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FocalTech — Interim / Quarterly Report 2020
Nov 13, 2020
52342_rns_2020-11-13_11f342b2-d28a-4c57-ba92-4b16bb64334d.pdf
Interim / Quarterly Report
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FocalTech Systems Co., Ltd. and Subsidiaries
Consolidated Financial Statements for the Nine Months Ended September 30, 2020 and 2019
This is the translation of the financial statements. CPAs do not audit or review on this translation.
INDEPENDENT AUDITORS’ REVIEW REPORT The Board of Directors and Shareholders FocalTech Systems Co., Ltd.
Introduction
We have reviewed the accompanying consolidated balance sheets of FocalTech Systems Co., Ltd. and its subsidiaries (collectively, the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019, the consolidated statements of changes in equity and of cash flows for the nine months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies(collectively referred to as the “consolidated financial statements”). Management 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 International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.
Scope of Review
Except as explained in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 65 "Review of Financial Information Performed by the Independent Auditor of the Entity". A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Basis for Qualified Conclusion
As disclosed in Note 12 to the consolidated financial statements, the financial statements of non-significant subsidiaries included in the consolidated financial statements referred to in the first paragraph were not reviewed. As of September 30, 2020 and 2019, combined total assets of these non-significant subsidiaries were NT$547,314 thousand and NT$593,613 thousand, respectively, representing 5% and 5%, respectively, of the consolidated total assets, and combined total liabilities of these subsidiaries were NT$173,810 thousand and NT$243,488 thousand, respectively, representing 4% and 8%, respectively, of the consolidated total liabilities; for the three months and nine months ended September 30, 2020 and 2019, the amounts of combined comprehensive income(loss) of these subsidiaries were NT$(51,964) thousand,NT$8,963 thousand, NT$(136,016)thousand and NT$(57,246) thousand, respectively, representing (22%), 30%, (41%) and 24%.
Qualified Conclusion
Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had the financial statements of the non-significant subsidiaries and as described in the preceding paragraph been reviewed, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not give a true and fair view of the consolidated financial position of the Group as of September 30, 2020 and 2019, its consolidated financial performance and its consolidated cash flows for the three months ended September 30, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.
The engagement partners on the reviews resulting in this independent auditors' review report are Shiow-Ming Shue and Chih-Ming Shao.
Deloitte & Touche Taipei, Taiwan Republic of China November 10, 2020
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
(In Thousands of New Taiwan Dollars)
| ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through other comprehensive income - current (Note 8) Trade receivables, net (Note 10) Inventories (Note 11) Other financial assets (Note 9) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Note 7) Financial assets at fair value through other comprehensive income - non-current (Note 8) Investments accounted for using equity method (Note 4 and 13) Property, plant and equipment (Note 14) Goodwill (Notes 15) Other intangible assets (Note 16) Deferred tax assets Other non-current assets (Note 29) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Trade payables (Note 17) Other payables (Note 18 and 20) Current tax liabilities (Notes 4) Other current liabilities (Notes 21) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Net defined benefit liabilities - non-current (Note 4) Guarantee deposits received Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (Notes 20 and 25) Share capital Ordinary shares Capital surplus Additional paid-in capital Treasury shares Changes in ownership interests in subsidiaries Employee share options Employee share options – expired Total capital surplus Undistributed earnings (deficits to be offset) Other equity Exchange differences from translating the financial statements of foreign operations Unrealized gain (loss) on financial assets at fair value through other comprehensive income Total other equity Treasury shares Equity attributable to owners of the parent NON-CONTROLLING INTERESTS Total equity TOTAL |
September 30, 2020 Amount % $ 3,535,594 30 17,587 - 1,486,527 12 2,266,684 19 1,260,351 11 246,938 2 8,813,681 74 55,481 - 197,314 2 4,970 - 1,310,337 11 1,237,268 10 67,117 1 105,947 1 150,602 1 3,129,036 26 $ 11,942,717 100 $ 1,832,027 15 1,836,772 16 399,501 3 144,672 1 4,212,972 35 30,897 - 23,796 - 407,754 4 10,400 - 472,847 4 4,685,819 39 2,100,456 18 4,714,996 39 68,133 1 - - 15,249 - 33,933 - 4,832,311 40 448,132 4 (90,032) (1) 497 - (89,535) (1) (43,074) - 7,248,290 61 8,608 - 7,256,898 61 $ 11,942,717 100 |
December 31, 2019 Amount % $ 3,461,503 30 120,475 1 1,420,459 12 1,570,753 14 1,596,292 14 361,925 3 8,531,407 74 56,354 - 60,898 1 - - 1,361,478 11 1,237,268 11 99,189 1 120,782 1 135,593 1 3,071,562 26 $11,602,969 100 $ 1,986,219 17 954,449 8 363,172 3 108,584 1 3,412,424 29 33,537 - 24,078 - 394,360 4 10,400 - 462,375 4 3,874,799 33 2,996,759 26 5,037,671 44 48,662 1 - - 25,510 - 33,534 - 5,145,377 45 (183,307) (2) 4,057 - 1,750 - 5,807 - (267,158) (2) 7,697,478 67 30,692 - 7,728,170 67 $ 11,602,969 100 |
September 30, 2019 | |||
|---|---|---|---|---|---|---|
| Amount $ 3,461,503 120,475 1,420,459 1,570,753 1,596,292 361,925 8,531,407 56,354 60,898 - 1,361,478 1,237,268 99,189 120,782 135,593 3,071,562 $11,602,969 $ 1,986,219 954,449 363,172 108,584 3,412,424 33,537 24,078 394,360 10,400 462,375 3,874,799 2,996,759 5,037,671 48,662 - 25,510 33,534 5,145,377 (183,307) 4,057 1,750 5,807 (267,158) 7,697,478 30,692 7,728,170 $ 11,602,969 |
Amount % $ 2,910,374 26 180,055 2 1,076,818 10 1,406,039 13 2,054,943 19 230,771 2 7,859,000 72 87,007 1 82,144 1 - - 1,402,938 13 1,237,268 11 108,593 1 118,503 1 53,960 - 3,090,413 28 $ 10,949,413 100 $ 1,290,051 12 920,010 8 380,628 3 193,505 2 2,784,194 25 31,672 - 25,836 - 266,118 3 10,400 - 334,026 3 3,118,220 28 2,994,857 27 5,034,044 47 48,662 1 20,295 - 28,709 - 31,688 - 5,163,398 48 (231,810) (2) 162,508 1 1,642 - 164,150 1 (268,656) (2) 7,821,939 72 9,254 - 7,831,193 72 $ 10,949,413 100 |
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 (LOSS) (In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share)
| NET REVENUE (Note 21) COST OF REVENUE (Note 11 and 22) GROSS PROFIT OPERATING EXPENSES (Note 19, 22, 27 and 29) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME (LOSS) NON-OPERATING INCOME AND EXPENSES Finance costs Interest income (Loss) gain on financial assets and liabilities at fair value through profit or loss Other gains and losses - net Gain (Loss) on foreign exchange Total non-operating income and expenses INCOME (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Note 4 and 23) NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME Items that may be reclassified subsequently to profit or loss: Exchange differences from translating the financial statements of foreign operations |
For the Three Months EndedSeptember 30 | For the Three Months EndedSeptember 30 | For the Three Months EndedSeptember 30 | For the Nine Months | For the Nine Months | EndedSeptember 30 | EndedSeptember 30 | EndedSeptember 30 | ||
|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||
| Amount % $ 3,815,809 100 (3,001,044) (79) 814,765 21 (87,234) (2 ) (97,449 ) (3 ) (391,046) (10) (575,729) (15) 239,036 6 - - 8,980 - 2,973 - 24,273 1 2,461 - 38,687 1 277,723 7 (10,014) - 267,709 7 (26,216) (1 ) |
Amount % $ 2,573,411 100 (1,976,946) (77) 596,465 23 (107,165) (4 ) (78,763 ) (3 ) (385,634) (15) (571,562) (22) 24,903 1 (2) - 28,052 1 52 - 31,477 1 (3,947) - 55,632 2 80,535 3 (7,599) - 72,936 3 43,542 (2 ) |
Amount $ 9,493,042 (7,425,266) 2,067,776 (257,800) (267,130) (1,125,648) (1,650,578) 417,198 (1,078) 44,658 (1,619) 43,594 13,738 99,293 516,491 (88,300) 428,191 (96,232) |
% 100 (78) 22 (3 ) (3 ) (12) (18) 4 - 1 - - - 1 5 (1) 4 (1 ) |
Amount % $ 6,352,830 100 (4,922,274) (77) 1,430,556 23 (369,821) (6 ) (235,420) (4 ) (1,172,331) (18) (1,777,572) (28) (347,016) (5) (1,152) - 82,840 1 384 - 30,206 - 5,506 - 117,784 1 (229,232) (4 ) (27,025) - (256,257) (4) 13,671 - (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 COMPREHENSIVE INCOME (LOSS) (In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share) (Reviewed, Not Audited)
| Unrealized (losses) gains from debt instrument investments measured at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss Total other comprehensive income TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD NET INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Parent Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Parent Non-controlling interests EARNINGS (LOSSES) PER SHARE (Note 24) Basic Diluted |
For the Three Months EndedSeptember 30 | For the Three Months EndedSeptember 30 | For the Three Months EndedSeptember 30 | For the Nine Months | EndedSeptember 30 | EndedSeptember 30 | EndedSeptember 30 | ||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||
| Amount % (1,793) - (28,009) (1) (28,009) (1) $ 239,700 6 $ 275,308 7 (7,599) - $ 267,709 7 $ 248,577 6 (8,877) - $ 239,700 6 $ 1.06 $ 1.00 |
Amount % 79 - (43,463) (2) (43,463) (2) $ 29,473 1 $ 79,983 3 (7,047) - $ 72,936 3 $ 36,553 1 (7,080) - $ 29,473 1 $ 0.29 $ 0.28 |
Amount % (1,253) - (97,485) (1) (97,485) (1) $ 330,706 3 $ 448,132 4 (19,941) - $ 428,191 4 $ 352,790 3 (22,084) - $ 330,706 3 $ 1.64 $ 1.55 |
Amount 3,932 17,603 17,603 $ (238,654) $ (231,810) (24,447) $ (256,257) $ (214,824) (23,830) $ (238,654) $ (0.84) |
% - - - (4) (4 ) - (4) (3 ) (1) (4) |
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| $ | $ | $ | $ | ||||||
| $ | $ | $ | $ | ||||||
| $ | $ | $ | $ | ||||||
| $ | $ | $ | $ | ||||||
| $ | $ | $ | $ | ||||||
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 (In Thousands of New Taiwan Dollars)
| CONSOLIDATED STATEMENTS OF CHANGES IN (In Thousands of New Taiwan Dollars) |
EQUITY | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
BALANCE, JANUARY 1, 2019 Reduction on legal reserve to offset accumulated deficits Reduction on capital surplus to offset accumulated deficits Cash distribution from additional paid-in capital Net loss for the nine months ended September 30, 2019 Other comprehensive income (loss) for the nine months ended September 30, 2019, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2019 Compensation cost of employee share options (Note 20 and 25) Treasury shares transferred to employees (Note 20 and 25) Changes in ownership interests in subsidiaries Issuance of ordinary shares from exercise of employee share options (Note 20 and 25) Decrease in non-controlling interests BALANCE, SEPTEMBER 30, 2019 BALANCE, JANUARY 1, 2020 Reduction on capital surplus to offset accumulated deficits Cash distribution from additional paid-in capital Net income for the nine months ended September 30, 2020 Other comprehensive income (loss) for the nine months ended September 30, 2020, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2020 Reduction of capital (Note 20) Compensation cost of employee share options (Note 20 and 25) Treasury shares transferred to employees (Note 20 and 25) Issuance of ordinary shares from exercise of employee share options (Note 20 and 25) BALANCE, SEPTEMBER 30, 2020 |
Equity Attributable toOwners of the Parent | Non-controlling Interests $ 33,342 - - - (24,447) 617 (23,830) - - 153 - (411) $ 9,254 $ 30,692 - - (19,941) (2,143) (22,084) - - - - $ 8,608 |
Total Equity | ||||||||||
| Share Capital Ordinary Shares $ 2,987,432 - - - - - - - - - 7,425 - $ 2,994,857 $ 2,996,759 - - - - - (899,721) - - 3,418 $ 2,100,456 |
Capital Surplus $ 6,551,481 - (1,248,601) (150,000) - - - 8,083 - (153) 2,588 - $ 5,163,398 $ 5,145,377 (183,307) (150,000) - - - - 16,049 - 4,192 $ 4,832,311 |
Retained Earnings(Accumulated Deficits) Legal Reserve Undistributed Earnings (Deficits to be offset) $ 186,154 $ (1,434,755) (186,154) 186,154 - 1,248,601 - - - (231,810) - - - (231,810) - - - - - - - - - - $ - $ (231,810) $ - $ (183,307) - 183,307 - - - 448,132 - - - 448,132 - - - - - - - - $ - $ 448,132 |
Other | Equity | Treasury Shares $ (393,203) - - - - - - - 124,547 - - - $ (268,656) $ (267,158) - - - - - - - 224,084 - $ (43,074) |
Total $ 8,044,273 - - (150,000) (231,810) 16,986 (214,824) 8,083 124,547 (153) 10,013 - $ 7,821,939 $ 7,697,478 - (150,000) 448,132 (95,342) 352,790 (899,721) 16,049 224,084 7,610 $ 7,248,290 |
|||||||
| Exchange Differences from Translating the Financial Statement of Foreign Operations $ 149,454 - - - - 13,054 13,054 - - - - - $ 162,508 $ 4,057 - - - (94,089) (94,089) - - - - $ (90,032) |
Unrealized Gains (Losses) on Financial Assets at Fair Value through Other Comprehensive Income $ (2,290) - - - - 3,932 3,932 - - - - - $ 1,642 $ 1,750 - - - (1,253) (1,253) - - - - $ 497 |
||||||||||||
| Legal Reserve $ 186,154 (186,154) - - - - - - - - - - $ - $ - - - - - - - - - - $ - |
|||||||||||||
| $ 8,077,615 - - (150,000) (256,257) 17,603 (238,654) 8,083 124,547 - 10,013 (411) $ 7,831,193 $ 7,728,170 - (150,000) 428,191 (97,485) 330,706 (899,721) 16,049 224,084 7,610 $ 7,256,898 |
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
(In Thousands of New Taiwan Dollars)
| CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax Adjustments for: Depreciation expenses Amortization expenses Net loss (gain) on financial assets at fair value through profit or loss Finance costs Interest income Compensation costs of employee share options 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 Trade receivables Inventories Other current assets Trade payables Other payables Other current liabilities Net defined benefit liabilities Cash generated from operations Interest paid Income tax paid Net cash (outflow) inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial asset at fair value through other comprehensive income Proceeds from disposal of financial asset 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 in other financial assets (Increase) decrease in other non-current assets Interest received Net cash inflow from investing activities |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|
|---|---|---|---|
| 2020 $ 516,491 58,368 32,087 1,619 1,078 (44,658) 16,049 40,928 - (26,705) (42,487) (72,688) (711,684) 105,715 (142,024) 4,680 38,068 (282) (225,445) (1,078) (29,919) (256,442) (142,888) 101,378 (4,970) (15,907) (147) 302,476 (15,648) 52,540 276,834 |
2019 $ (229,232) 61,317 40,920 (384) 1,152 (82,840) 8,083 - (38,418) 4,589 26,405 (89,605) 769,387 (9,717) (349,640) 120,988 129,610 (260) 362,355 (1,152) (27,998) 333,205 - 6,211 - (94,707) - 247,508 2,004 73,508 234,524 (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
(In Thousands of New Taiwan Dollars)
| CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in guarantee deposits Dividends paid to owners of the Company Exercise of employee share options Treasury shares transferred to employees Decrease in non-controlling interests Net cash inflow (outflow) 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 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|
|---|---|---|---|
| 2020 $ 14,959 (150,000) 7,610 224,084 - 96,653 (42,954) 74,091 3,461,503 $ 3,535,594 |
2019 $ (11,376) (150,000) 10,013 124,547 (411) (27,227) 13,946 554,448 2,355,926 $ 2,910,374 |
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 NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES
1. GENERAL INFORMATION
FocalTech Systems Co., Ltd. (the “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 (“TSE”) 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 solutions regarding human and machine interface devices, 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 November 6, 2020.
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 IFRSs endorsed and issued in to effect by the FSC did not have a significant impact on the Group’s accounting policies.
- b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
| 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 IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform – Phase 2” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IFRS 17 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 16 “Property, Plant and Equipment-Proceeds before Intended Use” Amendments to IAS 37 “Onerous Contracts—Cost of Fulfilling a Contract” |
Effective Date Announced by IASB (Note 1) |
|---|---|
| January 1, 2022 January 1, 2022 Effective immediately upon promulgation by the IASB January 1, 2021 To be determined by IASB January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2022 January 1, 2022 |
- Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
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 consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and IAS 34 “Interim Financial Reporting” as endorsed by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of annual financial statements.
- 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. Basis of consolidation
The detail information, holding percentages, and main business of the subsidiaries could be found in Note 12.
d. Other significant accounting policies
Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2019.
1) Retirement benefits
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, and adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.
- 2) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income and the tax rate that would be applicable to expected total annual earnings.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
- 3) Investment in joint ventures
A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.
The Group uses the equity method to account for its investments in joint ventures. Under the equity method, investments in a joint venture is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive of the equity of joint venture. The Group recognizes the changes of the equity of the joint venture by the Group’s share percentage.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The Group has considered the economic influences of COVID-19 on critical accounting estimates and will continue evaluating the impact on its financial position and financial performance as a result of the pandemic. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the periods the revision affects, in the current period or future periods. Other critical accounting judgments, estimations and assumptions applied in these consolidated financial statements are consistent with those in the consolidated financial statements for the year ended December 31, 2019.
6. CASH AND CASH EQUIVALENTS
| September 30, | December 31, | December 31, | September 30, | September 30, | |
|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | |||
| Cash on hand |
$ 6,727 |
$ | 4,381 |
$ | 6,913 |
| Checking accounts and demand deposits | 2,847,233 | 2,103,526 | 1,189,194 | ||
| Cash equivalent (time deposits with original | |||||
| maturities within three months) |
681,634 |
1,353,596 |
1,714,267 | ||
| $ 3,535,594 |
$ | 3,461,503 |
$ | 2,910,374 | |
| The interest rate intervals at the end of the reporting | period were as follows: | ||||
| September 30, | December 31, | September 30, | |||
| 2020 | 2019 | 2019 | |||
| Demand deposits |
0.001%-0.35% | 0.001%-0.35% | 0.001%-0.43% | ||
| Time deposits |
0.12%-1.095% | 1.56%-2.32% |
0.9%-3.06% |
7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS - NON-CURRENT
| September 30, | December 31, | September 30, | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Mandatorily measured at fair value through profit | |||
| or loss (FVTPL) | |||
| Listed preferred shares | $ 10,625 | $ 10,931 | $ 10,863 |
| Private Funds | 44,856 | 45,423 | 45,709 |
| Structured Investments | - |
- |
30,435 |
| $ 55,481 | $ 56,354 | $ 87,007 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
| 9. 10. |
September 30, 2020 December 31, 2019 September 30, 2019 Investments in debt instruments Current Foreign investments Fixed income bonds $ 17,587 $ 120,475 $ 180,055 Non–Current Foreign investments Fixed income bonds $ 197,314 $ 60,898 $ 82,144 Yield rates 1.82%-4.117% 2.307%-4.117% 2.201%-4.117% OTHER FINANCIAL ASSETS September 30, 2020 December 31, 2019 September 30, 2019 Time deposits with original maturities more than three months $ 1,260,351 $ 1,596,292 $ 2,054,943 Interest rate intervals 0.4%-4.18% 1.5%-4.18% 1.1%-4.18% TRADE RECEIVABLES, NET September 30, 2020 December 31, 2019 September 30, 2019 Trade receivables $ 1,486,527 $ 1,420,459 $ 1,076,818 |
|---|---|
The average credit term for sales of goods was 60-120 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 trade 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 trade receivables. The expected credit losses on trade 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 trade receivable.
The following table details the loss allowance of trade receivables based on the Group’s allowance matrix. September 30, 2020
This is the translation of the financial statements. CPAs do not audit or review on this translation.
Expected credit loss rate Gross carrying amount and Amortized cost December 31, 2019 Expected credit loss rate Gross carrying amount and Amortized cost September 30, 2019 Expected credit loss rate Gross carrying amount and Amortized cost |
Non Past Due 0% $ 1,476,532 Non Past Due 0% $ 1,420,085 Non Past Due 0% $ 1,063,638 |
Overdue 1-60 Days 0% $ 9,980 Overdue 1-60 Days 0% $ 374 Overdue 1-60 Days 0% $ 13,180 |
Overdue 61-180 Days 0% $ 15 Overdue 61-180 Days 0% $ - Overdue 61-180 Days 0% $ - |
Overdue Over 180 Days 0% $ - Overdue Over 180 Days 0% $ - Overdue Over 180 Days 0% $ - |
Total | ||
|---|---|---|---|---|---|---|---|
| 0% $ 1,486,527 Total |
|||||||
| 0% $ 1,420,459 Total |
|||||||
| 0% $ 1,076,818 |
11. INVENTORIES
| September 30, | September 30, | December 31, | December 31, | September 30, | September 30, | |
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||||
| Finished goods | $ | 481,383 |
$ | 476,430 |
$ | 451,689 |
| Work in process | 1,201,434 | 775,899 | 717,871 | |||
| Raw materials and supplies | 583,867 |
318,424 |
236,479 | |||
| $ | 2,266,684 |
$ | 1,570,753 |
$ | 1,406,039 |
The cost of goods sold were NT$3,001,044 thousand and NT$1,976,946 thousand, including reverse of write-off of inventories of NT$15,843 thousand for the three months ended September 30, 2020 and 2019, respectively. The cost of goods sold were NT$7,425,266 thousand and NT$4,922,274 thousand, including the reverse of write-off of inventories of NT$38,318 thousand for the nine months ended September 30, 2020 and 2019, respectively. Abovementioned reversals are resulted from sales of slow moving inventory.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
12. SUBSIDIARIES
Details of the Company’s subsidiaries included in the consolidated financial statements were as follows:
| Investor Investee Main Businesses |
Percentage of Ownership |
|---|---|
| September 30, 2020 December 31, 2019 September 30, 2019 |
|
| FocalTech Systems Co., Ltd. FocalTech Corporation, Ltd. Investment activity FocalTech Electronics, Ltd. Investment activity |
100% 100% 100% 100% 100% 100% |
| FocalTech Systems Co., Ltd. And FocalTech Electronics Co., Ltd. (a) FocalTech Smart Sensors, Ltd. Investment activity |
67.15% 67.15% (Note) 62.07% |
| FocalTech Smart Sensors, Ltd. FocalTech Smart Sensors Co., Ltd. Research, development, manufacturing and sale of integrated circuits |
100% 100% 100% |
| FocalTech Corporation,Ltd. FocalTech Systems, Inc. Investment activity |
100% 100% 100% |
| FocalTech Systems, Inc. FocalTech Systems, Ltd. Research, development, manufacturing and sale of integrated circuits |
100% 100% 100% |
| FocalTech Systems, Ltd. FocalTech Systems (Shenzhen) Co., Ltd. Design and research of integrated circuits FocalTech Electronics Co.,Ltd. Import and export of integrated circuits |
100% 100% 100% 100% 100% 100% |
| FocalTech Electronics, Ltd. FocalTech Electronics (Shanghai) Co., Ltd. Sales support and post-sales service for affiliates’ IC products FocalTech Electronics (Shenzhen) Co., Ltd. Design and research of integrated circuits Hefei PineTech Electronics Co.,Ltd. Research, development and sale of integrated circuits |
100% 100% 100% 100% 100% 100% 100% 100% 100% |
a. FocalTech Smart Sensors, Ltd. issued its ordinary shares but the Group did not subscribe according to the shareholding ratio causing changes in the shareholding ratio.
As of September 30, 2020 and 2019, the immaterial subsidiaries of the Company included FocalTech Smart Sensors Co., Ltd., FocalTech Electronics Co., Ltd., FocalTech Systems (Shenzhen) Co., Ltd., FocalTech Electronics (Shenzhen) Co., Ltd., FocalTech Electronics (Shanghai) Co., Ltd., Hefei PineTech Electronics Co., Ltd. and FocalTech Smart Sensors, Ltd.
The financial statements of the immaterial subsidiaries had not been reviewed by auditors. As of September 30, 2020 and 2019, the total amounts of assets of the immaterial subsidiaries were NT$547,314 thousand, and NT$593,613 thousand, respectively, accounted for 5% and 5% of total consolidated assets, respectively. The total amounts of liabilities were NT$173,810 thousand, and NT$243,488 thousand, respectively, accounted for 4% and 8% of total consolidated liabilities, respectively. For the three months ended September 30, 2020 and 2019, and for the nine months ended September 30, 2020 and 2019, the total immaterial subsidiaries comprehensive income (loss) has been recognized at NT$(51,964) thousand, NT$8,963 thousand, NT$(136,016) thousand and NT$(57,246) thousand, respectively, accounted for (22%), 30%, (41%) and 24% of the comprehensive income (loss), respectively.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
Investment in joint venture
Vitrio Technology Corporation
| September 30, | September 30, | December | 31, | September | 30, | |
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||||
| $ | 4,970 |
$ | - |
$ | - |
The Company and non-related party invested and founded Vitrio Technology Corporation. As of September 30, 2020, the Group’s holding percentage is 50%.
The financial statements of the joint venture had not been reviewed by auditors and were accounted in the Company financial statements. The management of the Group considers the un-reviewed financial statements of joint venture will not result in significant influence to Group’s consolidated financial statements.
14. PROPERTY, PLANT AND EQUIPMENT
Cost Balance, January 1, 2019 Additions Effect of foreign currency exchange differences Balance, September 30, 2019 Accumulated depreciation Balance, January 1, 2019 Depreciation Effect of foreign currency exchange differences Balance, September 30, 2019 Carrying amounts as of September 30, 2019 Cost Balance, January 1, 2020 Additions Reclassification Effect of foreign currency exchange differences Balance, September 30, 2020 Accumulated depreciation Balance, January 1, 2020 Depreciation Reclassification Effect of foreign currency exchange differences Balance, September 30, 2020 Carrying amounts as of December 31, 2019 and January 1, 2020 Carrying amounts as of September 30, 2020 |
Buildings Development Equipment $ 1,375,563 $ 192,558 - 93,461 (25,920 ) (579 ) $ 1,349,643 $ 285,440 $ 51,610 $ 138,166 27,683 29,518 (1,787 ) (116 ) $ 77,506 $ 167,568 $ 1,272,137 $ 117,872 $ 1,322,961 $ 285,660 - 12,769 - (258 ) (7,298 ) (4,438 ) $ 1,315,663 $ 293,733 $ 84,761 $ 174,368 26,155 29,624 - - (402 ) (2,726 ) $ 110,514 $ 201,266 $ 1,238,200 $ 111,292 $ 1,205,149 $ 92,467 |
Office Equipment $ 15,970 32 (231 ) $ 15,771 $ 11,635 931 (173 ) $ 12,393 $ 3,378 $ 15,548 2,154 (76 ) (61 ) $ 17,565 $ 12,431 727 10 (43 ) $ 13,125 $ 3,117 $ 4,440 |
Information Equipment $ 42,675 1,214 (776 ) $ 43,113 $ 31,508 2,659 (605 ) $ 33,562 $ 9,551 $ 42,621 984 334 (215 ) $ 43,724 $ 33,752 1,862 (10 ) (161 ) $ 35,443 $ 8,869 $ 8,281 |
Leasehold Improve- ments $ 38,956 - (277 ) $ 38,679 $ 38,431 526 (278 ) $ 38,679 $ - $ 38,388 - - (77 ) $ 38,311 $ 38,388 - - (77 ) $ 38,311 $ - $ - |
Total $ 1,665,722 94,707 (27,783 ) |
|---|---|---|---|---|---|
$ 1,732,646 $ 271,350 61,317 (2,959 ) |
|||||
$ 329,708 $ 1,402,938 $ 1,705,178 15,907 - (12,089 ) |
|||||
$ 1,708,996 $ 343,700 58,368 - (3,409 ) |
|||||
$ 398,659 $ 1,361,478 $ 1,310,337 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
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 not pledged as collateral.
15. GOODWILL
| September 30, | December 31, | September 30, | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Ending balance | $ 1,237,268 |
$ 1,237,268 |
$ 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, generating 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, it’s 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 10.66% and 9.95% for the years ended December 31, 2019 and 2018, under the assumptions of management team judgments and historical experiences with regard to future growth rates and gross margin .
This is the translation of the financial statements. CPAs do not audit or review on this translation.
16. OTHER INTANGIBLE ASSETS
| Cost Balance, January 1, 2019 Effect of foreign currency exchange differences Balance, September 30, 2019 Accumulated amortization Balance, January 1, 2019 Amortization expenses Effect of foreign currency exchange differences Balance, September 30, 2019 Carrying amounts as of September 30, 2019 Cost Balance, January 1, 2020 Additions Effect of foreign currency exchange differences Balance, September 30, 2020 Accumulated amortization Balance, January 1, 2020 Amortization expenses Effect of foreign currency exchange differences Balance, September 30, 2020 Carrying amounts as of December 31, 2019and January 1, 2020 Carrying amounts as of September 30, 2020 |
Licenses and Franchises $ 130,393 1,182 $ 131,575 $ 95,724 12,357 825 $ 108,906 $ 22,669 $ 127,719 - (3,201) $ 124,518 $ 109,676 17,778 (3,107) $ 124,347 $ 18,043 $ 171 |
Software $ 157,801 1,408 $ 159,209 $ 133,210 17,174 1,250 $ 151,634 $ 7,575 $ 154,970 147 (4,121) $ 150,996 $ 148,376 2,920 (4,083) $ 147,213 $ 6,594 $ 3,783 |
Patents Trademark $ 76,714 $ 74,000 (5) - $ 76,709 $ 74,000 $ 31,376 $ 29,600 5,839 5,550 (5) - $ 37,210 $ 35,150 $ 39,499 $ 38,850 $ 76,704 $ 74,000 - - - - $ 76,704 $ 74,000 $ 39,152 $ 37,000 5,839 5,550 - - $ 44,991 $ 42,550 $ 37,552 $ 37,000 $ 31,713 $ 31,450 |
Total $ 438,908 2,585 $ 441,493 $ 289,910 40,920 2,070 $ 332,900 $ 108,593 $ 433,393 147 (7,322) $ 426,218 $ 334,204 32,087 (7,190) $ 359,101 $ 99,189 $ 67,117 (concluded) |
|---|---|---|---|---|
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
This is the translation of the financial statements. CPAs do not audit or review on this translation.
17. TRADE PAYABLES
| September 30, | December 31, | September 30, | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Trade payables | $ 1,832,027 |
$ 1,986,219 |
$ 1,290,051 |
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.
18. OTHER PAYABLES
| September 30, | December 31, | September 30, | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||
| Payable | for rebates | $ 447,450 |
$ 408,291 |
$ 399,641 |
| Payable | for salaries and bonuses | 356,477 | 411,236 | 395,095 |
| Payable | for labor, health and social insurance | 14,613 | 12,367 | 14,808 |
| Reserve | for litigations | 48,634 | 50,105 | 52,653 |
| Payable | for professional services and others | 69,877 | 72,450 | 57,813 |
| Payable | for cash reduction of capital | 899,721 |
- |
- |
| $1,836,772 |
$ 954,449 |
$ 920,010 |
19. RETIREMENT BENEFIT
Pension expenses under the defined benefit plans, calculated using the actuarially determined pension cost rate as of December 31, 2019 and 2018, were NT$90 thousand, NT$112 thousand, NT$272 thousand and NT$335 thousand for the three months ended September 30, 2020 and 2019, and nine months ended September 30, 2020 and 2019, respectively.
20. EQUITY
- a. Share capital
Ordinary shares (par value at NT$10 per share)
| September 30, | December 31, | September 30, | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Numbers of shares authorized (in thousands) | 500,000 |
500,000 |
500,000 |
| Shares authorized |
$ 5,000,000 |
$ 5,000,000 |
$ 5,000,000 |
| Number of shares issued and fully paid (in | |||
| thousands) |
210,046 |
299,676 |
299,486 |
| Shares issued |
$ 2,100,456 |
$ 2,996,759 |
$ 2,994,857 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
b. Capital surplus
| BALANCE, JANUARY 1, 2019 Capital surplus used to offset accumulated deficits Cash distribution from additional paid-in capital Changes in ownership interests in subsidiaries Treasury shares transferred to employees Compensation cost of employee share options Issuance of ordinary shares from exercise of employee share options Expiration of employee share options BALANCE, SEPTEMBER 30, 2019 BALANCE, JANUARY 1, 2020 Capital surplus used to offset accumulated deficits Cash distribution from additional paid-in capital Changes in ownership interests in subsidiaries Treasury shares transferred to employees Compensation cost of employee share options Issuance of ordinary shares from exercise of employee share options Expiration of employee share options BALANCE, SEPTEMBER 30, 2020 |
Additional Paid-in Capital (1) $6,422,355 (1,248,601) (150,000) - - - 10,290 - $ 5,034,044 $5,037,671 (183,307 ) (150,000 ) - - - 10,632 - $ 4,714,996 |
Treasury Shares (1) $ 40,868 - - - 7,794 - - - $ 48,662 $ 48,662 - - - 19,471 - - - $ 68,133 |
Changes in ownership interests in subsidiaries (2) $ 20,448 - - (153 ) - - - - $ 20,295 $ - - - - - - - - $ - |
Employee Share Options (3) $ 47,476 - - - (7,794 ) 8,083 (7,702 ) (11,354) $ 28,709 $ 25,510 - - - (19,471 ) 16,049 (6,440 ) (399) $ 15,249 |
Employee Share Options -Expired (2) $ 20,334 - - - - - - 11,354 $ 31,688 $ 33,534 - - - - - - 399 $ 33,933 |
Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| $6,551,481 (1,248,601 ) (150,000 ) (153 ) - 8,083 2,588 - $ 5,163,398 $5,145,377 (183,307 ) (150,000 ) - - 16,049 4,192 - $ 4,832,311 |
-
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 may be used to offset a deficit.
-
3) 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 in its meeting held on June 20, 2019, which stipulate that earnings distribution may be made on a quarterly basis after the close of each quarter.
The Company’s amended Articles of Incorporation provide that, when distributing earnings belonging to the first three quarter, the Company shall first estimate and reserve taxes to be paid, offset its deficits, estimate and reserve employees’ compensation and remuneration to directors, then set aside a legal capital reserve at 10% of the remaining earnings and set aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings at the beginning shall be used by the Company’s board of directors as the basis for proposing a distribution plan after the Company’s board of directors consider operational situation and retain proper amount. By way of stock dividends, it shall be approved by the Company’s shareholders in its meeting; by way of cash dividends, it shall be approved by the Company’s board of directors.
When distributing annual earnings, the Company 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 prepare a distribution proposal for the remaining earnings plus the unappropriated retained earnings of previous years. Earnings distribution may be made in the form of
This is the translation of the financial statements. CPAs do not audit or review on this translation.
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 earing distribution is only allowed after yearly closing by the approval of the shareholders’ meeting. The rest 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 21(c) 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 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.
NT$186,154 thousand from legal reserve and NT$1,248,601 thousand from capital surplus for loss offsetting as well as the cash distribution of NT$150,000 thousand, i.e. NT$0.52010840 per share, from additional paid-in capital of share issue premium had been approved in the Company’s shareholders’ meeting on June 20, 2019.
NT$183,307 thousand from additional paid-in capital for loss offsetting as well as the cash distribution of NT$150,000 thousand, i.e. NT$0.50291032 per share, from additional paid-in capital of share issue premium had been approved in the Company’s shareholders’ meeting on June 20, 2020.
To increase the return on shareholders’ equity, it 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 9, 2020, and the date of completion of capitalization change registration was on September 14, 2020. As of September 30, 2020, the payable for cash reduction of capital was accounted for other payables, and the cash was returned to shareholders on October 28, 2020. There was no impact on cash flow on September 30, 2020.
The Company’s shareholders’ meeting resolved to issue restricted stocks for employees up to 6,000 thousand shares at par value of $10 on June 20, 2020. The restricted stocks plan was approved by Financial Supervisory Commission on August 12, 2020. As of September 30, 2020, there is no restricted shares under this plan issued yet.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
d. Treasury stock
Shares (In Thousands)
| Number of shares on January 1, 2019 Decrease during the period Number of shares on September 30, 2019 Number of shares on January 1, 2020 Decrease during the period Decrease due to capital reduction Number of shares on September 30, 2020 |
15,970 (4,932) 11,038 10,978 (9,247) (519) 1,212 |
|---|---|
The detailed information for other Shares Buy Back Programs could be found in Note 25 (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.
21. REVENUE
| IC for mobile devices Contract balances |
For the Three Months Ended September 30 2020 2019 $3,815,809 $2,573,411 |
For the Three Months Ended September 30 2020 2019 $3,815,809 $2,573,411 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|
|---|---|---|---|---|---|
| 2020 $3,815,809 |
2020 $9,493,042 |
2019 $6,352,830 |
| September 30, | September 30, | December 31, | December 31, | September 30, | September 30, | |
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||||
| Contract liabilities | ||||||
| Sales of goods | $ | 90,452 |
$ | 53,847 |
$ | 135,822 |
22. NET INCOME
a. Depreciation and amortization
| Property, plant and equipment Intangible assets An analysis of depreciation and amortization by function Operating costs Operating expenses |
For the Three Months Ended September 30 2020 2019 $ 19,379 $ 21,488 3,959 11,249 $ 23,338 $ 32,737 $ 173 $ 378 23,165 32,359 $ 23,338 $ 32,737 |
For the Three Months Ended September 30 2020 2019 $ 19,379 $ 21,488 3,959 11,249 $ 23,338 $ 32,737 $ 173 $ 378 23,165 32,359 $ 23,338 $ 32,737 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|---|---|---|---|---|---|
| 2020 $ 19,379 3,959 $ 23,338 $ 173 23,165 $ 23,338 |
2020 $ 58,368 32,087 $ 90,455 $ 548 89,907 $ 90,455 |
2019 $ 61,317 40,920 $ 102,237 $ 1,042 101,195 $ 102,237 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
b. Employee benefits expense
| Post-employment benefits Defined contribution plans Defined benefit plans (Note 18) Share-based payments (Note 24) Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses |
For the Three Months Ended September 30 2020 2019 $ 7,027 $ 7,083 90 112 6,088 1,958 357,837 363,290 $ 371,042 $ 372,443 $ 31,390 $ 28,561 339,652 343,882 $ 371,042 $ 372,443 |
For the Three Months Ended September 30 2020 2019 $ 7,027 $ 7,083 90 112 6,088 1,958 357,837 363,290 $ 371,042 $ 372,443 $ 31,390 $ 28,561 339,652 343,882 $ 371,042 $ 372,443 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|
|---|---|---|---|---|---|
| 2020 $ 7,027 90 6,088 357,837 $ 371,042 $ 31,390 339,652 $ 371,042 |
2020 $ 20,925 272 16,049 1,029,532 $1,066,778 $ 90,547 976,231 $1,066,778 |
2019 $ 21,412 335 8,083 1,113,995 $1,143,825 $ 83,102 1,060,723 $1,143,825 |
c. The remuneration to 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. Due to the net loss before tax for the nine months ended September 30, 2019, there was no accrual for any remuneration to employees and directors. The accrued employees’ compensation and remuneration to directors for the three months and nine months ended September 30, 2020 are as follows:
Accrual rate
| For the Three Months | For the Nine Months | |
|---|---|---|
| Ended September 30,2020 | Ended September 30,2020 | |
| Employees’ compensation | 9% | 9% |
| Remuneration to directors | 1% | 1% |
| Amount |
| Employees’ compensation Remuneration to directors |
For the Three Months Ended September 30,2020 Cash $ 28,371 $ 3,153 |
For the Nine Months Ended September 30,2020 |
For the Nine Months Ended September 30,2020 |
|---|---|---|---|
| Cash $ 52,873 $ 5,875 |
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.
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.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
23. INCOME TAXES
a. Major components of tax expense recognized in profit or loss:
| Current tax In respect of the current period Adjustments on prior periods Deferred tax In respect of the current period Effect of tax rate changes Income tax expense recognized in profit or loss |
For the Three Months Ended September 30 2020 2019 $ 14,694 $ 6,661 - (852) 14,694 5,809 (4,680) 1,790 - - (4,680) 1,790 $ 10,014 $ 7,599 |
For the Three Months Ended September 30 2020 2019 $ 14,694 $ 6,661 - (852) 14,694 5,809 (4,680) 1,790 - - (4,680) 1,790 $ 10,014 $ 7,599 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|
|---|---|---|---|---|---|
| 2020 $ 14,694 - 14,694 (4,680) - (4,680) $ 10,014 |
2020 $ 76,184 - 76,184 10,782 1,334 12,116 $ 88,300 |
2019 $ 9,932 346 10,278 16,747 - 16,747 $ 27,025 |
b. Income tax assessments
The Company, FocalTech Smart Sensors Co., Ltd., and FocalTech Electronics Co., Ltd.’s tax returns until 2018 have been assessed by the tax authorities.
24. EARNINGS (LOSS) PER SHARE
| EARNINGS (LOSS) PER SHARE | |||||
|---|---|---|---|---|---|
| Basic earnings (loss) per share Diluted earnings per share |
For the Three Months Ended September 30 2020 2019 $ 1.06 $ 0.29 $ 1.00 $ 0.28 |
Unit: NT$ Per Share For the Nine Months Ended September 30 |
|||
| 2020 $ 1.06 $ 1.00 |
2020 $ 1.64 $ 1.55 |
2019 $ (0.84) |
The earnings (loss) and weighted average number of ordinary shares outstanding in the computation of earnings (loss) per share were as follows:
Net Profit for the Period
| Earnings (loss) used in the computation of basic earnings (loss) per share |
For the Three Months Ended September 30 2020 2019 $ 275,308 $ 79,983 |
For the Three Months Ended September 30 2020 2019 $ 275,308 $ 79,983 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|---|---|---|---|---|---|
| 2020 $ 275,308 |
2020 $ 448,132 |
2019 $ (231,810) |
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 in computation of basic earnings (loss) per share Effect of potentially dilutive ordinary shares: Employee share option Employees’ compensation issued Weighted average number of ordinary shares used in the computation of diluted earnings per share |
For the Three Months Ended September 30 2020 2019 260,614 276,676 15,153 11,419 542 60 276,309 288,155 |
For the Three Months Ended September 30 2020 2019 260,614 276,676 15,153 11,419 542 60 276,309 288,155 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|---|---|---|---|---|---|
| 2020 260,614 15,153 542 276,309 |
2020 273,253 14,687 557 288,497 |
2019 275,415 - - 275,415 |
Note ： The Group has a net loss after tax for the three months and nine months ended September 30, 2019, so there is no dilution effect in the calculation of earnings (loss) per share.
25. SHARE-BASED PAYMENT ARRANGEMENTS
The Group did not have new share option plan issued for employees for the three months ended September 30, 2020 and 2019. The detailed information could be found in Note 24 of the consolidated financial statements of the year ended December 31, 2019.
- a. Employee share option plan
Information on outstanding options for the nine months ended September 30, 2020 and 2019 is as follows:
September 30, 2020
| Employee Share Option Plan |
BeginningBalance | BeginningBalance | Options unvested | Options unvested | Options exercised | Options exercised | Options | expired | EndingBalance | EndingBalance |
|---|---|---|---|---|---|---|---|---|---|---|
| Units of Option |
Weighted- Average Exercise Price (NT$) |
Units of Option - - |
Weighted- Average Exercise Price (NT$) |
Units of Option |
Weighted- Average Exercise Price (NT$) $ 26.60 12.20 |
Units of Option |
Weighted- Average Exercise Price (NT$) |
Units of Option |
Weighted- Average Exercise Price (NT$) |
|
| 2014 2015 |
805,599 677,500 |
$ 23.49 12.20 |
$ - - |
(238,800) (103,000) |
- ( 24,000) |
$ - 12.20 |
566,799 550,500 |
$ 22.18 12.20 |
September 30, 2019
| Employee Share Option Plan |
BeginningBalance | BeginningBalance | Options unvested | Options unvested | Options exercised | Options exercised | Options | expired | EndingBalance | EndingBalance |
|---|---|---|---|---|---|---|---|---|---|---|
| Units of Option |
Weighted- Average Exercise Price (NT$) |
Units of Option - - (35,750) |
Weighted- Average Exercise Price (NT$) |
Units of Option |
Weighted- Average Exercise Price (NT$) $ 13.72 - 12.20 |
Units of Option |
Weighted- Average Exercise Price (NT$) |
Units of Option |
Weighted- Average Exercise Price (NT$) |
|
| 2014 2013 2015 |
1,594,999 627,250 985,750 |
$ 19.86 37.90 12.20 |
$ - - 12.20 |
(630,200) - ( 112,250) |
( 38,400) (627,250) - |
$ 25.93 37.90 - |
926,399 - 837,750 |
$ 23.79 - 12.20 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
b. Shares Buyback Program
The Company's employee subscription base dates were March 20, 2020.The eligible employees newly subscribed 7,848 thousand shares and 1,399 thousand shares at the price of 24.1 and 24.98 respectively, with total proceeds as 224,084 thousand shares.
Information about Shares Buy Back Programs for the nine months ended September 30, 2020s as follows:
| The 2nd Shares Buy Back Program Employee subscription base date Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) 2016/10/28 2,624 $ 11.26 2017/02/24 50 11.26 2018/02/08 120 4.20 2018/04/24 255 4.30 2018/07/26 1,765 - 2019/05/07 186 - Total 5,000 The 4th Shares Buy Back 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 Total 7,848 |
The 2nd Shares Buy Back Program Employee subscription base date Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) 2016/10/28 2,624 $ 11.26 2017/02/24 50 11.26 2018/02/08 120 4.20 2018/04/24 255 4.30 2018/07/26 1,765 - 2019/05/07 186 - Total 5,000 The 4th Shares Buy Back 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 Total 7,848 |
The 3rd Shares Buy Back Program | The 3rd Shares Buy Back Program | The 3rd Shares Buy Back Program |
|---|---|---|---|---|
| Employee subscription base date Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) 2017/07/24 3,198 $ 12.85 2018/07/26 3,515 - 2019/05/07 95 - Total 6,808 The 5th Shares Buy Back Program |
The fair value of the right to subscribe (NT$) |
|||
| Employee subscription base date 2020/03/20 Total |
Shares transferred (In Thousands) 7,848 7,848 |
Employee subscription base date 2019/05/07 2019/11/08 2020/03/20 Total |
Shares transferred (In Thousands) 4,651 60 1,399 6,110 |
The fair value of the right to subscribe (NT$) |
| $ - - 3.70 |
Compensation cost of aforementioned share-based payments for the nine months ended September 30, 2019 and 2018 was as follows:
| Employee share option plans Shares buyback programs Adjustment account: Capital surplus - employee share options |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|
|---|---|---|---|
| 2020 $ - 16,049 $ 16,049 $ 16,049 |
2019 $ 669 7,414 $ 8,083 $ 8,083 |
26. OPERATING LEASE ARRANGEMENTS
The Group as Lessee
The Company and its subsidiaries have lease contracts in relation to office, plant and part of office equipment, and they would expire by September 2021. 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 $4,398 thousand and $16,841 thousand as of September 30, 2020 and 2019.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
The lease payments recognized in profit or loss were as follows:
Lease payments |
For the Three Months Ended September 30 2020 2019 $ 8,363 $ 9,641 |
For the Three Months Ended September 30 2020 2019 $ 8,363 $ 9,641 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
|---|---|---|---|---|---|
| 2020 $ 8,363 |
2020 $ 26,079 |
2019 $ 27,805 |
27. 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 September 30, 2020 Financial assets at FVTPL Listed preferred shares Private funds Total Financial assets at FVTOCI Investments in debt instruments Fixed income bonds December 31, 2019 Financial assets at FVTPL Listed preferred shares Private funds Total Financial assets at FVTOCI Investments in debt instruments Fixed income bonds September 30, 2019 Financial assets at FVTPL Listed preferred shares Private funds Structured Investments Total Financial assets at FVTOCI Investments in debt instruments Fixed income bonds |
Level 1 $ 10,625 - $ 10,625 $ - Level 1 $ 10,931 - $ 10,931 $ - Level 1 $ 10,863 - - $ 10,863 $ - |
Level 2 $ - - $ - $ 214,901 Level 2 $ - - $ - $ 181,373 Level 2 $ - - 30,435 $ 30,435 $ 262,199 |
Level 3 $ - 44,856 $ 44,856 $ - Level 3 $ - 45,423 $ 45,423 $ - Level 3 $ - 45,709 - $ 45,709 $ - |
Total $ 10,625 44,856 |
|---|---|---|---|---|---|
$ 55,481 |
|||||
$ 214,901 |
|||||
Total $ 10,931 45,423 |
|||||
$ 56,354 |
|||||
$ 181,373 |
|||||
Total $ 10,863 45,709 30,435 |
|||||
$ 87,007 |
|||||
$ 262,199 |
There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2020 and 2019.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
- 2) Reconciliation of Level 3 fair value measurements of financial instruments
For the nine Months ended September 30, 2020
| For the nine Months ended September 30, 2020 | |||
|---|---|---|---|
| Financial assets at FVTPL Balance, beginning of period Purchases Recognized in profit or loss(other income or loss) Effect of foreign currency exchange differences Balance, end of period |
For the Nine Months Ended September 30 |
||
| 2020 $ 45,423 2,046 (1,800) (813) $ 44,856 |
2019 $ 41,023 4,649 (275) 312 $ 45,709 |
- 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
| September 30, | September 30, | December 31, | December 31, | September 30, | September 30, | |
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||||
| Financial assets | ||||||
| Fair value through profit or loss (FVTPL) | ||||||
| Mandatorily at FVTPL | $ | 55,481 |
$ | 56,354 |
$ | 87,007 |
| Amortized cost (Note 1) | 6,420,106 | 6,597,902 | 6,072,497 | |||
| Financial assets at FVTOCI | ||||||
| Investments in debt instruments | 214,901 | 181,373 | 262,199 | |||
| Financial liabilities | ||||||
| Amortized cost (Note 2) | 4,076,553 | 3,335,028 | 2,476,179 |
-
1) The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, trade receivables, other financial assets and refundable deposits (categorized in other non-current assets).
-
2) The balances included financial liabilities measured at amortized cost, which comprise trade payables, other payables and guarantee deposits received.
-
d. Financial risk management objectives and policies
The Group’s major financial instruments include cash and cash equivalents, trade receivable, other financial assets, financial assets at FVTPL, financial assets at FVTOCI, trade and other payables. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic
This is the translation of the financial statements. CPAs do not audit or review on this translation.
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 financial-risk 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 operates 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 currency exchange risk (referred to a) and interest rate risk (referred to b).
a) Foreign currency 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 31.
Sensitivity analysis
The Group was mainly exposed to the U.S. dollar. The following table details the Group’s sensitivity to a 5% increase and decrease 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.
| Profit or loss/ equity |
USD Impact | USD Impact | |
|---|---|---|---|
| For the Nine Months Ended September 30 |
|||
| 2020 $ 17,065(i) |
2019 $ 43,668(i) |
- i. This was mainly attributable to the outstanding balances of USD time deposits, trade receivables, trade payables, other payables, other current assets and other current liabilities.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
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:
| September 30, | December 31, | September 30, | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Fair value interest rate risk | |||
| Financial assets | $ 2,156,886 |
$ 3,131,261 | $ 4,031,409 |
| Cash flow interest rate risk | |||
| Financial assets | $ 2,847,233 |
$ 2,103,526 | $ 1,219,629 |
| 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 personnel 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 nine months ended September 30, 2020 and 2019 would increase/ decrease by NT$5,339 thousand and NT$2,287 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 trade receivables mainly came from its top 5 customers. Ongoing credit evaluation of the financial condition of the customers is performed.
As of September 30, 2020, trade receivables from top 5 customers represented 61% of total trade receivables. The credit concentration risk of other trade receivables was insignificant.
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 institute. 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.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
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 Performing Category Performing Category Performing |
Description Basis for Recognizing Expected Credit Loss The debtor with low credit risk and fully capable of paying off contractual cash flows 12 months expected credit loss Description Basis for Recognizing Expected Credit Loss The debtor with low credit risk and fully capable of paying off contractual cash flows 12 months expected credit loss Description Basis for Recognizing Expected Credit Loss 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% Expected Credit Loss Ratio 0% |
Carrying Amount as of September 30, 2020 |
Carrying Amount as of September 30, 2020 |
|---|---|---|---|---|
| $ 214,901 Carrying Amount as of December 31, 2019 |
$ 214,901 | |||
| $ 181,373 Carrying Amount as of September 30, 2019 |
$ 181,373 | |||
| $ 292,634 |
- 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.
As of September 30, 2020, December 31, 2019, and September 30, 2019, the available unused short-term bank loan facilities were set out in (b) Financing credit line.
- a) 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.
This is the translation of the financial statements. CPAs do not audit or review on this translation.
September 30, 2020
| On Demand or | On Demand or | ||||||
|---|---|---|---|---|---|---|---|
| Less than 1 Year | 1-5 Years | ||||||
| Non-interest bearing | $ | 3,668,799 | $ | 407,754 | |||
| December 31, 2019 | |||||||
| On Demand or | |||||||
| Less than 1 Year | 1-5 Years | ||||||
| Non-interest bearing | $ 2,940,668 | $ | 394,360 | ||||
| September 30, 2019 | |||||||
| On Demand or | |||||||
| Less than 1 Year | 1-5 Years | ||||||
| Non-interest bearing | $ 2,210,061 | $ | 266,118 |
||||
| b) Financing credit line | |||||||
| September 30, | December 31, |
September 30, | |||||
| 2020 | 2019 | 2019 | |||||
| Unsecured bank overdraft line | |||||||
| of credit | |||||||
| $ | 15,665 | $ | - |
$ | - | ||
| Amount unused | 784,335 |
800,000 |
408,640 | ||||
| $ | 800,000 |
$ | 800,000 |
$ | 408,640 |
The above amounts included credit line for the subsidiaries guaranteed by the Company.
28. 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 Three Months Ended September 30 2020 2019 $ - $ - 10,910 9,767 135 135 1,111 730 $ 12,156 $ 10,632 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
||
|---|---|---|---|---|---|
| 2020 $ - 10,910 135 1,111 $ 12,156 |
2020 $ 21,870 34,270 405 3,271 $ 59,816 |
2019 $ 20,001 30,505 405 2,240 $ 53,151 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
29. PLEDGED ASSETS
The following assets were provided as collateral for import customs duties:
| September 30, | September 30, | December 31, | December 31, | September 30, | September 30, | |
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||||
| Pledge deposits (categorized in other non-current | ||||||
| assets) |
$ | 4,000 |
$ | 4,000 |
$ | 4,000 |
30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACTUAL COMMITMENTS
FocalTech Electronics, Ltd., a subsidiary of the Company, filed a litigation of patent infringement against Novatek Microelectronics Corp. in September 2018 .As of the report issue date, the result of litigation and the effect on financial statements still could not be inferred.
31. 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:
September 30, 2020
| Foreign | Carrying | |||
|---|---|---|---|---|
| Currencies | Exchange Rate | Amount | ||
| Financial assets | ||||
| Monetary items | ||||
| USD | $ | 114,746 |
29.10 (USD:NTD) | $ 3,339,118 |
| USD | 2,284 | 6.8101 (USD:RMB) | 66,471 |
|
| RMB | 31,218 | 0.1468 (RMB:USD) | 133,396 |
|
| Financial liabilities | ||||
| Monetary items | ||||
| USD | 102,331 | 29.10 (USD:NTD) | 2,977,824 |
|
| USD | 2,971 | 6.8101 (USD:RMB) | 86,465 |
|
| December 31, 2019 | ||||
| Foreign | Carrying | |||
| Currencies | Exchange Rate | Amount | ||
| Financial assets | ||||
| Monetary items | ||||
| USD | $ | 55,218 |
29.98 (USD:NTD) | $ 1,655,432 |
| USD | 6,641 | 6.9762 (USD:RMB) | 199,101 |
|
| RMB | 7,588 | 0.1433 (RMB:USD) | 32,610 |
|
| Financial liabilities | ||||
| Monetary items | ||||
| USD | 38,218 | 29.98 (USD:NTD) | 1,145,788 |
|
| USD | 5,644 | 6.9762 (USD:RMB) | 169,222 |
This is the translation of the financial statements. CPAs do not audit or review on this translation.
September 30, 2019
| Foreign | Carrying | |||
|---|---|---|---|---|
| Currencies | Exchange Rate | Amount | ||
| Financial assets | ||||
| Monetary items | ||||
| USD | $ | 52,564 |
31.04 (USD:NTD) | $ 1,631,580 |
| USD | 3,427 | 7.0729 (USD:RMB) | 106,359 |
|
| Financial liabilities | ||||
| Monetary items | ||||
| USD | 21,253 | 31.04 (USD:NTD) | 659,697 |
|
| USD | 6,600 | 7.0729 (USD:RMB) | 204,875 |
32. SEGMENT INFORMATION
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 and machine interface devices related IC under a single operation unit. Thus, the information of separate operating segments is not applicable.
This is the translation of the financial statements. CPAs do not audit or review on this translation.