Headway - Interim / Quarterly Report 2023

HEADWAY ADVANCED MATERIALS INC. AND SUBSIDIARIES

Consolidated Financial Statements for the Six Months Ended June 30, 2023 and 2022 and Independent Auditors’ Review Report

(English Version)

Address: No. 71, Guangfu Road, Hukou, Hsinchu County TEL: (03)5978899

Note: The English version is the translation of the Chinese version and if there is any discrepancy between this English translation and the Chinese text of this document, the Chinese text shall prevail.

§ CONTENTS §

==> picture [497 x 38] intentionally omitted <==

----- Start of picture text -----

Financial
Statements
Items Page
Note No.
----- End of picture text -----

Items	Page	Financial Statements Note No.
1. Cover Page	1	-
2. Contents	2	-
3. Independent Auditors’ Review Report	3~4	-
4. Consolidated Balance Sheets	5	-
5. Consolidated Statement of Comprehensive
Income	6~7	-
6. Consolidated Statement of Changes in Equity	8	-
7. Consolidated Cash Flow Statement	9~10	-
8. Notes to Consolidated Financial Statements
(1) Company History	11	1
(2) Date and Procedures of the Authorization
of Consolidated Financial Statement	11	2
(3) Application of the newly announced and
Amended regulations and interpretations	11~12	3
(4) Summary of Significant Accounting Policies	12~14	4
(5) Significant Accounting judgments,
Estimations, and the Main Sources of
Assumption Uncertainties	14	5
(6) Description of Major Accounting Items	14~47	6~29
(7) Related Party Transactions	47~49	30
(8) Collateral Assets	49	31
(9) Contractual Commitment with Material or
Liabilities without Recognition	49	32
(10) Major Casualty Loss	-	-
(11) Major Post-Period Matters	-	-
(12) Other Matters	49~50	33
(13) Notes to Disclosure
1. Major Transaction Related Information	50~51,54~56	34
2. Investments Related Information	51,57	34
3. Investments in Mainland China	52,58~59	34
4. Major Shareholders	52,60	34
(14) Segment Information	52~53	35

Independent Auditors’ Review Report

To Headway Advanced Materials Inc.:

Introduction

We have reviewed the accompanying financial statements of Headway Advanced Materials Inc.(the Company) and its subsidiaries, which comprise the consolidated balance sheets as of June 30, 2023, and 2022, the related consolidated statements of comprehensive income from April 1 to June 30, 2023 and 2022 and from January 1 to June 30, 2023 and 2022, the consolidated statements of changes in equity and cash flows from January 1 to June 30, 2023 and 2022, and the notes to the consolidated financial statements (including a summary of significant accounting policies). 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 ("FSC") of the Republic of China ("ROC''). Our responsibility is to express a conclusion on the consolidated fincncial statements based on our reviews.

Scope of Review

Except as stated in the following paragraph, we conducted our reviews in accordance with the International Standard on Review Engagements 2410 "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 13 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 June 30, 2023 and 2022, combined total assets of these non-significant subsidiaries were NT$ 567,855 thousand and NT$ 546,510 thousand, respectively, representing 33% and 29%, respectively, of the consolidated total assets, and combined total liabilities of these subsidiaries were NT$ 60,334 thousand and NT$ 67,440 thousand, respectively, representing 9% and 9%, respectively, of the consolidated total liabilities; for the three months ended June 30, 2023 and 2022, the amounts of combined comprehensive income of these subsidiaries were NT$ 1,146 thousand and NT$ (16,433) thousand, representing (17)% and (191)%, respectively, of the consolidated total comprehensive income; for the six months ended June 30, 2023 and 2022, the amounts of combined comprehensive income of these subsidiaries were NT$ 10,065 thousand and NT$ (22,408) thousand, representing 440% and (47)%, respectively, of the consolidated total comprehensive income.

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 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 in all material respects, the consolidated financial position of the Company and its subsidiaries as of June 30, 2023 and 2022, its consolidated financial performance for the three months ended June 30, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the six months ended June 30, 2023 and 2022 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 FSC of the ROC.

Deloitte & Touche

Taipei, Taiwan Republic of China August 10, 2023

日

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Balance Sheets

June 30, 2023 & 2022

Units: In Thousands of New Taiwan Dollars

==> picture [1078 x 463] intentionally omitted <==

----- Start of picture text -----

June 30, 2023 December 31, 2022 June 30, 2022 June 30, 2023 December 31, 2022 June 30, 2022
(Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed)
C o d e Assets Amount ％ Amount ％ Amount ％ C o d e Liabilities & Equity Amount ％ Amount ％ Amount ％
Current Assets Current Liabilities
1100 Cash and cash equivalents (Note 6 & 29) $ 448,399 26 $ 515,296 29 $ 488,560 26 2100 Short-trem borrowings (Note 19, 29 & 31) $ 177,017 10 $ 160,530 9 $ 114,384 6
1136 Current financial assets at amortized cost 2110 Short-trem bills payable (Note 19 & 29) - - 99,907 6 29,994 1
(Note 9 & 29) 161,879 9 130,150 7 105,688 6 2130 Contract liabilities (Note 23) 2,183 - 10,081 1 5,583 -
1150 Notes receivable, net (Note 11, 29 & 30) 44,712 3 32,163 2 46,848 3 2150 Notes payble (Note 29 & 30) 49,835 3 59,307 3 105,520 6
1170 Accounts receivable, net (Note 11, 29 & 30) 252,800 14 262,139 15 328,733 18 2170 Accounts payable (Note 29 & 30) 61,111 4 73,990 4 89,032 5
1220 Current tax assets (Note 25) 10,454 1 10,507 - - - 2206 Compensation payable to employees &
130X Inventories (Note 12) 303,216 17 346,689 19 382,283 20 directors (Note 24) 3,585 - 3,455 - 15,394 1
1476 Other financial assets – current (Note 10, 29 2216 Dividend payable 42,182 2 - - 105,503 6
& 31) 30,000 2 30,000 2 42,780 2 2220 Other payables (Note 20) 61,575 4 63,594 4 74,104 4
1479 Other current Assets (Note 18) 26,377 1 16,307 1 19,742 1 2230 Current tax liabilities (Note 25) 943 - 2,154 - 14,305 1
11XX Total Current Assets 1,277,837 73 1,343,251 75 1,414,634 76 2280 Lease liabilities – current (Note 15 & 29) 9,419 1 4,466 - 7,702 -
2399 Other current liabilities (Note 20) 5,814 - 3,322 - 3,185 -
Non-current Assets 21XX Total Current Liabilities 413,664 24 480,806 27 564,706 30
1510 Financial assets at fair value through profit or
loss, non-current (Note 7 & 29) 13,753 1 11,113 1 4,253 - Non-current Liabilities
1520 Financial assets at fair value through other 2540 Long-term borrowings (Note 19, 29 & 31) 200,000 11 165,000 9 165,000 9
comprehensive income, non-current (Note 2570 Deferred tax liabilities (Note 25) 24,475 1 24,475 1 24,475 1
8 & 29) 1,670 - 1,467 - 1,782 - 2580 Lease liabilities, non-current (Note 15 & 29) 28,721 2 9,514 1 11,256 1
1600 Properity, plant and equipment (Note 14 & 31) 322,221 19 337,559 19 336,739 18 2640 Defined benefit liabilities (Note 21) - - - - 5,396 -
1755 Right-of-use assets (Note 15) 64,758 4 41,524 2 46,864 3 25XX Total Non-current Liabilities 253,196 14 198,989 11 206,127 11
1780 Intangible assets (Note 17) 167 - 320 - 247 -
1805 Goodwill (Note 16) 1,625 - 1,673 - 1,684 - 2XXX Total Liabilities 666,860 38 679,795 38 770,833 41
1840 Deferred tax assets (Note 25) 23,581 1 23,752 1 25,060 1
1920 Guarantee deposits paid 6,161 - 6,184 - 6,182 - Equity (Note 22)
1975 Net defined benefit assets (Note 21) 361 - 181 - - - Equity Attributable To Owners of The Company
1990 Other non-current assets (Note 18) 28,004 2 26,774 2 30,465 2 Capital
15XX Total Non-current Assets 462,301 27 450,547 25 453,276 24 3110 Common stock captial 703,033 40 703,033 39 703,353 38
3200 Capital surplus 13,081 1 13,081 1 12,761 1
Retained earnings
3310 Legal reserve 217,716 13 215,371 12 215,371 11
3320 Special reserve 58,130 3 95,488 5 95,488 5
3350 Unappropriatee retained earnings 33,514 2 38,765 2 33,130 2
3300 Total Retained Earnings 309,360 18 349,624 19 343,989 18
3400 Other equity ( 57,100 ) ( 3 ) ( 58,375 ) ( 3 ) ( 66,763 ) ( 4 )
31XX Total Equity Attributable To Owners of
The Company 968,374 56 1,007,363 56 993,340 53
36XX Non-controlling Interests 104,904 6 106,640 6 103,737 6
3XXX Total Equity 1,073,278 62 1,114,003 62 1,097,077 59
1XXX Total Assets $ 1,740,138 100 $ 1,793,798 100 $ 1,867,910 100 Total Liabilities & Equity $ 1,740,138 100 $ 1,793,798 100 $ 1,867,910 100
----- End of picture text -----

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche auditors’ review report dated August 10, 2023)

Chairman ： Liou, Han Yin

Manager ： Chao, Wei Chun

Accountant in Charge ： Liao, Pei Hung

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three Months and for the Six Months Ended June 30, 2023 & 2022

(Reviewed, not Audited)

==> picture [497 x 52] intentionally omitted <==

----- Start of picture text -----

Unit: In Thousands of NTD, EPS in NTD
For the Three Months For the Three Months For the Six Months For the Six Months
Ended June 30,2023 Ended June 30,2022 Ended June 30,2023 Ended June 30,2022
C o d e Amount ％ Amount ％ Amount ％ Amount ％
4000 Net operating revenue (Note
----- End of picture text -----

C o d e 4000	Net operating revenue (Note		Amount		`％`		Amount		`％`		Amount		`％`		Amount		`％`
	23, 30 & 35)		$ 242,907		100		$ 372,998		100		$ 562,093		100		$ 790,333		100
5000	Operating costs (Note 12, 24
	&30)		213,247		88		321,715		86		490,698		87		674,182		86
5900	Gross Proifit		29,660		12		51,283		14		71,395		13		116,151		14
	Operating expenses (Note 24)
6100	Selling expenses		11,822		5		12,292		3		24,563		5		27,438		3
6200	Administrative expenses		21,563		9		22,846		6		44,913		8		47,614		6
6300	Research and development
	expenses		6,146		2		6,823		2		11,929		2		14,344		2
6450	Expected credit loss (gain)		2,043		1		4,123		1	(	907)		-		6,805		1
6000	Total operating
	expenses		41,574		17		46,084		12		80,498		15		96,201		12
6900	Profit (Loss) on operations	(	11,914)	(	5)		5,199		2	(	9,103)	(	2)		19,950		2
	Non-operating income and
	Expenses (Note 24)
7100	Interest income		6,500		3		2,187		-		12,733		2		4,427		-
7010	Other income		3,013		1		3,467		1		4,390		1		5,096		1
7020	Other gains and losses		748		-	(	7,902 )	(	2 )	(	202 )		-	(	1,989 )		-
7050	Financial costs	(	2,230)	(	1)	(	1,285)		-	(	4,436)	(	1)	(	2,522)		-
7000	Total non-operating income
	and expenses		8,031		3	(	3,533)	(	1)		12,485		2		5,012		1
7900	Pre-tax Profit (loss)	(	3,883 )	(	2 )		1,666		1		3,382		-		24,962		3
7950	Income tax (Note 4 & 25)	(	1,130)		-	(	2,293)	(	1)	(	1,650)		-	(	7,634)	(	1)
8200	Net Profit (Loss) for the
	period	(	5,013)	(	2)	(	627)		-		1,732		-		17,328		2
	Other comprehensive
	income(Note 22)
8310	Items that will not be
	reclassified ubsequently
	to profit or loss:
8316	Unrealized gains or
	losses on investments
	in equity instruments
	at fair value through
	other comprehensive
	income	(	129 )		-	(	183 )		-		203		-		1		-
8360	Items that may be
	reclassified ubsequently
	to profit or loss:
8361	Exchange differences
	on translation of the
	financial statement
	of foreign operations
	(Note 22)	(	1,996 )	(	1 )		11,808		3		557		-		37,820		5
8399	Income tax related to
	itmes that may be
	reclassified (Note 22
	&25)		293		-	(	2,395)	(	1)	(	207)		-	(	7,510)	(	1)

==> picture [497 x 232] intentionally omitted <==

----- Start of picture text -----

For the Three Months For the Three Months For the Six Months For the Six Months
Ended June 30,2023 Ended June 30,2022 Ended June 30,2023 Ended June 30,2022
C o d e Amount ％ Amount ％ Amount ％ Amount ％
8300 Total other
comprehensive
income (After
Tax) ( 1,832 ) ( 1 ) 9,230 2 553 - 30,311 4
8500 Total comprehensive
income ( $ 6,845 ) ( 3 ) $ 8,603 2 $ 2,285 - $ 47,639 6
Profit (loss) attributable to:
8610 The Company owners ( $ 3,742 ) ( 2 ) ( $ 635 ) - $ 1,918 - $ 17,510 2
8620 Non-controlling interests ( 1,271 ) - 8 - ( 186 ) - ( 182 ) -
8600 ( $ 5,013 ) ( 2 ) ( $ 627 ) - $ 1,732 - $ 17,328 2
Comprehensive income
attributable to:
8710 The Company owners ( $ 5,043 ) ( 2 ) $ 8,770 2 $ 2,948 - $ 47,554 6
8720 Non-controlling interests ( 1,802 ) ( 1 ) ( 167 ) - ( 663 ) - 85 -
8700 ( $ 6,845 ) ( 3 ) $ 8,603 2 $ 2,285 - $ 47,639 6
Earnings per share (Note 26)
9750 Basic ( $ 0.05 ) ( $ 0.01 ) $ 0.03 $ 0.25
9850 Diluted ( $ 0.05 ) ( $ 0.01 ) $ 0.03 $ 0.25
----- End of picture text -----

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche auditors’ review report dated August 10, 2023)

Chairman: Liou, Han Yin

Manager: Chao, Wei Chun

Accountant in Charge ： Liao, Pei Hung

Head wa y Ad va nced Mat eria ls I n c. a nd Subs id ia ries

Co ns olid ate d Sta te me nt o f C ha n ges in Equit y Fro m Ja nua ry 1 t o J une 3 0, 2 02 3 & 20 22

(Re vie we d, not Aud it ed)

U nit : I n Tho us a nds o f N TD, un l ess s ta ted ot he rw is e

==> picture [1108 x 574] intentionally omitted <==

----- Start of picture text -----

Equity Attributable To The Company Owners
Other Equity
Capital surplus (Note 22) Unrealized
Common stock captial Retained earnings (Note 22) gains and
losses on
Exchange investments in
differences on equity
translation of instruments at
the financial fair value
Shares Unappropriated statement of Unrealized through other Non
(Thousand Additional from logn-term Employee Restricted retained foreign revaluation comprehensive Unearned -controlling
Code shares) Amount paid-in capital investement stock options stock units From merger Total Legal reserve Special reserve earnings Total operations increments income compensation Total Interests Total Equity
A1 Balance as of January 1, 2022 70,336 $ 703,353 $ 4,142 $ 1,497 $ 3,225 $ 3,006 $ 891 $ 12,761 $ 201,208 $ 86,263 $ 144,203 $ 431,674 ( $ 99,875 ) $ 6,800 ( $ 2,411 ) ( $ 1,990 ) $ 1,050,312 $ 118,522 $ 1,168,834
2021 Appropriation and
distribution of retained
earnings:
B1 Legal reserve - - - - - - - - 14,163 - ( 14,163 ) - - - - - - - -
B3 Special reserve - - - - - - - - - 9,225 ( 9,225 ) - - - - - - - -
B5 Cash dividends - - - - - - - - - - ( 105,503 ) ( 105,503 ) - - - - ( 105,503 ) - ( 105,503 )
D1 Net profit (loss) for the six
months ended June 30,
2022 - - - - - - - - - - 17,510 17,510 - - - - 17,510 ( 182 ) 17,328
D3 Other comprehensive income
for the six months ended
June 30, 2022 - - - - - - - - - - - - 30,043 - 1 - 30,044 267 30,311
D5 Total comprehensive income
for the six months ended
June 30, 2022 - - - - - - - - - - 17,510 17,510 30,043 - 1 - 47,554 85 47,639
N1 Compensation cost from
restricted stock units - - 719 - - ( 719 ) - - - - - - - - - 977 977 - 977
O1 Cash dividends for
non-controlling interests - - - - - - - - - - - - - - - - - ( 14,870 ) ( 14,870 )
Q1 Disposal of investments in
equity instruments at fair
value through other
comprehensive income - - - - - - - - - - 308 308 - - ( 308 ) - - - -
Z1 Balance as of June 30, 2022 70,336 $ 703,353 $ 4,861 $ 1,497 $ 3,225 $ 2,287 $ 891 $ 12,761 $ 215,371 $ 95,488 $ 33,130 $ 343,989 ( $ 69,832 ) $ 6,800 ( $ 2,718 ) ( $ 1,013 ) $ 993,340 $ 103,737 $ 1,097,077
A1 Balance as of January 1, 2023 70,304 $ 703,033 $ 5,587 $ 1,497 $ 3,225 $ 1,881 $ 891 $ 13,081 $ 215,371 $ 95,488 $ 38,765 $ 349,624 ( $ 61,897 ) $ 6,800 ( $ 3,033 ) ( $ 245 ) $ 1,007,363 $ 106,640 $ 1,114,003
2022 Appropriation and
distribution of retained
earnings:
B1 Legal reserve - - - - - - - - 2,345 - ( 2,345 ) - - - - - - - -
B3 Special reserve - - - - - - - - - ( 37,358 ) 37,358 - - - - - - - -
B5 Cash dividends - - - - - - - - - - ( 42,182 ) ( 42,182 ) - - - - ( 42,182 ) - ( 42,182 )
D1 Net profit for the six months
ended June 30, 2023 - - - - - - - - - - 1,918 1,918 - - - - 1,918 ( 186 ) 1,732
D3 Other comprehensive income
for the six months ended
June 30, 2023 - - - - - - - - - - - - 827 - 203 - 1,030 ( 477 ) 553
D5 Total comprehensive income
for the six months ended
June 30, 2023 - - - - - - - - - - 1,918 1,918 827 - 203 - 2,948 ( 663 ) 2,285
N1 Compensation cost from
restricted stock units - - 936 - - ( 936 ) - - - - - - - - - 245 245 - 245
O1 Cash dividends for
non-controlling interests - - - - - - - - - - - - - - - - - ( 1,073 ) ( 1,073 )
Z1 Balance as of June 30, 2023 70,304 $ 703,033 $ 6,523 $ 1,497 $ 3,225 $ 945 $ 891 $ 13,081 $ 217,716 $ 58,130 $ 33,514 $ 309,360 ( $ 61,070 ) $ 6,800 ( $ 2,830 ) $ - $ 968,374 $ 104,904 $ 1,073,278
----- End of picture text -----

T he acc o mpa ny in g note s are a n int e gra l pa rt o f t he c o ns o lid ate d fina nc ia l st ate me nt s .

Chairman ： Liou, Han-Yin Manager ： Chao, Wei-Chun Accountant in Charge ： Liao, Pei-Hung

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Cash Flow Statement

For the Six Months Ended June 30, 2023 & 2022

(Reviewed, not Audited)

Unit: In Thousands of NTD

==> picture [469 x 36] intentionally omitted <==

----- Start of picture text -----

For the Six Months For the Six Months
C o d e Ended June 30,2023 Ended June 30,2022
Cash Flows from Operating Activities:
----- End of picture text -----

A10000	Pre-tax Profit (loss)		3,382		24,962
A20000	Adjustments to reconcile profit (loss):
A20100	Depreciation expense		31,729		31,272
A20200	Amortization expense		65		95
A20300	Expected credit loss(gain)/
	Provision (reversal of provision)
	for bad debt expense	(	907 )		6,805
A20400	Net loss (gain) on financial
	liabilities at fair value through
	loss(profit)	(	191 )		1,075
A20900	Interest cost		4,436		2,522
A21200	Interest income	(	12,733 )	(	4,427 )
A21900	Cmpensation cost relating to
	share-based payment		245		977
A22500	Loss (gain) on disposal of property,
	plant and equipment		-	(	100 )
A23700	Loss for market price decline and
	obsolete and slow-moving
	inventories		1,570		7,021
A24100	Loss on foreign exchange, net	(	348 )		28,381
A30000	Net changes in operating assets and
	liabilities:
A31130	Notes receivable	(	12,554 )		5,156
A31150	Accounts receivable		11,239	(	29,805 )
A31200	Inventories		42,406	(	76,284 )
A31240	Other current assets	(	9,780 )	(	2,692 )
A31250	Other financial assets – current		-		19,143
A31990	Net defined benefit assets	(	30 )		-
A32130	Notes payable	(	9,472 )		30,609
A32150	Accounts payable	(	12,815 )		7,211
A32180	Other payable & Other current
	liabilities	(	389 )	(	2,084 )
A32190	Compensation payable to
	employees & directors		130	(	1,425 )
A32125	Contract liabilities	(	7,898 )		2,560
A32240	Net defined benefit liabilities	(	150)	(	612)
A33000	Cash generated (used in) form operations		27,935		50,360
A33300	Interest paid	(	4,741 )	(	2,688 )
A33500	Income tax paid	(	2,844)	(	29,526)

==> picture [469 x 664] intentionally omitted <==

----- Start of picture text -----

For the Six Months For the Six Months
C o d e Ended June 30,2023 Ended June 30,2022
AAAA Net Cash Generated (Used In) from
Operating Activities 20,350 18,146
Cash Flows from Investing Activities:
B00020 Proceeds from disposal of financial assets
at fair value through other
comprehensive income $ - $ 618
B00040 Payment for financial assets at amortised
cost ( 70,626 ) ( 20,224 )
B00050 Proceeds from disposal of financial assets
at amortised cost 40,544 17,668
B00100 Acquisition of financial assets at fair
value through profit or loss ( 3,458 ) ( 2,580 )
B00200 Proceeds from disposal of financial assets
at fair value through profit or loss 1,009 -
B02700 Payment for property, plant and
equipment ( 10,521 ) ( 19,821 )
B02800 Proceeds from disposal of property, plant
and equipment - 107
B03800 Decrease in guarantee deposits paid - 248
B04500 Payment for intangible assets ( 180 ) ( 155 )
B07100 Increase in prepayments for equipment ( 1,230 ) ( 4,680 )
B07500 Interest received 12,391 3,457
BBBB Net Cash Used In from Investing
Activities ( 32,071 ) ( 25,362 )
Cash Flows from Financing Activities:
C00100 Increase in Short-trem borrowings 16,482 592
C00500 Decrease in Short-trem bills payable ( 100,000 ) ( 10,000 )
C01600 Proceeds from long-term borrowings 35,000 -
C04020 Repayment of the principal portion of
lease liabilities ( 4,985 ) ( 4,900 )
C05200 Cash dividends for non-controlling
interests paid ( 1,073 ) ( 14,870 )
CCCC Net cash flows from (used in)
financing activities ( 54,576 ) ( 29,178 )
DDDD Effects of Exchange Rate Changes on the
Balance of Cash Held in Foreign Currencies ( 600 ) ( 2,682 )
EEEE Net Decrease in Cash and Cash Equivalents ( 66,897 ) ( 39,076 )
E00100 Cash and Cash Equivalents at the Beginning of
the Period 515,296 527,636
E00200 Cash and Cash Equivalents at the End of the
Period $ 448,399 $ 488,560
T he acc o mpa ny in g note s are a n int e gra l pa rt o f t he c o ns o lid ate d fina nc ia l s t ate me nt s.
(Wit h De lo it te & Touc he a ud it o rs’ re view re po rt da ted Aug us t 10, 20 23 )
Chairman: Manager: Accountant in Charge ：
Liou, Han Yin Chao, Wei Chun Liao, Pei Hung
----- End of picture text -----

10 -

Headway Advanced Materials Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Six Months Ended June 30, 2023 & 2022

(Amounts expressed in Thousands of NTD, unless stated otherwise ）

1. Company History

Headway Advanced Materials Inc. (hereinafter referred to as "the Company") was established on April 24, 1976. Its business includes the manufacture, processing, and sale of PU curing agents, processing agents, coatings, resin for coatings, adhesives, flatting agents, and related raw materials.

The Company's stock has been listed on the Taiwan Stock Exchange since May 2016.

This consolidated financial report is expressed in the functional currency of the Company, which is New Taiwan dollars.

Hereinafter, the Company and its subsidiaries will be collectively referred to as
"the Consolidated Company".

2. Date and Procedures of the Authorization of Financial Statements

The consolidated financial statement was authorized by the Board of Directors on August 10, 2023.

Application of the Newly Announced and Amended Regulations and Interpretations
(1) The Company has adopted International Financial Reporting Standards (IFRSs) that were recognized by the Financial Supervisory Commission, International Accounting Standards (IAS), Interpretations, and Notices (IFRS), Interpretation (IFRIC), and Interpretative Announcement (SIC) for the first time.
The Company has started applying the amended International Financial Reporting Standards (IFRSs) that were recognized and announced by the Financial Supervisory Commission (FSC) and it will not have a significant impact on the accounting policies of the Consolidated Company.
(2) The IFRSs issued by the International Accounting Standards Board (IASB) but not yet endorsed and issued into effect by the FSC:

Newly announced / revised / amended regulations and interpretations

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

Effective date for the announcement of the IASB (Remark1)

To be determined by IASB

11 -

Effective date for the announcement of the IASB (Remark1)

Newly announced / revised / amended regulations and announcement of the interpretations IASB (Remark1) Amendments to IFRS 16“Lease Liability in a Sale and Leaseback” January 1, 2024 （ Remark2 ） IFRS 17“Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IFRS 17“Initial Application of IFRS 17 and IFRS 9 — Comparative Information” January 1, 2023 Amendments to IAS 1 “Classification of Liabilities as Current or Noncurrent” and “Non-current Liabilities with Covenants” January 1, 2024 Amendments to IAS 1“Non-current Liabilities with Covenants” January 1, 2024 Amendments to IAS 7 and IFRS 7 “Supplier Finance Arrangements ” January 1, 2024 Amendments to IAS 12 “International Tax Reform — Remark3 Pillar Two Model Rules ”

Remark1: Unless otherwise stated, the above newly announced/ revised/ amended regulations or interpretations become effective for annual reporting periods beginning on or after the respective dates mentioned.
Remark2: A seller-lessee should retrospectively apply the amendments to IFRS 16 for sale and leaseback transactions entered into after the initial application of IFRS 16.
Remark3: The requirement that an entity applies the exception and the requirement to disclose that it has applied the exception immediately upon issuance of the amendments and retrospectively in accordance with IAS 8. The remaining disclosure requirements are required for annual reporting periods beginning on or after 1 January 2023.

As of the date the accompanying consolidated financial statements were authorized for issue, the Consolidated Company continues in evaluating the impact on its financial position and financial performance from the initial adoption of aformentioned standards or interpretations and related applicable period. The related impact will be disclosed when the Consolidated Company completes its evaluation.

Summary of Significant Accounting Policies
(1) Statement of compliance
12 -

These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed and issued into effect 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 consolidated financial statements.

(2) Preparation basis for financial statements

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

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
3) Level 3 inputs are unobservable inputs for an asset or liability.
(3) Consolidation basis

This consolidated financial report includes the financial statements of the Company and the entities (subsidiaries) controlled by the Company. The consolidated statements of comprehensive income have included the operating profit and loss of the acquired or disposed subsidiary companies in the current period from the date of acquisition or till the date of disposal. The financial reports of the subsidiaries have been adjusted to make their accounting policies consistent with the accounting policies of the Consolidated Company. All transactions, account balances, incomes, and expenses between business entities have been written-off at the time of preparing the consolidated financial report. The total comprehensive income of subsidiaries is attributable to the owners and non-controlling interests of the Company, even if the non-controlling interests are with a negative balance thereafter.

When the changes in the equity of the subsidiary owned by the Consolidated Company do not result in the loss of control, it is treated as an equity transaction. The book amount of the Consolidated Company and non-controlling interests

13 -

have been adjusted to reflect changes in its relative equity in the subsidiary. The difference between the adjustment amount of non-controlling interests and the fair value of the consideration paid or received is directly recognized as equity and attributable to the Company owners.

Please refer to Note 13 and Table 4 for the subsidiaries, shareholding ratio, and business items in detail.

(4) Other significant accounting policies

Except for the following, for the summary of other significant accounting policies, please refer to the consolidated financial statements for the year ended December 31, 2022.

1) Defined benefit 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 adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

2) Income tax

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 on an interim period's pre-tax income by applying to the tax rate that would be applicable to expected total annual earnings.

5. Significant Accounting Judgments, Estimations, and the Main Sources of

Assumption Uncertainties

When the Consolidated Company develops its significant accounting estimations, it has taken into consideration the recent developments of the COVID-19 epidemic and its potential impacts on the economic environment, inflation, and market interest rate volatility, in assessing significant accounting estimates related to cash flow projections, growth rates, discount rates, profitability, and other factors, and the management will continue to review the estimates and basic assumptions. For the other significant accounting judgments, estimations, and the main sources of assumption uncertainties, please refer to the consolidated financial statements for the year ended December 31, 2022.

Cash and Cash Equivalents
14 -

Cash on hand and petty cash Bank checking deposit and demand deposit Cash equivalents Bank term deposit Repurchase agreement bonds Term deposits with original maturity exceeding 3 months Restricted bank deposit Pledged bank deposit Total		June 30, 2023 $ 1,074 242,214 396,990 - 640,278 121,054 ) 40,825 ) 30,000) $ 448,399		December 31, 2022 $ 529 233,906 425,609 15,402 675,446 89,889 ) 40,261 ) 30,000) $ 515,296		June 30, 2022
	( ( (		( ( (		( ( (	$ 604 279,720 356,704 - 637,028 66,725 ) 38,963 ) 42,780) $ 488,560

The interest rate range of bank deposits on the balance sheet date is as follows:

June 30, 2023 December 31, 2022 Bank deposit 0.05%~5.6% 0.05%~6% Repurchase agreement bonds - 4.25% Financial Assets Measured at Fair Value through Profit or Loss June 30, 2023 December 31, 2022 Financial assets-current Measured at fair value through profit or loss mandatorily Non-derivative financial assets - Foreign Bonds $ 7,136 $ 3,968 - Domestic TWSE/TPEx listing stock 406 1,030 - Domestic Fund beneficiary certificate 6,211 6,115 $ 13,753 $ 11,113	June 30, 2023 December 31, 2022 Bank deposit 0.05%~5.6% 0.05%~6% Repurchase agreement bonds - 4.25% Financial Assets Measured at Fair Value through Profit or Loss June 30, 2023 December 31, 2022 Financial assets-current Measured at fair value through profit or loss mandatorily Non-derivative financial assets - Foreign Bonds $ 7,136 $ 3,968 - Domestic TWSE/TPEx listing stock 406 1,030 - Domestic Fund beneficiary certificate 6,211 6,115 $ 13,753 $ 11,113	June 30, 2022
		0.01%~3.7% - June 30, 2022
Financial assets-current Measured at fair value through profit or loss mandatorily Non-derivative financial assets - Foreign Bonds - Domestic TWSE/TPEx listing stock - Domestic Fund beneficiary certificate	June 30, 2023 $ 7,136 406 6,211 $ 13,753
		$ 4,253 - - $ 4,253

Financial Assets Measured at Fair Value through Other Comprehensive income June 30, 2023 December 31, 2022 June 30, 2022 Non-current Equity investment $ 1,670 $ 1,467 $ 1,782 Equity investment June 30, 2023 December 31, 2022 June 30, 2022 Non-current Domestic investment Non-TWSE/TPEx listing stock $ 1,670 $ 1,467 $ 1,782	Financial Assets Measured at Fair Value through Other Comprehensive income June 30, 2023 December 31, 2022 June 30, 2022 Non-current Equity investment $ 1,670 $ 1,467 $ 1,782 Equity investment June 30, 2023 December 31, 2022 June 30, 2022 Non-current Domestic investment Non-TWSE/TPEx listing stock $ 1,670 $ 1,467 $ 1,782	Financial Assets Measured at Fair Value through Other Comprehensive income June 30, 2023 December 31, 2022 June 30, 2022 Non-current Equity investment $ 1,670 $ 1,467 $ 1,782 Equity investment June 30, 2023 December 31, 2022 June 30, 2022 Non-current Domestic investment Non-TWSE/TPEx listing stock $ 1,670 $ 1,467 $ 1,782	Financial Assets Measured at Fair Value through Other Comprehensive income June 30, 2023 December 31, 2022 June 30, 2022 Non-current Equity investment $ 1,670 $ 1,467 $ 1,782 Equity investment June 30, 2023 December 31, 2022 June 30, 2022 Non-current Domestic investment Non-TWSE/TPEx listing stock $ 1,670 $ 1,467 $ 1,782
Non-current Equity investment Equity investment Non-current Domestic investment Non-TWSE/TPEx listing stock	June 30, 2023 $ 1,670 June 30, 2023 $ 1,670	December 31, 2022 $ 1,467 December 31, 2022 $ 1,467
			$ 1,782 June 30, 2022

			$ 1,782

15 -

The Consolidated Company has based on the mid-term and long-term strategic purpose to invest in Non-TWSE/TPEx listing stocks, and expect to make profits through long-term investment. The management of the Consolidated Company believes that if the short-term fluctuation in the fair value of the investment is included in the profit and loss, it is inconsistent with the aforementioned long-term investment plan; therefore, the management chooses to have such investments measured at fair value through other comprehensive income.

9. Financial Assets Measured at the Amortized Cost

Current Domestic investment Term deposits with original maturity exceeding 3 months (Remark 1) Restricted bank deposit(Remark 2)		June 30, 2023 $ 121,054 40,825 $ 161,879		December 31, 2022 $ 89,889 40,261 $ 130,150		June 30, 2022
						$ 66,725 38,963 $ 105,688

Remark 1: As of June 30, 2023, and for the periods ending on December 31, 2022, and June 30, 2022, the annual interest rate ranges for Term deposits with original maturity exceeding 3 months were as follwos: 1.195%~8.50%, 0.945%~8.09%, and 0.53%~5.30%.

Remark2: The Company has obtained approval from the National Taxation Bureau of Northen Area, Ministry of Finance(R.O.C.) to repatriate USD 1.5 million under the "Regulations Governing the Investment of Overseas Funds Repatriated" and has submitted an investment plan to the Ministry of Economic Affairs. According to the regulations, the repatriated funds are restricted in the approved investment plan and cannot be used for other purposes.

10. Other Financial Assets

er Financial Assets
Current Pledged bank deposit		June 30, 2023 $ 30,000		December 31, 2022 $ 30,000		June 30, 2022
						$ 42,780

The Consolidated Company has established pledges as collateral for borrowings, please refer to Note 31.

16 -

11. Notes Receivable and Accounts Receivable

Notes Receivable Measured at the amortized cost Total book amount Less: Allowance for loss Accounts Receivable Measured at the amortized cost Total book amount Less: Allowance for loss		June 30, 2023 $ 44,802 90) $ 44,712 $ 277,685 24,885) $ 252,800		December 31, 2022 $ 32,248 85) $ 32,163 $ 288,660 26,521) $ 262,139		June 30, 2022
	( (		( (		( (	$ 46,958 110) $ 46,848 $ 357,338 28,605) $ 328,733

Accounts Receivabl

The credit period granted by the Consolidated Company to customers is generally between 30 and 120 days from the end of the month. The allowance for loss is estimated based on the analysis of overdue accounts, customer creditworthiness, and financial status to estimate the amount of uncollectible accounts. Before accepting new customers, the Consolidated Company evaluates the credit quality of the potential customer through a credit rating system and sets the customer's credit limit. The customer's credit limit and rating are reviewed regularly every year.

The Consolidated Company recognizes the allowance for loss of accounts receivable based on the expected credit loss over the remaining lifetime of the accounts. The expected credit loss is calculated using a provision matrix, which considers the customer's past default history and current financial condition, the economic situation of the industry, and future prospects. Because the credit loss historical experience of the Consolidated Company shows no significant differences in the loss patterns among different customer groups, the provision matrix does not distinguish between customer groups, but only sets the expected credit loss rate based on the number of days overdue of accounts receivable.

The provision for doubtful accounts and notes receivable of the Consolidated Company is measured based on the provision matrix as follows:

17 -

June 30, 2023

June 30, 2023	June 30, 2023
Not Overdue Total book amount $ 227,587 Allowance for loss (expected credit loss in the duration) ( 562) Amortized cost $ 227,025 December 31, 2022 Not Overdue Total book amount $ 258,610 Allowance for loss (expected credit loss in the duration) ( 130) Amortized cost $ 258,480 June 30, 2022 Not Overdue Total book amount $ 303,606 Allowance for loss (expected credit loss in the duration) ( 821) Amortized cost $ 302,785			Overdue 1 ~ 60 days $ 62,419 1,641) $ 60,778 Overdue 1 ~ 60 days $ 30,991 112) $ 30,879 Overdue 1 ~ 60 days $ 62,765 957) $ 61,808		Overdue 61~245 days $ 9,646 2,275) $ 7,371 Overdue 61~245 days $ 4,909 1,758) $ 3,151 Overdue 61~245 days $ 15,910 6,367) $ 9,543		Overdue 246~429 days $ 4,675 2,337) $ 2,338 Overdue 246~429 days $ 8,549 6,757) $ 1,792 Overdue 246~429 days $ 2,890 1,445) $ 1,445		Overdue Over 430 days $ 18,160 18,160) $ - Overdue Over 430 days $ 17,849 17,849) $ - Overdue Over 430 days $ 19,125 19,125) $ -		Total
		(		(		(		(		(	$ 322,487 24,975) $ 297,512 Total
Total book amount Allowance for loss (expected credit loss in the duration) Amortized cost June 30, 2022 Total book amount Allowance for loss (expected credit loss in the duration) Amortized cost
		(		(		(		(		(	$ 320,908 26,606) $ 294,302 Total
	(	(		(		(		(		(	$ 404,296 28,715) $ 375,581

The changes in the allowance for loss of the notes receivable and accounts receivable are as follows:

Beginning Balance Add:Expected credit impairment loss appropriated (reversed) for the current year Less:Actual write-off for the current year Exchange differences on translation Ending Balance	For the Six Months Ended June 30,2023 $ 26,606 ( 907 ) ( 89 ) ( 635) $ 24,975	For the Six Months Ended June 30,2022 $ 22,036 6,805 ( 611 ) 485 $ 28,715	For the Six Months Ended June 30,2022 $ 22,036 6,805 ( 611 ) 485 $ 28,715
	( ( (		$ 22,036 6,805 611 ) 485 $ 28,715

18 -

12. Inventories

ntories
Commodities Finished goods Work-in-process goods Raw materials Construction in progress		June 30, 2023 $ 2,544 152,202 18,567 129,813 90 $ 303,216		December 31, 2022 $ 3,713 165,059 17,793 138,391 21,733 $ 346,689		June 30, 2022
						$ 4,662 168,042 24,298 185,281 - $ 382,283

The nature of the operating cost is as follows:

Cost of inventory sold Inventory impirement loss Physical inventory Gain (loss)	For the Three Months Ended June 30,2023 $ 213,247 ( $ 139 ) ( $ 59 )	For the Three Months Ended June 30,2022 $ 321,715 $ 4,140 ( $ 185 )	For the Six Months Ended June 30,2023 $ 490,698 $ 1,570 $ 112	For the Six Months Ended June 30,2022 $ 674,182 $ 7,021 ( $ 186 )

13. Subsidiaries

(1) Subsidiaries included in the consolidated financial report

The main business entities of the consolidated financial report are as follows:

==> picture [415 x 74] intentionally omitted <==

----- Start of picture text -----

The ratio of ownership equity held by
The Company
Location
of
Name of establish
Investing ment and June 30, December June 30,
Company Name of Subsidiary Nature of Business operation 2023 31, 2022 2022
The Company Urasia International Inc. General investment Panama 100% 100% 100%
----- End of picture text -----

	`（`URASIA`）`	business
	Headway Polyurethane	Manufacturing and sales of	Taiwan	50%	50%	50%
	Corporation Limited	TPU
	(TPU Company)
URASIA	Shanghai Huiyu	Construction of housing	Shanghai	74%	74%	74%
	Construction Co., Ltd.	projects, construction of
	(Shanghai Huiyu	municipal public works
	Company)	projects, construction of
		mechanical and electrical
		installation projects,
		construction of building
		decoration projects,
		construction of
		anti-corrosion and
		waterproofing projects,
		construction of sports
		tracks, stadiums, artificial
		turf projects, and
		wholesale of sports field
		materials.
	Headway Advanced	PU resin products	Vietnam	100%	100%	100%
	Matereials(Vietnam) Co.,
	Ltd. (Headway Vietnam
	Company)
	Cheng Yu Develop Co.,	General investment	Hong	100%	100%	100%
	Ltd. (Cheng Yu	business	Kong
	Company)
Cheng Yu	Fo-Shan City Shanshui	PU resin products	Fo-Shan	100%	100%	100%
Company	Lianmei Chemical Co.,		City
	LTD. (Shanshui Lianmei

19 -

Name of Investing Company Shanghai Huiyu Company	Name of Subsidiary Company) Anhui Huayu Materials Technology Co., Ltd. (Anhui Huiyu Company)	Nature of Business Research, manufacturing, import and export of plastic materials for sports fields, and sports facility construction.	Location of establish ment and operation Chizhou City	The ratio of ownership equity held by The Company	The ratio of ownership equity held by The Company	The ratio of ownership equity held by The Company
				June 30, 2023 100%	December 31, 2022	June 30, 2022 100%
					100%

Remark 1: Except for TPU Company and Headway Vietnam Company in the second quarter of 2023 and the first quarter of 2022, whose financial reports have been reviewed by the independent auditors, the financial reports of other non-significant subsidiaries have not been reviewed by the independent auditors.

(2) Information on subsidiaries with significant non-controlling interests

Name of Subsidiary TPU Company	The ratio of equity and voting rights held by non-controlling interests	The ratio of equity and voting rights held by non-controlling interests	The ratio of equity and voting rights held by non-controlling interests
	June 30, 2023 50%	December 31, 2022 50%	June 30, 2022
			50%

The information of the Company's main business premises and the country of registration are available in Table 4.

Name of Subsidiary TPU Company		Profit and loss distributed to non-controllinginterest	Profit and loss distributed to non-controllinginterest	Profit and loss distributed to non-controllinginterest	Profit and loss distributed to non-controllinginterest	Profit and loss distributed to non-controllinginterest	Profit and loss distributed to non-controllinginterest			Non-controllinginterests	Non-controllinginterests	Non-controllinginterests	Non-controllinginterests	Non-controllinginterests
	(	For the Three Months Ended June 30,2023 $ 518 )		For the Three Months Ended June 30,2022 $ 1,609	(	For the Six Months Ended June 30,2023 $ 1,283 )		For the Six Months Ended June 30,2022 $ 3,240		June 30, 2023 $ 90,076		December 31, 2022 $ 92,432		June 30, 2022 $ 94,425

The financial information summary of TPU Company is compiled according to the amount before writing off the inter-company transactions:

Current Assets Non-current Assets Current Liabilities Non-current Liabilities Equity Equtiy attributable to: The Company owners Non-controlling interests of TPU Company		June 30, 2023 $ 188,571 58,342 38,040 28,721 $ 180,152 $ 90,076 90,076 $ 180,152		December 31, 2022 $ 207,564 40,607 54,008 9,299 $ 184,864 $ 92,432 92,432 $ 184,864		June 30, 2022
						$ 264,953 44,260 109,019 11,344 $ 188,850 $ 94,425 94,425 $ 188,850

20 -

Operating Income Net Profit (loss) for the period Other comprehensive income Total comprehensive income Net Profit (loss) attributable to: The Company owners Non-controlling interests of TPU Company Comprehensive income attributable to: The Company owners Non-controlling interests of TPU Company Cash flow Operating activities Investing activities Financing activities Effect of exchange rate Net cash generated Cash dividends for non-controlling interests paid: TPU Company	For the Three Months Ended June 30,2023 $ 41,904 ( $ 1,036 ) - ( $ 1,036 ) ( $ 518 ) ( 518) ( $ 1,036 ) ( $ 518 ) ( 518) ( $ 1,036 )	For the Three Months Ended June 30,2022 $ 67,866 $ 3,218 - $ 3,218 $ 1,609 1,609 $ 3,218 $ 1,609 1,609 $ 3,218	For the Six Months Ended June 30,2023 $ 84,841 ( $ 2,566 ) - ( $ 2,566 ) ( $ 1,283 ) ( 1,283) ( $ 2,566 ) ( $ 1,283 ) ( 1,283) ( $ 2,566 ) $ 13,593 724 ( 25,255 ) 500 ( $ 10,438 ) $ 1,073	For the Six Months Ended June 30,2022 $ 134,595 $ 6,480 - $ 6,480 $ 3,240 3,240 $ 6,480 $ 3,240 3,240 $ 6,480 $ 9,644 130 1,985 341 $ 12,100 $ 14,870

21 -

14. Property, Plant and Equipment

Self -Use

==> picture [446 x 295] intentionally omitted <==

----- Start of picture text -----

Land House and Machinery Transportation Miscellaneous Other Construction
Land improvements Building equipment equipment equipment equipment in progress Total
Cost
Balance as of January 1, 2023 $ 109,145 $ 151 $ 289,670 $ 419,682 $ 41,617 $ 15,493 $ 134,959 $ 8,569 $ 1,019,286
Addition - - 655 4,000 650 677 3,587 2,199 11,768
Disposal - - - - - ( 57 ) ( 437 ) - ( 494 )
Reclassification - - - 572 - - 347 ( 919 ) -
Net exchange difference - - ( 1,338 ) ( 1,384 ) ( 73 ) ( 74 ) ( 114 ) ( 166 ) ( 3,149 )
Balance as of June 30, 2023 $ 109,145 $ 151 $ 288,987 $ 422,870 $ 42,194 $ 16,039 $ 138,342 $ 9,683 $ 1,027,411
Accumulated depreciation
Balance as of January 1, 2023 $ - $ 151 $ 209,020 $ 345,011 $ 28,988 $ 12,079 $ 86,478 $ - $ 681,727
Depreciation - - 4,547 12,461 2,509 858 5,831 - 26,206
Disposal - - - - - ( 57 ) ( 437 ) - ( 494 )
Net exchange difference - - ( 1,037 ) ( 1,062 ) ( 31 ) ( 72 ) ( 47 ) - ( 2,249 )
Balance as of June 30, 2023 $ - $ 151 $ 212,530 $ 356,410 $ 31,466 $ 12,808 $ 91,825 $ - $ 705,190
Net balance as of June 30, 2023 $ 109,145 $ - $ 76,457 $ 66,460 $ 10,728 $ 3,231 $ 46,517 $ 9,683 $ 322,221
Net balance as of December 31,
2022 and January 1, 2023 $ 109,145 $ - $ 80,650 $ 74,671 $ 12,629 $ 3,414 $ 48,481 $ 8,569 $ 337,559
Cost
Balance as of January 1, 2022 $ 109,145 $ 151 $ 284,491 $ 410,180 $ 40,760 $ 14,799 $ 111,466 $ 1,932 $ 972,924
Addition - - 440 2,449 2,124 56 11,434 3,168 19,671
Disposal - - - ( 1,478 ) ( 1,205 ) ( 85 ) ( 440 ) - ( 3,208 )
Reclassification - - - - - - 1,027 ( 1,027 ) -
Net exchange difference - - 4,007 4,008 580 65 177 28 8,865
Balance as of June 30, 2022 $ 109,145 $ 151 $ 288,938 $ 415,159 $ 42,259 $ 14,835 $ 123,664 $ 4,101 $ 998,252
Accumulated depreciation
Balance as of January 1, 2022 $ - $ 151 $ 198,594 $ 321,575 $ 27,092 $ 11,017 $ 76,142 $ - $ 634,571
Depreciation - - 4,553 12,915 2,565 745 5,208 - 25,986
Disposal - - - ( 1,471 ) ( 1,205 ) ( 85 ) ( 440 ) - ( 3,201 )
Net exchange difference - - 1,496 2,154 335 58 114 - 4,157
Balance as of June 30, 2022 $ - $ 151 $ 204,643 $ 335,173 $ 28,787 $ 11,735 $ 81,024 $ - $ 661,513
Net balance as of June 30, 2022 $ 109,145 $ - $ 84,295 $ 79,986 $ 13,472 $ 3,100 $ 42,640 $ 4,101 $ 336,739
----- End of picture text -----

Depreciation expenses are accrued on a straight-line basis according to the following years of useful life:

wing years of useful life:
Land improvements	25 Years
House and building	3~47 Years
Machinery equipment	1~14 Years
Transportation equipment	3~10 Years
Miscellaneous equipment	3~13 Years
Other equipment	1~18 Years

Please refer to Note 31 for the property, plant and equipment that are pledged as collateral for loans.

22 -

15. Lease Agreement

(1) Right-of-use assets

ght-of-use assets
June 30, 2023 December 31, 2022 Book amount of right-of-use assets: Right-of-use land $ 27,649 $ 28,487 Building 36,579 12,189 Transportation equipment 530 848 $ 64,758 $ 41,524 For the Three Months Ended June 30,2023 For the Three Months Ended June 30,2022 For the Six Months Ended June 30,2023 Addition of right-of-use assets $ 29,123 Depreciation expense of right-of-use assets: $ 225 $ 224 $ 449 Right-of-use land 2,490 2,265 4,756 Building 159 159 318 $ 2,874 $ 2,648 $ 5,523		June 30, 2022
		$ 28,977 16,722 1,165 $ 46,864 For the Six Months Ended June 30,2022 $ - $ 444 4,524 318 $ 5,286

Apart from the recognition of depreciation expenses, there was no significant subleasing or impairment of the right-of-use assets of the Consolidated Company during the period from January 1 to June 30, 2023 and 2022, respectively.

(2) Lease liability

e liability
Book amount of lease liability Current Non-current		June 30, 2023 $ 9,419 $ 28,721		December 31, 2022 $ 4,466 $ 9,514		June 30, 2022
						$ 7,702 $ 11,256

The discount rate ranges for lease liabilities are as follows:

Building Transportation equipment	June 30, 2023 2.10%~3.85% 1.07%	December 31, 2022 2.5%~4.05% 1.07%	June 30, 2022
			2.5%~4.05% 1.07%

(3) Key leasing activities and terms:

The Consolidated Company leases buildings for use as factories and offices with lease terms of 1 to 10 years. At the end of the lease term, the Consolidated Company has no preferential purchase option for the leased buildings. Additionally, the Consolidated Company has land use rights in Mainland China and Vietnam with lease terms of 50 years and 48 years, respectively.

23 -

(4) Other lease information

Short-term lease expense Low-value assets lease expense Total lease cash (outflow)	For the Three Months Ended June 30,2023 $ 327 $ 16	For the Three Months Ended June 30,2022 $ 440 $ 16	For the Six Months Ended June 30,2023 $ 780 $ 32 ( $ 6,184 )	For the Six Months Ended June 30,2022 $ 759 $ 32 ( $ 5,959 )

The Consolidated Company chose to apply the recognition Exemption for assets, such as employee dormitories, company vehicles, and office equipment, qualify for short-term leases and qualify for low-value asset leases, and did not recognize related right-of-use assets and lease liabilities for such leases.

16. Goodwill

dwill
Cost Beginning Balance Net exchange difference		June 30, 2023		December 31, 2022		June 30, 2022
	(	$ 1,673 48) $ 1,625		$ 1,649 24 $ 1,673		$ 1,649 35 $ 1,684

17. Intangible Assets

ngible Assets
Cost Balance as of January 1, 2023 Separate purchase Reclassification Net exchange difference Balance as of June 30, 2023 Accumulated amortization & Impirement Balance as of January 1, 2023 Amortization expense Reclassification Net exchange difference Balance as of June 30, 2023 Net balance as of June 30, 2023 Net balance as of December 31, 2022 and January 1, 2023 Cost Balance as of January 1, 2022 Separate purchase Net exchange difference Balance as of June 30, 2022	Computersofteware
	( ( ( (	$ 769 180 415 ) 10) $ 524 $ 449 65 148 ) 9) $ 357 $ 167 $ 320 $ 442 155 8 $ 605

Accumulated amortization & Impirement

24 -

Balance as of January 1, 2022 Amortization expense Net exchange difference Balance as of June 30, 2022 Net balance as of June 30, 2022	Computersofteware	Computersofteware
		$ 258 95 5 $ 358 $ 247

Amortization expenses are accrued on a straight-line basis according to the following years of useful life:

Computer softeware

3~5 Years

18. Other Assets

Other Assets
Current Prepaid expenses Other receivable overpaid sales tax income tax refund receivable Other Non-current Advance payments for equipment and construction		June 30, 2023 $ 19,031 2,997 2,512 1,108 729 $ 26,377 $ 28,004		December 31, 2022 $ 10,802 1,324 2,699 867 615 $ 16,307 $ 26,774		June 30, 2022
						$ 13,725 1,334 2,526 1,708 449 $ 19,742 $ 30,465

19. Borrowings

(1) Short-term borrowings

ort-term borrowings
Pledged loans Bank loans Unsecured loans Credit line loans		June 30, 2023 $ 19,269 157,748 $ 177,017		December 31, 2022 $ 54,836 105,694 $ 160,530		June 30, 2022
						$ 39,384 75,000 $ 114,384

1 As of June 30, 2023, and for the periods ending on December 31, 2022, and June 30, 2022, the annual interest rate ranges for Bank loans were as follwos: 3.85%, 1.77%~3.85%, and 1.18%~3.85%.
2 As of June 30, 2023, and for the periods ending on December 31, 2022, and June 30, 2022, the annual interest rate ranges for Credit line loans were as follwos: 1.80%~1.95%, 1.54%~2.28%, and 1.18%~1.25%.
25 -

(2) Short-term bills payable

ort-term bills payable
Commercial paper payable Less: Discount on Short-term bills payable		June 30, 2023 $ - - $ -		December 31, 2022 $ 100,000 93) $ 99,907		June 30, 2022
			(		(	$ 30,000 6) $ 29,994

The outstanding short-term bills payable, which have not yet matured, are as follows:

December 31, 2022

==> picture [412 x 184] intentionally omitted <==

----- Start of picture text -----

Guarantor/Acceptor Discount Interest rate Book value
institution Face value amount Book value range Collateral of Collateral
Commercial paper
payable
China bills
finance co. $ 50,000 $ 9 $ 49,991 1.94% None $ -
Mega bills
finance co. $ 50,000 $ 84 $ 49,916 2.04% None $ -
June 30, 2022
Guarantor/Acceptor Discount Interest rate Book value
institution Face value amount Book value range Collateral of Collateral
Commercial paper
payable
China bills
finance co. $ 30,000 $ 6 $ 29,994 1.19% None $ -
----- End of picture text -----

(3) Long-term borrowings

ng-term borrowings
Pledged loans Mortgage loan (Remark 1) Mortgage loan (Remark 2) Mortgage loan (Remark 3) Mortgage loan (Remark 4) Mortgage loan (Remark 5) Long-term borrowings		June 30, 2023 $ 85,000 80,000 35,000 - - $ 200,000		December 31, 2022 $ 85,000 80,000 - - - $ 165,000		June 30, 2022
						$ - - - 85,000 80,000 $ 165,000

Remark 1: The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 31), with a maturity date of October 14, 2024. As of June 30, 2023 and December 31, 2022, the effective annual interest rate is 1.82% and 1.57%, respectively.

Remark 2: The bank loan is secured by the Company's real estate, plant, and

equipment (refer to Note 31), with a maturity date of October 14, 2024. As of June 30, 2023 and December 31, 2022, the effective annual interest rate is 1.82% and 1.57%, respectively.

26 -
Remark 3: The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 31), with a maturity date of January 30, 2025. As of June 30, 2023, the effective annual interest rate is 1.82%.
Remark 4: The bank loan is secured by the Consolidated Company's real estate, plant, and equipment (refer to Note 31), with a maturity date of December 30, 2023. It was fully repaid in October 2022, and as of June 30, 2022, the effective annual interest rate is 1.445%.
Remark 5: The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 31), with a maturity date of September 7, 2023. It was fully repaid in October 2022, and as of June 30, 2022, the effective annual interest rate is 1.445%.

20. Other Liabilities

er Liabilities
Current Other payable Payroll and bonus payable Payables on equipment Professional service payable Other Other current liabilities		June 30, 2023 $ 26,358 4,944 4,343 25,930 $ 61,575 $ 5,814		December 31, 2022 $ 32,376 3,697 5,080 22,441 $ 63,594 $ 3,322		June 30, 2022
						$ 32,647 3,041 4,440 33,976 $ 74,104 $ 3,185

21. Retirement Benefit Plan

(1) Defined contribution plan

The retirement pension system of the Company and its domestic subsidiaries in the Consolidated Company, is a defined contribution plan under the "Labor Pension Act" regulated by the government. The Company contributes 6% of employees' monthly salaries to their personal accounts at the labor insurance bureau as retirement pension.

URASIA and Cheng Yu Company do not have an employee retirement policy, and there are no mandatory government regulations regarding employee retirement policy. Anhui Huiyu Company, Shanghai Huiyu Company, Sanshui Lianmei Company, and Headway Vietnam Company pay basic endowment insurance premiums to the government-managed retirement plan, which are recognized as current expenses when they are provided.

(2) Defined benefit plan

27 -

The pension expenses of defined benefit plans were NT$ 15 thousand, NT$ 38 thousand, NT$ 30 thousand and NT$ 78 thousand for the three months and six months ended June 30, 2023 and 2022, respectively, and these were calculated based on the actuarially determined pension cost rate on December 31, 2022 and 2021, respectively.

22. Equity

(1) Common stock capital

Authorized stock shares (thousand shares) Authorized capital stock Stock shared issued and paid in full (thousand shares) Outstanding capital stock		June 30, 2023 80,000 $ 800,000 70,304 $ 703,033		December 31, 2022 80,000 $ 800,000 70,304 $ 703,033		June 30, 2022 80,000 $ 800,000 70,336 $ 703,353

The par value of the issued common shares is NT$ 10 per share, with each share entitled to one voting right and the right to receive dividends.

The changes in the Company's common stsock capital are mainly due to the issuance and cancellation of restricted stock units granted to employees.

(2) Capital surplus

pital surplus
Applicable for making up for losses, distributing cash, or capitalization Additional paid-in capital Difference between consideration and book amount of subsidiary’s stock shares acquired or disposed From merger Cannot be used for any purpose Employee stock options Restricted sotck units	June 30, 2023 $ 6,523 1,497 891 3,225 945 $ 13,081	December 31, 2022 $ 5,587 1,497 891 3,225 1,881 $ 13,081	June 30, 2022
			$ 4,861 1,497 891 3,225 2,287 $ 12,761

The portion of capital surplus that exceeds the par value of stock issuance (including the issuance of ordinary shares above par) and the portion received as donations may be used to offset losses. When the Company has no losses, it may also be used to distribute cash dividends or allocate to common stock

28 -

capital, subject to an annual limit based on a certain percentage of the paid-in capital.

(3) Retained earnings and dividend policy

The Company revised its Articles of Incorporation and approved a dividend policy of distributing 50% to 100% of unappropriated retained earnings at the shareholder meeting on July 30, 2021.

According to the revised policy, if there are profits in the annual financial statements, the Company shall first pay taxes, make up for losses from previous years, set aside 10% of the legal reserve, and make adjustments for special reserves according to laws or regulations. After adding the accumulated unappropriated retained earnings from previous years, the remaining amount shall be distributable earnings. The board of directors shall propose a shareholder dividend or profit distribution plan for approval at the shareholder meeting, with a distribution range of 50% to 100% of distributable earnings.

If the distribution of dividends or profits is made in cash, the board of directors may authorize it with the approval of two-thirds of the directors present and the majority of attending directors, and report it to the shareholder meeting.

Under the previous policy, if there were profits in the annual financial statements, the Company shall first pay taxes, make up for losses from previous years, set aside 10% of the legal reserve, and make adjustments for special reserves according to laws or regulations. After adding the accumulated unappropriated retained earnings from previous years, the board of directors may retain it based on business needs and propose a shareholder dividend or profit distribution plan for approval at the shareholder meeting.For the Company's employee and director compensation distribution policy, please refer to (7) of Note 24 on employee and director compensation.

According to the Company's Articles of Incorporation, the dividend policy will consider the overall development needs of the enterprise and make appropriate dividend distributions. The cash dividends shall not be less than 10% of the total amount of dividends.

The legal reserve should be set aside until its balance reaches the total amount of the Company's issued and paid-up capital. The legal reserve can be used to offset losses. If the legal reserve exceeds 25% of the total amount of the outstanding capital, the excess can be used for cash distribution in addition to capitalization.

29 -

The earnings distribution proposal for the year 2022 and 2021 were approved by the shareholders' meeting held on May 31, 2023 and June 9, 2022, respectively. The details are as follows:

Legal reserve Appropriation (reversal) of Special reserve Cash dividends Cash dividend per share`（`NTD`）`	(	2022 $ 2,345 $ 37,358 ) $ 42,182 $ 0.60		2021 $ 14,163 $ 9,225 $ 105,503 $ 1.50

(4) Special reserve

Special reserve
Beginning balance Appropriation (reversal) of Special reserve Reversal of reduction in other equity items Ending balance	For the Six Months Ended June 30,2023 $ 95,488 ( 37,358) $ 58,130	For the Six Months Ended June 30,2022
	(		$ 86,263 9,225 $ 95,488

(5) Other equity

a.Exchange differences on translation of the financial statement of foreign operations

erations
Beginning balance Exchange differences on translation of the financial statement of foreign operations Income tax effect Ending balance	For the Six Months Ended June 30,2023 ( $ 61,897 ) 1,034 ( 207) ( $ 61,070 )	For the Six Months Ended June 30,2022
	( ( (	( ( (	$ 99,875 ) 37,553 7,510) $ 69,832 )

b. Unrealized profit and loss in valuation of financial assets measured at fair value through other comprehensive inocme

Beginning balance Incurred in the current period- Unrealized profit and loss- Equity instrument Accumulated profit/loss from the disposal of equity instrument transferred to retained earnings	For the Six Months Ended June 30,2023 ( $ 3,033 ) 203 -	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
	(	( (	$ 2,411 ) 1 308)

30 -

For the Six Months For the Six Months Ended June 30,2023 Ended June 30,2022 Ending balance ( $ 2,830 ) ( $ 2,718 )

c. Unrealized revaluation increments

For the Six Months For the Six Months Ended June 30,2023 Ended June 30,2022 Beginning & Ending Balance $ 6,800 $ 6,800

d. Unearned compensation

The Company's shareholders' meeting resolved on May 31, 2019 to issue restricted stock units. Please refer to Note 27 for further details.

Beginning balance Recognition of share-based payment expense Ending balance	For the Six Months Ended June 30,2023 ( $ 245 ) 245 $ -	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
	(	( (	$ 1,990 ) 977 $ 1,013 )

(6) Non-controlling interests

For the Six Months For the Six Months Ended June 30,2023 Ended June 30,2022 $ 106,640 $ 118,522

Beginning balance $ 106,640 $ 118,522 Attributation to Non- Controlling Interests Profit (loss) for the period ( 186 ) ( 182 ) Exchange differences on translation of the financial statement of foreign operations ( 477 ) 267 Cash dividends from subsidiaries ( 1,073 ) ( 14,870 ) Ending balance $ 104,904 $ 103,737

23. Operating revenue

rating revenue
Revenue from contracts with customers: PU resin Thermoplastic Polyurethane (TPU) Others	For the Three Months Ended June 30,2023		For the Three Months Ended June 30,2022 $ 278,348 66,445 28,205 $ 372,998	For the Six Months Ended June 30,2023 $ 392,081 81,454 88,558 $ 562,093	For the Six Months Ended June 30,2022
		$ 178,259 39,545 25,103 $ 242,907				$ 614,576 129,669 46,088 $ 790,333

(1) Contract balance

June 30,	December 31,	June 30,	January 1,
2023	2022	2022	2022

Accounts

31 -

receivable(Note 11) Contract liabilities Contract liabilities-cruuent		June 30, 2023 $ 252,800 $ 2,183	December 31, 2022 $ 262,139 $ 10,081		June 30, 2022 $ 328,733 $ 5,583		January 1, 2022 $ 300,318 $ 3,023

(2) Subdivision of contract revenues by customers

Please refer to Note 35 for details on subdivision of contract revenues.

24. Profit (loss) from Continuing Operations

(1) Interest income

erest income
Bank deposits her income Rental income Miscellaneous income	For the Three Months Ended June 30,2023 $ 6,500 For the Three Months Ended June 30,2023 $ 974 2,039 $ 3,013	For the Three Months Ended June 30,2022 $ 2,187 For the Three Months Ended June 30,2022 $ 1,256 2,211 $ 3,467	For the Six Months Ended June 30,2023 $ 12,733 For the Six Months Ended June 30,2023 $ 1,919 2,471 $ 4,390	For the Six Months Ended June 30,2022 $ 4,427 For the Six Months Ended June 30,2022
					$ 1,919 3,177 $ 5,096

(2) Other income

(3) Other gains and losses

ther gains and losses
Net gain (loss) from foreign currency exchange Gain on disposal of property, plant, and equipment Financial assets measured at fair value through profit and loss mandatorily Gain on disposal of investment Miscellaneous losses Financial costs Interest on bank borrowings Interest on lease liabilities	For the Three Months Ended June 30,2023 $ 1,286 - ( 36 ) 96 ( 598) $ 748 For the Three Months Ended June 30,2023 $ 2,006 224 $ 2,230		For the Three Months Ended June 30,2022 ( $ 6,967 ) 100 ( 475 ) - ( 560) ( $ 7,902 ) For the Three Months Ended June 30,2022		For the Six Months Ended June 30,2023 $ 649 - 191 96 ( 1,138) ( $ 202 ) For the Six Months Ended June 30,2023 $ 4,049 387 $ 4,436	For the Six Months Ended June 30,2022
	( (		( ( ( (		( (	$ 115 100 ( 1,075 ) - ( 1,129) ( $ 1,989 ) For the Six Months Ended June 30,2022 $ 2,254 268 $ 2,522
		$ 2,006 224		$ 1,159 126 $ 1,285			$ 2,254 268 $ 2,522
		$ 2,230

(4) Financial costs

32 -

(5) Depreciation and Amortization

Depreciation expense summarized by functions: Operating costs Operating expenses Miscellaneous losses Amortization expense summarized by functions: Operating costs Operating expenses	For the Three Months Ended June 30,2023 $ 13,791 2,182 33 $ 16,006 $ - 32 $ 32	For the Three Months Ended June 30,2022 $ 13,543 2,133 49 $ 15,725 $ - 54 $ 54	For the Six Months Ended June 30,2023 $ 27,335 4,328 66 $ 31,729 $ - 65 $ 65	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
					$ 26,826 4,342 104 $ 31,272 $ - 95 $ 95

Please refer to Note 17 for details on amortization expense of intangible assets.

(6) Employee benefit expense

Short-term employee benefits Post-employment benefits(Note 21): Defined contribution plan Defined benefit plan Share-based payment: Equity settlement Other employee benefit Total employee benefit expense Summarized by functions: Operating costs Operating expenses	For the Three Months Ended June 30,2023 $ 33,853 1,817 15 1,832 33 5,580 $ 41,298 For the Three Months Ended June 30,2023 $ 20,113 21,185 $ 41,298	For the Three Months Ended June 30,2022 $ 35,736 1,831 38 1,869 491 5,485 $ 43,581 For the Three Months Ended June 30,2022 $ 21,692 21,889 $ 43,581	For the Six Months Ended June 30,2023 $ 67,683 3,654 30 3,684 245 11,394 $ 83,006 For the Six Months Ended June 30,2023 $ 40,544 42,462 $ 83,006	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
				$ 75,376 3,684 78 3,762 977 11,379 $ 91,494 For the Six Months Ended June 30,2022
					$ 44,466 47,028 $ 91,494

(7) Compensation to employees and dircetors

The Company has compensation to employees and directors appropriated for an amount to 5%~8% and not higher than 5% of the net income before tax and before deducting the compensation to employees and directors, respectively, in accordance with the Article of Incorporation. The

33 -

estimated employee compensation and director compensation for the six months ended June 30, 2023 and June 30, 2022 are as follows:

Estimation ratio

Estimation ratio
Employee compensation Director compensation Amount For the Three Months Ended June 30,2023 Employee compensation ( $ 191 ) Director compensation ( $ 115 )	For the Six Months Ended June 30,2023 For the Six Months Ended June 30,2022 5% 5% 3% 3% For the Three Months Ended June 30,2022 For the Six Months Ended June 30,2023 For the Six Months Ended June 30,2022 ( $ 8 ) $ 119 $ 1,107 ( $ 5 ) $ 71 $ 664	For the Six Months Ended June 30,2022
	5% 3% For the Three Months Ended June 30,2022 ( $ 8 ) ( $ 5 )		5% 3% For the Six Months Ended June 30,2022 $ 1,107 $ 664

The changes in the amount of the consolidated financial report after the publication date shall be processed according to the change in accounting estimates and adjusted and recorded in the next year.

The appropriations of compensation of employees and directors for 2022 and 2021, which were resolved by the Company’s board of directors on March 14, 2023 and March 9, 2022, respectively, are as follows:

Employee compensation Director compensation	2022 Cash Stock $ 2,089 $ - 1,305 -	2021	2021
	Cash	Cash $ 9,711 5,827	Stock
	$ 2,089 1,305		$ - -

There is no difference between the actual amounts of compensation of employees and directors paid and the amounts recognized in the consolidated financial statements for the years 2022 and 2021.

Please refer to the Market Observation Post System of Taiwan Stock Exchange for information on the compensation to employees and directors resolved by the Company’s board of directors

(8) Foreign currency exchange profit (loss)

Total foreign currency exchange profit Total foreign currency exchange loss Net profit (loss)	For the Three Months Ended June 30,2023	For the Three Months Ended June 30,2023	For the Three Months Ended June 30,2022 $ 13,229 ( 20,196) ( $ 6,967 )	For the Six Months Ended June 30,2023 $ 8,158 ( 7,509) $ 649	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
	(	$ 4,758 3,472) $ 1,286	( (	(	(	$ 23,266 23,151) $ 115

25. Income Tax from Continuing Operations

(1) Income tax recognized in profit and loss
34 -

The main composition items of income tax expense as follows:

Current income tax Incurred in the current period levied on the undistributed earnings Adjustment of prior periods Deferred income tax Incurred in the current period Income tax expense recognized in profit and loss	For the Three Months Ended June 30,2023 $ 951 275 - 1,226 ( 96) $ 1,130	For the Three Months Ended June 30,2022 $ 13,033 - ( 1,451) 11,582 ( 9,289) $ 2,293	For the Six Months Ended June 30,2023 $ 1,411 275 - 1,686 ( 36) $ 1,650	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
	(	( (	(	( (	$ 18,564 - 1,451) 17,113 9,479) $ 7,634

The tax rate applicable to the subsidiaries in Mainland China is 25%; the tax amounts generated in other territories are calculated based on the tax rates applicable to each respective territory.

(2) Income tax recognized in other comprehensive income.

Deferred income tax Incurred in the current period -Conversion through foreign operations Income tax recognized in other comprehensive inocme	For the Three Months Ended June 30,2023 $ 293 $ 293	For the Three Months Ended June 30,2022 ($ 2,395) ( $ 2,395 )	For the Six Months Ended June 30,2023 ($ 207) ( $ 207 )	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
		( (	( (	( (	$ 7,510) $ 7,510 )

(3) Income tax audit

The income tax returns for The Company and TPU Company have been approved by the tax authorities up to the year 2021.

26. Earnings per Share

For the Three For the Three For the Six For the Six Months Ended Months Ended Months Ended Months Ended June 30,2023 June 30,2022 June 30,2023 June 30,2022 Basic earnings per share From continuing operations ( $ 0.05 ) ( $ 0.01 ) $ 0.03 $ 0.25

35 -

Diluted earnings per share From continuing operations	For the Three Months Ended June 30,2023 ( $ 0.05 )	For the Three Months Ended June 30,2022 ( $ 0.01 )	For the Six Months Ended June 30,2023 $ 0.03	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
	(	(			$ 0.25

The net income and weighted average number of outstanding common shares used to compute earnings per share are as follows:

Net profit (loss) for the period

Net profit (loss) for the calculation of basic and diluted earnings per share Shares Weighted average number of common stock shares for the calculation of basic earnings per share The impact of potential diluted common stock shares: Employee compensation Restricted stock units Weighted average number of common stock shares for the calculation of diluted earnings per share	For the Three Months Ended June 30,2023 ( $ 3,742 ) For the Three Months Ended June 30,2023 70,251 - - 70,251	For the Three Months Ended June 30,2022 ( $ 635 ) For the Three Months Ended June 30,2022 69,561 - - 69,561	For the Six Months Ended June 30,2023 For the Six Months Ended June 30,2022 $ 1,918 $ 17,510 Unit : Thousand shares For the Six Months Ended June 30,2023 For the Six Months Ended June 30,2022 70,109 69,561 56 237 194 671 70,359 70,469

If the Company may choose to pay remuneration to employees in the form of stocks or cash, when calculating the diluted earnings per share, it is assumed that the remuneration to employees is paid in the form of stocks, and the weighted average number of outstanding shares is included in the potential diluted common stock for the calculation of the diluted earnings per share. When calculating the diluted earnings per share before the distribution of remuneration in the form of stock resolved in the shareholders meeting of the following year, the dilution effect of this potential common stock will be considered continuously.

Share -based Payment Restricted stock units
36 -

The Company resolved to issue restricted stock units at the shareholder meeting held on May 28, 2018, with an issuance price of NT$ 0 per share (i.e., free of charge). The aforementioned issuance of restricted stock units was approved by the Securities and Futures Bureau under the Financial Supervisory Commission R.O.C. and became effective on May 20, 2019. The details of the issuance resolved by the Board of Directors are as follows:

Unit:Thousand shares

Grant date 108.09.25 109.04.15	Grant amount 426 374	Fair value per share 15.10 17.65	Issuance and capital raising record date 108.09.25 109.04.15	Actual shares issued
				426 374

After the restricted stock units are granted to employees under this policy, they must meet certain conditions and fulfill their service obligations without any violation of the Company's employment agreement, code of conduct, work rules, contractual obligations, or regulations. In addition, they must achieve a certain level of annual performance evaluation. The granted restricted stock units shall vest in the employees according to the following schedule, subject to their continued employment on the vesting date:

(1) After one year of employment, employees can receive 30% of the granted restricted stock units if they achieve a performance evaluation level of B or above.
(2) After two years of employment, employees can receive an additional 30% of the granted restricted stock units if they achieve a performance evaluation level of B or above.
(3) After three years of employment, the remaining 40% of the granted restricted stock units can be vested if they achieve a performance evaluation level of B or above.
If the above-mentioned dates fall on a holiday, the transaction will be processed
on the next business day.
The handling methods for employees who fail to meet the vested conditions are
as follows:
(1) If an employee violates these regulations, trust agreements, labor contracts, work rules, or contractual agreements between the employee and the Company (related contractual agreements are authorized by the Board of Directors to be negotiated and signed by the Chairman on behalf of the Company), the
37 -

Company has the right to retrieve the restricted stock units granted but not yet vested to the employee and cancel them free of charge.

(2) If an employee fails to meet the vested conditions, the Company has the right to retrieve the restricted stock units granted but not yet vested to the employee and cancel them free of charge.
(3) For general resignation (voluntary/retirement/layoff/dismissal), the Company will retrieve the restricted stock units granted but not yet vested to the employee in accordance with the law and cancel them free of charge.
(4) For leave without pay: Employees who are granted restricted stock units and have applied for leave without pay with the Company's approval will be deemed as not having met the vested conditions during the period of leave. After returning to their original position, the employee's restoration of their rights will be subject to approval by the Chairman. The vested conditions, percentage, and deadline for meeting them will be reevaluated within the scope of the granted shares.
(5) For general death, the Company will retrieve the restricted stock units granted but not yet vested to the employee in accordance with the law and cancel them free of charge.
(6) Occupational accidents:
a. If an employee suffers a disability due to an occupational accident and cannot continue working, the restricted stock units granted but not yet vested will be vested ahead of schedule from the date of effective resignation.
b. If an employee dies due to an occupational accident, the restricted stock units granted but not yet vested will be vested ahead of schedule from the date of death, and the inheritance will receive them.
(7) For job transfer: If an employee transfers to a related enterprise or another company (excluding subsidiaries), the restricted stock units granted but not yet vested will be handled in the same manner as specified in the "general resignation" clause. However, for operational needs, if an employee is assigned by the Company to work at a related enterprise or another company, their restricted stock units granted but not yet vested will not be affected by the transfer.
(8) Employees who have been granted restricted stock units but have not met the vested conditions are not required to return the stock dividend and cash dividend they have received.

The restricted rights and obligations of employees who have been allocated or subscribed to new shares but have not yet met the vesting conditions are as follows:

38 -
(1) Prior to meeting the vesting conditions, employees shall not sell, pledge, transfer, gift, or otherwise dispose of the restricted stock units allocated under this policy.
(2) Employees who have been allocated new shares but have not yet met the vesting conditions shall have the same rights and obligations (including the right to participate in rights issues, dividends, attend shareholder meetings, propose resolutions, speak, vote, elect, subscribe to cash increases, and other matters related to shareholder rights and interests) as the common shares already issued by the Company, except for the aforementioned restricted rights.
(3) The restricted stock units issued this time may be held in trust by a trustee. Before meeting the vesting conditions, the employee shall not request the trustee to return the restricted stock units for any reason or by any means.
Summary of restricted stock units information of the Company:

Beginning balance Cancellation in current period Ending balance	Shares (Thousand shares) For the Six Months Ended June 30,2023 743 ( 743) -	Shares (Thousand shares)	Shares (Thousand shares)
		For the Six Months Ended June 30,2022
	(		775 - 775

The recognized compensation costs of the Company for the three months and for the six months ended June 30, 2023 and June 30, 2022 were NT$ 33 thousand, NT$ 491 thousand, NT$ 245 thousand and NT$ 977 thousand, respectively.

28. Capital Risk Management

The Consolidated Company conducts capital management to ensure that each enterprise within the group can maximize shareholder returns by optimizing debt and equity balances under the assumption of going concern. The overall strategy of the Consolidated Company has not undergone significant changes.

The Consolidated Company's senior management regularly reviews its capital structure, considering the cost and associated risks of various types of capital. Based on the recommendations of senior management, The Consolidated Company balances its overall capital structure through methods such as paying dividends, issuing new stocks, and so on.

The Consolidated Company is not required to comply with any other external capital regulations.

Financial Instruments
39 -
(1) Fair value information - Financial instruments that are not measured at fair value.

The management of the Company believes that the carrying amounts of financial assets and financial liabilities that are not measured at fair value approximate their fair value.

(2) Fair value information - financial instruments measured at fair value on a repeatability basis
a. Fair value level

June 30, 2023 Financial assets valued at fair value through profit and loss Foreign Bonds Domestic TWSE/TPEx listing stock Domestic Fund beneficiary certificate Total Financial assets measured at fair value through other comprehensive income Domestic non-TWSE /TPEx listing stock December 31, 2022 Financial assets valued at fair value through profit and loss Foreign Bonds Domestic TWSE/TPEx listing stock Domestic Fund beneficiary certificate Total Financial assets measured at fair value through other comprehensive income Domestic non-TWSE /TPEx listing stock June 30, 2022 Financial assets valued at fair value through profit and loss		Level 1 $ 7,136 406 6,211 $ 13,753 $ - Level 1 $ 3,968 1,030 6,115 $ 11,113 $ - Level 1		Level 2 $ - - - $ - $ - Level 2 $ - - - $ - $ - Level 2		Level 3 $ - - - $ - $ 1,670 Level 3 $ - - - $ - $ 1,467 Level 3		Total
								$ 7,136 406 6,211 $ 13,753 $ 1,670 Total
								$ 3,968 1,030 6,115 $ 11,113 $ 1,467 Total

40 -

Foreign Bonds Financial assets measured at fair value through other comprehensive income Domestic non-TWSE /TPEx listing stock		Level 1 $ 4,253 $ -		Level 2 $ - $ -		Level 3 $ - $ 1,782		Total $ 4,253 $ 1,782

There was no transfer between Level 1 and Level 2 fair value measurements for the six months Ended June 30, 2023 and June 30, 2022.

b. Evaluation technology and the input value of Level 2 fair value measurement

Type of financial instruments Evaluation technology and the input value Derivatives - foreign exchange Future cash flows are estimated based on forward contracts observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

c. Evaluation technology and the input value of Level 3 fair value measurement

The domestic unlisted equity investments are valued using the net asset value method, where the company measures the fair value of the investments based on its net assets on the balance sheet date.

(3) Types of financial instruments

Financial assets Financial assets measured at fair value through other comprehensive income Financial assets measured at the amortized cost (Remark 1) Measured at fair value through profit and loss Financial assets measured at fair value through profit and loss mandatorily Financial liabilities Measured at the amortized cost (Remark 2)	June 30, 2023 $ 1,670 937,790 13,753 487,963	December 31, 2022 $ 1,467 969,748 11,113 558,734	June 30, 2022
			$ 1,782 1,012,609 4,253 503,930

41 -

Remark 1: The balance includes financial assets measured at amortized cost such as cash and cash equivalents, financial assets measured at amortized cost, notes receivable, accounts receivable, and other financial assets.

Remark 2: The balance includes financial liabilities measured at amortized cost such as short-term borrowings, short-term bills payable, notes payable, accounts payable and long-term borrowings.
(4) Financial risk management objectives

The main financial instruments of the Consolidated Company include notes and accounts receivable, accounts payable, lease liabilities, long-term and short-term borrowings. The financial management department of the Consolidated Company provides services to all business units, plans and coordinates entering the domestic and international financial markets, analyzes internal risk exposure according to the degree and breadth of risk, and reports, supervises, and manages the financial risks related to the operations of the Company. These risks include market risk (including exchange rate risk and interest rate risk), credit risk, and liquidity risk.

a. Market risk

The main financial risks from the operating activities of the Consolidated Company are the risk of changes in foreign currency exchange rates (see I below) and the risk of changes in interest rates (see II below). I. Exchange rate risk

Several subsidiaries of the Company engage in sales and purchase transactions denominated in foreign currencies, which exposes the Consolidated Company to foreign exchange risk.

Please refer to Note 33 for the book value of monetary assets and monetary liabilities denominated in non-functional currencies (including monetary items denominated in non-functional currencies that have been offset in the consolidated financial statements) and the book value of derivative instruments with foreign exchange risk exposure of the Consolidated Company as of the balance sheet date.

Sensitivity Analysis

The Consolidated Company is mainly exposed to fluctuations in the exchange rates of the U.S. dollar and Chinese yuan.

The sensitivity analysis below illustrates the impact on the Consolidated Company's pre-tax profit when the functional currency of the relevant foreign currencies increases or decreases by 5% against the

42 -

New Taiwan Dollar (the functional currency). The 5% sensitivity ratio is used by the Company's management to report foreign exchange risks to senior management and represents the reasonable possible range of exchange rate fluctuations assessed by management. The sensitivity analysis includes only the foreign currency-denominated monetary items outstanding and adjusts their year-end translation by 5% for exchange rate movements. A positive number in the table below indicates that a 5% depreciation of the New Taiwan Dollar against the relevant foreign currency will increase pre-tax profit by the stated amount, while a 5% appreciation will reduce pre-tax profit by the same amount.

pre-tax profit	Effect of	USD For the Six Months Ended June 30,2022 $ 5,407	Effect of Chinese Yuan	Effect of Chinese Yuan	Effect of Chinese Yuan
	For the Six Months Ended June 30,2023 $ 7,653		For the Six Months Ended June 30,2023 $ 3,182		For the Six Months Ended June 30,2022 $ 7,923

(i) The primary source of the impact is from the US dollar cash and US dollar-denominated accounts receivable and accounts payable of the Consolidated Company that were outstanding and not hedged against cash flow risks on the balance sheet date.
(ii) The primary source of the impact is from the Chinese yuan cash and Chinese yuan-denominated accounts receivable and accounts payable of the Consolidated Company that were outstanding and not hedged against cash flow risks on the balance sheet date.

The management believes that sensitivity analysis cannot fully represent the inherent risk of exchange rate fluctuations, as the exchange rate exposure at the balance sheet date may not reflect the exposure throughout the year.

II.Interest rate risk

The Consolidated Company is exposed to interest rate risk due to the fact that individual entities within the Consolidated Company borrow funds at both fixed and floating rates. To manage this risk, the Consolidated Company maintains an appropriate mix of fixed and floating rate instruments, and uses interest rate swap and forward rate contracts. The Consolidated Company regularly evaluates its hedging activities to ensure that they align with its interest rate outlook and established risk preferences, in order to adopt the most cost-effective hedging strategies.

43 -

The book amount of the financial assets and financial liabilities of the Consolidated Company with interest rate risk exposure on the balance sheet date are as follows:

sheet date are as follows:
With fair value interest rate risk `－`Financial assets `－`Financial liabilities With cash flow interest rate risk `－`Financial assets `－`Financial liabilities	June 30, 2023 $ 396,990 165,157 242,214 250,000	December 31, 2022 $ 441,011 159,417 233,907 280,000	June 30, 2022
			$ 356,704 163,336 279,720 165,000

Sensitivity Analysis

The sensitivity analysis below is based on the interest rate risk exposure of the non-derivative instruments on the balance sheet date. For floating rate liabilities, the analysis is based on the assumption that the amount of liabilities that were in circulation on the balance sheet date was in circulation throughout the reporting period.

If the interest rate increases/decreases by 1% with all other variables held constant, the Consolidated Company's pre-tax profit for the six months ended June 30, 2023 and June 30, 2022 will decrease/ increase by NT$ 39 thousand and NT$ 574 thousand, respectively, mainly due to the interest rate risk associated with the Consolidated Company's variable-rate borrowings.

b. Credit risk

Credit risk refers to the risk that the counterparty of the transaction defaults on contractual obligations and causes financial losses to the Consolidated Company. As of the balance sheet date, the maximum credit risk exposure of the Consolidated Company that may cause financial losses due to the counterparty’s failure to perform its obligations and financial guarantees provided by the Consolidated Company is mainly derived from:

I. the book value of financial assets recognized in the consolidated balance sheet.
II.The maximum amount that may need to be paid by the Consolidated Company for providing financial guarantees, regardless of the likelihood of occurrence.

The Consolidated Company adopts a policy of conducting credit ratings on counterparties and obtaining adequate collateral in necessary situations to mitigate the risk of financial losses caused by default. The Consolidated

44 -

Company continues to monitor credit risk and counterparties' credit ratings, and diversifies the total transaction amount among qualified clients with different credit ratings. The credit risk is controlled by annual credit limit reviews by the credit control unit.

To mitigate credit risk, the Consolidated Company's management assigns dedicated units to decide on credit limits, credit approval, and other monitoring procedures to ensure that appropriate actions are taken to recover overdue receivables. In addition, the Consolidated Company conducts a review of the recoverable amount of receivables on the balance sheet date to ensure that appropriate impairment losses are recognized for irrecoverable receivables. Therefore, the management of the Consolidated Company believes that the credit risk of the Company has been significantly reduced. c. Liquidity risk

The Consolidated Company manages and maintains sufficient positions of cash and cash equivalents to support the group's operations and reduce the impact of cash flow volatility. The management of the Consolidated Company supervises the usage of bank financing facilities and ensures compliance with the terms of borrowing agreements.

Bank borrowings are an important source of liquidity for the Company. As of June 30, 2023, December 31, 2022 and June 30, 2022, the unused financing facilities of the Consolidated Company are explained in the following II financing facilities.

I. Non-derivative financial liabilities liquidity and interest rate risk list

The remaining contract maturity analysis of non-derivative financial liabilities is prepared based on the earliest date when the Consolidated Company may be required to repay the liabilities, using the undiscounted cash flows of the financial liabilities. Therefore, the bank borrowings that the Consolidated Company may be required to repay immediately are listed in the earliest period in the table, without considering the probability of the bank immediately exercising such rights; other non-derivative financial liabilities are prepared based on the contractual repayment dates.

June 30, 2023

June 30, 2023
Non-derivative financial liabilities Non-interest-bearing liabiblities	I m m e d i a t e payment or p a y i n g w i t h i n 1 month $ -	1~3 months $ 110,946	3months ~ 1 year $ -	1~5 years $ -	Over 5 years
					$ -

45 -

Lease liabilities Floating interest rate instrument Fixed interest rate instrument	I	m m e d i a t e payment or p a y i n g w i t h i n 1 month 1,428 - 5,053 $ 6,481		1~3 months 1,133 50,000 113,400 $ 275,479		3months ~ 1 year 6,858 - 8,564 $ 15,422		1~5 years		Over 5 years
								22,487 200,000 - $ 222,487		6,234 - - $ 6,234

Further information on the maturity analysis of financial liabilities mentioned above is as follows:

Lease liabilities		Less than 1 year $ 10,222		1~5 years $ 23,865	5`～`10 years $ 6,332		10`～`15 years $ -		15`～`20 years $ -		Over 20 years $ -

December 31, 2022

December 31, 2022
Non-derivative financial liabilities Non-interest-bearing liabiblities Lease liabilities Floating interest rate instrument Fixed interest rate instrument	I	m m e d i a t e payment or p a y i n g w i t h i n 1 month $ - 1,288 30,000 103,224 $ 134,512		1~3 months $ 133,297 572 50,000 31,193 $ 215,062		3months ~ 1 year $ - 2,606 35,000 11,020 $ 48,626		1~5 years $ - 9,514 165,000 - $ 174,514	Over 5 years
									$ - - - - $ -

Further information on the maturity analysis of financial liabilities mentioned above is as follows:

Lease liabilities		Less than 1 year $ 4,740		1~5 years $ 9,859	5`～`10 years $ -		10`～`15 years $ -		15`～`20 years $ -		Over 20 years $ -

June 30, 2022

June 30, 2022
Non-derivative financial liabilities Non-interest-bearing liabiblities Lease liabilities Floating interest rate instrument Fixed interest rate instrument	I	m m e d i a t e payment or p a y i n g w i t h i n 1 month $ - 1,315 - 50,346 $ 51,661		1~3 months $ 194,552 1,270 - 62,934 $ 258,756		3months ~ 1 year $ - 5,456 - 31,098 $ 36,554		1~5 years		Over 5 years
								$ - 11,727 165,000 - $ 176,727		$ - - - - $ -

Further information on the maturity analysis of financial liabilities mentioned above is as follows:

==> picture [395 x 29] intentionally omitted <==

II.Financing facilities

46 -

Unsecured bank overdraft facility (reviewed annually) `－`Used amount `－`Unused amount Secured bank borrowing facility (extendable by mutual agreement) `－`Used amount `－`Unused amount		June 30, 2023 $ 168,996 451,004 $ 620,000 $ 220,191 98,724 $ 318,915	December 31, 2022 $ 226,305 413,695 $ 640,000 $ 205,610 111,759 $ 317,369		June 30, 2022
					$ 109,545 640,455 $ 750,000 $ 214,547 109,781 $ 324,328

30. Related Party Transactions

The transactions, account balances, and income and expenses between the Company and its subsidiaries (related parties) are all eliminated at the time of consolidation; therefore, they are not disclosed in this note. In addition to the disclosure in other notes, the transactions between the Consolidated Company and other related parties are as follows.

(1) Name and relationship of related parties

==> picture [412 x 22] intentionally omitted <==

----- Start of picture text -----

Name of related praties Relation with the Consolidated Company
Isotech Products Incorporated Substantial related party
----- End of picture text -----

Name of related praties Isotech Products Incorporated	Relation with the Consolidated Company Substantial related party
Chaei Hsin Enterprise Co., Ltd.	Substantial related party
Liou, Han -Yin	Key management personnel

(2) Operating revenue

Account Operating revenue	Classification of Related party Substantial related party	For the Three Months Ended June 30,2023 $ 21,135	For the Three Months Ended June 30,2022 $ 44,422	For the Six Months Ended June 30,2023 $ 46,327	For the Six Months Ended June 30,2022 $ 81,946

Transactions with related parties are carried out at the agreed prices between both parties, with a payment term of 90 days from the end of the month, in principle.

(3) Purchase

Classification of Related party Substantial related party	For the Three Months Ended June 30,2023 $ 238	For the Three Months Ended June 30,2022 $ 220	For the Six Months Ended June 30,2023 $ 483	For the Six Months Ended June 30,2022 $ 440

47 -

The price and transaction terms for purchases made by the Consolidated Company from related parties are determined by mutual agreement, with a payment period of 90 days from the end of each month.

(4) Receivables from related parties (excluding the loaning of funds to the related parties)

Account Notes receivable Accounts receivable	Classification of Related party Substantial related party Substantial related party		June 30, 2023 $ 1,922 $ 30,524	December 31, 2022 $ 1,958 $ 35,527		June 30, 2022 $ 1,564 $ 64,319

There is no guarantee for the outstanding receivables from related parties. As of June 30, 2023, December 31, 2022 and June 30, 2022, the provision for doubtful accounts related to receivables from related parties was NT$ 114 thousand, NT$ 108 thousand and NT$ 202 thousand, respectively.

(5) Payables to related parties (excluding the loaning of funds from the related parties)

Account Notes payable Accounts payable	Classification of Related party Substantial related party Substantial related party		June 30, 2023 $ 362 $ -	December 31, 2022 $ 283 $ 39		June 30, 2022 $ 201 $ 30

The balance of payables to related parties outstanding is unsecured.

(6) Endorsements/guarantees

Guaranteed by Classification of Related party The amount guaranteed by key management personnel		June 30, 2023 $ 393,420	December 31, 2022 $ 392,130		June 30, 2022 $ 533,580

(7) Remunerations to the management

The total remuneration of directors and other key management personnel is as follows:

Short-term employee benefits	For the Three Months Ended June 30,2023 $ 2,578	For the Three Months Ended June 30,2022 $ 3,526	For the Six Months Ended June 30,2023 $ 4,676	For the Six Months Ended June 30,2022 $ 5,606

The remuneration of directors and other key management personnel is determined by the Remuneration Committee of the Company based on individual performance and market trends. In addition, the Consolidated

48 -

Company provides official cars for business use by key management personnel, with a total acquisition cost of NT$ 4,197 thousand.

31. Collateral Assets

The following assets of the Consolidated Company have been pledged as collateral for short-term and long-term borrowings:

Pledged bank deposit Property, plant and equipment		June 30, 2023 $ 30,000 110,675 $ 140,675		December 31, 2022 $ 30,000 111,325 $ 141,325		June 30, 2022
						$ 42,780 124,197 $ 166,977

Contractual Commitment with Material or Liabilities without Recognition As of June 30, 2023, December 31, 2022 and June 30, 2022, the balance of letters of credit issued but unused was USD 640 thousand, USD 396 thousand and USD 812 thousand, respectively.
Information on Significantly Influential Assets and Liabilities in Foreign Currency

The following information is summarized and expressed in foreign currencies other than the functional currencies of each business entity in the Consolidated Company. The disclosed exchange rates refer to the exchange rates for the conversion of the foreign currencies into functional currencies. The influential assets and liabilities in foreign currency are as follows: June 30, 2023

Froeign currencyassets Monetary item USD CNY ZAR Foreign currency liabilities Monetary item USD CNY	Foreign currency $ 5,956 14,877 910 1,041 17	Exchange rate 31.14 4.282 1.649 31.14 4.282	Carrying amount	Carrying amount
				$ 185,470 63,703 1,501 $ 250,674 $ 32,417 73 $ 32,490

December 31, 2022

49 -

	Foreign currency	Foreign currency	Exchange rate	Carrying amount	Carrying amount
Froeign currencyassets
Monetary item
USD	$	7,317	30.71	$	224,705
CNY		11,255	4.408		49,612
				$	274,317
Foreign currency
liabilities
Monetary item
USD		896	30.71	$	27,516
June 30, 2022
	Foreign currency		Exchange rate	Carrying amount
Froeign currencyassets
Monetary item
USD	$	5,202	29.72	$	154,603
CNY		35,747	4.439		158,681
				$	313,284
Foreign currency
liabilities
Monetary item
USD		1,563	29.72	$	46,452
CNY		48	4.439		213
				$	46,665
The foreign exchange gains (losses) (realized and unrealized) of the
Consolidated Company for the three months and			six months ended June 30, 2023
and 2022, respectively, were NT$ 1,286 thousand, NT$ (6,967) thousand, NT$ 649
thousand and NT$ 115 thousand, respectively.			Due to the variety of foreign
currency transactions and	functional currencies of individual entities within the
Consolidated Company, it	is not possible to disclose the exchange gains or losses
by significant foreign currency types.

34. Notes to Disclosure

(1) Information on major transactions and (2) Investment related information:
a. Financing provided to others: Table 1.
b. Endorsements/guarantees provided: Table 2.
c. The Marketable securities held (excluding investment in the equity of the subsidiaries and associates): Table 3.
d. Marketable securities acquired or disposed at costs or prices at least NT$ 300 million or 20% of the paid-in capital: None.
50 -
e. Acquisition of individual real estate at costs of at least NT$ 300 million or 20% of the paid-in capital: None.
f. Disposal of individual real estate 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 amounting to 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. Trading in derivative instruments: None.
j. Others: The business relationship between the parent company and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions:

==> picture [387 x 68] intentionally omitted <==

----- Start of picture text -----

Transactions
Ratio to
consolidated
Relations total
hip Trade income or
(Remark terms(Re total assets
Company Name Counterparty 1) Account Amount mark 2) (%)
----- End of picture text -----

The Company	TPU Company	1	Operating costs	5,577	`－`	1
			Other income	525	`－`	-
			Notes receivable	276	`－`	-
			Accounts	92	`－`	-
			receivable
			Notes payable	2,968	`－`	-
			Accounts payable	1,683	`－`	-
			Research and
			development
			expenses	1	`－`	-
	Shanshui Lianmei	1	Operating revenue	22,926	`－`	4
	Company		Operating costs	122	`－`	-
			Accounts
			receivable	14,252	`－`	1
			Accounts payable	71	`－`	-
	Headway Vietnam	1	Operating revenue	8,386	`－`	1
	Company		Accounts receivabe	8,572	`－`	-
Shanshui Lianmei	Shanghai Huiyu	2	Selling expneses	852	`－`	-
Company	Company		Prepaid expense	39	`－`	-
	Anhui Huayu	2	Operating revenue	235	`－`	-
	Company		Accounts receivabe	265	`－`	-
Shanghai Huiyu	Anhui Huayu	2	Operating costs	12,450	`－`	2
Company	Company		Prepaid expense	53,552	`－`	3
	URASIA	2	Short-tem
			borrowing	21,410	`－`	1
			Interest expense	248	`－`	-
			Other payable	79	`－`	-

Remark 1 : “1” represents the parent company dealings with its subsidiaries. “2” represents th e subsidiary dealin gs with other subsidiaries.

Remark 2: The selling prices of products to subsidiaries by the Company are generally equivalent to those charged to third-party customers, with a payment term of 90 days after month-end. However, for certain products that assist subsidiaries in expanding local business, their selling prices are based on agreed prices between the Company and the subsidiaries. As of June 30, 2023, the payment terms for subsidiaries are su bject to their respective financial conditions.

k. Information on investees: Table 4
51 -
(3) Information on investment in Mainland China:
a. Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment gain or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Talbe 5.
b. Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, unrealized gains or losses: Talbe 6.
- I. The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- II. The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
- III. The amount of property transactions and the amount of the resultant gains or losses.
- IV. The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
- V. The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
- VI. Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.
(4) Information of major shareholders: list of the shareholders with ownership of 5% or greater, showing the names, the number of shares and percentage of ownership held by each shareholder: Talbe 7.

35. Segment Information

The operating decision-makers of the Consolidated Company focus on the financial information of each operating segment to allocate resources and evaluate segment performance, and the measurement basis of this financial information is the same as that of this financial statements. The reporting segments of the Consolidated Company are Taiwan, Mainland China, and Vietnam.

(1) Segment revenues and operating results

The revenue and operating results of the continuing operations of the Consolidated Company are analyzed by the reporting segments as follows.

52 -

For the Three Months Ended June 30,2023 Taiwan $ 148,413 Mainland China 52,298 Vietnam 42,196 Total form Continuing operations $ 242,907 (2) Segment operating results For the Three Months Ended June 30,2023 Taiwan ( $ 13,510 ) Mainland China 492 Vietnam 1,104 Total form Continuing operations ( 11,914 ) Net exchange gain (loss) 1,286 Interest income 6,500 Gain on disposal of investment 96 Net profit (loss) on financial assets measured at fair value through profit and loss mandatorily ( 36 ) Gain on disposal of property, plant, and equipment - Financial costs ( 2,230 ) Others 2,415 Pre-tax profit ( $ 3,883 )	For the Three Months Ended June 30,2022 $ 248,667 54,876 69,455 $ 372,998 For the Three Months Ended June 30,2022 $ 11,071 ( 8,546 ) 2,674 5,199 ( 6,967 ) 2,187 - ( 475 ) 100 ( 1,285 ) 2,907 $ 1,666	For the Six Months Ended June 30,2023 $ 328,676 142,711 90,706 $ 562,093 For the Six Months Ended June 30,2023 ( $ 18,152 ) 6,098 2,951 ( 9,103 ) 649 12,733 96 191 - ( 4,436 ) 3,252 $ 3,382	For the Six Months Ended June 30,2022	For the Six Months Ended June 30,2022
			$ 511,980 104,294 174,059 $ 790,333 For the Six Months Ended June 30,2022
	( ( ( (	( ( (	( ( (	$ 22,960 14,909 ) 11,899 19,950 115 4,427 - 1,075 ) 100 2,522 ) 3,967 $ 24,962

Segment profit refers to the profits earned by each segment, excluding allocated operating expenses, non-operating income and gains, and non-operating expenses and losses. This measurement amount is provided to the main operating decision-makers for allocating resources to segments and evaluating their performance.

(3) Segment assets

The Company did not provide the operating decision-makers with a measure of departmental assets, and therefore the measured amount of assets is zero.

53 -

Headway Advanced Materials Inc. and Subsidiaries

Financing Provided to Others From January 1 to June 30, 2023

Table 1

Unit: In Thousands of NTD, Unless Stated Otherwise

No.	Lender	Borrower	Account	Related party	Maximum balance for the period	Ending balance	Actual amount drawn	Interest rate range	Nature of financing	Transaction amount	Reason for financing	Allowance for bad debt	Collateral	Collateral	Financing limits for each borrower (Remark 1)	Lander’s total financing limit Note	Lander’s total financing limit Note
													Item	Value
1	URASIA	Shanghai Huiyu Company	Other receivable	Y	$ 44,745	$ 22,325	$ 22,325	2.5%	Remark 2	$ -	Working capital	$ -	`－`	$ -	$ 292,921	$ 292,921	Remark 1

Remark 1: The short-term financing provided by URASIA INTERNATIONAL INC. to to entities in need of working capital are subject to individual and aggregate limits, which shall not exceed 40% of the net worth of the company both.

Remark 2: In need of short-term financing.

54 -

Headway Advanced Materials Inc. and Subsidiaries

Endorsements/Guarantees Provided

From January 1 to June 30, 2023

Table 2

Unit: In Thousands of NTD, Unless Stated Otherwise

No.	Endorser/ guarantor	Endorsee/guarantee	Endorsee/guarantee	Limits on endorsements /guarantees given on behalf of each party	Maximum amount endorsements /guarantees during the period	Outstanding endorsements /guarantees the end of the period	Actual amount drawn	Amount endorsements /guarantees by collaterals	Ratio of accumulated endorsements /guarantees to net equity per latest financial statements(%)	Maximum endorsements /guarantees amount allowable (Remark 1)	Endorsements /guarantees given by parent on behalf of subsidiaries	Endorsements /guarantees by subsidiaries on behalf of parent	Endorsements /guarantees given on behalf of companies in Mainland China	Note
		Company name Relationship
0	The Company	Headway Vietnam Company	2	Remark 2	$ 59,410	$ 59,410	$ -	$ -	6.14	$ 387,349	Y	N	N	`－`

Remark 1: The total amount of endorsements/guarantes shall not exceed 40% of the net worth of this Company.

Remark 2: The endorsement/guarantee limit for a single entity shall not exceed 25% of the current net worth of the Company.

55 -

Headway Advanced Materials Inc. and Subsidiaries

The Marketable securities held

June 30, 2023

Table 3

Unit: In Thousands of NTD, Unless Stated Otherwise

==> picture [1038 x 306] intentionally omitted <==

----- Start of picture text -----

June 30, 2023
Type and name of marketable Relationship with the Shares Percentage of
Holding company name Financial statement account Note
securities holding company (Thousand Carrying Amount ownership Fair value
shares) (%)
The Company Anchor Digital Technology － Financial assets at fair value 185 $ 1,670 6.06 $ 1,670 －
Corporation/ Stock shares through other comprehensive
income - non-current
Yuanta 2-10 year investment Financial assets at fair value 20 6,211 - 6,211 －
grade corporate bond fund through profit or loss -
non-current
American Express/ Corporate － Financial assets at fair value - 2,988 - 2,988 －
bond through profit or loss -
non-current
Apple Inc./ Corporate bond － Financial assets at fair value - 2,184 - 2,184 －
through profit or loss -
non-current
Verizon Communications Inc/ － Financial assets at fair value - 1,964 - 1,964 －
Corporate bond through profit or loss -
non-current
Taiwan Biomedical Company － Financial assets at fair value 10 406 0.02 406 －
Limited./ Stock shares through profit or loss -
non-current
----- End of picture text -----

Remark 1: The aforementioned marketable securities were not provided as collateral, pledged, or otherwise restricted as of June 30, 2023. Remark 2: Please refer to Table 4 for the information of investment in subsidiaries.

56 -

Headway Advanced Materials Inc. and Subsidiaries

Information on investees

From January 1 to June 30, 2023

Table 4

Unit: In Thousands of NTD, Unless Stated Otherwise

==> picture [1039 x 112] intentionally omitted <==

----- Start of picture text -----

Original Investment Amount Balance as of June 30, 2023 Net Income
Main businesses and Investment Gain
Investor company Investee company Location June 30, December 31, Shares Ratio (Loss) of the Note
products Carrying Amount (Loss)
2023 2022 (Thousand shares) (%) Investee
The Company URASIA Panama General investment business $ 223,251 $ 223,251 78 100 $ 743,340 $ 15,849 $ 16,593 －
TPU Company Taiwan Manufacturing and sales of TPU 68,084 68,084 6,808 50 89,938 ( 2,566) ( 1,372) －
URASIA Headway Vietnam Company Vietnam PU resin products USD 5,000 thousand USD 5,000 thousand - 100 USD 8,241 thousand USD 220 thousand USD 220 thousand －
Cheng Yu Company Hong Kong General investment business USD 7,384 thousand USD 7,384 thousand - 100 USD 5,441 thousand USD 124 thousand USD 124 thousand －
----- End of picture text -----

Remark: Please refer to Table 5 for the information on investment in Mainland China

57 -

Headway Advanced Materials Inc. and Subsidiaries

Information on Investment in Mainland China

From January 1 to June 30, 2023

Table 5

Unit: In Thousands of NTD, Unless Stated Otherwise

==> picture [1039 x 419] intentionally omitted <==

----- Start of picture text -----

Accumulated outward Investment flows Accumulated outward Percentage of Accumulated
remittance for remittance for ownership of repatriation of
Main businesses and Total amount of Method of Investment gain Carrying amount as of
Investee company investments from investments from direct or investment income as
products paid-in capital investment Taiwan as of Outward Inward Taiwan as of indirect (Loss) June 30, 2023 of June 30, 2023
January 1, 2023 June 30, 2023 investment (Remark 5)
Shanghai Huiyu Construction of housing CNY 10,600 thousand Remark 1 USD 324 thousand $ - $ - USD 324 thousand 74% USD 87 thousand USD 1,368 thousand USD 5,958 thousand
Company projects, construction of
municipal public works
projects, construction of
mechanical and electrical
installation projects,
construction of building
decoration projects,
construction of
anti-corrosion and
waterproofing projects,
construction of sports
tracks, stadiums, artificial
turf projects, and wholesale
of sports field materials.
Shanshui Lianmei PU resin products HKD57,170 thousand Remark 2 - - - - 100% HKD 975 thousand HKD42,637 thousand -
Company
Anhui Huiyu Research, manufacturing, CNY 8,058 thousand Remark 3 - - - - 100% ( CNY 847 thousand ) CNY 1,705 thousand -
Company import and export of
plastic materials for sports
fields, and sports facility
construction.
Accumulated outward remittance for Limits on the investment in Mainland China
nvestment amount authorized by the
investments in Mainland China as of according to the Investment Commission,
Investment Commission, MOEA
June 30, 2023 MOEA
USD 23,020 thousand &
USD 324 thousand (Remark 4)
HKD 26,200 thousand
----- End of picture text -----

Remark 1: Invested through subsidiary URASIA.

Remark 2: Invested through subsidiary Cheng Yu Company.

Remark 3: Invested through Shanghai Huiyu Company.

Remark 4: According to the revised "Principles for Reviewing Investment or Technical Cooperation in the Mainland" on August 29, 2008, enterprises that have been issued a certificate of operation headquarters scope by the Industrial Development Bureau of the Ministry of Economic Affairs are not subject to this limit.

Remark 5: As of June 30, 2023, the accumulated investment income repatriated was USD 5,958 thousand for Shanghai Huiyu Company, which exceeded the cumulative investment amount remitted out, and the Investment Commission, MOEA has approved USD 5,958 thousand.

58 -

Headway Advanced Materials Inc. and Subsidiaries

Significant Transactions with Investee Companies in Mainland China, either Directly or Indirectly through a Third Party, and their Prices, Payment Terms, Unrealized Gains or Losses and Other Related Information

From January 1 to June 30, 2023

Table 6

Unit: In Thousands of NTD, Unless Stated Otherwise

Investee company	Transaction type	Purchase, sales	Purchase, sales	Price	Transaction terms	Transaction terms	Notes receivable (payable), accouts receivable(payable)	Notes receivable (payable), accouts receivable(payable)	unrealized gains/losses	Note
		Amount	Percentage		Payment term	Comparison with ordinarytransactions	Amount	Percentage
Shanshui Lianmei Company	Sales	$ 22,926	4%	Remark	Remark	Remark	$ 14,252	5%	$ -	`－`

Remark: The selling prices of products to subsidiaries by the Company are generally equivalent to those charged to third-party customers, with a payment term of 90 days after month-end. However, for certain products that assist subsidiaries in expanding local business, their selling prices are based on agreed prices between the Company and the subsidiaries. As of June 30, 2023, the payment terms for subsidiaries are subject to their respective financial conditions.

59 -

Headway Advanced Materials Inc. and Subsidiaries Information of major shareholders June 30, 2023

Table 7

Name of the major shareholder	Shares
	Number of shares owned	Percentage of ownership
Jinteng Investment Co., Ltd. YoulongInvestment Co.,Ltd.	6,268,937 3,849,642	8.91% 5.47%

Remark 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preference shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Consolidated Company as of the last business day for the current quarter. The share capital in the consolidated financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.
Remark 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, refer to Market Observation Post System.
60 -

AI assistant

Headway — Interim / Quarterly Report 2023

51919_rns_2023-11-28_ebe31676-f677-4f82-9640-cd987cf960bd.pdf

HEADWAY ADVANCED MATERIALS INC. AND SUBSIDIARIES

§ CONTENTS §

Independent Auditors’ Review Report

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Deloitte & Touche

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Balance Sheets

June 30, 2023 & 2022

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Head wa y Ad va nced Mat eria ls I n c. a nd Subs id ia ries

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Cash Flow Statement

For the Six Months Ended June 30, 2023 & 2022

(Reviewed, not Audited)

1. Company History

2. Date and Procedures of the Authorization of Financial Statements

5. Significant Accounting Judgments, Estimations, and the Main Sources of

Assumption Uncertainties

9. Financial Assets Measured at the Amortized Cost

10. Other Financial Assets

11. Notes Receivable and Accounts Receivable

Accounts Receivabl

June 30, 2023

12. Inventories

13. Subsidiaries

(1) Subsidiaries included in the consolidated financial report

(2) Information on subsidiaries with significant non-controlling interests

14. Property, Plant and Equipment

Self -Use

15. Lease Agreement

(1) Right-of-use assets

(2) Lease liability

(3) Key leasing activities and terms:

(4) Other lease information

16. Goodwill

17. Intangible Assets

Computer softeware

18. Other Assets

19. Borrowings

(2) Short-term bills payable

December 31, 2022

20. Other Liabilities

21. Retirement Benefit Plan

(1) Defined contribution plan

(2) Defined benefit plan

22. Equity

(2) Capital surplus

23. Operating revenue

(1) Contract balance

(2) Subdivision of contract revenues by customers

24. Profit (loss) from Continuing Operations

(1) Interest income

(2) Other income

(3) Other gains and losses

(4) Financial costs

(5) Depreciation and Amortization

(6) Employee benefit expense

(7) Compensation to employees and dircetors

Estimation ratio

25. Income Tax from Continuing Operations

(2) Income tax recognized in other comprehensive income.

26. Earnings per Share

Net profit (loss) for the period

28. Capital Risk Management

Sensitivity Analysis

Sensitivity Analysis

June 30, 2023

December 31, 2022

June 30, 2022

30. Related Party Transactions

31. Collateral Assets

34. Notes to Disclosure

35. Segment Information

Headway Interim / Quarterly Report 2023