FocalTech - Annual Report 2021 | FinancialReports.eu

FocalTech Systems Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2021 and 2020

Notice to Readers

The reader is advised that these financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

REPRESENTATION LETTER

The entities that are required to be included in the combined financial statements of FocalTech Systems Co., Ltd. as of and for the year ended December 31, 2021, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standard 10, “Consolidated Financial Statements.” In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, FocalTech Systems Co., Ltd. and Subsidiaries do not prepare a separate set of combined financial statements.

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Very truly yours, FocalTech Systems Co., Ltd.

By Genda James Hu Chairman February 23, 2022

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This is the translation of the financial statements. CPAs do not audit or review on this translation.

Independent Accountants’ Report

To the Board of Directors of FocalTech Systems Co., Ltd.

Introduction

We have audited the accompanying consolidated balance sheets of FocalTech Systems Co., Ltd. and its subsidiaries (the “Group”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years ended December 31, 2021 and 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated 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 for 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 consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements in the current period are stated as follows:

Sales Revenue

The sales revenue of Integrated Driver Controller is the main indicator of financial and business performance evaluated by investors and the management. It possibly exists the pressure to achieve the financial target, and it might result in the risk of the occurrence of sales revenue. Therefore, the sales revenue of Integrated Driver Controller is listed in the Key Audit Matters in 2021.

Refer to Notes 4,23 for the accounting policy, accounting estimation and disclosure information. Our audit procedures related to the abovementioned Key Audit Matters included the following:
We evaluated the design of internal control related to sales and collection cycle and the implement of the internal control.
We obtained customer ranking list in 2021, and analyze the differences of customers and its sales amount.
We analyzed if the sales quantities, sales revenue and gross margin by products existed material exception.
We sampled purchase orders, shipping documents bills of lading, and collection records in revenue breakdown to ensure the occurrence of sales revenue.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Other Matter

We have also audited the parent company only financial statements of FocalTech Systems Co., Ltd. as of and for the years ended December 31, 2021 and 2020 on which we have issued an unmodified opinion.

Responsibilities of Corporate Management and Governance Hierarchy for the Consolidated Financial Statements

Management Level is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management level 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.

Corporate governance level (including members of the Audit Committee) is responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated 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 Group’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 Group’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 consolidated 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 Group to cease to continue as a going concern.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated 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 entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group 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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2021 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 Shiow-Ming Shue and Chih-Ming Shao.

Deloitte & Touche Taipei, Taiwan Republic of China February 23, 2022

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 4 and 6) Financial assets at fair value through profit or loss - current (Note 4 and 7) Financial assets at fair value through other comprehensive income - current (Note 4 and 8) Accounts receivables, net (Note 4 and 10) Inventories (Note 4 and 11) Other financial assets (Note 4 and 9) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Note 4 and 7) Financial assets at fair value through other comprehensive income - non-current (Note 4 and 8) Property, plant and equipment (Note 4 and 13) Goodwill (Notes 4 and 14) Other intangible assets (Note 4 and 15) Deferred tax assets(Note 4 and 25) Refundable deposits(Note 16) Other non-current assets (Note 32) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 17) Accounts payables (Note 18) Other payables (Note 19) Current tax liabilities (Notes 4 and 25) Other current liabilities (Notes 23) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 17) Deferred tax liabilities(Note 4 and 25) Net defined benefit liabilities - non-current (Note 4 and 20) Guarantee deposits received(Note 21) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (Notes 4, 22 and 27) Share capital Ordinary shares Capital surplus Additional paid-in capital Treasury shares Employee stock options Restricted stock for employees Employee share options – expired Total capital surplus Retained earnings Legal reserve Special reserve Undistributed earnings Total retained earnings Other equity Exchange differences from translating the financial statements of foreign operations Unrealized gain on financial assets at fair value through other comprehensive income Unearned employee compensation Total other equity Treasury shares Equity attributable to owners of the parent NON-CONTROLLING INTERESTS (Note 22) Total equity TOTAL		2021 Amount % $ 6,456,988 26 119,218 1 55,590 - 3,255,081 13 3,822,218 15 3,879,862 15 536,459 2 18,125,416 72 412,779 1 178,404 1 2,468,605 10 1,237,268 5 47,228 - 9,914 - 2,841,745 11 10,575 - 7,206,518 28 $ 25,331,934 100 $ 301,712 1 2,620,160 10 1,596,958 6 1,786,309 7 110,356 1 6,415,495 25 786,840 3 51,584 - 22,140 - 4,397,513 18 10,400 - 5,268,477 21 11,683,972 46 2,162,367 9 4,737,390 19 79,917 - 65,873 - 1,145,555 5 34,134 - 6,062,869 24 101,230 - 122,316 - 6,202,079 25 6,425,625 25 (211,648) (1) 169 - (813,720) (3) (1,025,199) (4) - - 13,625,662 54 22,300 - 13,647,962 54 $ 25,331,934 100		2020
				Amount $ 4,011,682 - - 1,633,900 1,755,142 1,385,936 184,262 8,970,922 234,662 247,974 1,321,940 1,237,268 63,202 85,154 172,465 11,466 3,374,131 $12,345,053 $ 523,648 1,731,109 1,037,431 433,121 230,944 3,956,253 - 53,213 23,366 490,361 10,400 577,340 4,533,593 2,103,532 4,725,445 69,361 14,903 - 33,933 4,843,642 - - 1,012,301 1,012,301 (125,038) 2,722 - (122,316) (24,316) 7,812,843 (1,383) 7,811,460 $ 12,345,053		%
						33 - - 13 14 11 2 73 2 2 11 10 - 1 1 - 27 100 4 14 8 4 2 32 - 1 - 4 - 5 37 17 38 1 - - - 39 - - 8 8 (1) - - (1) - 63 - 63 100

The accompanying notes are an integral part of the consolidated financial statements.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021AND 2020 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

REVENUE (Note 4 and 23) COST OF REVENUE (Note 4,11 and 24) GROSS PROFIT OPERATING EXPENSES (Note 24, 27, 28 and 31) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Finance costs(Note 24) Share of loss of subsidiaries and joint ventures(Note4) Interest income(Note4) Gain (Loss) on financial assets and liabilities at fair value through profit or loss(Note4) Other gains and losses - net Loss on foreign exchange(Note4) Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Note 4 and 25) NET INCOME OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans(Notes 4 and 20) Income tax related to items that will not be reclassified subsequently to profit or loss(Notes 4 and 25) Items that may be reclassified subsequently to profit or loss: Exchange differences from translating the financial statements of foreign operations(Notes 4) Unrealized (loss) gain from debt instrument investments measured at fair value through other comprehensive loss(Notes 4) Items that may be reclassified subsequently to profit or loss Total other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET INCOME ATTRIBUTABLE TO: Owners of the Parent Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Parent Non-controlling interests EARNINGS PER SHARE (Note 26) Basic Diluted		2021	% 100 (51) 49 (2 ) (3 ) (11) (16) 33 - - - - 2 - 2 35 (7) 28 - - - (1 ) - (1) (1) 27 28 - 28 27 - 27		2020
		Amount $ 21,991,497 (11,262,098) 10,729,399 (555,675) (633,984 ) (2,409,274) (3,598,933) 7,130,466 (12,680) - 31,307 83,103 428,564 (57,690) 472,604 7,603,070 (1,506,220 ) 6,096,850 751 (105) 646 (89,858) (2,553) (92,411) (91,765) 6,005,085 6,112,935 (16,085) 6,096,850 $ 6,024,418 (19,333) $ 6,005,085 $ 30.23 $ 28.62			Amount $ 13,800,348 (10,371,572) 3,428,776 (398,828) (363,193 ) (1,636,018) (2,398,039) 1,030,737 (2,009) (4,970) 51,835 (5,607) 92,446 (5,335) 126,360 1,157,097 (173,639) 983,458 359 (50) 309 (132,636) 972 (131,664) (131,355) 852,103 1,011,992 (28,534) 983,458 $ 884,178 (32,075) $ 852,103 $ 3.97 $ 3.73	%
						100 (75) 25 (3 ) (3 ) (12) (18) 7 - - - - 1 - 1 8 (1) 7 - - - (1 ) - (1) (1) 6 7 - 7 6 - 6

The accompanying notes are an integral part of the consolidated financial statements

(Concluded)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

(In Thousands of New Taiwan Dollars)
BALANCE, JANUARY 1, 2020 Reduction on capital surplus to offset accumulated deficits Cash distribution from additional paid-in capital Net income for the year ended December 31, 2020 Other comprehensive income (loss) for the year ended December 31, 2020, net of income tax Total comprehensive income (loss) for the year ended December 31, 2020 Reduction of capital (Note 22) Compensation cost of employee share options (Note 22 and 27) Treasury shares transferred to employees (Note 22 and 27) Issuance of ordinary shares from exercise of employee share options (Note 22 and 27) BALANCE, DECEMBER 31, 2020 Appropriation of 2020 earnings Legal reserve Special reserve Cash dividends Net income for the year ended December 31, 2021 Other comprehensive income (loss) for the year ended December 31, 2021, net of income tax Total comprehensive income (loss) for the year ended December 31, 2021 Compensation cost of employee share options (Note 22 and 27) Treasury shares transferred to employees (Note 22 and 27) Treasury shares retired Increase in non-controlling interests Changes in ownership interests in subsidiaries Issuance of ordinary shares from exercise of employee share options (Note 22 and 27) Issuance of restricted stock employees (Note 4, 22 and 27) Compensation cost of restricted stock to employees (Note 4, 22 and 27) BALANCE, DECEMBER 31, 2021				Equity Attributable to Owners of the Parent							Total $ 7,697,478 - 150,000 ) 1,011,992 127,814) 884,178 894,530 ) 21,279 238,879 15,559 7,812,843 - - 700,000 ) 6,112,935 88,517) 6,024,418 66,351 25,892 - - 257 ) 9,390 55,190 331,835 $ 13,625,662	Non-controlling Interests $ 30,692 - - ( 28,534 ) ( 3,541) ( 32,075) - - - - ( 1,383 ) - - - ( 16,085 ) ( 3,248) ( 19,333) - - - 42,759 257 - - - $ 22,300		Total Equity
	Share Capital Ordinary Shares $ 2,996,759 - - - - - ( 899,721 ) - - 6,494 2,103,532 - - - - - - - - ( 119 ) - - 3,764 55,190 - $ 2,162,367	Capital Surplus $ 5,145,377 ( 183,307 ) ( 150,000 ) - - - - 21,279 1,228 9,065 4,843,642 - - - - - - 66,351 1,947 ( 252 ) - - 5,626 1,145,555 - $ 6,062,869		Retained Earnings	Undistributed Earnings ( $ 183,307 ) 183,307 - 1,011,992 309 1,012,301 - - - - 1,012,301 ( 101,230 ) ( 122,316 ) ( 700,000 ) 6,112,935 646 6,113,581 - - - - ( 257 ) - - - $ 6,202,079		Other Equity	Unearned employee compensation $ - - - - - - - - - - - - - - - - - - - - - - - ( 1,145,555 ) 331,835 ($ 813,720)	Treasury Shares ( $ 267,158 ) - - - - - 5,191 - 237,651 - ( 24,316 ) - - - - - - - 23,945 371 - - - - - $ -
			Legal Reserve $ - - - - - - - - - - - 101,230 - - - - - - - - - - - - - $ 101,230	Special Reserve $ - - - - - - - - - - - - 122,316 - - - - - - - - - - - - $ 122,316		Exchange Differences from Translating the Financial Statement of Foreign Operations $ 4,057 - - - ( 129,095) ( 129,095) - - - - ( 125,038 ) - - - - ( 86,610) ( 86,610) - - - - - - - - ($ 211,648)	Unrealized Gain (Loss) on Financial Assets at Fair Value through Other Comprehensive Income $ 1,750 - - - 972 972 - - - - 2,722 - - - - ( 2,553) ( 2,553) - - - - - - - - $ 169
	( (	( ( (			( ( ( ( (	( ( ( ( ( (	( (	( (	( (	( ( ( ( ( (		( ( ( ( ( ( (	( ( ( ( (	$ 7,728,170 - 150,000 ) 983,458 131,355) 852,103 894,530 ) 21,279 238,879 15,559 7,811,460 - - 700,000 ) 6,096,850 91,765) 6,005,085 66,351 25,892 - 42,759 - 9,390 55,190 331,835 $ 13,647,962

The accompanying notes are an integral part of the consolidated financial statements.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Net (gain) loss on financial assets at fair value through profit or loss Finance costs Interest income Compensation cost of employee share options Compensation cost of restricted stock to employees Share of loss of subsidiaries and joint ventures Loss on disposal of property, plant and equipment (Gain) loss on disposal of investments Reversal gain on write-off of inventories Unrealized (gain) loss on foreign exchange Changes in operating assets and liabilities Financial assets mandatorily measured at fair value through profit or loss Accounts receivables Inventories Other current assets Accounts payables Other payables Other current liabilities Net defined benefit liabilities Cash generated from operations Interest paid Income tax paid Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through other comprehensive income Proceeds from disposal of financial assets at fair value through other comprehensive income Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Acquisition of intangible assets (Decrease) increase in other financial assets Increase in refundable deposits Decrease in other non-current assets Interest received Net cash (outflow) inflow from investing activities		2021 $ 7,603,070 86,494 15,955 (83,103) 12,680 (31,307) 66,351 331,835 - 318 (183,272) (259,552) (31,157) (34,762) (1,624,336) (1,814,888) (354,559) 893,835 581,523 (119,053) (475) 5,055,597 (12,673) (70,372) 4,972,552 - - - (1,241,028) - (2,520,040) (2,669,759) 851 36,430 (6,393,546)		2020
				$ 1,157,097 77,433 35,903 5,607 2,009 (51,835) 21,279 - 4,970 1,264 40,928 (229,556) (37,330) (230,416) (233,170) 19,988 165,670 (228,551) 113,845 125,308 (353) 760,090 (1,792) (31,382) 726,916 (197,216) 118,197 (4,970) (22,860) (147) 155,603 (52,817) 3,880 63,648 63,318

(Continued)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in short-term borrowings Increase in long-term borrowings Increase in guarantee deposits Issuance of restricted stock employees Dividends paid to owners of the Company Capital reduction payments to shareholders Exercise of employee share options Treasury shares transferred to employees Increase in non-controlling interests Net cash inflow (outflow) from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD		2021 $ (221,693) 786,840 3,907,208 55,190 (700,000) - 9,390 25,892 42,759 3,905,586 (39,286) 2,445,306 4,011,682 $ 6,456,988		2020
				$ 522,827 - 99,862 - (150,000) (894,530) 15,559 238,879 - (167,403) (72,652) 550,179 3,461,503 $ 4,011,682

The accompanying notes are an integral part of the consolidated financial statements.

(Concluded)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

FocalTech Systems Co., Ltd. (“FocalTech” or “the Company”), formerly named as Orise Technology Co., Ltd., was incorporated in the Republic of China (“ROC”) in January 2006 and moved to Hsinchu Science Park in April in the same year. The Company’s shares have been listed on the Taiwan Stock Exchange (“TWSE”) since July 2007. On January 2, 2015, the Company acquired FocalTech Corporation, Ltd. through a share swap and renamed on January 17, 2015. This acquisition was comprehensively considered as a reverse merger, where FocalTech Corporation, Ltd. was treated as the acquirer in the financial statements. The Company mainly engages in the research, development, design, manufacturing, and sales of Human-Machine Interface solutions, such as Display Driver IC, Touch Control IC and so on.

The consolidated financial statements are presented in the Company’s functional currency of New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on February 23, 2022.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

The initial application of the amendments to the IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16 (Interest Rate Benchmark Reform-Phase 2 and Covid-19-Related Rent Concessions beyond 30 June 2021) endorsed and issued in to effect by the FSC did not have a significant impact on the Group’s accounting policies.

b. The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2022

New, Revised or Amended Standards and Interpretations Annual Improvements to IFRS Standards 2018–2020 Amendments to IFRS 3 “Reference to the Conceptual Framework” Amendments to IAS 16 “Property, Plant and Equipment-Proceeds before Intended Use”	Effective Date Announced by IASB
	January 1, 2022 (Note 1) January 1, 2022 (Note 2) January 1, 2022 (Note 3)

— Amendments to IAS 37 “Onerous Contracts Cost of Fulfilling a January 1, 2022 (Note 4) Contract”

Note 1: The amendments to IFRS 9 will be applied prospectively to modifications or exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.
Note 2: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Note 3: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.
Note 4: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

As of the date the financial statements were authorized for issue, the Group assessed the application of abovementioned standards and interpretations do not have significant impact on the Group’s financial position and financial performance.

c. The IFRSs issued by IASB, but not yet endorsed and issued into effect by the FSC

Effective Date New, Revised or Amended Standards and Interpretations Announced by IASB (Note 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IFRS 17 “Initial Application of IFRS 9 and IFRS 17January 1, 2023 Comparative Information” Amendments to IAS 1 “Classification of Liabilities as Current or NonJanuary 1, 2023 current” Amendments to IAS 1 “Disclosure of Accounting Policies” January 1, 2023 (Note 2) Amendments to IAS 8 “Definition of Accounting Estimates” January 1, 2023 (Note 3) Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities January 1, 2023 (Note 4) arising from a Single Transaction”

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.
Note 3: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.
Note4: Except for deferred taxes that will be recognized on January 1, 2022 for temporary differences associated with leases and decommissioning obligations, the amendments will be applied prospectively to transactions that occur on or after January 1, 2022.

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have impact on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The present Consolidated Financial Report has been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by Financial Supervisory Commission.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

b. Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis, except for financial instruments measured at fair value and the net defined benefit liabilities recognized in the amount of the present value of defined benefit obligation less the fair value of any plan assets.

The evaluation of fair value could be classified into Level 1 to Level 3 by the observable intensity and importance of related input value:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Standards in differentiating current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within twelve months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

1) Assets expected to be realized within 12 months after the reporting period; and
2) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Those not as aforementioned current assets or current liabilities are classified as non-current assets or non-current liabilities.

d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Applicable adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Total comprehensive income of the subsidiaries is attributed both to the shareholders of the parent and the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing controlling over the subsidiaries are accounted as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their interests in the subsidiaries respectively. The amount adjusted for the non-controlling interests and the difference between fair value and the consideration paid or received are recognized directly in equity and attributed to shareholders of the parent.

The detail information, holding percentages, and main business of the subsidiaries could be found in Note 12, TABLE 6 and TABLE 7.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

e. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the Group entities (including subsidiaries in other countries that use currency different from the currency of the Company) are translated into the presentation currency - New Taiwan dollars as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

f. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

g. Property, plant and equipment

Property, plant and equipment are initially measured at cost, and subsequently measured at cost less accumulated depreciation.

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

h. Goodwill

Goodwill arising from the acquisition of a business is carried at cost, and subsequently measured at cost less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. If the recoverable amount of the cashgenerating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An

This is the translation of the financial statements. CPAs do not audit or review on this translation.

impairment loss recognized for goodwill is not reversed in subsequent periods.

i. Intangible assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is recognized on a straightline basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset are recognized in profit or loss.

j. Impairment of property, plant and equipment and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of Property, plant and equipment and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs to.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cashgenerating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

k. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

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

This is the translation of the financial statements. CPAs do not audit or review on this translation.

i) Measurement category

The Group’s financial assets include those measured at FVTPL, at amortized cost and investments in debt instruments measured at FVTOCI.

A. Financial asset at FVTPL

The equity instruments that are not specified as FVTOCI and debt instruments that do not meet the criteria of amortized cost or FVTOCI are mandatorily required to be measured at FVTPL.

Any dividends, interest earned and gain or loss arising from the remeasurement is recognized in profit or loss at fair value. The determination methodology of fair value of financial instruments states in Note 30.

B. Financial assets at amortized cost

Financial assets that meet both two following conditions will subsequently be measured at amortized cost:

(1) The objective of the business model to hold the financial asset is to collect contractual cash flows; and
(2) The cash flows from contractual terms of the financial asset on specified dates are solely matched for payments of principal and interests on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, account receivables at amortized cost, other financial assets, and refundable deposits, are measured at amortized cost, which equals to gross carrying amount determined by the effective interest method, subtracting any impairment loss. Foreign exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset.

Cash equivalents include time deposits with original maturities within 3 months from obtaining date, high liquidation level, readily convertible to a known amount of cash at any time, and low risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

C. Investments in debt instruments at FVTOCI

Investments in debt instruments that meet both the following conditions are subsequently measured at FVTOCI:

(1) The objective of the business model to hold the financial asset is to collect contractual cash flows and sell financial assets; and
(2) The cash flows from contractual terms of the financial asset on specified dates are solely matched for payments of principal and interests on the principal amount outstanding.

Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment losses or reversed gains on investments in debt instruments at FVTOCI are recognized in profit or loss. Other changes in the carrying amount of these debt

This is the translation of the financial statements. CPAs do not audit or review on this translation.

instruments are recognized in other comprehensive income and will be reclassified to profit or loss when these debt instruments are disposed.

ii) Impairment of financial assets

At the end of each reporting period, the impairment loss is recognized by expected credit loss method for financial assets at amortized cost (including accounts receivables) and for investments in debt instruments in FVTOCI.

The loss allowance for accounts receivables is determined by the expected credit losses over the lifetime. For other financial assets at amortized cost and investments in debt instruments that are measured at FVTOCI, if the credit risk on the financial instrument has not increased significantly after initial recognition, a loss allowance is determined by the expected credit losses resulting from the possible default events within 12 months after the reporting date. If, on the other hand, there has been a significant increase in credit risk after initial recognition, a loss allowance is determined by the expected credit losses resulting from all possible default events over the expected life of a financial instrument.

Expected credit losses (ECLS) reflect the weighted average of credit losses with the respective risks of default occurring as the weights. 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. In contrast, Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

All impairment loss of the financial instruments with a corresponding adjustment to their carrying amount are through an allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset.

iii) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

When a financial asset carried at amortized cost is derecognized in its entirety, the difference between the asset’s carrying amount and the consideration is recognized in profit or loss. If the financial asset is an investment in debt instruments at FVTOCI and derecognized in its entirety, the difference between the asset’s carrying amount and the sum of the consideration plus the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

2) Equity instruments

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

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

3) Financial liabilities

i) Subsequent measurement

All the financial liabilities are measured by amortized cost using the effective interest method.

ii) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

l. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

m. Revenue recognition

The Group recognizes revenue when customer’s contract obligations are satisfied.

Revenue comes from sales of human and machine interface devices ICs. Revenue is recognized when the ICs start to be shipped or are delivered to the specific locations instructed by customers, at which time the customer has full discretion over the ICs. Revenue and accounts receivables are recognized concurrently.

The Group considers varying contractual terms to estimate sales returns and recognize refund liabilities, which is classified under other payables.

n. Lease

The Group evaluates if the contract belongs to or includes the lease the commencement date.

The Group as a lessee

Except for the leases of low-value asset or short-term leases recognized as expenses on a straight-line basis, the Group recognizes right-of-use assets and lease liabilities for all leases on the consolidated balance sheets from the commencement date.

o. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (assets which are substantially ready for their intended use or sale through a fairly long period) are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

p. Government Grants

Government grants are not recognized until it is assured reasonably that the Group will be able to comply with the conditions attaching to the subsidies and the grants will be received possibly.

Government grants used as the compensation for expenses or losses already incurred are recognized in profit or loss in the period in which they become receivable and are not necessary to return.

q. Employee benefits
1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost, including current service cost and net interest on the net defined benefit liability (asset), is recognized as employee benefits expense in the period it occurs. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

r. Share-based payment arrangements

Equity-settled and share-based payment arrangements granted to employees

The fair value at the grant date of the equity-settled and share-based payments is expensed on a straightline basis over the vesting period, based on the Group’s optimal estimate number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options.

The fair value at the grant date of the restricted shares for employees is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in other equity - unearned employee benefits.

When restricted shares for employees are issued, other equity - unearned employee benefits is recognized on the grant date, with a corresponding increase in capital surplus - restricted shares for employees.

At the end of each reporting period, the Group revises its estimate of the number of restricted shares for employees that are expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - restricted shares for employees.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

s. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

The tax on unappropriated earnings according to the Income Tax Law should be accrued in the year when the resolution regarding to the appropriated earnings is made in the shareholder meeting.

Any adjustment of prior years’ tax liability is counted in the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. In addition, a deferred tax liability is not recognized on taxable temporary difference arising from initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the deferred tax is recognized in other comprehensive income.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent (time deposits with original maturities within three months)		December 31	December 31	December 31
		2021 $ 24,233 4,141,003 2,291,752 $ 6,456,988		2020
				$ 2,182 3,668,013 341,487 $ 4,011,682

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Current Mandatorily measured at fair value through profit or loss (FVTPL) Listed ordinary shares Non–Current Mandatorily measured at fair value through profit or loss (FVTPL) Listed preferred shares Private Funds Structured Investments	December 31	December 31
	2021 $119,218 $ 151,801 156,075 104,903 $ 412,779	2020
		$-
		$ 72,186 52,579 109,897
		$ 234,662

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in debt instruments Current Foreign investments Fixed income bonds Non–Current Foreign investments Fixed income bonds		December 31	December 31	December 31
		2021 $ 55,590 $ 178,404		2020
				$ - $ 247,974

This is the translation of the financial statements. CPAs do not audit or review on this translation.

9. OTHER FINANCIAL ASSETS

Time deposits with original maturities more than three months 10. ACCOUNTS RECEIVABLES, NET Accounts receivables		December 31	December 31	December 31
		2021		2020

		2021		2020
		$ 3,255,081		$ 1,633,900

The average credit term for sales of goods was 30-120 days. In order to minimize credit risk, management of the Group has delegated a team responsible for determining line of credit, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual accounts receivable at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts. In this regard, the Group’s management believes the Group’s credit risk was significantly reduced.

The Group applies the simplified approach prescribed by IFRS 9, which permits the use of allowances of expected credit losses over the lifetime for all accounts receivables. The expected credit losses on accounts receivables are estimated by using an allowance matrix with references to past customer default records, customer’s current financial position, and general economic conditions of the industry. Due to the past experiences, there is no significant difference in the loss patterns of different customer groups. Therefore, the allowance matrix does not further distinguish the customer base, and only sets the expected credit loss rate based on the overdue days of accounts receivable.

The following table details the loss allowance of accounts receivables based on the Group’s allowance matrix. December 31, 2021

Expected credit loss rate Gross carrying amount and Amortized cost December 31, 2020 Expected credit loss rate Gross carrying amount and Amortized cost	Non Past Due 0% $ 3,023,207 Non Past Due 0% $ 1,593,485		Overdue 1-60 Days 0% $ 231,874 Overdue 1-60 Days 0% 40,401	Overdue 61-180 Days 0% $ - Overdue 61-180 Days 0% $ 14	Overdue Over 180 Days 0% $ - Overdue Over 180 Days 0% $ -	Total
						0% $ 3,255,081 Total
		$				0% $ 1,633,900

This is the translation of the financial statements. CPAs do not audit or review on this translation.

11. INVENTORIES

Finished goods Work in progress Raw materials and supplies		December 31	December 31	December 31
		2021 $ 1,233,626 1,622,781 965,811 $ 3,822,218		2020
				$ 418,694 1,025,201 311,247 $ 1,755,142

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2021 and 2020 was NT$11,262,098 thousand and NT$10,371,572 thousand, included gain from price recovery of inventory of NT$259,552 thousand and NT$229,556 thousand for the years ended December 31, 2021 and 2020, respectively. Above mentioned gains from price recovery of inventory are resulted from sales of slow moving inventory.

12. SUBSIDIARIES

Details of the Company’s subsidiaries included in the consolidated financial statements were as follows:

Investor	Investee	Main Businesses	Percentage of Ownership	Percentage of Ownership	Note
			December 31, 2021	December 31, 2020
FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd.	FocalTech Corporation, Ltd. FocalTech Electronics, Ltd.	Investment activity Investment activity	100% 100%	100% 100%	- -
FocalTech Systems Co., Ltd. And FocalTech Electronics Co., Ltd.	FocalTech Smart Sensors, Ltd.	Investment activity	66.45%	67.15%	Note1
FocalTech Smart Sensors, Ltd.	FocalTech Smart Sensors Co., Ltd.	Research, development, manufacturing and sale of integrated circuits	100%	100%	-
FocalTech Corporation, Ltd.	FocalTech Systems, Inc.	Investment activity	100%	100%	-
FocalTech Systems, Inc.	FocalTech Systems, Ltd.	Investment activity	100%	100%	-
FocalTech Systems, Ltd. FocalTech Systems, Ltd.	FocalTech Systems (Shenzhen) Co., Ltd. FocalTech Electronics Co., Ltd.	Design and research of integrated circuits Import and export of integrated circuits	100% 100%	100% 100%	- -
FocalTech Electronics, Ltd. FocalTech Electronics, Ltd. FocalTech Electronics, Ltd.	FocalTech Electronics (Shanghai) Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. Hefei PineTech Electronics Co., Ltd.	Sales support and post-sales service for affiliates’ IC products Research, development, manufacturing and sale of integrated circuits Research, development and sale of integrated circuits	100% 100% 100%	100% 100% 100%	- - -

Note1: The changes in the shareholding ratio of FocalTech Smart Sensors, Ltd. is due to the Group did not subscribe proportionally when its cash capital was increased.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2021 Additions Reclassification Disposals Effect of foreign currency exchange differences Balance, December 31, 2021 Accumulated depreciation Balance, January 1, 2021 Depreciation Reclassification Disposals Effect of foreign currency exchange differences Balance, December 31, 2021 Carrying amounts as of December 31, 2021 Cost Balance, January 1, 2020 Additions Reclassification Disposals Effect of foreign currency exchange differences Balance, December 31, 2020 Accumulated depreciation Balance, January 1, 2020 Depreciation Reclassification Disposals Effect of foreign currency exchange differences Balance, December 31, 2020 Carrying amounts as of December 31, 2020		Buildings	Development Equipment		Office Equipment		Information Equipment	Leasehold Improvements	Leasehold Improvements		Construction Inprogress	Total
		$ 1,343,090 - - - ( 6,969) $ 1,336,121 $ 121,696 35,492 - - ( 622) $ 156,566 $ 1,179,555 $ 1,322,961 - - - 20,129 $ 1,343,090 $ 84,761 35,022 - - 1,913 $ 121,696 $ 1,221,394	$ 292,977 154,365 ( 156 ) ( 8,366 ) ( 4,132) $ 434,688 $ 203,722 47,738 ( 8,048 ) ( 2,989) $ 240,423 $ 194,265 $ 285,660 19,431 ( 259 ) ( 5,965 ) ( 5,890) $ 292,977 $ 174,368 39,020 - ( 5,868 ) ( 3,798) $ 203,722 $ 89,255	$ 11,557 731 104 - ( 43) $ 12,349 $ 9,574 575 ( 10 ) - ( 32) $ 10,107 $ 2,242 $ 15,548 97 ( 76 ) ( 4,123 ) 111 $ 11,557 $ 12,431 798 10 ( 3,750 ) 85 $ 9,574 $ 1,983		$ 38,869 5,802 52 - ( 183) $ 44,540 $ 29,561 2,689 10 - ( 133) $ 32,127 $ 12,413 $ 42,621 3,332 335 ( 7,935 ) 516 $ 38,869 $ 33,752 2,593 ( 10 ) ( 7,141 ) 367 $ 29,561 $ 9,308			$ 38,604 - - - ( 74) $ 38,530 $ 38,604 - - - ( 74) $ 38,530 $ - $ 38,388 - - - 216 $ 38,604 $ 38,388 - - - 216 $ 38,604 $ -		$ - 1,080,130 - - - $ 1,080,130 $ - - - - - $ - $ 1,080,130 $ - - - - - $ - $ - - - - - $ - $ -	$ 1,725,097 1,241,028 - ( 8,366 ) ( 11,401) $ 2,946,358 $ 403,157 86,494 - ( 8,048 ) ( 3,850) $ 477,753 $ 2,468,605 $ 1,705,178 22,860 - ( 18,023 ) 15,082 $ 1,725,097 $ 343,700 77,433 - ( 16,759 ) ( 1,217) $ 403,157 $ 1,321,940

Property, plant and equipment were depreciated on a straight-line basis over the estimated useful lives as follows:

Buildings 45-50 years Development equipment 3-5 years Office equipment 3-5 years Information equipment 3-5 years Leasehold improvements 1-5 years

Property, plant and equipment were pledged as collateral. Refer to Note 32.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

14. GOODWILL

Ending balance	For the Year Ended	For the Year Ended	For the Year Ended	December 31
		2021 $ 1,237,268		2020
				$ 1,237,268

Considering the synergy of integration of LCD driver and touch controller under the industry trend, the reverse merger was triggered by FocalTech Corporation, Ltd. on January 2, 2015, resulting the goodwill of $3,237,268 thousand. In 2018, the impacts of market improper competition and the shortage of wafer supply made the company a serious market share decline, which is expected to influence the market shares and gross margins in the future. Therefore, the recoverable amount from IDC (Integrated Driver Controller) less than the carrying value so the Company recognized the impairment loss of $2,000,000 thousand. In 2019, based on the market growth and market share gain in smartphone market, the Group estimated cash flows from sales of IDC (Integrated Driver Controller), and the recoverable amount exceeded the carrying value. Therefore, the Group did not recognize any impairment on goodwill.

The recoverable amount is calculated by IDC projected net cash flows, discounted at 16.52% and 15.45% for the years ended December 31, 2021 and 2020, under the assumptions of management team judgments and historical experiences with regard to future growth rates and gross margin.

15. OTHER INTANGIBLE ASSETS

Cost Balance, January 1, 2021 Reclassification Effect of foreign currency exchange differences Balance, December 31, 2021 Accumulated amortization Balance, January 1, 2021 Amortization expenses Reclassification Effect of foreign currency exchange differences Balance, December 31, 2021 Carrying amounts as of December 31, 2021 Cost Balance, January 1, 2020 Additions Effect of foreign currency exchange differences Balance, December 31, 2020		Licenses and Franchises $ 122,262 8,911 3,161) $ 128,012 $ 122,130 132 8,911 3,161) $ 128,012 $ - $ 127,719 - 5,457) $ 122,262	Software $ 148,247 ( 8,911 ) ( 3,497) $ 135,839 $ 144,543 638 ( 8,911 ) ( 3,478) $ 132,792 $ 3,047 $ 154,970 147 ( 6,870) $ 148,247		Patents $ 76,708 - 1) $ 76,707 $ 46,942 7,785 - 1) $ 54,726 $ 21,981 $ 76,704 - 4 $ 76,708	Trademark $ 74,000 - - $ 74,000 $ 44,400 7,400 - - $ 51,800 $ 22,200 $ 74,000 - - $ 74,000		Total
	( ( (			( (			( ( (	$ 421,217 - 6,659) $ 414,558 $ 358,015 15,955 - 6,640) $ 367,330 $ 47,228 $ 433,393 147 12,323) $ 421,217

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Accumulated amortization Balance, January 1, 2020 Amortization expenses Reclassification Balance, December 31, 2020 Carrying amounts as of December 31, 2020		Licenses and Franchises $ 109,676 17,660 5,206) $ 122,130 $ 132		Software $ 148,376 3,057 6,890) $ 144,543 $ 3,704		Patents $ 39,152 7,786 4 $ 46,942 $ 29,766	Trademark $ 37,000 7,400 - $ 44,400 $ 29,600	Total
	(		(					$ 334,204 35,903 ( 12,092) $ 358,015 $ 63,202

Other intangible assets were amortized on a straight-line basis over the estimated useful lives as follows:

Licenses and franchises 3-5 years Software 1-5 years Patents 7-10 years Trademark 10 years

16. REFUNDABLE DEPOSITS

Capacity guarantee deposits and others		December 31	December 31	December 31
		2021 $2,841,745		2020
				$ 172,465

Guarantee deposits mainly consists of cash paid to suppliers to ensure stable foundry capacity.

17. BORROWINGS

a. Short-term borrowings

Unsecured bank loans Secured bank loans(Note 32) Annual interest rate Unsecured bank loans Secured bank loans		December 31	December 31	December 31
				2020
			$ 480,000 43,648 $ 523,648 0.88`～`1.06% 4.1%

Properties, plants and equipment are pledged as collateral for the bank loans, please refer to Note 32.

b. Long-term borrowings

Secured bank loans Annual interest rate Secured bank loans		December 31	December 31	December 31
		2021 $ 786,840 1.00%		2020
				$ - -

Commercial building is pledged as collateral for long-term loans, please refer to Note 32.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

18. ACCOUNTS PAYABLES

Accounts payables		December 31	December 31	December 31
		2021 $ 2,620,160		2020
				$ 1,731,109

The average credit period on purchases was 30-60 days. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

19. OTHER PAYABLES

Payable for rebates Payable for salaries and bonus Payable for labor, health and social insurance Reserve for litigations Payable for professional services and others		December 31	December 31	December 31
		2021 $ 610,291 777,747 15,913 46,261 146,746 $1,596,958		2020
				$ 423,800 467,979 13,977 47,598 84,077 $1,037,431

20. RETIREMENT BENEFIT

a. Defined contribution plans

、 The Company FocalTech Smart Sensors Co., Ltd. and FocalTech Electronics Co., Ltd. adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plans

The defined benefit plan adopted by the Company in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability			December 31	December 31	December 31	December 31
			2021 $ 40,265 18,125) $ 22,140			2020
						$ 42,275 18,909) $ 23,366

Movements in net defined benefit liability were as follows:

Balance at January 1, 2021 Net interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding amounts included in net interest) Actuarial loss - changes in financial assumptions Actuarial loss - experience adjustments Recognized in other comprehensive income Contributions from the employer Benefits paid Balance at December 31, 2021 Balance at January 1, 2020 Service cost Net interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding amounts included in net interest) Actuarial gains - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial loss - experience adjustments Recognized in other comprehensive income Contributions from the employer Benefits paid Balance at December 31, 2020	Present Value of the Defined Benefit Obligation $ 42,275 338 338 - 764 ( 1,425) ( 661) - ( 1,687) $ 40,265 $ 45,235 126 452 578 - 1,436 1,151 ( 2,327) 260 - ( 3,798) $ 42,275	Fair Value of the Plan Assets ($ 18,909) ( 154) ( 154) ( 90 ) - - ( 90) ( 659 ) 1,687 ($ 18,125) ($ 21,157) - ( 215) ( 215) ( 619 ) - - - ( 619) ( 716 ) 3,798 ($ 18,909)		Net Defined Benefit Liability (Asset)
	( ( ( ( (		$ 23,366 184 184 ( 90 ) 764 ( 1,425) ( 751) ( 659 ) - $ 22,140 $ 24,078 126 237 363 ( 619 ) 1,436 1,151 ( 2,327) ( 359) ( 716 ) - $ 23,366

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated

This is the translation of the financial statements. CPAs do not audit or review on this translation.

management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rate of salary increase	December 31	December 31
	2021 0.65% 4.5%	2020
		0.8% 4.5%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 1% increase 1% decrease		December 31	December 31	December 31
		2021 ($ 1,263) ($ 1,314) ($ 5,348) ($ 4,670)		2020
				($ 1,501) ($ 1,566) ($ 6,441) ($ 5,567)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

December	December	31
2021 2020 $ 680 $ 717 15.2 years 16.1 years December 31		2020

	2020
	$ 490,361

Guarantee deposit mainly consists of cash received from customers to ensure they have access to the Group’s specified capacity

This is the translation of the financial statements. CPAs do not audit or review on this translation.

22. EQUITY

a. Share capital Ordinary shares (par value at NT$10 per share)

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31	December 31
		2021		2020
		500,000 $ 5,000,000 216,237 $ 2,162,367		500,000 $ 5,000,000 210,353 $ 2,103,532

The company has redeemed 326 thousand shares of issued restricted stocks for employees during the year ended December 31, 2021. The registration processes have not been completed as of December 31, 2021.

b. Capital surplus

BALANCE, JANUARY 1, 2021 Treasury shares transferred to employees Employee treasury share vested Treasury shares retired Compensation cost of employee share options Issuance of ordinary shares from exercise of employee share options Employee share options expired Issuance of restricted stock for employees BALANCE, DECEMBER 31, 2021 BALANCE, JANUARY 1, 2020 Capital surplus used to cover accumulated deficits Cash distribution from additional paid-in capital Employee treasury share vested Treasury shares transferred to employees Compensation cost of employee share options Issuance of ordinary shares from exercise of employee share options Employee share options expired BALANCE, DECEMBER 31, 2020	Additional Paid-in Capital (1) $ 4,725,445 - - - - 11,945 - - $ 4,737,390 $ 5,037,671 (183,307) (150,000) - - - 21,081 - $ 4,725,445	Treasury Shares (1) $ 69,361 1,947 8,861 (252) - - - - $ 79,917 $ 48,662 - - 19,471 1,228 - - - $ 69,361	Restricted stock for employees (2) $ - - - - - - - 1,145,555 $ 1,145,555 $ - - - - - - - - $ -	Employee Share Options (2) $ 14,903 - (8,861) - 66,351 (6,319) (201) - $ 65,873 $ 25,510 - - (19,471 ) - 21,279 (12,016 ) (399 ) $ 14,903	Employee Share Options - Expired (1) $ 33,933 - - - - - 201 - $ 34,134 $ 33,534 - - - - - - 399 $ 33,933	Total
						$ 4,843,642 1,947 - (252) 66,351 5,626 - 1,145,555
						$ 6,062,869
						$5,145,377 (183,307 ) (150,000 ) - 1,228 21,279 9,065 -
						$ 4,843,642

1) This type of capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (at a certain percentage of the Company’s capital surplus annually).

2) This type of capital surplus cannot be used for any purposes.

c. Retained earnings and dividend policy

The amendments to the Company’s Articles of Incorporation had been approved by the Company’s shareholders’ meeting held on June 20, 2019, which stipulate that earnings distribution may be made on a quarterly basis after the close of each quarter.

According to The Company’s amended Articles of Incorporation, when the Company distributed earnings belonging to the first three quarters, it shall first estimate and reserve taxes to be paid, offset its deficits, estimate and reserve employees’ compensation and remuneration to directors. Second, the Company set aside a legal capital reserve at 10% of the remaining earnings and set aside or reverse special reserve in accordance with the laws and regulations. Third any remaining profit along with any undistributed retained earnings at the beginning shall be used by the Company’s board of directors. The board of directors shall propose the distribution of retained earnings after considering operational situations. When the retained earnings are distributed in form of stock, the resolution shall be approved by the shareholders’ meeting. When the retained earnings are distributed in form of cash, the resolution shall be approved by the board of directors.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

When the Company has earnings at the end of the year, it shall pay taxes, offset its losses, set aside 10% as legal reserve, then set aside or reverse a special reserve in accordance with relevant laws or regulations. The Board of Directors shall propose a distribution for the remaining earnings, along with the unappropriated retained earnings of previous years. Earnings distribution may be made in the form of shares after an approved resolution made by the shareholders’ meeting. Pursuant to the Company Act, the distributable dividends and bonuses or the legal reserve and the capital reserve (stipulated in Article 241, Paragraph 1 of the Company Act) in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors; and in addition to a report of such distribution shall be submitted to the shareholders’ meeting.

Before the amendment of the Company’s Articles of Incorporation on shareholders’ meeting on June 20, 2019, the earning distribution is only allowed after yearly closing by the approval of the shareholders’ meeting. The remaining retained earnings and dividends policy are consistent.

On June 20, 2020, the shareholders’ meeting resolved that the Company’s Articles of Incorporation amended on June 20, 2019 shall be revised back to the previous version.

See Note 24(d) for policy stipulated in the Articles of Incorporation regarding to the remuneration for employees and directors.

Considering current and future development plans, investment conditions, capital requirements, and market competition situations and shareholder benefits, the Company would appropriate the dividends to the shareholders not less than 10% of the current year’s earnings. The dividends could be paid in cash or shares. The cash portion should be equal or more than 10% of the total dividends. It is allowed not to distribute any cash dividend if the cash amount per share is less than NT 0.5.

Legal reserve should be appropriated from earnings until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

The Company’s shareholders’ meeting was held on June 20, 2020. The resolution was as follows. The Company offset the loss of NT$183,307 thousand from additional paid-in capital and the cash distribution of NT$150,000 thousand, i.e. NT$0.50291032 per share, from additional paid-in capital of share issue premium.

To increase the return on shareholders’ equity, the Company was approved for reduction of capital in the Company’s shareholders’ meeting on June 20, 2020. Company’s share capital was reduced by $899,721 thousand, and estimated to eliminate 89,972 thousand shares of the Company. Each share will be returned by $3 and the ratio of capital reduction is 30%. The reduction of capital was approved by Financial Supervisory Commission on September 2, 2020. The record date of capital reduction was September 8, 2020, and the date of completion of capitalization change registration was on September 14, 2020. The fund of capital reduction was returned to the company’ shareholders on October 28[th] , 2020.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

The appropriation of earnings for 2020 was approved by the shareholders’ meeting held on August 19[th] ,2021. The details of distribution are as follows:

Legal reserve Special reserve Cash dividends Cash dividends per share	2020
	$ 101,230
	$ 122,316
	$ 700,000
	$ 3.32

d. Special reserve

Balance, beginning Special reserve appropriated Balance, ending	2021
	$ - 122,316 $ 122,316

e. Treasury shares

Number of shares on January 1, 2020 Decrease during the period Decrease due to capital reduction Number of shares on December 31, 2020 Number of shares on January 1, 2021 Decrease during the period Number of shares on December 31, 2021	Shares (In Thousands)	Shares (In Thousands)
		10,978 (9,681) (519) 778 778 (778) -

The detailed information for other treasure shares transferred to employees programs could be found in Note 27 (b).

The treasury shares held by the company cannot be pledged and no dividend and voting right is attached in accordance with the Regulations of Securities and Exchange Act.

f. Unearned employee compensation

Balance, beginning Issuance of shares Share-based payment expenses recognized Balance, ending		2021
	( (	$ - 1,145,555 ) 331,835 $ 813,720)

The issuance of employee restricted share plan has been approved by shareholders’ meeting held on June 20, 2020. The board of directors approved to issue 5,749 thousand and 236 thousand shares on April 7 2021 and July 29 2021, respectively. Please refer Note 27 (c) for the detailed information.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

g. Non-controlling interests

Balance, beginning Net loss Other comprehensive income (loss) Exchange differences from translating the financial statements of foreign operations Non-controlling interests subscribing subsidiary new shares issuing for cash Changes in ownership interests in subsidiaries Balance, ending	December 31	December 31
	2021 ($ 1,383) ( 16,085) ( 3,248) 42,759 257 $ 22,300	2020
		$ 30,692 ( 28,534 ) ( 3,541 ) - - ($ 1,383)

23. REVENUE

IC for Human-Machine Interface solutions Contract balances	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 21,991,497		2020
				$ 13,800,348

Contract liabilities (classified as current liabilities) Sales of goods		December 31	December 31	December 31
		2021 $ 49,099		2020
				$ 149,430

24. NET INCOME

a. Financial costs

Interest on bank loans Interest on deposits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 12,240 440 $ 12,680		2020
				$ 931 1,078 $ 2,009

This is the translation of the financial statements. CPAs do not audit or review on this translation.

c. Depreciation and amortization

Property, plant and equipment Intangible assets An analysis of depreciation and amortization by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	For the Year Ended	December 31
		2021 $ 86,494 15,955 $ 102,449 $ 8,892 93,557 $ 102,449		2020
				$ 77,433 35,903 $ 113,336 $ 722 112,614 $ 113,336

c. Employee benefits expense

Post-employment benefits Defined contribution plans Defined benefit plans (see Note 20) Share-based payments (see Note 27) Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 30,331 184 398,186 2,214,641 $ 2,643,342 $ 227,778 2,415,564 $ 2,643,342		2020
				$ 28,022 363 21,279 1,442,245 $ 1,491,909 $ 124,636 1,367,273 $ 1,491,909

d. The remuneration of employees and directors

According to the Company’s Articles of Incorporation, the distributable compensation to employees and remuneration to directors shall not be less than 1% and not more than 1.5%, respectively, of net profit before income tax. The accrued employees’ compensation and remuneration of directors for the year ended December 31, 2021 and 2020 are as follows:

Amount

Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 316,730 $ 30,000		2020
				$ 123,450 $ 7,214

If there is any change in the proposed amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

The board of directors resolved the remuneration of employees and directors for 2021 and 2020 had been approved by the Board of Directors of the Company, as illustrated follows:

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2021 February23,2022 $ 316,730 $ 30,000	2020
	February4,2021
		$ 123,450 $ 7,214

There is no difference between the actual amount of remuneration to employees and directors resolved and the amount of remuneration to employees and directors accounted for in 2021 and 2020 financial statements.

Information on the employees’ compensation and remuneration to directors resolved by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

25. INCOME TAXES

a. Major components of tax expense recognized in profit or loss:

Current tax In respect of the current year Adjustments for prior years Deferred tax In respect of the current year Adjustments for prior years Income tax expense recognized in profit or loss		For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 1,310,749 122,040 1,432,789 73,431 - 73,431 $ 1,506,220		2020
				$ 114,160 4,006 118,166 54,139 1,334 55,473 $ 173,639

A reconciliation of accounting profit and income tax expense is as follows:

Income before tax from continuing operations Income tax expense calculated at the statutory rate and the effective tax rate Nondeductible expenses in determining taxable income Tax effect of earnings to be distributed by subsidiaries Tax exemption Unrecognized temporary differences Unrecognized loss carryforwards Adjustments for prior years’ tax Tax effects from investment tax credit rate less than 30% Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	For the Year Ended	December 31
		2021 $ 7,603,070 $ 1,097,956 17,678 429 ( 37,877 ) ( 1,001 ) 43,083 122,040 263,912 $ 1,506,220		2020
				$ 1,157,097 $ 156,784 7,510 21,734 - ( 31,207 ) 13,478 5,340 - $ 173,639

The company’s research and development expenditure is expected to offset the corporate income tax by 30%, so the effective tax rate is 14% after considering the deduction effect.

For other jurisdictions, taxes are calculated using the applicable tax rate for each individual jurisdiction.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

b. Current tax assets and liabilities

Current tax assets( recorded as other current assets) Tax refund receivable Current tax liabilities Income tax levied on accumulated overseas undistributed earnings (i) Income tax payable Total	For the Year Ended	For the Year Ended	For the Year Ended	December 31
				2020
				$ 2,050 December 31
		2021 $ 286,867 1,499,442 $ 1,786,309		2020
				$ 316,119 117,002 $ 433,121

(i) The estimated income tax from accumulated overseas undistributed earnings determined at the end of 2017 for FocalTech Systems, Inc. could be paid in installments for eight years under the US tax law.

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

2021

Deferred tax assets Temporary differences Obsolete of inventory Others Loss carryforwards Deferred tax liabilities Temporary differences Intangible assets Investment income recognized from foreign investees 2020		Beginning Balance $ 71,336 3,950) 67,386 17,768 $ 85,154 $ 8,232 44,981 $ 53,213	Recognized in Profit or Loss ( $ 60,557 ) ( 379) ( 60,936 ) ( 14,124) ($ 75,060) ( $ 2,058 ) 429 ($ 1,629)	Recognized in Other Comprehensive Income $ - ( 105) ( 105 ) - ($ 105) $ - - $ -		Exchange Differences $ - - - 75) $ 75) $ - - $ -		Ending Balance
	(				( (		(	$ 10,779 4,434) 6,345 3,569 $ 9,914 $ 6,174 45,410 $ 51,584

Deferred tax assets Temporary differences Obsolete of inventory Others Loss carryforwards Deferred tax liabilities Temporary differences Intangible assets Investment income recognized from foreign investees		Beginning Balance	Recognized in Profit or Loss	Recognized in Other Comprehensive Income $ - ( 50) ( 50 ) - ($ 50) $ - - $ -		Exchange Differences $ - - - 219 $ 219 $ - - $ -		Ending Balance
		$ 89,699 2,111 91,810 28,972 $ 120,782 $ 10,290 23,247 $ 33,537	( $ 18,363 ) ( 6,011) ( 24,374 ) ( 11,423) ($ 35,797) ( $ 2,058 ) 21,734 $ 19,676				(	$ 71,336 3,950) 67,386 17,768 $ 85,154 $ 8,232 44,981 $ 53,213

This is the translation of the financial statements. CPAs do not audit or review on this translation.

d. Information about unused loss carryforwards and tax-exemption.
Loss carryforwards as of December 31, 2021 comprised of:

Unused Amount $ 11,925 22,897 73,861 91,287 73,447 72,534 87,309 $ 433,260	Expiry Year
	2025 2026 2027 2028 2029 2030 2031

e. The aggregate amount of temporary difference associated with investments for which deferred tax liabilities have not been recognized

As of December 31, 2021 and 2020, the taxable temporary differences associated with investment in subsidiaries for which no deferred tax liabilities have been recognized were $1,770,810 thousand and $2,480,872 thousand, respectively.

f. Income tax assessments

The Company, FocalTech Smart Sensors Co., Ltd., and FocalTech Electronics Co., Ltd.’s tax returns until 2019 have been assessed by the tax authorities.

26. EARNINGS PER SHARE

EARNINGS PER SHARE
Basic earnings per share Diluted earnings per share	Unit: NT$ Per Share For the Year Ended December 31
		2021 $ 30.23 $ 28.62	2020
			$ 3.97 $ 3.73

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Period

Earnings used in the computation of basic earnings per share	For the Year Ended	For the Year Ended	For the Year Ended	December 31
		2021 $6,112,935		2020
				$1,011,992

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Treasury shares transferred to Employees Employee share options(share) Restricted stock for employees(share) The remuneration to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 202,208 8,157 475 785 1,984 213,609		2020
				254,897 14,592 569 - 1,322 271,380

27. SHARE-BASED PAYMENT ARRANGEMENTS

The Group did not have stock option plan issued for employees and share buyback program for the year ended December 31, 2021 and 2020.

a. Employee stock option plan

Information about vested options of 2021 and 2020 are as following:

Employee Stock Option Plan 2006 2015	December	31,2021 Weighted- average remaining contractual life (years) 0.11~1.27 3.67	December	31,2020
	Range of exercise price (NT$) $5.37~36.17 15.6		Range of exercise price (NT$) $5.46~36.8 15.9	Weighted- average remaining contractual life (years)
				1.1~2.27 4.67

Information about outstanding options in 2021 and 2020 is as following:

December 31, 2021

Employee Stock Option Plan	BeginningBalance	BeginningBalance	Options exercised	Options	expired	EndingBalance	EndingBalance
	Units of Option 398,199 397,500	Weighted- Average Exercise Price (NT$)	Units of Option Weighted- Average Exercise Price (NT$)	Units of Option - ( 12,000)	Weighted- Average Exercise Price (NT$)	Units of Option 198,399 209,000	Weighted- Average Exercise Price (NT$)
2006 2015		$26.25 15.90	( 199,800) $33.04 ( 176,500) 15.78		$ - 15.90		$19.86 15.60

December 31, 2020

Employee Stock Option Plan	BeginningBalance	BeginningBalance	Options exercised	Options exercised	Options expired	EndingBalance	EndingBalance
	Units of Option 805,599 677,500	Weighted- Average Exercise Price (NT$)	Units of Option	Weighted- Average Exercise Price (NT$)	Units of Option Weighted- Average Exercise Price (NT$)	Units of Option 398,199 397,500	Weighted- Average Exercise Price (NT$)
2006 2015		$ 23.49 12.20	(407,400) (242,000)	$ 29.68 14.33	- $ - (38,000) 13.56		$ 26.65 15.90

This is the translation of the financial statements. CPAs do not audit or review on this translation.

As of December 31, 2021, the valid and outstanding employee stock option plans are as following:

Plan 2006 employee stock option plan 2015 employee stock option plan	Number of Options 12,600,000 2,800,000	Valid Period 10 years 10 years	VestingTerms
			(1) A certain percentages of the options defined in the plan are vested and exercisable after the first year, or (2) according to the achievement level of the performance target defined in advance. (1) A certain percentage of the options defined in the plan are vested and exercisable after the second year.

For the subsequent changes in the Company’s ordinary share capital, such as issuance of shares in cash, from earnings and capital surplus, consolidation, spin-off, share split, issuance of global depositary receipts, and decrease in ordinary shares which is not resulted from treasury share retired, the exercise price and the conversion ratio would be considered to adjust accordingly based on the plans.

b. Treasury shares transferred to employees

Information about treasury shares transferred to employees as follows :

Items The 4th treasury shares Buy Back Program The 5th treasury shares Buy Back Program	The date of board of directors approved 2018/7/26 2018/8/23	Buyback shares (In thousand share) 8,000 7,689	Transferred shares (In thousand share) 7,952 7,206	Adjustment due to capital reduction (In thousand share) (46) (473)	Retired Shares (In thousand share) (2) (10)	Transferred price (in dollar)
						$33.69 (Adjusted) $32.93 (Adjusted)

Information about treasure stock transferred to employees for the year ended December 31, 2021 is as follows:

The4thSharesBuyBack Program Employee subscription base date Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) 2020/03/20 7,848 $ 3.30 2021/04/07 104 181.40 Total 7,952	The4thSharesBuyBack Program Employee subscription base date Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) 2020/03/20 7,848 $ 3.30 2021/04/07 104 181.40 Total 7,952	The 5thSharesBuyBack Program	The 5thSharesBuyBack Program	The 5thSharesBuyBack Program
Employee subscription base date 2020/03/20 2021/04/07 Total	Shares transferred (In Thousands) 7,848 104 7,952	Employee subscription base date 2019/05/07 2019/11/08 2020/03/20 2020/11/16 2021/04/07 2021/07/29 Total	Shares transferred (In Thousands) 4,651 60 1,399 434 572 90 7,206	The fair value of the right to subscribe (NT$)
				$ - - 3.70 1.90 181.70 242.20

The limitations and rights on the unvested shares were as follows;

1) The employees cannot sell, pledge, transfer, donate, or dispose these shares.
2) The Company and the employees should enter into a trust agreement with a trust and custodian institution and authorize the institution to exercise the shareholders’ rights including but not limited to attendance, proposing, speaking and voting in the shareholder meetings.
3) The unvested shares are entitled to receive cash and/or share dividends and the derivatives.

If an employee fails to meet the vesting conditions, the trust institution would dispose the unvested shares and return proceeds to the employee no more than the original purchase price.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

c. Restricted stock for employees

The Company’s shareholders’ meeting resolved to issue restricted stocks for employees up to 6,000 thousand shares on June 20, 2020, and the issued price is NT$10 per share. The restricted stocks plan was approved by Financial Supervisory Commission on August 12, 2020. The information of the issued resolved by board of directors is as follow:

Grant date 2021/04/07 2021/07/29	Fair value per share (in dollar) $ 205 265	Actual shares of issued (in thousand)
		5,749 236

After the employees were granted restricted stock, the employees will be vested in the stocks if they fulfill both service period and performance condition. The vesting condition are as follows:

a. Upon service for two years. the shares vested in 50% to employees.
b. Upon service for three years. the shares vested in 25% to employees.
c. Upon service for four years. the shares vested in 25% to employees.

The constraints of restricted stock are as follows:

a. Employees are restricted to dispose, pledged, transferred, and give to others the granted shares until they are vested.
b. The rights of restricted stock are same as ordinary share including attendance, propose, speak, voting right and so on.
c. Stock dividends and cash dividends yielding from restricted stock will be distributed to employees in the current year, and will not be restricted.
d. National employee should transfer the granted shares to trustee appointed by the Company immediately. Before they are vested, the restricted should be kept in trustee. Non-national employee’ granted share should be kept by bank appointed by the Company.

The Company will buy back the restricted shares at issued price and write off the shares if employees do not fulfill the vesting condition.

Compensation cost of aforementioned share-based payments for the year ended December 31, 2021 and 2020 was as follows:

Shares buyback programs Restricted stock for employees Adjustment account: Capital surplus - employee stock options Other equity - unearned employee compensation	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 66,351 331,835 $ 398,186 $ 66,351 331,835 $ 398,186		2020
				$ 21,279 - $ 21,279 $ 21,279 - $ 21,279

This is the translation of the financial statements. CPAs do not audit or review on this translation.

28. OPERATING LEASE ARRANGEMENTS

The Group as a lessee

The Company and its subsidiaries have lease contracts in relation to office, plant and part of office equipment, which would be expired before December, 2022. Those agreements are short-term leases and qualified for the recognition exemption to leases so the Company does not recognize right-of-use assets and lease liabilities for these leases. The committed payments for the short-term leases were $21,135 thousand and $16,708 thousand as of December 31, 2021 and 2020.

The lease payments recognized in profit or loss were as follows:

Lease payment	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 34,633		2020
				$ 35,178

29. CAPITAL MANAGEMENT

The capital structure of the Group consists of debt and equity. The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stockholders through the optimization of the debt and equity balance.

To define the strategy of the Group’s capital structure, the Group first sets its target market share according to the industry scale, the growth of the industry and the product roadmap. Based on the projected market position, the Group plans the research and development investment and capital expenditure. Furthermore, the Group calculates working capitals and cash demands based on the long-term development plan considering the industry characteristics to build up the overall operating model. Finally, the Group evaluates not only the possible contribution margin, operating profit ratio and cash flows according to the product competitiveness but also risk factors such as the fluctuation of the business circle and the life circle of the product to decide the suitable capital structure. The management reviews capital structures periodically and considers the possible costs and risks of different capital structures. Generally, the Group adopted prudent capital management strategy.

The Group was not restricted to other external capital requirements.

30. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The Group’s management believes the carrying amounts of financial assets and financial liabilities not measured at fair value approximate their fair values.

b. Fair value of financial instruments that are measured at fair value on a recurring basis

1)	Fair value hierarchy December 31, 2021 Financial assets at FVTPL Listed ordinary shares Private funds Structured Investments Total Financial assets at FVTOCI Investments in debt instruments Fixed income bonds		Level 1 $ 271,019 - - $ 271,019 $ -		Level 2 $ - - 104,903 $ 104,903 $ 233,994		Level 3 $ - 156,075 - $ 156,075 $ -		Total
									$ 271,019 156,075 104,903 $ 531,997 $ 233,994

This is the translation of the financial statements. CPAs do not audit or review on this translation.

December 31, 2020

December 31, 2020
Financial assets at FVTPL Listed ordinary shares Private funds Structured Investments Total Financial assets at FVTOCI Investments in debt instruments Fixed income bonds		Level 1 $ 72,186 - - $ 72,186 $ -		Level 2 $ - - 109,897 $ 109,897 $ 247,974		Level 3 $ - 52,579 - $ 52,579 $ -		Total
								$ 72,186 52,579 109,897 $ 234,662 $ 247,974

There were no transfers between Level 1 and Level 2 for the year ended December 31, 2021 and 2020.

2) Reconciliation of Level 3 fair value measurements of financial instruments

Financial assets at FVTPL Balance, beginning of period Purchases Disposals Recognized in profit or loss(other income or loss) Effect of foreign exchange differences Balance, end of period		December 31	December 31	December 31
		2021 $ 52,579 100,554 750 ) 4,428 736) $ 156,075		2020
	( (		( ( (	$ 45,423 10,000 483 ) 914 ) 1,447) $ 52,579

3) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

The fair values of foreign fixed income bonds are determined by quoted market prices provided by the independent third party. The fair values of structured investments are determined by quoted prices provided by the seller.

4) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement

The fair values of non-publicly traded equity investments are mainly determined by using the market approach, with reference to the recent financing activities of investees or the market transaction prices and status of the similar instruments. The Group evaluated and selected the suitable valuation method with discretion, but the use of different valuation models or fair values may result in different valuation results.

c. Categories of financial instruments

Financial assets Fair value through profit or loss (FVTPL) Mandatorily at FVTPL Amortized cost (Note 1) Financial assets at FVTOCI Investments in debt instruments Financial liabilities Amortized cost (Note 2)	December 31	December 31
	2021 $ 531,997 16,433,676 233,994 9,703,183	2020
		$ 234,662 7,203,983 247,974 3,782,549

1) The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivables, other financial assets and refundable deposits.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

2) The balances included financial liabilities measured at amortized cost, which comprise short-term borrowing, accounts payables, other payables, long-term borrowing and guaranteed deposits received.
d. Financial risk management objectives and policies

The Group’s major financial instruments include cash and cash equivalents, accounts receivable, other financial assets, financial assets at FVTPL, financial assets at FVTOCI, accounts and other payables. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign exchange risk, interest rate risk and other price risk), credit risk and liquidity risk.

The board of directors is solely responsible for establishing and monitoring the framework of risk management of the Group. The chairman is authorized by the board of directors to develop and monitor the risk management policy of the Group with the operation center of the Group, and regularly reported the situation to the board of directors.

The Group’s financial risk management policies are established for identifying and analyzing the financial risks to the Group, evaluating the impacts of the financial risks, and conducting the financialrisk aversion policies. The financial risk management policies are periodically reviewed to reflect changes in the market and the operations. The Group devotes to build a disciplined and constructive control environment through proper internal controls, such as training and establishing managerial principles and operation procedures in order to have all employees aware of their own roles and responsibilities.

The Group’s management oversees the Group operation in compliance with financial risk management policies and reviews the appropriateness of risk management structure under supervision of the board of directors. Internal auditors, in assistance to the board of directors, perform periodical and exceptional reviews on the controls and procedures of financial risk management and report the results of review to the board of directors.

1) Market risk

The major financial risks from the Group’s operations were foreign exchange risk (referred to a) and interest rate risk (referred to b).

a) Foreign exchange risk

The carrying amounts of the Group’s monetary assets and monetary liabilities denominated in foreign currency at the end of the reporting period are shown in Note 34.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar. The following table details the Group’s sensitivity to a 5% appreciate and depreciate in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation value at the end of the reporting period by a 5% change in foreign currency rates. A positive number in below table indicates an increase in pre-tax profit or equity associated with a 5% depreciation of the New Taiwan Dollar against the U.S. dollar.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

USD Impact	USD Impact	USD Impact
For the Years Ended December 31
	2021 $ 271,944 (i)	2020
		$ 59,478 (i)

i. This was mainly attributable to the outstanding balances of USD deposits, accounts receivables, bank loans, accounts payables, other payables, other current assets, refundable deposits, other current liabilities and other non-current liabilities.

b) Interest rate risk

The Group was exposed to interest rate risk primarily related to its investments in fixed-rate time deposits, bonds, floating-rate demand deposits and structured investments. The time deposits were at fixed interest rates, and bonds were at fixed rates or with guaranteed minimal interest rates and carried. Therefore, changes in interest rates would not affect estimated profit or loss regarding to the financial instruments above.

Financial assets exposed to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets		December 31	December 31	December 31
		2021 $ 6,405,608 $ 1,088,552 $ 4,241,431		2020
				$ 1,975,397 $ 523,648 $ 3,777,910

Sensitivity analysis

The below sensitivity analysis was determined based on the Company’s exposure to interest rates for non-derivative instruments as of the end of the reporting period. An increase or a decrease of 25 basis points was used when reporting interest rate risk internally to key management and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 25 basis points higher/ lower and all other variables were held constant, the Company’s pre-tax profit for the year ended December 31, 2021 and 2020 would increase/ decrease by NT$10,604 thousand and NT$9,445 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure of counterparties to discharge an obligation could arise from the carrying amounts of the financial assets as recognized in the balance sheets.

The Company’s major credit risk of accounts receivables mainly came from its top 5 customers. Ongoing credit evaluation of the financial condition of the customers is performed.

As of December 31, 2021, accounts receivables from top 5 customers are 63% of total accounts receivables. The credit concentration risk of other accounts receivables was insignificant.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Credit risk management for investments in debt instruments

The Company’s investments in debt instruments are financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. The Company’s policy allows it only to invest in those with credit ratings equal to or higher than the investment grade and with low credit risk after the impairment assessment. Credit rating information is provided by independent rating institutions. The Company continuously tracks external rating information to monitor changes in credit risk of the invested debt instruments, and also examines other information such as the bond yield curve and material information concerning the debtors to assess whether the credit risk of the debt instrument investment has increased significantly after the original recognition. The Company assesses the 12-month expected credit loss based on the probability of default and loss given default provided by external credit rating agencies. The current credit risk assessment policies and carrying amount of investments in debt instruments for each credit rating are as follows:

Category Description Basis for Recognizing Expected Credit Loss Performing The debtor with low credit risk and fully capable of paying off contractual cash flows 12 months expected credit loss Category Description Basis for Recognizing Expected Credit Loss Performing The debtor with low credit risk and fully capable of paying off contractual cash flows 12 months expected credit loss	Expected Credit Loss Ratio 0% Expected Credit Loss Ratio 0%	Carrying Amount as of December 31, 2021	Carrying Amount as of December 31, 2021
		$ 233,944 Carrying Amount as of December 31, 2020
			$ 247,974

3) Liquidity risk

The Company manages its liquidity risk by monitoring and maintaining adequate cash and cash equivalents to fund its operations and mitigate the impacts of fluctuations in cash flows.

Liquidity and interest rate risk tables for non-derivative financial liabilities

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments, including principal and interest.

December 31, 2021

Non-interest bearing Fixed interest rate liabilities	On Demand or Less than 1 Year $ 4,216,894 301,936 $ 4,518,830		1-5 Years $ 4,397,513 155,832 $ 4,553,345		More than 5 Years
					$ - 631,008 $ 631,008

This is the translation of the financial statements. CPAs do not audit or review on this translation.

December 31, 2020

Non-interest bearing Fixed interest rate liabilities	On Demand or Less than 1 Year $ 2,768,322 523,866 $ 3,292,188		1-5 Years $ 490,361 - $ 490,361	More than 5 Years	More than 5 Years
					$ - - $ -

31. TRANSACTIONS WITH RELATED PARTIES

a. Balances, transactions, revenue and expenses between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
b. Compensation of key management personnel

Long-term employee benefits Short-term employee benefits Post-employment benefits Share-based payments	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 11,548 109,734 488 48,275 $ 170,045		2020
				$ 20,629 54,148 459 3,888 $ 79,124

32. PLEDGED ASSETS

The following assets were provided as collateral for bank loans and import customs duties:

Properties, plants and equipment – net of buildings Properties, plants and equipment –Construction in progress Pledge deposits (categorized in other non-current assets)	December 31	December 31
	2021 $ 510,257 1,071,400 4,000 1,585,657	2020
		$ 524,487 - 4,000 528,487

33. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACTUAL COMMITMENTS

NOVATEK MICROELECTRONICS CORP. (“NOVATEK”) filed five patent infringement actions with Intellectual Property and Commercial Court on August 9, 2021, asking the court to prohibit the Company from manufacturing, offering for sale, selling, utilizing or importing, for the aforementioned purposes, products infringing on such patents and asking for indemnification for any losses. The litigations are still in the preliminary stages of the Intellectual Property and Commercial Court, and the result could not be inferred. The Company does not expect any material operations and financial impact of the Company resulting from this case.

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the Group entities and the exchange rates between foreign currencies and respective functional currencies were disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

This is the translation of the financial statements. CPAs do not audit or review on this translation.

December 31, 2021

Financial assets Monetary items USD USD Financial liabilities Monetary items USD USD December 31, 2020 Financial assets Monetary items USD USD RMB Financial liabilities Monetary items USD USD	Foreign Currencies (thousand) $ 494,679 16,817 279,278 35,727 Foreign Currencies (thousand) $ 147,429 2,459 12,369 105,765 2,354	Exchange Rate 27.68(USD:NTD) 6.3757 (USD:RMB) 27.68 (USD:NTD) 6.3757 (USD:RMB) Exchange Rate 28.48 (USD: NTD) 6.5249 (USD:RMB) 0.1533 (RMB:USD) 28.48 (USD: NTD) 6.5249 (USD:RMB)	NT$(thousand)
			$ 13,692,701 465,507 7,730,402 988,917 NT$(thousand)
			$ 4,198,767 70,018 53,988 3,012,178 67,049

35. ADDITIONAL DISCLOSURES

(1) Information about significant transactions and investees :
a. Financings provided to others: See Table 1 attached;
b. Endorsement/guarantee provided: See Table 2 attached;
c. Marketable securities held (excluding investments in subsidiaries and associates): See Table 3 attached;
d. Marketable securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20 percent of the paid-in capital: None;
e. Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in capital: See Table 4 attached;
f. Disposal of individual real estate properties at prices of at least NT$300 million or 20% of the paid-in capital: None;
g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: None;
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None;
i. Information about the derivative financial instruments transaction: None;
j. Others: The business relationship between the parent and the subsidiaries and significant transactions between them: See Table 5 attached;
(2) Names, locations, and related information of investees over which the Company exercises significant influence (excluding information on investment in mainland China): See Table 6 attached;
(3) Information on investment in Mainland China:
a. The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee: See Table 7attached.
b. Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial reports: See Table 5 attached.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

(4) Information of major shareholders: There are no shareholders holding more than 5% of the Company’s shares for the year ended December 31, 2021.

36. SEGMENT INFORMATION

a. Operating segments

Segment information is provided to business decision makers to allocate resources and assesse segment performance. The Company operates the business of the sales and development of Human-Machine Interface solutions related IC under a single operation unit. Thus, the information of separate operating segments is not applicable.

b. Revenue from major products and services

The following is an analysis of the Group’s revenue from continuing operations from its major products and services.

and services.
IC for Human-Machine Interface Solutions	For the Year Ended December 31
		2021 $ 21,991,497	2020
			$ 13,800,348

c. Geographical information

The Group operates in two principal geographical areas China and Taiwan.

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below.

Revenue from External Customers For the Year Ended December 31 2021 2020 $ 18,929,282 $ 12,527,084 2,856,250 1,121,492 205,965 151,772 $ 21,991,497 $ 13,800,348	Revenue from External Customers For the Year Ended December 31 2021 2020 $ 18,929,282 $ 12,527,084 2,856,250 1,121,492 205,965 151,772 $ 21,991,497 $ 13,800,348	Non-current Assets	Non-current Assets
		December 31
2021 $ 18,929,282 2,856,250 205,965 $ 21,991,497		2021 $ 1,256,858 4,100,720 - $ 5,357,578	2020
	$ 12,527,084 1,121,492 151,772 $ 13,800,348		$ 1,304,279 253,328 - $ 1,557,607

The Group’s revenue was classified by location of receivable. Non-current assets which comprise property, plant and equipment, other intangible assets and guarantee deposits, exclude Measured at fair value through other comprehensive income-financial assets, financial assets at fair value through profit, goodwill, deferred tax assets and other non-current assets.

d. Information about major customers

Single customers contributed 10% or more to the Group’s revenue were as follows:

For	the Year Ended December 31	the Year Ended December 31
2021	Percentage 13 NA NA 11 13	2020
Sales amount $ 2,943,186 NA(Note) NA(Note) 2,328,269 2,859,803		Sales amount $ NA(Note) 1,539,211 2,060,074 1,666,900 NA(Note)	Percentage
			NA 11 15 12 NA

Note: The sale amount is under 10% of the Group’s revenue.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 1

FocalTech Systems Co., Ltd. and Subsidiaries FINANCINGS PROVIDED TO OTHERS

FOR THE YEAR ENDED DECEMBER 31, 2021

(Amount in thousand; Currency denomination in NTD or in foreign currencies)

No (Note 1)	Financing Company	Counterparty	Financial Statement Account	Related Party	Maximum Balance for the Period (Note 4)	Ending Balance (Note 4)	Amount Actually Drawn (Note 4)	Interest Rate	Nature for Financing	Transaction Amounts	Reason for Financing	Allowance for Bad Debt	Collateral	Collateral	Financing Limits for Each Borrowing Company (Note 2)	Financing Company’s Total Financing Amount Limits (Note 2)	Note
													Item	Value
1	FocalTech Systems, Ltd.	FocalTech Systems Co., Ltd.	Other receivables from relatedparties	Yes	$ 1,660,800 (USD 60,000)	$ 1,660,800 (USD 60,000)	$ -	-	The need for short- term financing	$ -	Operating capital	$ -	-	-	$ 2,382,050	$ 2,382,050	Note 3

Note 1: The parent company and its subsidiaries are coded as follows:

1) The parent company is coded "0".
2) The subsidiaries are coded consecutively beginning from "1" in the order presented in the table above.

Note 2: The lending limits:

1) The total amount available for lending purpose shall not exceed 20% of the net worth of the Company.
2) The lending limits for any borrowers are set forth as below:
A. The total amount for lending to a company having a business relationship with the company shall not exceed the total transaction amount between the parties during the period of twelve months prior to the time of lending (the transaction amount shall mean the sales or purchasing amount between the parties, whichever is higher), and shall not exceed 20% of the net worth of the financing company or 30% of the net worth of the counterparty, whichever is lower.
B. The total amount for lending to a company in need of funds for a short-term period shall not exceed 20% of the net worth of the financing company. The lending limits for any borrower shall not exceed 10% of the net worth of the creditor or 30% of the net worth of the borrower, whichever is lower.
3) For financing needs between offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company, or financing needs to the Company by offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company, the total amount for such fund-lending shall not be subject to the limit of 100% of the net worth of the creditor

4) Where the Company’s financial reports are prepared in accordance with the International Financial Reporting Standards, “net worth” in the Procedures means the equity attributable to shareholders of the parent in the balance sheet. Note 3: The balances have been eliminated on consolidation.

Note 4: Using the exchange rate of 1 USD: 27.68 NTD as of December 31, 2021.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 2

FocalTech Systems Co., Ltd. and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2021

(Amount in thousand; Currency denomination in NTD or in foreign currencies)

No. (Note1)	Endorsement/ Guarantee Provider	Guaranteed Party	Guaranteed Party	Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Note 2)	Maximum Balance for the Period (Note 5)	Ending Balance (Note 5)	Amount Actually Drawn	Amount of Endorsement/ Guarantee Collateralized by Properties	Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements(%)	Maximum Endorsement/ Guarantee Amount Allowable (Note 2)	Guarantee Provided by Parent Company	Guarantee Provided by A Subsidiary	Guarantee Provided to Subsidiaries in Mainland China	Note
		Name	Nature of Relationship
0 0 0 0 0 0 1	FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems (Shenzhen) Co., Ltd.	FocalTech Systems, Ltd. FocalTech Electronics, Ltd. Hefei PineTech Electronics Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Smart Sensors Co., Ltd. FocalTech Smart Sensors, Ltd. FocalTech Electronics (Shenzhen) Co., Ltd.	The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/ guaranteed company. The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/ guaranteed company. The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/ guaranteed company. The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/ guaranteed company. The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/ guaranteed company. The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/ guaranteed company. The endorser/ guarantor parent company owns directly and indirectly 100% voting shares of the endorsed/guaranteed company.	$ 6,812,831 6,812,831 6,812,831 6,812,831 6,812,831 6,812,831 1,199,837	$ 1,245,600 ( USD 45,000 ) 1,262,326 ( USD 45,604 ) 1,577,760 ( USD 57,000 ) 1,909,920 ( USD 69,000 ) 196,880 96,880 ( USD 3,500 ) 434,150 ( CNY 100,000 )	$ 1,245,600 ( USD 45,000 ) 1,262,326 ( USD 45,604 ) 1,577,760 ( USD 57,000 ) 1,909,920 ( USD 69,000 ) 96,880 96,880 ( USD 3,500 ) 434,150 ( CNY 100,000 )	$ - - 14,815 85,841 - - 301,712	$ - - - - - - 434,150	9.14% 9.26% 11.58% 14.02% 0.71% 0.71% 36.18%	$ 6,812,831 6,812,831 6,812,831 6,812,831 6,812,831 6,812,831 1,199,837	Y Y Y Y Y Y N	N N N N N N N	N N Y Y N N Y	(Note 3) (Note 3) (Note 3 and 6) (Note 3 and 6) (Note 4 and 5) (Note 4) -

Note 1: Number should be input in the remark column for intercompany transactions. Here illustrate how to assign numbers to transaction

1) 0 for parent company.
2) Subsidiaries are given a number in sequence starting with No. 1.
Note 2: Limits on Endorsement/ Guarantee Amount
1) The ceilings on the amount of endorsements/guarantees due to business transaction are as below:
2) The total amount of endorsements/guarantees and the amount of endorsements/guarantees for any single entity shall not exceed 50% of the net worth of the Company.
3) The total amount of endorsements/guarantees between the Company owns directly or indirectly 100% voting shares shall not exceed 100% of the net worth of the Company.
4) The total amount of endorsement/guarantee provided by the Company or by the Company and its subsidiaries shall not exceed 50% of the net worth of the Company. The total amount of the endorsement/guarantee provided by the Company and the subsidiaries to any individual entity shall not exceed 50% of the net worth of the Company.
5) The net worth referred to above are based on the latest reviewed financial statements. Where the Company’s financial reports are prepared in accordance with the International Financial Reporting Standards, “net worth” in the Procedures means the equity attributable to shareholders of the parent in the balance sheet.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 2

Note 3: FocalTech Systems Co., Ltd. provided USD 45,000 thousand of endorsements/guarantees for FocalTech Electronics Ltd., FocalTech Systems, Ltd., Hefei PineTech Electronics Co., Ltd. and FocalTech Electronics (Shenzhen) Co., Ltd. for the purchases, the amount actually drawn during the period is NT$0, NT$0, NT$0, and NT$ 31,607 thousand respectively.
Note 4: FocalTech Systems Co., Ltd. provided USD 3,500 thousand of endorsements/guarantees for FocalTech Smart Sensors Ltd. and FocalTech Smart Sensors Co., Ltd. for the purchases, the amount actually drawn during the period is NT$ 0.
Note 5: FocalTech Systems Co., Ltd. provided NT$ 100,000 thousand of endorsements/guarantees for FocalTech Smart Sensors Co., Ltd..
Note 6: FocalTech Systems Co., Ltd. provided USD 5,000 thousand of endorsements/guarantees for Hefei PineTech Electronics Co., Ltd. and FocalTech Electronics (Shenzhen) Co., Ltd. for the purchases, the amount actually drawn during the period is NT$ 0.
Note 7: Using the exchange rate of 1 USD: 27.68 NTD and 1 RMB: 4.3415 NTD as of December 31, 2021.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 3

FocalTech Systems Co., Ltd. and Subsidiaries MARKETABLE SECURITIES HELD DECEMBER 31, 2021

(Amount in thousand; Currency denomination in NTD or in foreign currencies)

Held Company Name			Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December 31,2021	December 31,2021		Note
						Shares/Units	Carrying Value	Percentage of Ownership (%)	Fair Value
FocalTech Systems Co., Ltd. FocalTech Systems, Ltd. FocalTech Electronics, Ltd.		Stock Common stock of Wisdom Marine Lines Co., Ltd. (CAYMAN) Class B Preferred Stock of Fubon Financial Holding Co., Ltd. Class A Preferred Stock of WT Microelectronics Co., Ltd. Privately Offered Fund CDIB Capital Healthcare Ventures II Limited Partnership CDIB Capital Growth Partners L.P. CDIB-Innolux Limited Partnership Cathay Private Equity Smart Tech Limited Partnership Structured product CLN Link HSBC SUB CLN Link Barclays SUB Fixed income bond Azure Nova International Finance Limited Maturity Date`：`March 21, 2022 Bank of China Limited Maturity Date`：`November 13, 2024 Industrial and Commercial Bank of China Limited Maturity Date`：`September 21, 2025 Privately Offered Fund TIEF Fund, L.P.		- - - - - - - - - - - - -	Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non current `〃` Financial assets at fair value through profit or loss - non current `〃` `〃` `〃` Financial assets at fair value through profit or loss - non current `〃` Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - non current `〃` Financial assets at fair value through profit or loss - non current	1,461,000 170,000 2,882,000 - - - - - - - - - -	NT$ 119,218 NT$ 10,727 NT$ 141,074 NT$ 12,581 NT$ 32,820 NT$ 12,211 NT$ 74,858 NT$ 52,356 ( USD 1,891 ) NT$ 52,547 ( USD 1,898 ) NT$ 55,590 ( USD 2,008 ) NT$ 128,292 ( USD 4,635 ) NT$ 50,112 ( USD 1,810 ) NT$ 23,605 (USD 853)	0.20 0.03 2.13 0.96 0.66 4.37 35.71 4.83	NT$ 119,218 NT$ 10,727 NT$ 141,074 NT$ 12,581 NT$ 32,820 NT$ 12,211 NT$ 74,858 NT$ 52,356 ( USD 1,891 ) NT$ 52,547 ( USD 1,898 ) NT$ 55,590 ( USD 2,008 ) NT$ 128,292 ( USD 4,635 ) NT$ 50,112 ( USD 1,810 ) NT$ 23,605 (USD 853)

Note 1 ： The percentage of ownership for preferred stock is the held shares divided by the number of outstanding shares. Note 2 ： Using the exchange rate of 1 USD: 27.68 NTD as of December 31, 2021.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 4

FocalTech Systems Co., Ltd. and Subsidiaries

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2021

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

Company Name	Types of Property	Date of the Event	Transaction Amount	Status of payment	Counterparty	Relationship		Information on prior transaction if the counterpartyis a relatedparty	Information on prior transaction if the counterpartyis a relatedparty	Information on prior transaction if the counterpartyis a relatedparty	Basis or reference used in setting the price	Purpose of acquisition and utilization	Other Terms
							Owner	Relationship with the company	Date of transfer	Amount
FocalTech Systems Co., Ltd.	Commercial building	May 28, 2021	$1,071,400	Based on the terms in the contract	MADISON ASSET MANAGEMENT CORP.	-	Not applicable	Not applicable	Not applicable	Not applicable	Market price and real estate assessment report	Office building for own-use	None

Note 1: Fill in the column the “Basis or reference used in setting the price” if an appraisal report issued by a professional appraiser shall be obtained.

Note 2: Pain-in capital means the shares that the Company issued and fully paid. In the case of the company whose shares have no par value or a par value other than NT$10, the term “20% of the company’s paid-in capital” used herein shall be calculated based on the equity attributable to shareholders of the parent in the balance sheet.
Note 3: “Date of the Event” used herein means, the contract date, the payment date, the transaction date, the title transfer date, the date of relevant board resolutions or other dates in which the transaction parties and the transaction amount can be ascertained (whichever is earlier).

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 5

FocalTech Systems Co., Ltd. and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2021 (Amount in Thousands of New Taiwan Dollars)

No. (Note 1)	Company Name	Counterparty	Nature of Relationship (Note 3)		IntercompanyTransactions	IntercompanyTransactions
				Financial Statements Item	Amount (Note 4)	Terms	Percentage of Consolidated Net Revenue or Total Assets
0 0 0 1 1 2 2 2 2 3 3 3 4 5	FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Electronics, Ltd. FocalTech Electronics, Ltd. FocalTech Systems, Ltd. FocalTech Systems, Ltd. FocalTech Systems, Ltd. FocalTech Systems, Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Smart Sensors, Ltd. FocalTech Systems,Inc.	FocalTech Systems, Ltd. FocalTech Electronics, Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Systems (Shenzhen) Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Electronics (Shanghai) Co., Ltd. Hefei PineTech Electronics Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Smart Sensors, Ltd. Hefei PineTech Electronics Co., Ltd. FocalTech Systems (Shenzhen) Co., Ltd. FocalTech Electronics (Shanghai) Co., Ltd. FocalTech Smart Sensors Co., Ltd. FocalTech Systems,Ltd.	1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2	Unearned Receipts- related parties Accounts Payables Accounts Payables Cost of Revenue Research and development expenses Other Receivables Cost of Revenue Research and development expenses Research and development expenses Other Receivables Research and development expenses Accounts Payables Research and development expenses Other Payables Research and development expenses Other Payables Selling and marketing expenses Other Receivables Service revenue	$ 198,797 515,551 14,985 38,340 58,728 70,701 29,099 65,465 34,233 275,892 42,014 240,582 20,045 290,421 642,228 42,123 45,536 299,652 21,287	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2	0.78% 2.04% 0.06% 0.17% 0.27% 0.28% 0.13% 0.30% 0.16% 1.09% 0.19% 0.95% 0.09% 1.15% 2.92% 0.17% 0.21% 1.18% 0.1%

Note 1: Number should be input in the remark column for intercompany transactions. Here illustrate how to assign numbers to transaction 1) 0 for parent company.

2) Subsidiaries are given a number in sequence starting with No. 1.

Note 2: The services of production management, sales, research and development are provided between the Company and its subsidiaries. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements. Note 3: The transaction relationships with the counterparties are as follows:

1) The Company to the consolidated subsidiary.
2) The consolidated subsidiary to another consolidated subsidiary.
Note 4: Balances, transactions, revenue and expenses between the Company and its subsidiaries have been eliminated on consolidation.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 6

FocalTech Systems Co., Ltd. and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA) (Note 1) FOR THE YEAR ENDED DECEMBER 31, 2021

(Amount in thousand; Currency denomination in NTD or in foreign currencies)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of December 31,2021	Balance as of December 31,2021	Balance as of December 31,2021	Net Income (Losses) of the Investee (Note 4)	Share of Profits/Losses of Investee (Note 4)	Note
				December 31,2021 (Note 2)	December 31,2020 (Note 3)	Shares	Percentage of Ownership	Carrying Value (Note 2)
FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Systems Co., Ltd. FocalTech Electronics Co., Ltd. FocalTech Smart Sensors, Ltd. FocalTech Corporation, Ltd. FocalTech Systems, Inc. FocalTech Systems, Ltd.	FocalTech Corporation, Ltd. FocalTech Electronics, Ltd. FocalTech Smart Sensors, Ltd. Vitrio Technology Corporation FocalTech Smart Sensors, Ltd. FocalTech Smart Sensors Co., Ltd. FocalTech Systems, Inc. FocalTech Systems, Ltd. FocalTech Electronics Co., Ltd.	Cayman Islands Cayman Islands Cayman Islands Taiwan Cayman Islands Taiwan U.S.A Cayman Islands Taiwan	Investment activity Investment activity Investment activity Research, development, manufacturing and sale of integrated circuits Investment activity Research, development, manufacturing and sale of integrated circuits Investment activity Investment activity Import and export of integrated circuits	NT$ 7,059,264 NT$ 2,768 (USD 100 ) NT$ 85,350 NT$ 4,970 NT$ 238,821 NT$ 11,990 NT$ 2,831,466 (USD 102,293 ) NT$ 646,330 (USD 23,350 ) NT$ 20,000	NT$ 7,059,264 NT$ 2,848 (USD 100 ) NT$ - NT$ 4,970 NT$ 238,821 NT$ 11,990 NT$ 2,913,300 (USD 102,293 ) NT$ 665,010 (USD 23,350 ) NT$ 20,000	5,491,200 2 3,000,000 142,000 18,813,050 17,417,000 100 2 2,000,000	100% 100% 9.14% 50.00% 57.31% 100% 100% 100% 100%	NT$ 2,500,591 (USD 90,339 ) NT$ 1,543,791 (USD 55,773 ) NT$ 6,074 (USD 219 ) NT$ - NT$ 38,091 (USD 1,376 ) (NT$ 289,349 ) NT$ 2,312,135 (USD 83,531 ) NT$ 2,382,050 (USD 86,057 ) NT$ 110,304 (USD 3,985 )	(NT$ 660,388 ) (USD 23,578) NT$ 15,502 (USD 553) (NT$ 47,944 ) (USD 1,712 ) (NT$ 3,341 ) (NT$ 47,944 ) (USD 1,712 ) (NT$ 87,310 ) (NT$ 653,934 ) (USD 23,347 ) (NT$ 654,693 ) (USD 23,374 ) (NT$ 29,260 ) (USD 1,045 )	(NT$ 660,388 ) (USD 23,578 ) NT$ 15,502 (USD 553 ) (NT$ 4,382 ) (USD 156 ) NT$ - (NT$ 27,477 ) (USD 981 ) (NT$ 87,310 ) (NT$ 653,934 ) (USD 23,347 ) (NT$ 654,693 ) (USD 23,374 ) (NT$ 29,260 ) (USD 1,045 )	Subsidiary Subsidiary Subsidiary Joint Venture Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

Note 1: Please refer to the table 7 for the information on investment in Mainland China.

Note 2: Using the exchange rate of 1 USD: 27.68 NTD as of December 31, 2021.

Note 3: Using the exchange rate of 1 USD: 28.48 NTD as of December 31, 2020.

Note 4: Using the average exchange rate of 1 USD: 28.009 NTD for year ended December 31, 2021.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 7

FocalTech Systems Co., Ltd. and Subsidiaries INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR YEAR ENDED DECEMBER 31, 2021

(Amount in thousand; Currency denomination in NTD or in foreign currencies)

Investee company	Main businesses and products	Total amount of paid-in capital (Note 1)	Method of investment	Accumulated outflow of investment from Taiwan as of January 1,2021(Note 1)	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2021 (Note 1)	Net income (loss) of investee company (Note 2)	Percentage of ownership	Investment income (loss) recognized (Note 2)	Carrying amount as of December 31, 2021 (Note 1)	Accumulated inward remittance of earnings as of December 31, 2021	Note
					Outflow	Inflow
FocalTech Electronics (Shanghai) Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Systems (Shenzhen) Co., Ltd. Hefei PineTech Electronics Co., Ltd.	Sales support and post- sales service for affiliates’ IC products Research, development, manufacturing and sale of integrated circuits Design and research of integrated circuits Research, development and sale of integrated circuits	NT$ 55,360 (USD 2,000) NT$ 63,664 (USD 2,300) NT$ 1,024,164 (USD 37,000) NT$ 130,245 (RMB 30,000)	(Note 3 and 4) (Note 3) (Note 4) (Note 4)	NT$ 27,680 (USD 1,000) NT$ 27,680 (USD 1,000) - -	$ - - - -	$ - - - -	NT$ 27,680 (USD 1,000) NT$ 27,680 (USD 1,000) - -	(NT$ 6,034) (USD 215) NT$ 199,146 (USD 7,110) (NT$ 236,158) (USD 8,432) NT$ 13,371 (USD 477)	100% 100% 100% 100%	(NT$ 6,034) (USD 215) NT$ 199,146 (USD 7,110) (NT$ 236,158) (USD 8,432) NT$ 13,371 (USD 477)	NT$ 29,525 USD 1,067 NT$ 257,102 (USD 9,288) NT$ 1,199,837 (USD 43,347) NT$ 229,356 (USD 8,286)	$ - - - -	- - - -

Accumulated Investment in Mainland China as of December 31,2021	Investment Amounts Authorized by Investment Commission,MOEA	Upper Limit on Investment
$55,360 (USD2,000)	$1,673,730 (USD60,467)	$8,175,396

Note 1: Using the exchange rate of 1 USD: 27.68 NTD and 1 RMB :4.3415 NTD as of December 31, 2021. Note 2: Using the average exchange rate of 1 USD: 28.009 NTD and 1 RMB :4.3417 NTD for nine months ended December 31, 2021. Note 3: Indirect investment in Mainland China through a holding company established in other countries. Note 4: The investment is through the foreign subsidiaries, has not been remitted from Taiwan.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

AI assistant

FocalTech — Annual Report 2021

52342_rns_2021-12-29_42b07f8b-bd77-4e11-835c-6021c52a6e12.pdf

FocalTech Systems Co., Ltd. and Subsidiaries

Notice to Readers

REPRESENTATION LETTER

Independent Accountants’ Report

Introduction

Basis for Opinion

Key Audit Matters

Sales Revenue

Other Matter

Responsibilities of Corporate Management and Governance Hierarchy for the Consolidated Financial Statements

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021AND 2020 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

d. Basis of consolidation

e. Foreign currencies

1) Financial assets

i) Measurement category

ii) Impairment of financial assets

iii) Derecognition of financial assets

2) Equity instruments

3) Financial liabilities

The Group as a lessee

p. Government Grants

s. Taxation

1) Current tax

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

9. OTHER FINANCIAL ASSETS

11. INVENTORIES

12. SUBSIDIARIES

13. PROPERTY, PLANT AND EQUIPMENT

14. GOODWILL

15. OTHER INTANGIBLE ASSETS

16. REFUNDABLE DEPOSITS

17. BORROWINGS

18. ACCOUNTS PAYABLES

19. OTHER PAYABLES

20. RETIREMENT BENEFIT

a. Defined contribution plans

b. Defined benefit plans

22. EQUITY

b. Capital surplus

c. Retained earnings and dividend policy

g. Non-controlling interests

23. REVENUE

24. NET INCOME

a. Financial costs

c. Depreciation and amortization

c. Employee benefits expense

Amount

25. INCOME TAXES

b. Current tax assets and liabilities

c. Deferred tax assets and liabilities

26. EARNINGS PER SHARE

Net Profit for the Period

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)

27. SHARE-BASED PAYMENT ARRANGEMENTS

December 31, 2021

December 31, 2020

c. Restricted stock for employees

28. OPERATING LEASE ARRANGEMENTS

The Group as a lessee

29. CAPITAL MANAGEMENT

30. FINANCIAL INSTRUMENTS

FocalTech Annual Report 2021