss	Unused loss	Expiry date
2022(examined)	$ 153,071	2032
2023(examined)	311,631	2033
2024(filed)	272,960	2034
2025(estimated)	133,683	2035
	$ 871,345

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

3) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2025 and 2024 were as follows:

	Exchange gains	Gain on valuation of financial assets	Others	Total
Deferred tax liabilities:
Balance at January 1, 2025	$ -	-	-	-
Recognized in profit or loss	294	-	-	294
Recognized in other comprehensive income	-	-	125	125
Balance at December 31, 2025	$ 294	-	125	419
Balance at January 1, 2024	-	874	-	874
Recognized in profit or loss	-	(874)	-	(874)
Balance at December 31, 2024	$ -	-	-	-
	Warranty provisions	Premiums payable	Loss on inventory valuation	Exchange losses
---	---	---	---	---
Deferred tax assets:
Balance at January 1, 2025	$ 16,817	183	5,337	748
Recognized in profit or loss	(15,738)	(183)	581	(748)
Recognized in other comprehensive income	-	-	-	-
Balance at December 31, 2025	$ 1,079	-	5,918	-
Balance at January 1, 2024	$ 16,120	978	5,257	27,476
Recognized in profit or loss	697	(795)	80	(26,728)
Balance at December 31, 2024	$ 16,817	183	5,337	748

(iii) The R.O.C. tax authorities have examined the income tax returns of the Company through 2023.

(m) Capital and other equities

For the years ended December 31, 2025 and 2024, the authorized ordinary shares were both $1,000,000 of which 68,698 thousand shares and 67,336 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(i) Ordinary shares

Reconciliation of shares outstanding for the years ended December 31, 2025 and 2024 were as follow:

Unit: in thousands of shares

	Ordinary shares
	2025	2024
Balance at January 1	67,336	67,638
Issuance of employee restricted shares	1,500	-
Cancellation of employee restricted shares	(138)	(302)
Balance at December 31	68,698	67,336

The Company issued restricted stock awards to employees without consideration in 2025, with an aggregate par value of $15,000, and the capital increase record date was May 28, 2025. During 2025, as certain employees who were granted the 2025 restricted stock awards failed to satisfy the vesting conditions, share capital of $1,380 was cancelled. Accordingly, capital surplus was reduced by $1,325. The related amendment registration has been completed.

During 2024, as certain employees who were granted the 2021 restricted stock awards failed to satisfy the vesting conditions, share capital of $3,024 was cancelled. Accordingly, capital surplus was reduced by $6,260. The related amendment registration has been completed.

(ii) Capital surplus

The balance of capital surplus were as follows:

	December 31, 2025	December 31, 2024
Additional paid in capital premium	$ 305,603	318,043
Employee share options	-	48,101
Issuance of employee restricted shares	13,075	-
Changes in equity of associates accounted for using equity method	-	315
	$ 318,678	366,459

On June 23, 2025, the shareholders' meeting resolved to use capital surplus of $60,856 to offset the accumulated losses.

For information regarding the adjustment of capital surplus arising from the issuance of restricted stock awards, please refer to note (6)(n).

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the ordinary shares or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital shares 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 ordinary shares outstanding.

(iii) Retained earnings

1) Limits of distributed earnings and dividend policy

According to the Company’s Articles of Incorporation, the Company’s annual net profit, after providing for income tax and covering the losses of previous years, is first set aside for legal reserve at the rate of 10% thereof until the accumulated balance of legal reserve equals the total issued capital and any special reserves pursuant to relevant laws and regulations. The remainder, plus the undistributed earnings of the previous years, are distributed or left undistributed for business purposes according to the resolution of the shareholders’ dividend distribution plan, which are initially proposed by the Board of Directors and adopted by the shareholders in the annual stockholders’ meeting. However, if earnings per share of the current year do not exceed a dollar, the earnings shall not be distributed.

The Company authorizes the Board of Directors with two-thirds or more of the directors present, and the consent of more than of the directors present at the meeting, to distribute all or part of the dividends and bonuses, capital surplus or legal reserve to shareholders in cash, and report such distribution to the stockholders’ meeting.

The Company is in its growth phase. The Company’s dividend policy prioritizes the operating environment, performance, and financial structure. The stock dividends shall be distributed at least 10% to the shareholders. However, the Board may adjust the proportion based on the current operating conditions and submitted to the shareholders’ meeting for approval. The distribution ratio for cash dividends to shareholders should not be less than 10% of the total dividend distribution.

2) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

3) 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 equal to the current period total net reduction of other shareholders’ equity. The amount to be reclassified to special reserve shall be a portion of current-period earnings plus other line items in the retained earnings movements and undistributed prior-period earnings. A portion of previous unappropriated earnings shall be set aside as a special reserve, which should not be distributed, to account for cumulative changes to other equity interests pertaining to prior periods. The special reserve shall be made available for appropriation when the net deductions of other equity interests are reversed in the subsequent periods.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(iv) Earnings distribution (Accumulated deficit offsetting)

The Company suffered accumulated losses for the years ended 2024 and 2023. On March 11, 2025, and March 8, 2024, respectively, the Board of Directors resolved not to distribute dividends.

On June 23, 2025, the shareholders’ meeting resolved to use special reserve of $588, legal reserve of $104,494 to offset losses.

On June 24, 2024, the shareholders’ meeting resolved to use legal reserve of $42,516 to offset the accumulated losses.

(n) Share-based payment—Employee restricted share

The restricted stock awards issued by the Company in 2021 have expired in 2024.

On October 30, 2024, as resolved by the shareholders’ extraordinary meeting, the Company issued 1,500 thousand shares of restricted stock awards (“RSAs”) to employees. The issuance was made without consideration and was limited to full-time employees of the Company who met certain eligibility requirements and were employed as of the grant date.

Of the total RSA issued, 1,000 thousand shares will vest in tranches of 40%, 30% and 30% upon completion of one, two and three years of continued employment, respectively, provided that the grantees remain employed and meet the performance requirements set by the Company.

The remaining 500 thousand shares will vest in tranches of 40%, 30% and 30% upon completion of one, two and three years of continued employment, respectively, provided that:

(i) The Company’s consolidated revenue, as audited by independent accountants, for the most recent fiscal year during the vesting period has increased by at least 20% compared to the average consolidated revenue of the preceding two years and resulted in a net profit, and

(ii) The grantees remain employed and meet the Company’s performance requirements.

Before vesting, all restricted shares are required to be deposited in a trust designated by the Company and may not be sold, pledged, transferred, gifted or otherwise disposed of, except by inheritance. Prior to vesting, shareholder rights attached to the shares are exercised by the designated trustee. Any shares for which the vesting conditions are not satisfied will be forfeited and canceled by the Company without compensation.

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

	2025
Outstanding unit at January	-
Shares granted during the period	1,500
Cancellation during the period	(138)
Outstanding unit at December 31	1,362

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

The fair value of the aforementioned employee restricted shares was measured at $19.60 per share, being the closing price of the Company’s common shares on May 28, 2025, the grant date. Accordingly, capital surplus – issuance of employee restricted shares of $14,400 was recognized. As of December 31, 2025, the unearned employee benefit amounted to $17,666.

The compensation expenses (benefits) recognized due to the restricted shares amounted to $9,029 and ($6,274) for the years ended December 31, 2025 and 2024, respectively.

(o) Loss per share

The Company’s basic and diluted loss per share are calculated as follows:

	2025	2024
Basic loss per share
Loss attributable to ordinary shareholders of the Company	$ (76,207)	(165,938)
Weighted-average number of outstanding ordinary shares (in thousands)	67,336	67,336
Basic loss per share (NTD)	$ (1.13)	(2.46)
Diluted loss per share
Weighted-average number of ordinary shares (diluted) (in thousands)	67,336	67,336
Diluted loss per share (NTD)	$ (1.13)	(2.46)

For the years ended December 31, 2025 and 2024, due to net losses after tax, all potential ordinary shares were anti-dilutive and thus excluded from the computation of diluted loss per share.

(p) Revenue from contracts with customers

(i) Details of revenue

	2025	2024
Primary geographical markets:
America	$ 295,138	359,494
Taiwan	190,506	304,625
Others	112,244	277,815
	$ 597,888	941,934
Major products:
Communication network products	$ 409,956	802,885
Material sales revenue and others	187,932	139,049
	$ 597,888	941,934

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(ii) Contract balances

	December 31, 2025	December 31, 2024	January 1, 2024
Accounts receivable	$ 142,289	222,414	427,808
Less: loss allowance	(271)	(26,229)	(26,841)
Total	$ 142,018	196,185	400,967
Contract liabilities	$ 17,586	26,339	1,846

For the details on accounts receivable and loss allowance, please refer to note (6)(b).

The amount of revenue recognized for the years ended December 31, 2025 and 2024 that were included in the balance of contract liabilities at the beginning of the period were $26,339 and $1,846, respectively.

The major change in the balance of contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received.

(q) Remuneration to employees and directors

Pursuant to the resolution approved at the shareholders' meeting on June 23, 2025, the Company amended its Articles of Incorporation. According to the amended Articles, the Company shall distribute employees' remuneration at a rate of not less than 5% of the current year's profitability, of which not less than 5% shall be allocated to frontline employees; and directors' remuneration shall be distributed at a rate of not more than 2% of the current year's profitability. However, if the Company has accumulated losses, the Company shall make up for them. Employees who are entitled to receive the above-mentioned employee remuneration, in share or cash, include the employees serve in the controlled and affiliated companies who meet certain specific requirements.

Before the amendment, the Articles of Incorporation provided that the Company shall distribute employees' remuneration at a rate of not less than 5% of the current year's profitability and directors' remuneration at a rate of not more than 2% of the current year's profitability, however, if the Company has accumulated losses, the Company shall make up for them. Employees who are entitled to receive the above-mentioned employee remuneration, in share or cash, include the employees serve in the controlled and affiliated companies who meet certain specific requirements.

The Company did not estimate employee remuneration and directors' remuneration due to loss before tax for the years ended December 31, 2025 and 2024.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(r) Other gains and losses

The other gains and losses of the Company for the years ended December 31, 2025 and 2024 were as follow:

	2025	2024
Foreign currency exchange gains	$ 3,770	7,213
Gains (losses) on financial assets (liabilities) at fair value through profit or loss, net	4,923	(8,236)
Gain on lease modification	362	108
Loss on disposal of property, plant and equipment	-	(8,378)
Others	(3,405)	(4,152)
Other gains and losses, net	$ 5,650	(13,445)

(s) Financial instruments

(i) Credit risk

1) Credit risk exposure

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

2) Concentration of credit risk

Sales to individual customers constituting over 10% of total revenue for the years ended December 31, 2025 and 2024, amounted to $431,238 and $732,482, accounting for 72% and 78% of the operating revenue, respectively. The carrying amounts of the accounts receivable as of December 31, 2025 and 2024 amounted to $104,020 and $152,656, respectively. In order to reduce credit risk, the Company continuously assesses the financial status of the customers.

3) Accounts receivable credit risk

For credit risk exposure of accounts receivables, please refer to note (6)(b) and credit risk exposure of other receivables, please refer to note (6)(c).

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(ii) Liquidity risk

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

	Carrying amount	Contractual cash flows	Within a year	1 ~ 2 years	Over 2 years
December 31, 2025
Non-derivative financial liabilities
Accounts payable (including related parties)	$ 183,270	(183,270)	(183,270)	-	-
Other payables (including related parties)	37,998	(37,998)	(37,998)	-	-
Lease liabilities (including current and non-current)	14,368	(14,628)	(8,123)	(6,322)	(183)
	$ 235,636	(235,896)	(229,391)	(6,322)	(183)
December 31, 2024
Non-derivative financial liabilities
Accounts payable (including related parties)	$ 338,276	(338,276)	(338,276)	-	-
Other payables (including related parties)	75,431	(75,431)	(75,431)	-	-
Lease liabilities (including current and non-current)	40,611	(41,495)	(14,432)	(14,432)	(12,631)
	$ 454,318	(455,202)	(428,139)	(14,432)	(12,631)

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 financial assets and liabilities for foreign currency risk were as follows:

Unit: thousands of foreign currency

	December 31, 2025			December 31, 2024
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD
Financial assets
Monetary items
USD	$ 9,134 USD/TWD =31.430		287,082	11,306 USD/TWD =32.785		370,667
EUR	1,045 EUR/TWD =36.90		38,561	1,309 EUR/TWD =34.14		44,689
Financial liabilities
Monetary items
USD	6,134 USD/TWD =31.430		192,792	10,438 USD/TWD =32.785		342,210

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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, accounts receivable, other receivables, accounts payable (including related parties), and other payables 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, 2025 and 2024 would have affected the net loss before tax as follows. The analysis is performed on the same basis for both periods:

	2025	2024
USD (against the TWD)
Strengthening 5%	$ 4,715	1,423
Weakening 5%	(4,715)	(1,423)
EUR (against the TWD)
Strengthening 5%	1,928	2,234
Weakening 5%	(1,928)	(2,234)

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. For the years ended December 31, 2025 and 2024, the foreign exchange gains (including realized and unrealized portions) amounted to $3,770 and $7,213, respectively.

(iv) Interest rate analysis

The Company’s risk exposure to financial assets and liabilities for interest rate has been disclosed in the note of liquidity risk management.

The following sensitivity analysis is based on the risk exposure to interest rate for the derivative and non-derivative 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 whole 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%, assuming all other variables remaining constant, the net loss before tax would have decreased or increased by $358 and $144 for the years ended December 31, 2025 and 2024, respectively, which would be mainly resulted from the bank deposits with variable interest rates.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(v) Fair value

1) The kinds of financial instruments and fair value

The fair value of financial assets and liabilities at fair value through profit or loss 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, 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, 2025
	Book value	Fair value
		Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	$ 343,489	-	-	-	-
Accounts receivable, net	142,018	-	-	-	-
Other receivables, net	104,069	-	-	-	-
Other non-current asset (refundable deposits)	1,891	-	-	-	-
Other non-current asset (Pledged certificate of deposits)	500	-	-	-	-
Total	$ 591,967
Financial liabilities measured at amortized cost
Accounts payable (including related parties)	$ 183,270	-	-	-	-
Other payables (including related parties)	37,998	-	-	-	-
Lease liabilities (including current and non-current)	14,368	-	-	-	-
Total	$ 235,636

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

	December 31, 2024
	Book value	Fair value
		Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	508,571	-	-	-	-
Accounts receivable, net	196,185	-	-	-	-
Other receivables, net	19,528	-	-	-	-
Other non-current asset (refundable deposits)	3,841	-	-	-	-
Other non-current asset (Pledged certificate of deposits)	500	-	-	-	-
Total	$ 728,625
Financial liabilities measured at amortized cost
Accounts payable (including related parties)	$ 338,276	-	-	-	-
Other payables (including related parties)	75,341	-	-	-	-
Lease liabilities (including current and non-current)	40,611	-	-	-	-
Total	$ 454,228

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

The Company's estimates financial instruments that not measured at fair value by methods and assumptions as follows:

a) Financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the most 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) There were no transfers from one level to another for the years ended December 31, 2025 and 2024.

(t) Financial risk management

(i) Overview

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

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

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

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.

The Board of Directors ensures that the Group’s risk management policies and procedures are properly implemented and reviews the appropriateness of the related risk management framework. The Group’s internal auditors assist the Board of Directors in supervising and reviewing the effectiveness of the risk management controls and procedures on a regular and as-needed basis, and report the results to the Board of Directors.

(iii) Credit risk

1) 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 bank savings.

2) 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 or financial statements provided by customers (internal ratings). Purchase limits are established for each customer, and these limits are reviewed periodically. Customer who do not meet the basic credit rating of the Company only can make transactions by either advanced payment or obtain consent by authorized supervisors.

The Company’s customers are mainly from the communications industry. 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’ credit worthiness and historical collection records.

3) 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 and investment grade, there are no compliance issues, and therefore, no significant credit risk.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(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, 2025 and 2024, the unused long-term and short-term bank financing lines are $723,590 and $773,990, respectively.

(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 optimizing the return.

In order to manage market risk, there are some financial liabilities incurred by the Company from its buying and selling of derivatives. All transactions are executed in accordance with management guidelines.

The Company is exposed to currency risk on sales and purchases that are denominated in a currency other than the functional currencies of the Company, primarily EUR and USD. 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. As for other monetary assets and liabilities denominated in other foreign currencies, when short-term imbalance takes place, the Company buys or sells foreign currencies at spot rate or exchange rate to ensure that the net exposure is kept on an acceptable level.

(u) Capital management

The Company’s policy is to maintain a strong capital base considering the current operating characteristics of the industry, future development, and changes in external environment, to assure there are financial resources and operating plan to support working capital, capital expenditures, research & development expense, debt redemption and dividend payment, and so on. The management decides the optimal capital structure by using an appropriate debt ratio. To maintain a strong capital base, the Company monitor through periodic review of debt ratio by optimizing debt ratio. The Company’s debt ratio at the reporting date was as follows:

	December 31, 2025	December 31, 2024
Total liabilities	$ 275,637	567,019
Total assets	1,187,920	1,545,783
Debt ratio	23%	37%

As of December 31, 2025, there were no changes in the Company’s approach to capital management.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(v) Investing and financing activities not affecting cash flow

The Company’s investing and financing activities which did not affect the cash flow for the years ended December 31, 2025 and 2024 were as the acquisition of right-of-use assets by lease, please refer to note (6)(g).

Reconciliation of liabilities arising from financing activities were as follows:

	January 1, 2025	Cash flows	Non-cash changes		December 31, 2025
			Acquisition	Disposal
Lease liabilities	$ 40,611	(7,600)	1,590	(20,233)	14,368
	January 1, 2024	Cash flows	Non-cash changes		December 31, 2024
			Acquisition	Disposal
Lease liabilities	$ 55,812	(14,257)	138	(1,082)	40,611

(7) Related-party transactions

(a) Parent company and ultimate controlling party

Compal Electronics Inc. is the parent company and also the ultimate controlling party of the Company. Compal Electronics Inc. has compiled the consolidated financial statements available for public use.

(b) Names and relationship with related parties

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

Name of related party	Relationship with the Company
Compal Electronics, Inc. ( “Compal Electronics” )	Parent company
Compal Display Electronics (Kunshan) Co., Ltd. ( “CDE” )	The subsidiary of parent company
Compal (Vietnam) Co., Ltd. ( “CVC” )	The subsidiary of parent company
Kinpo Group Management Service Company ( “Kinpo” )	The associate of parent company
Starmems Semiconductor Corp. ( “Starmems” )	An associate

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(c) Significant transactions with related parties

(i) Purchases and processing fee

	2025	2024
Parent Company- Compal Electronics	$ 35,407	78,122

The terms and pricing of purchase transactions with related parties, with payment terms ranging from 90~120 days, were not significantly different from those offered by other vendors.

The Company sold raw materials to its related parties for processing purposes, wherein the related sales income and costs have been eliminated in the financial statements and were not treated as sales of raw materials and purchases of finished goods. For the raw materials sold and processed, the uncollected amounts are recorded under other receivables, whereas for the raw materials that have not been processed, the collected amounts are recorded under other payables.

(ii) Other expenditures

Parent company and other related parties provided software updated services (the provisions were eliminated on the financial statements), professional services and other expenditures for the Company. For the years ended December 31, 2025 and 2024, the related expenses were as follows:

	2025	2024
Parent Company- Compal Electronics	$ 4,889	28,394
Other related parties	95	100
	$ 4,984	28,494

(iii) Rental income

The Company leases office space and machinery equipment to the associates. Rental agreements are signed based on the prevailing rental rates in neighboring areas and rental is collected on a monthly basis. For the years ended December 31, 2025 and 2024, the rent revenue amounted to $1,547 and $2,448, respectively.

(iv) Receivables from related parties

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

Account	Related party categories	December 31, 2025	December 31, 2024
Other receivables	Other related parties- CVC	$ 89,918	18,705
"	Associates	126	266
Total		$ 90,044	18,971

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(v) Payables to related parties

The payables arising from the transactions mentioned above and payment on behalf of related the Company were as follows:

Account	Related party categories	December 31, 2025	December 31, 2024
Accounts payable	Parent Company-Compal Electronics	$ 83,148	223,168
Other payables	Other related parties- CDE	-	33,421
Other payables	Other related parties	21	26
Total		$ 83,169	256,615

(d) Transactions with key management personnel

Key management personnel compensation comprised:

	2025	2024
Short-term employee benefits	$ 24,505	23,774
Post-employment benefits	824	698
Share-based payments	4,275	(3,434)
	$ 29,604	21,038

There are no termination benefits and other long-term benefits. Please refer to note (6)(n) for explanations related to share-based payments.

(8) Pledged assets:

The carrying amount of pledged assets were as follows:

Assets	Subject	December 31, 2025
Other non-current assets-restricted asset
-time deposit	Guarantee payment for
import VAT	$ 500	500

(9) Significant commitments and contingencies:

As of December 31, 2025, the Company has signed technical service agreements with an unrecognized amount of USD 3,000 (approximately $94,290).

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(12) Other:

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

By item	2025			2024
	Operating cost	Operating expense	Total	Operating cost	Operating expense	Total
Employee benefits
Salary	-	136,584	136,584	-	116,570	116,570
Labor and health insurance	-	8,971	8,971	-	11,072	11,072
Pension	-	4,544	4,544	-	5,715	5,715
Remuneration of directors	-	2,640	2,640	-	2,640	2,640
Others	-	2,977	2,977	-	3,985	3,985
Depreciation	5,361	53,208	58,569	5,024	56,203	61,227
Amortization	-	1,672	1,672	-	1,472	1,472

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

	2025	2024
Number of employees	95	124
Number of directors who were not employees	6	6
The average employee benefit	$ 1,720	1,164
The average salaries and wages	$ 1,535	988
Average salary expense adjustment	55.36%
Remuneration of supervisors	$ -	-

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

(i) Directors' remuneration: According to the Company's articles of association, the Company should distribute directors' remuneration no more than 2% of the current year's profit; and when directors execute the business of the Company, regardless of operating profit or loss, the Company shall pay salaries. The remuneration of all directors is based on the degree of participation in the Company's operations and the value of their contributions, and in consideration of the industry standards. The Salary and Compensation Committee submits it to the Board of Directors for resolution.

(ii) Employees and managers' remuneration: It's handled in accordance with the Company's personnel regulations and salary adjustments which are based on performance and price levels every year. Managers' salaries are recommended by the Salary and Compensation Committee and submitted to the Board of Directors for approval in accordance with regulations.

(Continued)

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(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 Company for the year ended December 31, 2025:

(i) Loans to other parties: None.
(ii) Guarantees and endorsements for other parties: None.
(iii) Securities held as of December 31, 2025 (excluding investment in subsidiaries, associates and joint ventures): None.
(iv) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: None.
(v) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: None.

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2025 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

Name of investee	Name of investee	Location	Main businesses and products	Original investment amount		Balance as of December 31, 2025			Net income (losses) of investee	Investment Income (losses)	Note
				December 31, 2025	December 31, 2024	Shares (thousands)	Percentage of ownership	Carrying value
Ne Company	CIINB	Belgium	Import, export, technical support, and consulting services for broadband network products and related components	6,842	6,842	20	100%	4,995	(364)	(364)	Note 1
The Company	CIINN	Netherlands	"	7,016	7,016	20	100%	6,556	(187)	(187)	o
The Company	Starmems	Taiwan	Research and development of micro-electro-mechanical system (MEMS) microphone technology products	16,300	10,000	1,630	9.59%	5,055	(17,998)	(1,729)	Invested company accounted for using equity method

Note 1: Except for the current period profit or loss of the investee, which was translated into NTD using the average exchange rate ([email protected]), all other items were translated using the closing exchange rate as of the reporting date ([email protected]).

(14) Segment information:

Please refer the consolidated financial statements for the year ended December 31, 2025.

Compal Broadband Networks, Inc.

Statement of Cash and Cash Equivalents

December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Items	Description	Amount
Cash on hand		$ 251
Checking accounts and demand deposits	TWD	117,282
	Foreign currency (USD 136 thousand, EUR 582 thousand and others)	25,956
		143,238
Time deposits	TWD (maturity date: February 25, 2026~March 18, 2026)	200,000
Total		$ 343,489

Note : The exchange rate: USD1 = NTD 31.430; EUR1 = NTD 36.90

Statement of Accounts Receivable

December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Client Name	Description	Amount
Company P	Sales of non-related-parties	$ 75,902
Company Q	„	13,103
Company R	„	10,862
Company S	„	10,395
Company F	„	10,106
Other (note)	„	21,921
Subtotal		142,289
Less: loss allowance		(271)
Net amount		$ 142,018

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

Compal Broadband Networks, Inc.

Statement of Inventories

December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Item	Amount
	Cost	Net realizable value
Raw material	$ 390,388	391,500
Work in process and semi-finished goods	1,902	1,902
Merchandise	2,439	9,964
	$ 394,729	403,366

Note: Allowance for inventory valuation and obsolescence loss is the result of taking the lower of cost and net realizable value and evaluating the inventory which is not changed for more than three months.

Compal Broadband Networks, Inc.

Statement of Changes in Investment Accounted for Using The Equity Method

December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Name of investee	Beginning balance		Increase		Decrease		Profit or loss of investment	Other	Ending balance			Net assets value	Pledge or collateral
	Shares	Amount	Shares	Amount	Shares	Amount			Shares	Percentage of shareholding	Amount
Compal Broadband Networks Belgium BVBA	20$	4,979	-	-	-	-	(364)	380	20	100%	4,995	4,995	None
Compal Broadband Networks Netherlands B.V.	20	6,251	-	-	-	-	(187)	492	20	100%	6,556	6,556	n
Starmems Semiconductor Corp.	1,630	6,784	-	-	-	-	(1,729)	-	1,630	9.59%	5,055	5,005	n
Total	$ 18,014		-		-		(2,280)	872	16,606

Compal Broadband Networks, Inc.

Statement of Changes in Property, Plant and Equipment

For the year ended December 31, 2025

Please refer to note 6(f).

Statement of Accounts Payable

December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Supplier Name	Amount
Company K	$ 18,596
Company B	11,483
Company J	7,675
Company L	6,594
Others (Note)	55,773
	$ 100,121

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

Compal Broadband Networks, Inc.

Statement of Other Payables

December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Item	Description	Amount
Payroll payables and bonuses payable		$ 13,811
Others (Note)	Insurance expenses payable and others	24,187
		$ 37,998

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, 2025

(Expressed in thousands of New Taiwan Dollars)

Item	Quantity (in thousands)	Amount
Sales revenue:
Communication network products	188	$ 409,956
Material sales revenue and others		187,932
Net operating revenue		$ 597,888

Compal Broadband Networks, Inc.

Statement of Operating Costs

For the year ended December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Item	Amount
Raw materials
Raw materials, beginning of year	$ 507,131
Add: Purchases	351,719
Less: Raw materials, end of year	(393,895)
Cost of raw materials sold	(16,427)
Transferred to operating expense and others	(8,593)
Raw material used	439,935
Processing fee, royalty and depreciation	9,697
Add: Work in progress and semi-finished goods, beginning of the year	4,023
Purchase of semi-finished products and others	4,023
Less: Work in progress and semi-finished goods, end of the year	(4,614)
Cost of merchandise	453,064
Add: Merchandise, beginning of year	43,819
Purchases	(90,709)
Less: Merchandise, end of year	(26,921)
Transferred to operating expense and others	(7,722)
Cost of merchandise sold	371,531
Cost of materials sold	16,427
Allowance for inventory valuation and obsolescence loss	2,906
Operating costs	$ 390,864

Compal Broadband Networks, Inc.

Statement of Selling, Administrative, Research and Development Expenses

For the year ended December 31, 2025

(Expressed in thousands of New Taiwan Dollars)

Item	Selling expenses	Administrative expenses	Research and development expenses
Salaries	$ 56,417	21,007	59,160
Depreciation	2,465	5,302	45,441
Import and export costs	5,930	-	306
Miscellaneous expense	3,578	5,648	55,039
Service expense	1,371	6,454	36
Testing expense	-	-	7,736
After-sales service expense (reversal)	(62,509)	-	-
Research material	2,630	-	13,906
Others (Note)	14,222	12,096	18,594
Total	$ 24,104	50,507	200,218

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

AI assistant

CBN — Audit Report / Information 2025

52609_rns_2026-05-29_b743834f-f4f2-4d5c-93e1-a459f0ab0f13.pdf

COMPAL BROADBAND NETWORKS, INC.

Table of contents

Independent Auditors' Report

Opinion

Basis for Opinion

Key Audit Matters

Auditors' Responsibilities for the Audit of the Financial Statements

Notes to Readers

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

COMPAL BROADBAND NETWORKS, INC.

Balance Sheets

December 31, 2025 and 2024

(Expressed in Thousands of New Taiwan Dollars)

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

COMPAL BROADBAND NETWORKS, INC.

Statements of Cash Flows

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(4) Summary of material accounting policies:

(a) Statement of compliance

(b) Basis of preparation

(i) Basis of measurement

(ii) Functional and presentation currency

(c) Foreign currencies

(i) Foreign currency transactions

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(i) Sale of goods

(ii) Financing components

(p) Employee benefits

(i) Defined contribution plans

(ii) Short term employee benefits

(q) Share-based payment

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

(b) Accounts receivable

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(f) Property, plant and equipment

COMPAL BROADBAND NETWORKS, INC.

Notes to the Financial Statements

(g) Right-of-use assets

COMPAL BROADBAND NETWORKS, INC.

CBN Audit Report / Information 2025