Stock Code: 3533

Lotes Co., Ltd. and Subsidiaries

Consolidated Financial Statements and Accountant’s Audit Report

2023 & 2022

Notice to Readers

For the convenience of readers, the Consolidated Financial Statements and Accountant’s Audit Report have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

Address: No. 15, Wuxun St., Anle Dist., Keelung City 204 Telephone: (02) 2433 1110

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Item I. Cover Page II. Table of Content III. Declaration IV. Independent Auditor’ s Report V. Consolidated Balance Sheet VI. Consolidated Statement of Comprehensive Income VII. Consolidated Statement of Changes in Equity VIII. Consolidated Statement of Cash Flows IX. Notes to the Consolidated Financial Statements (I) Company History (II) Date and Procedures of Approval of Financial Statement (III) Application of New and Revised Standards and Interpretations (IV) Summary of Major Accounting Policies (V) Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties (VI) Descriptions for Important Accounting Items (VII) Related Party Transactions (VIII) Pledged Assets (IX) Significant Contingent Liabilities and Unrecognized Contractual Commitments (X) Significant Disaster Loss (XI) Significant Post-Period Events (XII) Others (XIII) Disclosing Information (1) Major Transaction Details (2) Information on Reinvestment Business (3) Investment in China (4) Information on Major Shareholders (XIV) Segmental Information	Page
	1 2 3 4 9 10 11 12 14 14 14~16 16~37 37~38 38~82 82~83 84 84 84 84~85 85 86~90 91 92~93 94 94~95

Item
I.
Cover Page
II.
Table of Content
III.
Declaration
IV.
Independent Auditor’ s Report
V.
Consolidated Balance Sheet
VI.
Consolidated Statement of Comprehensive Income
VII.
Consolidated Statement of Changes in Equity
VIII. Consolidated Statement of Cash Flows
IX.
Notes to the Consolidated Financial Statements
(I)
Company History
(II)
Date and Procedures of Approval of Financial Statement
(III) Application of New and Revised Standards and Interpretations
(IV) Summary of Major Accounting Policies
(V)
Primary Sources of Major Accounting Judgment, Estimate and
Assumption Uncertainties
(VI) Descriptions for Important Accounting Items
(VII) Related Party Transactions
(VIII) Pledged Assets
(IX) Significant Contingent Liabilities and Unrecognized Contractual
Commitments
(X)
Significant Disaster Loss
(XI) Significant Post-Period Events
(XII) Others
(XIII) Disclosing Information
(1)
Major Transaction Details
(2)
Information on Reinvestment Business
(3)
Investment in China
(4)
Information on Major Shareholders
(XIV) Segmental Information

Page

1
2
3
4
9
10
11
12
14
14
14~16
16~37
37~38
38~82
82~83
84
84
84
84~85
85
86~90
91
92~93
94
94~95

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Declaration

For the year 2023 (from January 1, 2023 to December 31, 2023), the companies that should be included in the consolidated financial statements of affiliated enterprises in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same as those that should be included in the consolidated financial statements of parent and subsidiary companies in accordance with IFRS 10 approved by the Financial Supervisory Commission, and the information required to be disclosed in the consolidated financial statements of affiliated enterprises has been disclosed in the previous consolidated financial statements of parent and subsidiary companies, therefore, no further consolidated financial statements of affiliated enterprises will be prepared.

Company: Lotes Co., Ltd.

Chairperson: CHU, TE-HSIANG

Date: March 12, 2024

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Independent Auditor’s Report

To the Board of Directors of Lotes Co., Ltd.:

Audit opinion

We have audited the Consolidated Balance Sheet of Lotes Co., Ltd. and subsidiaries (Lotes Group) as of December 31, 2023 and 2022, the Consolidated Statement of Comprehensive Income as of January 1 to December 31, 2023 and 2022 as well as the Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the Notes to Consolidated Financial Statement (including important accounting policies summary).

In our opinions, the compilation of the above consolidated financial statements present fairly, in all material respects, of the financial status of December 31, 2023 and 2022 in Lotes Group and the consolidated financial performance and consolidated cash flow of January 1 to December 31, 2023 and 2022 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect. Basis of the audit opinions

The audit was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under these standards will be further explained in the responsibility paragraph of the accountant’s audit on the consolidated financial statements. The personnel regulated by independence at the accounting firm that our accountants work with have been managed according to the code of professional ethics to maintain independence from Lotes Group as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes Group’s consolidated financial statements of fiscal year 2023 based on the professional judgment of our accountants. The matters have been responded on the whole audited consolidated financial statements and during the process of the expression of the audit opinions. There, our accountants will not express opinions separately towards the matters. Based on the judgment of the accountants, the following key audit matters that should be communicated on the audit report are as follows: I. Recognition of income

Please refer to Note IV (16) to the consolidated financial statements for the accounting policy in terms of income recognition. Please refer to Note VI (16) to the consolidated financial statements for the refund liability. Please refer to Note VI (24) to the consolidated financial statements for details about income.

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Description of the key audit matters:

The operating income is the most critical factor when determining the operational performance of Lotes Group. Users of the statements are cautiously concerned about the performance of the operating income. In response to the market conditions and business needs, discounts were provided for parts of the sales of goods agreed with the customers. Based on the agreements with the customers, the management would estimate the refund liability and include it as a deduction of operating income. Thus, the income recognition evaluation is one of the fundamental evaluation items for accountants in the execution of financial report audit for Lotes Group.

Corresponding audit procedures:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the relevant control procedures and the effectiveness of the design and execution of the control procedure. Regarding the sampling testing for sales close to the balance sheet date, external certification documents were reviewed to assess the adequacy of the income recognition timings. The management’s method to estimate and list refund liabilities were also obtained to assess whether the evaluation is based on the agreed conditions with customers. The adequacy of the refund liability estimate was analyzed with the actual situation afterward.

II. Evaluation of inventory

Please refer to Note IV (8) for the accounting policy of inventory evaluation. Please refer to Note V in the consolidated financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (4) in the consolidated financial statements for the information on the losses from the falling price of inventory. Description of the key audit matters:

Due to the impacts of rapid changes in the market demand and the development of production technology, the existing products are at risk to become outdated inventory or non-compliant with market demand. Parts of the inventory may become obsolete or have the market prices dropped. Thus, the inventory evaluation is one of the fundamental evaluation items for the accountants in the execution of financial report audit for Lotes Group. Corresponding audit procedure:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the basis and methods used by the management to assess the net realizable value of inventory. Review and audit were conducted in terms of the data used by the management as the basis and to estimate the net realizable value, and an evaluation was conducted on the estimated sales price to the latest sales record by sampling. To evaluate the adequacy of the drop in prices, the adequacy of the inventory aging report was checked, and the changes in the inventory aging of each period were analyzed.

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Emphasis of Matter

As disclosed in Note III (1) to the consolidated financial statements, effective January 1, 2023, Lotes Group adopted the amendments to IAS 12, which was recognized and issued by the Financial Supervisory Commission, for the preparation of its financial statements, and restated its consolidated financial statements for the year ended December 31, 2022 retrospectively. We have not modified our audit opinion accordingly.

Other Matters

Lotes Co., Ltd. has prepared its parent company only financial statements for fiscal years 2023 and 2022, and we have issued an unqualified audit report thereon for your information.

Responsibility from management level and governing unit towards the consolidated financial statements

Management level’s responsibility is to prepare the consolidated financial statements present fairly according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect and to maintain necessary internal control related to the preparation of the consolidated financial statements in order to ensure there is no major untrue expression on the financial statements due to fraud or error.

When preparing the consolidated financial statements, the responsibility of management level also includes evaluating Lotes Group’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the management level intends to liquidate Lotes Group or suspend its business operation or there is no alternative practical and feasible solution other than liquidation or business suspension.

The governing unit (including the audit committee) at Lotes Group is responsible for supervising the process of financial reports.

Responsibility of accountants’ audit on the consolidated financial statements

The purpose of the consolidated financial statements audited by our accountants is to obtain reasonable assurance on whether the significant untrue expression exists on the whole consolidated financial statements due to fraud or error as well as issue the audit report. The reasonable assurance is the high certainty; however, it will not be able to guarantee that the significant untrue expression will definitely be able to be detected by generally accepted auditing standards, and the untrue expression might be caused from fraud or error. It is regarded as with significance if the individual amount or the aggregation number of the untrue expression can reasonably predict that it will affect the economic decisions made by the users of the consolidated financial statements.

When we conduct the audit according to generally accepted auditing standards, we use professional judgment and maintain our professional suspicion. We also executed the following tasks:

Identifying and evaluating the risk of major untrue expression on the consolidated financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit

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opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.

Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the effectiveness of the internal control in Lotes Group.
Evaluating the adequacy of the accounting policies used by the management level and the rationality of the accounting evaluation and relevant disclosure concluded.
Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the management level adopts and the existence of major uncertainty on events or situations with major concerns affecting Lotes Group’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of consolidated financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes Group not capable in continuous operation.
Evaluating the overall expression, structure and content of the consolidated financial statements (including relevant notes) as well as whether the consolidated financial statements present fairly, in all material respects, relevant transaction and events.
We obtained sufficient and appropriate audit evidence about the financial information of the constituent entities of the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and execution of the Group's audits and for forming an opinion on the Group's audits.

The communication between us and the governing unit includes the audit scope and time planned and major audit findings (including the significant defects on the internal control identified during the auditing process).

We have also provided information to the governing unit that the personnel of the firm—under which our CPAs are working—who are subject to independence requirements have complied with the statement of independence in the CPA code of professional ethics and communicated to the governing unit all relationships and other matters (including relevant safeguards) that may be considered to affect the independence of CPAs.

We determined the key audit matters that we would like to execute on Lotes Group’s consolidated financial statements for fiscal year 2023 from the communication with the governing unit. We clearly stated the related matters on the audit report unless it is the specific matter that is not allowed to be disclosed to the public according to laws, or under a very rare situation that we decided not to communicate specific matters on the audit report because we can reasonably anticipate the negative influence generated by the communication will be greater than the public interests increased.

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KPMG Taiwan

CPAs:

Competent CHIN-KUAN-CHENG-SHENAuthority of : TZU No. 1000011652 Securities CHIN-KUAN-CHENG-SHENApproval TZU No. 1110333933 Certificate No.[March 12, 2024 ]

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Lotes Co., Ltd. And Subsidiaries

Unit: NT$ 1,000

Consolidated Balance Sheet

December 31, 2023 and 2022

Dec. 31, 2023 Amount % $ 13,132,491 35 60,784 - - - 305,564 1 9,305,409 25 506,207 1 599 - 2,657,313 7 102,555 - 3,832 -	(Restated) Dec. 31, 2022 Amount % 7,090,304 21 79,007 - - - 203,501 1 10,507,021 31 384,111 1 739 - 3,561,132 11 260,014 1 4,650 -	Dec. 31, 2023 Amount % $ 1,580,000 4 30,617 - 5,209 - 1,822,819 5 1,859,015 5 969,358 3 129,085 - 420,182 1 38,059 - - - 6,854,344 18	(Restated) Dec. 31, 2022 Amount % 1,906,775 6 54,427 - 8,504 - 2,351,503 7 1,937,095 6 1,296,939 4 110,281 - 384,044 1 32,168 - 15,861 - 8,097,597 24	(Restated) Jan. 1, 2022 Amount % 1,142,178 4 97,494 - 16,402 - 2,613,359 10 1,998,938 8 670,568 3 220,742 1 195,105 1 34,715 - 14,805 - 7,004,306 27
26,074,754 69	22,090,479 66
26,916 - 79,979 - 81,730 - 9,129,914 24 1,278,713 3 344,997 1 150,113 1 412,071 1 373,212 1	- - 83,520 - - - 8,871,880 27 982,871 3 97,817 - 182,069 1 297,115 1 775,192 2
		934,155 2 - - 43,534 - - - 226,640 1 487,452 1 25,272 -	132,449 - 149,769 1 41,410 - 6,928 - 154,433 1 260,380 1 25,101 -	911,927 4 29,600 - 45,220 - 31,342 - 131,132 - 285,847 1 22,539 -
		1,717,053 4	770,470 3	1,457,607 5
11,877,645 31	11,290,464 34	8,571,397 22	8,868,067 27	8,461,913 32
		1,113,298 3 1,423 - 8,896,393 24 18,552,928 49 (790,983) (2)	1,068,762 3 9,536 - 6,307,022 19 15,765,305 47 (339,053) (1)	1,059,779 4 1,167 - 5,283,698 20 11,202,788 42 (682,384) (2)
$ 37,952,399 100	33,380,943 100	27,773,059 74	22,811,572 68	16,865,048 64
		1,607,943 4	1,701,304 5	1,192,223 4
		29,381,002 78	24,512,876 73	18,057,271 68
		$ 37,952,399 100	33,380,943 100	26,519,184 100

(Please read the Notes to the Consolidated Financial Statements) Manager: HO, TE-YU

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

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Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income

From January 1 to December 31, 2023 and 2022

Unit: NT$ 1,000

2023	% 100 53	(Restated) 2022	% 100 56
Amount $ 24,483,463 13,002,401		Amount 27,099,134 15,161,454
11,481,062	47	11,937,680	44
779,454 1,593,509 2,173,521 (11,371)	3 7 9 -	828,044 1,532,956 2,300,779 7,015	3 6 8 -
4,535,113	19	4,668,794	17
6,945,949	28	7,268,886	27
325,532 412,287 (74,898) (71,118) (17,259)	1 2 - - -	46,801 367,702 560,287 (55,109) -	- 1 2 - -
574,544	3	919,681	3
7,520,493 1,793,447	31 8	8,188,567 1,780,487	30 7
5,727,046	23	6,408,080	23
(2,292) 3,892 (458)	- - -	2,790 (7,981) 558	- - -
2,058	-	(5,749)	-
(320,804) (1,794)	(1) -	352,379 830	1 -
(319,010)	(1)	351,549	1
(316,952)	(1)	345,800	1
$ 5,410,094	22	6,753,880	24
$ 5,593,032 134,014	22 1	6,255,931 152,149	22 1
$ 5,727,046	23	6,408,080	23
$ 5,145,430 264,664	21 1	6,601,494 152,386	23 1
$ 5,410,094	22	6,753,880	24
$	50.65		58.72
$	50.19		57.88

(Please read the Notes to the Consolidated Financial Statements)

Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting Manager: LIU, HSIN-HSIA

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Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Changes in Equity

From January 1 to December 31, 2023 and 2022

					Equity attributable to own	Equity attributable to own	ers of parent						Non-controll ing interests	Total equity 18,054,704 2,567
	Share capital		Capital reserves		Retained	earnings			Other equity			Unrealized gains (losses) on financial assets measured at FVTOCI
								Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on financial assets measured at FVTOCI	Unearned compensation to employees	Total
Share capital for ordinary shares	Certificates of bond-to-stoc k conversion	Total		Legal reserve	Special reserve	Unappropri ated retained earnings	Total
$ 1,059,779 -	1,167 -	1,060,946 -	5,283,698 -	1,571,158 -	594,972 -	9,034,040 2,618	11,200,170 2,618	(669,055) (51)	(13,278) -	- -	(682,333) (51)	16,862,481 2,567	1,192,223 -
1,059,779	1,167	1,060,946	5,283,698	1,571,158	594,972	9,036,658	11,202,788	(669,106)	(13,278)	-	(682,384)	16,865,048	1,192,223	18,057,271
- -	- -	- -	- -	- -	- -	6,255,931 2,232	6,255,931 2,232	- 349,811	- (6,480)	- -	- 343,331	6,255,931 345,563	152,149 237	6,408,080 345,800
-	-	-	-	-	-	6,258,163	6,258,163	349,811	(6,480)	-	343,331	6,601,494	152,386	6,753,880
- - - - - 8,983 - -	- - - - - 8,369 - -	- - - - - 17,352 - -	- - - 127,583 (90) 895,831 - -	347,528 - - - - - - -	- 87,361 - - - - - -	(347,528) (87,361) (1,695,646) - - - - -	- - (1,695,646) - - - - -	- - - - - - - -	- - - - - - - -	- - - - - - - -	- - - - - - - -	- - (1,695,646) 127,583 (90) 913,183 - -	- - - - - - 413,561 (56,866)	- - (1,695,646) 127,583 (90) 913,183 413,561 (56,866)
1,068,762 - -	9,536 - -	1,078,298 - -	6,307,022 - -	1,918,686 - -	682,333 - -	13,164,286 5,593,032 (1,834)	15,765,305 5,593,032 (1,834)	(319,295) - (449,712)	(19,758) - 3,944	- - -	(339,053) - (445,768)	22,811,572 5,593,032 (447,602)	1,701,304 134,014 130,650	24,512,876 5,727,046 (316,952)
-	-	-	-	-	-	5,591,198	5,591,198	(449,712)	3,944	-	(445,768)	5,145,430	264,664	5,410,094
- - - - - - 35,000 9,536 - - -	- - - - - - - (8,113) - - -	- - - - - - 35,000 1,423 - - -	- - - 114,556 24,049 52,309 2,270,973 127,484 - - -	625,649 - - - - - - - - - -	- (343,303) - - - - - - - - -	(625,649) 343,303 (2,803,575) - - - - - - - -	- - (2,803,575) - - - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	- - - - - - - - (6,162) - -	- - - - - - - - (6,162) - -	- - (2,803,575) 114,556 24,049 52,309 2,305,973 128,907 (6,162) - -	- - - - - - - - (6,258) (207,388) (144,379)	- - (2,803,575) 114,556 24,049 52,309 2,305,973 128,907 (12,420) (207,388) (144,379)
$ 1,113,298	1,423	1,114,721	8,896,393	2,544,335	339,030	15,669,563	18,552,928	(769,007)	(15,814)	(6,162)	(790,983)	27,773,059	1,607,943	29,381,002

(Please read the Notes to the Consolidated Financial Statements) Manager: HO, TE-YU

Accounting Manager: LIU, HSIN-HSIA

Chairperson: CHU, TE-HSIANG

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Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows

From January 1 to December 31, 2023 and 2022

Cash flows from (used in) operating activities: Net profit before tax Adjustments: Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Expected credit loss (gain) Net loss (gain) on financial assets or liabilities at FVTPL Interest expense Interest income Dividend income Compensation expense for share-based payment Share in the gain or loss of subsidiaries, associate and joint ventures accounted for using the equity method Loss (gain) on disposal of property, plant and equipment Impairment loss on non-financial instruments Inventory valuation and disposal loss Profit from the repurchase of corporate bonds Other adjustments Total adjustments to reconcile profit (loss): Changes in operating assets and liabilities: Changes in operating assets: Increase in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventory Decrease (increase) in advance payment Decrease in other current assets Total changes in operating assets Changes in operating liabilities: Decrease in contract liabilities Decrease in notes payable Decrease in accounts payable Decrease in other payables Decrease in provisions Increase (decrease) in other current liabilities Increase in refund liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities	Unit: NT$ 1,000 2023 (Restated) 2022 $ 7,520,493 8,188,567 2,333,633 2,212,956 57,955 55,711 (11,371) 7,015 (10,726) 14,301 71,118 55,109 (325,532) (46,801) (4,003) (5,535) 58,061 10,825 17,259 - 35,805 28,364 37,320 - 101,013 97,602 - (35) (607) 23,779	Unit: NT$ 1,000 2023 (Restated) 2022 $ 7,520,493 8,188,567 2,333,633 2,212,956 57,955 55,711 (11,371) 7,015 (10,726) 14,301 71,118 55,109 (325,532) (46,801) (4,003) (5,535) 58,061 10,825 17,259 - 35,805 28,364 37,320 - 101,013 97,602 - (35) (607) 23,779
	2,359,925	2,453,291
	(88,404) 1,348,895 (58,914) 876,958 155,894 1,467	(142,209) (1,777,302) 85,564 432,653 (116,723) 4,368
	2,235,896	(1,513,649)
	(27,506) (3,229) (942,001) (87,353) (168) 5,301 36,138	(43,067) (7,898) (261,856) (62,876) (1,020) (2,547) 188,939
	(1,018,818)	(190,325)
	1,217,078	(1,703,974)
	3,577,003	749,317
	11,097,496 275,214 4,003 (58,939) (2,184,951)	8,937,884 36,337 5,535 (45,171) (1,201,299)
	9,132,823	7,733,286

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Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows (Continued)

From January 1 to December 31, 2023 and 2022

Unit: NT$ 1,000

Cash flows from (used in) investing activities: Disposal of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTPL Disposal of financial assets measured at FVTPL Acquisition of Investments accounted for using the equity method Cash outflow from the losing the control of subsidiaries Acquisition of property, plant and equipment Disposal of property, plant and equipment Acquisition of intangible assets Net cash inflows from business combination Acquisition of investment property Decrease in other non-current assets Net cash flows from (used in) investing activities: Cash flows from (used in) financing activities: Increase (decrease) in short-term loans Borrowings of long-term loans Repayments of long-term loans Payments of lease liabilities Increase in other non-current liabilities Cash dividends paid Cash dividends paid to non-controlling interests Cash capital increase Issuance of restricted stock awards Repurchase of restricted stock awards Subsidiary issuing corporate bonds Issuance of corporate bonds Repurchase of corporate bonds Changes in non-controlling interests Changes in subsidiaries, associates and joint ventures accounted for using equity method Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2023 $ 7,433 - (25,000) 27,794 (94,000) (50,631) (2,658,787) 72,444 (37,453) (54,076) (256,488) 299,198	2022 1,422 (61,465) (8,000) 69,302 - - (3,677,619) 2,392 (30,457) - - 18,314
	(2,769,566)	(3,686,111)
	(317,432) - (165,630) (249,887) 171 (2,803,575) (144,379) 2,305,973 16,620 255 - 1,079,877 - (16,092) (1,508)	714,342 130,000 (8,775) (237,460) 2,562 (1,695,646) (56,866) - - - 346,268 - (2,800) 246,344 67,445
	(295,607)	(494,586)
	(25,463) 6,042,187 7,090,304	234,653 3,787,242 3,303,062
	$ 13,132,491	7,090,304

(Please read the Notes to the Consolidated Financial Statements) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting Manager: LIU, HSIN-HSIA

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Lotes Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements

2023 & 2022

(All amounts are in NT$ thousands unless otherwise stated)

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the “Company”) was incorporated on August 23, 1986 in accordance with the provisions of the Company Act and was approved for registration with its registered office at No.15, Wuxun Street, Anle District, Keelung City. The Company and Subsidiaries (hereinafter referred to as the “Consolidated Company”) are principally engaged in the sale and purchase of various hardware parts and components, the manufacturing and processing of various terminals and their connectors, the import and export business in connection with the preceding item and the agency of the preceding item in connection with the tender quotation and distribution of products of domestic and foreign manufacturers. Please refer to Note XIV for further details.

II. Date and Procedures of Approval of Financial Statement

The Consolidated Financial Statement was approved and released by the Board of Directors on March 12, 2024.

III. Application of New and Revised Standards and Interpretations

(1) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission

Effective January 1, 2023, the Consolidated Company adopted the following newly revised IFRSs, the impact of which is described below:

Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

The amendments restrict the scope of the recognition exemption. When the original recognition of a transaction results in an equal amount of taxable and deductible temporary differences, the recognition exemption no longer applies, and an equal amount of deferred income tax assets and deferred income tax liabilities should be recognized. This accounting change resulted in an increase of NT$99,793 thousand, an increase of NT$97,226 thousand, an increase of NT$2,618 thousand and a decrease of NT$51 thousand in deferred income tax assets, deferred income tax liabilities, retained earnings and other equity, respectively, as of January 1, 2022, and an increase of NT$85,303 thousand, an increase of NT$81,040 thousand, an increase of NT$4,286 thousand, and a decrease of NT$23 thousand in deferred income tax assets, deferred income tax liabilities,

~ 14~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

retained earnings and other equity, respectively, as of December 31, 2022. The income tax expense decreased by NT$1,668 thousand, while basic earnings per share and diluted earnings per share increased by NT$0.02 and NT$0.01, respectively, and had no impact on net cash flows for the year ended December 31, 2022.

If the Consolidated Company had followed the previous accounting policy, the deferred income tax assets, deferred income tax liabilities, retained earnings and other equity as of December 31, 2023 would have been decreased by NT$148,902 thousand, decreased by NT$142,025 thousand, decreased by NT$7,023 thousand and increased by NT$146 thousand, respectively. For the year ended December 31, 2023, the income tax expense would have been increased by NT$2,737 thousand, basic earnings per share and diluted earnings per share would have been decreased by $0.02 and $0.01, respectively, and there would have been no effect on net cash flows.

Others

The following revised standards are also effective January 1, 2023, but did not have a significant impact on the consolidated financial statements:

Amendments to IAS 1 – “Disclosure of Accounting Policies”
Amendments to IAS 8 – “Definition of Accounting Estimates”

In addition, effective May 23, 2023, the Consolidated Company adopted the amendments to IAS 12, "International Tax Reform - Pillar Two Model Rules", which provide a temporary mandatory exemption and applies retrospectively to the accounting for deferred income taxes related to supplemental taxes and newly disclose Pillar II income tax risk information from the annual reporting period which began from January 1, 2023. However, as of December 31, 2022, no country where the Consolidated Company operates has enacted or substantively enacted legislation related to supplemental tax, and no related deferred income tax has been recognized; therefore, the retroactive application of the amendment had no impact on the consolidated financial statements. The Consolidated Company is closely monitoring the progress of the legislation on the introduction of the global minimum tax in each of the jurisdictions in which the Consolidated Company operates and will disclose the mandatory exemption and the new disclosure requirements in the 2023 consolidated financial statements. Please refer to Note VI (20) Income Tax for more details.

(2) Effects of new and revised standards and interpretation has been approved by FSC but not yet being adopted

The Consolidated Company assessed that the application of the following newly revised IFRSs, effective January 1, 2024, would not have a material impact on the consolidated financial statements.

~ 15~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

‧Amendments to IAS 1, “Classification of Liabilities as Current or Non-current”

‧Amendments to IAS 1, “Non-current Liabilities with Covenants”

‧Amendments to IAS 7 and IFRS 7, “Supplier Finance Arrangements”

‧Amendments to IFRS 16, “Lease Liability in a Sale and Leaseback”

(3) New and revised standards and interpretations not yet recognized by the FSC

The Consolidated Company does not expect the following newly issued and amended standards, which have not yet been endorsed, to have a material impact on the consolidated financial statements.

‧Amendments to IFRS 10 and IAS 28, “Disposal of or Contribution to Assets between an Investor and its Affiliate or Joint Venture”.

‧Amendments to IFRS 17, “Insurance Contracts” and IFRS 17

‧Amendments to IFRS 17, "First-time Application of IFRS 17 and IFRS 9 Comparative Information"

‧Amendments to IAS 21, “Lack of Exchangeability”

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Financial Statement are summarized as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Consolidated Financial Statement.

(1) Compliance statement

The Consolidated Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission.

(2) Compiling basis
Measurement foundation

Except the major items in the following balance sheet, the Consolidated Financial Statement was compiled based on the historical costs:

(1) Financial assets at fair value through profit or loss measured with fair value.
(2) Financial assets measured at fair value through other comprehensive income.
(3) Liabilities for cash-settled share-based benefit agreements that are measured at fair value.
(4) Net defined benefit liability (or asset) is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (17).

~ 16~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

2. Functional currency and presentation currency

Each party of the Consolidated Company takes the currency of major economic environment where each operation is located as its functional currency. The Consolidated Financial Statement is presented in the functional currency of the Company, NTD. All of the financial information expressed herein in NTD is of one thousand per unit.

(3) Consolidation basis

The main entity for the preparation of consolidated financial statements consists of the Company and the entity controlled by the Company (i.e., the subsidiaries).

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is obtained until the date that control is lost. Total consolidated income of subsidiaries is attributed to the Company's owners and non-controlling interests, respectively, even if the non-controlling interests become a deficit balance as a result.

Inter-company transactions, balances and any unrealized gains and losses are eliminated in the preparation of the consolidated financial statements. The financial statements of subsidiaries have been appropriately adjusted to conform to the accounting policies used by the Consolidated Company.

Changes in ownership interests in subsidiaries that do not result in a loss of control of subsidiaries are accounted for as equity transactions with owners.

1. Subsidiaries included in the consolidated financial statements

The subsidiaries included in the consolidated financial statements are:

Investing
company
Subsidiary
**Location ** Shareholding %
Dec. 31,
2023
Dec. 31,
2022
Note

The Company Lotes Investments Limited
Samoa
〞
Good Hope Investments
Limited
〞
〞
Guansi Development Co., Ltd.
〞
〞
Zhaxi Investment Co., Ltd.
Anguilla
〞
Zhaxi Investment Co., Ltd.
Taiwan
〞
Lotes USA, Inc
America
〞
LOTES EU GmbH
Germany
〞
Lerain Technology Co., Ltd.
Taiwan
〞
Lomites Co., Ltd.
〞
〞
LOTES VIET NAM
COMPANY LIMITED
Vietnam
Lotes
Investments
Limited
Loteson International
Investments Limited
Hong Kong 100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
(Note 3)
15.74% (Note 1)
99.04%
99.92% (Note 2)
100.00%
100.00%
100.00%
100.00%

Investing company Subsidiary Location	Shareholding % Dec. 31, 2023 Dec. 31, 2022 Note
The Company Lotes Investments Limited Samoa `〞` Good Hope Investments Limited `〞` `〞` Guansi Development Co., Ltd. `〞` `〞` Zhaxi Investment Co., Ltd. Anguilla `〞` Zhaxi Investment Co., Ltd. Taiwan `〞` Lotes USA, Inc America `〞` LOTES EU GmbH Germany `〞` Lerain Technology Co., Ltd. Taiwan `〞` Lomites Co., Ltd. `〞` `〞` LOTES VIET NAM COMPANY LIMITED Vietnam Lotes Investments Limited Loteson International Investments Limited Hong Kong	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% (Note 3) 15.74% (Note 1) 99.04% 99.92% (Note 2) 100.00% 100.00% 100.00% 100.00%

~ 17~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Loteson	Lotes Guangzhou Co., Ltd.	China	100.00%	100.00%	100.00%
International
Investments
Limited
Lotes	Lotes Hengnan Co., Ltd.	`〞`	100.00%	100.00%
Guangzhou Co.,
Ltd.
`〞`	Shenzhen DeYi Automation	`〞`	100.00%	100.00%
	Equipment Co., Ltd.
`〞`	Lotes Zhongshan Co., Ltd.	`〞`	50.00%	50.00%
`〞`	Zhongshan Dezhi Metal Surface	`〞`	100.00%	100.00%
	Treatment Co., Ltd.
`〞`	Hengnan Deyi Property	`〞`	100.00%	100.00%
	Development Co., Ltd.
`〞`	Zhongshan Jinmeida Metal	`〞`	- %	-	% (Note 1)
	Surface Treatment Co., Ltd.
`〞`	Guangzhou Leside Technology	`〞`	100.00%	100.00%
	Co., Ltd.
`〞`	Zhongshan Huixing Electronics	`〞`	30.06%	-	% (Note 1)
	Co., Ltd.
`〞`	Guangzhou Dezhi Technology	`〞`	100.00%	-	%
	Co., Ltd.
Lotes	Zhongshan DeZhi Real Estate	`〞`	100.00%	100.00%
Zhongshan Co.,	Development Co., Ltd.
Ltd.
Guangzhou	Chongqing Fuxinrui Electronic	`〞`	51.00%	51.00%
Leside	Technology Co., Ltd.
Technology
Co., Ltd.
Zhongshan	Ningbo Huili Electronic	`〞`	51.00%	-	%
Huixing	Technology Co., Ltd.
Electronics Co.,
Ltd.
Good Hope	Xincheng Development Co.,	Samoa	100.00%	100.00%
Investments	Ltd.
Limited
`〞`	REKA Technology Co., Ltd.	Hong Kong	100.00%	100.00%
Guansi	Jae You Co., Ltd.	`〞`	100.00%	100.00%
Development
Co., Ltd.
Jae You Co.,	Lotes Suzhou Co., Ltd.	China	100.00%	100.00%
Ltd.
Lotes Suzhou	Lotes Zhongshan Co., Ltd.	`〞`	50.00%	50.00%
Co., Ltd.
Zhaxi	Wangden Investments Limited	Hong Kong	100.00%	100.00%
Investment Co.,
Ltd.
Wangden	Zongka Technology (Shenzhen)	China	100.00%	100.00%
Investments	Co., Ltd.
Limited
Zhaxi	Ememe Robot Co., Ltd.	Taiwan	94.37%	94.37%
Investment Co.,
Ltd.

~ 18~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

`〞`	Compertum Microsystems Inc.	`〞`	31.78%	31.78% (Note 1)
Zhaxi	Good News Medical Co., Ltd.	Taiwan	25.44%	25.44% (Note 1)
Investment
Co., Ltd.
`〞`	Lintes Technology Co., Ltd.	`〞`	49.61%	50.24% (Note 1)
Good News	FELICITY NEWS LIMITED	British Virgin Islands	100.00%	- %
Medical Co.,
Ltd.
FELICITY	Guangzhou Jiashimei Trading	China	100.00%	- %
NEWS	Co., Ltd.
LIMITED
Lintes	Genie Precision Machine Co.,	Taiwan	60.00%	60.00%
Technology	Ltd.
Co., Ltd.
`〞`	Compertum Microsystems Inc.	`〞`	10.59%	10.59% (Note 1)
`〞`	Lerain Technology Co., Ltd.	`〞`	(Note 3)	1.82% (Note 1)
`〞`	Jilong Co., Ltd.	Samoa	100.00%	100.00%
`〞`	LINTES TECHNOLOGY	Thailand	100.00%	100.00%
	(THAILAND) CO., LTD.
Jilong Co.,	Rihui Co., Ltd.	Samoa	100.00%	100.00%
Ltd.
Rihui Co.,	Lintes Technology (Suzhou)	Taiwan	100.00%	100.00%
Ltd.	Co., Ltd.

Note 1: Although the Consolidated Company does not hold more than half of the voting shares of this company, it is included as a subsidiary in the consolidated financial statements because the Consolidated Company has control over its major operating activities and other decisions.

Note 2: MicroIdea Co., Ltd. changed its name into Lomites Co., Ltd. on May 18, 2022.

Note 3: The Consolidated Company has lost control over Lerain Technology Co., Ltd. since June 1, 2023 based on the judgment that the Consolidated Company does not have the absolute power and the ability to dominate the relevant activities and changes in the remuneration of the operation of Lerain Technology Co., Ltd. Therefore, it has not been listed as a subsidiary in the Consolidated Financial Statements since June 2023.

Subsidiaries not included in the consolidated financial statements: None.

(4) Foreign currency

1. Foreign currency trading

Foreign currency is converted into functional currency according to exchange rate on the date of transaction. At the end of each subsequent reporting period (the “Reporting Date”), foreign currency monetary items are translated into functional currency at the exchange rate prevailing on that date. Non-monetary items measured at fair value in foreign currencies are translated into functional currencies using the exchange rates prevailing at the date of fair value measurement, while non-monetary items measured at historical cost in foreign currencies are translated at the exchange rates prevailing at the dates of the transactions.

~ 19~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The foreign currency exchange difference resulting from the conversion is recognized to be other comprehensive Income excepting for the following situations, otherwise, recognized to be gains and losses:

(1) Equity instruments designated as measured at fair value through other comprehensive income.

(2) Financial liabilities designated as a net investment hedge for a foreign operating entity are within the effective range of the hedge; or

(3) Eligible cash flow hedges are within the effective range of the hedge.

Foreign operating organizations

The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be NTD according to exchange rate on the report day; gains and losses are converted into NTD according to exchange rate in the current period, and the resultant conversion difference is recognized to be other comprehensive Income.

In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. Upon partial disposal of a subsidiary with foreign operations, the related accumulated exchange differences are reattributed to non-controlling interest on a pro rata basis. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion.

As to the receivable and payable monetary items of foreign operating organizations, if without the repayment plan or the possibility of repayment in foreseeable future, the resultant gains and losses from foreign currency conversion shall be regarded as a part of net investments to the foreign operating organizations as recognized as other comprehensive income.

(5) Standards for classifying current and non-current assets and liabilities

Assets meeting one of the following conditions are recognized to be current assets, and

other assets not belonging to current assets are recognized to be non-current assets:

Those that are expected to be realized during the normal operating period or intended to be sold or consumed.
Those held mainly for the purpose of transaction.
Those expected to be realized within 12 months after the reporting period.
The asset is cash or cash equivalents, unless the asset is otherwise restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

~ 20~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The liabilities meeting any one of the following conditions are current liabilities, and other liabilities not belonging to current liabilities are recognized to be non-current liabilities:

Those expected to be paid off during the normal operating period.
Those held mainly for the purpose of transaction.
Those expected to be paid off within 12 months after the reporting period.
Liabilities that do not have an unconditional right to extend the maturity period to at least 12 months after the reporting period. The terms of the liability may, at the option of the counterparty, not affect its classification if the issuance of equity instruments results in its settlement.
(6) Cash and cash equivalents

Cash includes cash on hand and demand deposits. Cash equivalents are the investments which are allowed to be converted into normed cash with few value change risks and short-term high flowability. Certificate of deposit which satisfy the foregoing definition and with the holding purpose of meeting the short-term cash pledges rather than investment or others shall be recognized as cash equivalents.

(7) Financial instrument

Accounts receivable and the original debt securities issued are recognized when they are incurred. All other financial assets and financial liabilities were originally recognized when the Consolidated Company became a party to the terms of the financial instrument agreement. Financial assets that are not measured at fair value through profit or loss (except accounts receivable, which do not contain a significant financial component) or financial liabilities are measured at fair value plus the transaction cost directly attributable to the acquisition or issue. Accounts receivable, which do not contain significant financial components, are originally measured at transaction prices.

1. Financial assets

The purchase or sale of financial assets by a conventional trader, the Consolidated Company shall treat all purchases and sales of financial assets classified in the same manner in accordance with the transaction date or the settlement date.

At the time of the original recognition, financial assets were classified as: financial assets measured at amortized cost, debt instrument investments measured at fair value through other comprehensive income, equity instrument investments measured at fair value through other comprehensive income, or financial assets measured at fair value through gains and losses.

The Consolidated Company will only change its business model for managing financial assets from the first day of the next reporting period to classify all affected financial assets.

~ 21~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(1) Financial assets measured at amortized cost

Financial assets are measured at post-amortized cost when they simultaneously meet the following conditions and are not specified to be measured at fair value through profit or loss:

The financial asset is held under a business model for the purpose of collecting contractual cash flow.
The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The cumulative amortization of such assets is subsequently calculated by the effective interest method plus or minus the original amount recognized, and the amortized cost of any loss allowance is adjusted. Interest income, foreign exchange gains and losses and impairment losses are recognized as gains and losses. When derecognized, the profit or loss shall be included in the profit or loss.

(2)Financial assets measured at FVTOCI

When the debt instrument investment simultaneously meets the following conditions and is not specified to be measured at fair value through profit and loss, it is measured at fair value through other consolidated profit and loss:

The financial asset is held under a business model for the purpose of collecting contractual cash flow and selling.
The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The Consolidated Company may, at the time of its original recognition, irrevocably choose to report the subsequent changes in the fair value of its non-tradable equity instrument investments to other consolidated profits and losses. The foregoing selection is made on an item-by-item tool basis.

Debt instrument investors are measured by fair value afterwards. Interest income, foreign exchange gains and losses and impairment losses calculated by the effective interest method are recognized as gains and losses, while the remaining net gains or losses are recognized as other comprehensive income. When discounting, the accumulated amount of other comprehensive income shall be reclassified into comprehensive income.

Equity instrument investors are measured by fair value afterwards. Dividend income (unless it clearly represents the recovery of a portion of the investment cost) is recognized as a profit or loss. The remaining net benefits or losses are recognized as other comprehensive income and are not reclassified into gains and losses.

~ 22~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Dividend income from equity investments is recognized on the date (usually ex-dividend date) when the Consolidated Company becomes entitled to receive dividends.

(3) Financial assets measured at FVTPL

Financial assets not measured at amortized cost or through other comprehensive income at fair value (e.g., financial assets held for trading and managed on a fair value basis for performance evaluation) are measured at fair value through profit or loss, including derivative financial assets. The Consolidated Company may, at the time of its original recognition, irrevocably designate financial assets that meet the criteria of measuring at fair value according to the amortized cost or through other comprehensive income as financial assets measured at fair value through gains and losses in order to eliminate or substantially reduce improper accounting matching.

Such assets are subsequently measured at fair value and their net gains or losses (including any dividends and interest income) are recognized as gains or losses.

(4) Business model evaluation

The purpose of the Consolidated Company is to assess the business model of holding financial assets at a portfolio level, which best reflects the way of operation and management and the way of providing information to management. The following information is considered:

The portfolio policies and objectives described and the operation of such policies. Including whether the management’s strategy is to focus on earning contractual cash flow, maintaining a certain portfolio of interest rates, matching the duration of financial assets with the duration of the relevant liabilities or anticipated cash outflows, or achieving cash flow through the sale of financial assets.
Performance of the business model and how the financial assets held under the business model are evaluated and reported to the principal managers of the business.
Risks that affect the performance of the business model (and the financial assets held under the business model) and the manner in which such risks are managed.
The frequency, amount and timeliness of previous sales of financial assets, the reasons for such sales and the expectation of future sales.
The transfer of a financial asset to a third party for the above business purposes that
does not meet the exclusion criteria is not a sale as described above, consistent with the purpose for which the merged Consolidated Company continues to recognize the asset.

~ 23~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(5) Evaluate whether the cash flow of the contract is fully the interest on the payment of the principal and the amount of outstanding principal

For evaluation purposes, the principal is the fair value of the financial asset at the time of its original recognition, and the interest is made up of the following considerations: the time value of money, the credit risk associated with the amount of outstanding principal in circulation during a particular period, and other basic lending risks and costs and profit margins.

To evaluate whether the contract cash flow is fully interest on the principal and the outstanding principal amount, the Consolidated Company considers the terms of the financial instrument contract, including whether the financial asset contains a contract term that can change the point or amount of the cash flow of the contract, causing it to fail to meet this condition. In the evaluation, the Consolidated Company considers:

Any contingencies that change the timeliness or amount of the cash flow of the contract;
The terms of the coupon rate may be adjusted, including the nature of the variable rate;
The nature of prepayment and extension; and
Claims of the Consolidated Company are limited to cash flow terms derived from specific assets (e.g. non-recourse nature).
(6) Impairment of financial assets

For the financial assets measured at the amortized cost after (including cash and about when cash, notes receivable, accounts receivable, other receivables, refundable deposit, and other financial assets, etc.), through the other comprehensive income measured at fair value, the debt instruments of investment assets and contract of expected loss, the Consolidated Company recognizes the allowance for credit losses.

The following financial assets are measured against losses according to the expected credit loss amount of 12 months, and the rest are measured according to the expected credit loss amount of the existing period:

Determine that the credit risk of the debt securities at the reporting date is low; and
The credit risk of other debt securities and bank deposits (i.e. the risk of default during the expected life of financial instruments) has not increased significantly since the original recognition.

The loss allowance for accounts receivable and contract assets is measured in terms of the expected credit loss during the period of existence.

~ 24~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

In determining whether credit risk has increased significantly since the initial recognition, the Consolidated Company considers reasonable and verifiable information (available at no excessive cost or investment), including qualitative and quantitative information, as well as analysis based on the Consolidated Company’s historical experiences, credit assessment and forward-looking information.

The Consolidated Company shall be deemed to be in default of the financial asset if the debtor of the contract payment is unlikely to meet his credit obligations to make the full payment to the Consolidated Company.

Expected credit loss during the life of a financial instrument refers to the expected credit loss arising from all possible defaults during the life of the financial instrument.

Twelve-month expected credit loss refers to the expected credit loss arising from the possible default of the financial instrument within twelve months after the date of the report (or a shorter period, if the expected duration of the financial instrument is shorter than twelve months).

The longest contract period during which the expected credit loss is measured is the longest contract period during which the Consolidated Company is exposed to credit risk.

The expected credit loss is the probabilistic weighted estimate of the credit loss during the expected life of the financial instrument. Credit losses are measured in terms of the present value of all cash shortfalls, the difference between the cash flows that the Consolidated Company can collect under the contract and the cash flows that the Consolidated Company expects to collect. The expected credit loss is discounted at the effective interest rate of the financial asset.

On each reporting date, the Consolidated Company evaluates whether there is a credit impairment in the debt securities on which financial assets are measured at after-amortized cost and on which fair value is measured through other comprehensive income. When one or more events have occurred that adversely affect the estimated future cash flow of a financial asset, the financial asset has suffered a credit impairment. Evidence of credit impairment of financial assets includes observable information relating to:

Major financial difficulties of the borrower or issuer;
Default, such as delay or delay beyond a specified period;
For economic or contractual reasons related to the borrower’s financial difficulties, the merged Consolidated Company gives the borrower concessions that the borrower would not have considered;
The borrower is likely to file for bankruptcy or other financial restructuring; or
The active market for the financial asset disappears due to financial difficulties.

~ 25~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The loss allowance for a financial asset measured at its amortized cost is deducted from the carrying amount of the asset. The allowance for losses on debt instrument investments is measured at fair value through other comprehensive income. It is adjusted and recognized as other comprehensive income (without reducing the carrying amount of the assets).

When the Consolidated Company cannot reasonably expect to recover the financial assets as a whole or in part, it will directly reduce the total book amount of its financial assets. For the Company, the Consolidated Company shall analyze the date and amount of the write-off on the basis of whether it is reasonable to expect recovery. The Consolidated Company does not expect a significant reversal of the write-off. However, financial assets that have been written off may still be enforced to comply with the procedures of the Consolidated Company for recovering overdue amounts.

(7) Financial assets derecognition

When the Consolidated Company terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets shall be derecognized.

Transactions in which the Consolidated Company enters into transfers of financial assets that retain all or substantially all of the risks and rewards of ownership of the transferred assets continue to be recognized on the balance sheet.

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

Debt and equity instruments issued by the Consolidated Company are classified as financial liabilities or equity based on the substance of the contractual agreements and the definitions of financial liabilities and equity instruments.

(2) Equity transactions

An equity instrument is any contract that evidences a residual interest in the assets of the Consolidated Company after deducting all of its liabilities. Equity instruments issued by the Consolidated Company are recognized at the amount of the consideration received less direct issue costs.

(3) Compound financial instruments

The number of shares issued does not vary with the change in fair value of the compound financial instruments, which are convertible bonds (denominated in New Taiwan dollars) that the holders have the option to convert to equity.

~ 26~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The original recognition amount of the liability component of a compound financial instrument is measured at the fair value of a similar liability excluding the equity conversion rights. The original recognition amount of the equity component is measured as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to the carrying amounts of the original liability and equity.

After initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured after initial recognition.

Interest related to financial liabilities is recognized as profit or loss. Financial liabilities are reclassified to equity upon conversion, and no gain or loss is recognized upon conversion.

(4) Financial liabilities

Financial liabilities are classified as amortized costs or measured at fair value through profit or loss. Financial liabilities which are held for trading, derivatives or specified at the time of their original recognition are classified as being measured at fair value through profit or loss. Financial liabilities, measured at fair value through profit and loss, are measured at fair value, and the associated net benefits and losses, including any interest expense, are recognized as profit and loss.

The effective subsequent interest method for other financial liabilities is measured at the amortized cost. Interest expenses and exchange gains and losses are recognized as gains and losses. Any benefit or loss at the time of discounting is also considered as profit or loss.

(5) Derecognition of financial liabilities

The Consolidated Company derecognizes financial liabilities when contractual obligations have been fulfilled, cancelled or matured. When the terms of a financial liability are modified and the cash flows of the modified liability differ materially, the original financial liability is derecognized and a new financial liability is recognized at fair value based on the modified terms.

When derecognizing financial liabilities, the difference between carrying amount and the sum of paid or payable considerations (including any transferred non-cash capital or assumed liabilities) shall be recognized as gains and losses.

~ 27~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(6) Offset between financial assets and liabilities

Financial assets and financial liabilities can be offset with each other and represented on the balance sheet with net value only when the Consolidated Company has legal rights to offset and has the intention to deliver with net value as well as realize capital and liquidate the liabilities.

3. Derivative financial instruments

The Consolidated Company holds derivative financial instruments to avoid foreign currency and interest rate risks. Embedded derivatives are separated from the main contract when specific conditions are met and the main contract is not a financial asset.

Derivative instruments are initially recognized at fair value and subsequently measured at fair value, and the resulting gain or loss is recognized directly in profit or loss.

(8) Inventory

Inventory shall be measured with the lower of the costs and net realizable value. The costs include the acquisition, production and processing costs enabling them to arrive at the available places and status and other costs, which are calculated according to the standard cost method, and priced at cost transferring according to weighted mean method. The costs of the inventory of finished products and products in process include the manufacturing costs amortized based on normal production capacity according to proper percentage.

Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling.

(9) Investments in Associates

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

The Consolidated Company accounts for its interests in associates using the equity method. Under the equity method, the investment is initially recognized at cost, including the cost of the transaction. The carrying amount of the investment in associates includes goodwill identified at the time of the initial investment, less any accumulated impairment losses.

The consolidated financial reports include the Consolidated Company's share of the profits or losses and other comprehensive income of the associates, from the date of significant influence until the date when significant influence is lost, after adjustments consistent with the Consolidated Company’s accounting policies. When an associate undergoes an equity transaction affecting comprehensive income and other comprehensive income that does not affect the Consolidated Company’s ownership percentage, the Consolidated Company recognizes any changes in equity proportionately as capital reserves.

~ 28~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Unrealized gains and losses arising from transactions between the Consolidated Company and its associates are recognized in the financial statements only to the extent unrelated to the investor's interest in the associates. When the Consolidated Company’s share of losses in an associate equals or exceeds its interest in the associate, recognition of further losses is stopped unless there is a legal or constructive obligation or payments have been made on behalf of the investee.

(10) Investment property

Investment real estate means real property held for the purpose of earning rent or asset appreciation, or both, rather than for the purpose of production, provision of goods or services, or for administrative purposes. Investment real estate is originally measured by cost, and later measured by cost minus accumulated depreciation and accumulated impairment. The depreciation method, durable life and residual value shall be treated in accordance with the provisions of real estate, plant and equipment.

The disposal interest or loss of the investment real estate (calculated at the difference between the net disposal price and the account amount of the project) shall be recognized as the profit or loss.

The rental income of investment real estate is recognized as other income in the straight-line method during the lease term. The incentive to lease is recognized as part of the rental income during the lease term.

(11) Property, plant and equipment
Recognition and measurement

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

Significant components of property, plant and equipment are treated as separate items (major components) when they have different life cycles.

Gain or loss on disposal of property, plant and equipment is recognized in profit or loss.

2. Subsequent costs

Subsequent expenses are capitalized only when it is probable that future economic benefits will flow into the Consolidated Company.

Depreciation

Depreciation is calculated based on the cost of the asset less its residual value and is recognized in profit or loss using the straight-line method over the estimated useful life of each component.

The land is not subject to depreciation.

~ 29~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

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

(1) Buildings 20-40 years (2) Machinery 2-10 years (3) Other equipment 2-10 years

The Consolidated Company reviews the method of depreciation, durability and residual value at each reporting date and makes appropriate adjustment as necessary.

Reclassification to investment real estate

When real property for own use is reclassified to investment property, the real property is reclassified to investment property based on its carrying amount at the time of change of use.

(12) Leasing

The Consolidated Company shall assess whether the contract is a lease or includes a lease on the date of formation of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract shall be a lease or includes a lease.

The lessee

The Consolidated Company recognize the right-of-use assets and lease liabilities on the beginning date of the lease. Right-of-use assets are originally measured in terms of cost, which includes the original measured amount of lease liabilities, adjusts the lease beginning date or before payment of any rent payment, and the initial direct costs, and applied to removing the asset and restoring its location or the estimated cost of the underlying assets. It minuses the charge of any lease incentives at the same time.

Depreciation of right-of-use assets following the commencement of the lease shall be carried out by the straight-line method at the end of the useful life of right-of-use assets or earlier at the end of the lease term. In addition, the Consolidated Company will periodically evaluate whether there is any loss of right-of-use assets and deal with any loss that has occurred, and adjust the right-of-use assets in the case of lease liabilities.

Lease liabilities are defined as the present value of lease benefits not yet paid at lease commencement date. If the implied lease rate is easy to determine, the discount rate will be that rate, and if not, the incremental borrowing rate of the Consolidated Company will be used. Generally speaking, the Consolidated Company adopts its incremental borrowing rate as the discount rate.

Lease benefits measured in lease liabilities include:

(1) fixed payments, including substantive fixed payments;
(2) depending on the variation of a certain index or rate of rent payment, the index or rate on the commencement date of the lease shall be used as the original measurement;

~ 30~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(3) the guaranteed amount of salvage value expected to be paid; and
(4) the price at which the option to exercise the option to purchase or terminate the

lease will be reasonably determined or the penalty to be paid.

Lease liabilities is then calculated using effective interest method, and the amount was measured when:

(1) changes in the index or rate used to determine lease payments result in changes in future lease payments;
(2) the guaranteed amount of the residual value expected to be paid has changed;
(3) the evaluation of the underlying asset purchase option has changed;
(4) the estimate of whether to exercise the option of extension or termination has changed, which leads to the change of the assessment of the lease period;
(5) modification of the subject matter, scope or other terms of the lease.

Lease liabilities are remeasured due to the aforementioned changes in the index or rate used to determine lease payments, changes in the residual value guarantee amount, and changes in the evaluation of purchases, extensions or termination options, the book value of right-of-use assets should be adjusted accordingly. When the book value of right-of-use assets is reduced to zero, the remaining re-measured amount is recognized in profit or loss.

For the tease modifications about the reduced coverage, the book amount of right-of-use assets will be reduced to reflect partial or total termination of Lease, and the difference between Lease assets and Lease assets will be included in the profit and loss.

The Consolidated Company will express the right-of-use assets and lease liabilities that do not conform to the definition of investment real estate in the form of single line items in the balance sheet.

In relation to short-term leases and leases of low-value assets, the Consolidated Company has chosen not to recognize right-of-use assets and lease liabilities, but rather to recognize lease payments on a straight-line basis as an expense during the lease term. 2. The lessor

The transaction in which the Consolidated Company is a lessor shall be classified as a financial lease or an operating lease on the date of establishment of the lease, depending on whether or not the lease contract is transferred to almost all the risks and rewards attached to the ownership of the underlying asset. In the evaluation, the Consolidated Company shall consider certain indicators, including whether the lease term covers the principal part of the underlying asset’s economic life.

~ 31~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

If the Consolidated Company is a sublease lessor, it will handle the master lease and the sublease transaction respectively and evaluate the sublease transaction classification based on the right-of-use assets generated from the master lease. If the principal lease is a short-term lease and a recognition waiver is applicable, the sublease transaction shall be classified as an operating lease.

(13) Intangible assets

1. Recognition and measurement

Goodwill arising from the acquisition of subsidiaries is measured at cost less accumulated impairment.

Computer software acquired by the Consolidated Company is measured at cost less accumulated amortization and accumulated impairment.

2. Subsequent expenditure

The subsequent expenditure can be capitalized only when they can increase the future economic benefits of relevant specific assets, and all of other expenditures are recognized as gains and losses when they occur, including the expenses for developing reputation and brand establishing.

3. Amortization

Except for goodwill, amortization is calculated based on the cost of the asset less its estimated residual value and is recognized in profit or loss using the straight-line method over the estimated useful lives of the Intangible assets, from one to five years from the time the assets reach a ready-for-use condition.

The Consolidated Company reviews the amortization method, useful life and residual value of Intangible assets at each reporting date and makes appropriate adjustments as necessary.

(14) Non-financial asset impairment

At each reporting date, the Consolidated Company assesses whether there is any indication that the carrying amount of non-financial assets (other than inventories, deferred income tax assets) may be impaired. If any indication exists, the recoverable amount of the asset is estimated. Goodwill is tested for impairment on a regular basis each year.

For the purpose of impairment testing, cash inflows that are largely independent of other individual assets or groups of assets are treated as the smallest identifiable group of assets.

~ 32~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The recoverable amount is the higher of the fair value less costs to dispose of the individual asset or cash-generating unit or its value in use. If the recoverable amount of an individual asset or cash-generating unit is less than its carrying amount, an impairment loss is recognized. An impairment loss is recognized immediately in profit or loss and is reduced first by the carrying amount of goodwill amortized on the cash-generating unit and then by the carrying amount of each other asset in the unit in proportion to its carrying amount.

Goodwill impairment losses are not reversed. Non-financial assets other than goodwill are reversed only to the extent that they do not exceed the carrying amount (net of depreciation or amortization) that would have been determined had no impairment loss been recognized for the asset in prior years.

(15) Provision for liabilities

Provisions are recognized as present obligations due to past events that make it probable that the Consolidated Company will need to expend economically efficient resources in the future to settle the obligation and the amount of the obligation can be reliably estimated.

The amount recognized in Provisions takes into account the risks and uncertainties of the obligation and is the best estimate of the payments required to settle the obligation at the end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows.

(16) Income recognition

Revenue from customer contracts

Income is measured in consideration for the expected entitlement to transfer goods or services. The Consolidated Company recognizes revenue from the transfer of control of goods or services to the customer in order to meet its performance obligations.

The Consolidated Company manufactures electronic components and sells them to manufacturers in the electronics industry. The Consolidated Company recognizes revenue at the time of the transfer of control over the products. Control transfer of the product means that the product has been delivered to the customer and the customer can fully determine the sales channel and price of the product, and there is no failure to fulfill obligations that would affect the customer’s acceptance of the product. Delivery occurs when the product is shipped to a specific location, the risk of obsolescence and loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have expired, or the Consolidated Company has objective evidence that all acceptance conditions have been met.

~ 33~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The Consolidated Company recognizes revenue on the basis of the net amount of the estimated discount deducted from the contract price, the amount of which is estimated based on past experiences, and only to the extent that there is a high probability that no significant turnaround will occur. As of the date of the report, the sales will expect to pay the customer for the discount, which is refunded as refund liabilities. The average credit period of sales is one hundred twenty days to one hundred fifty days, which is consistent with the practice of the same trade, so no financing elements are included.

The Consolidated Company shall recognize accounts receivable at the time of delivery of the goods, as the Consolidated Company shall have the right to receive unconditional consideration at that time.

The time between the transfer of goods or services from all customer contracts to the customer and the time between the customer’s payments for the goods or services is expected to be no more than one year, so the Consolidated Company does not adjust the time currency value of the transaction price.

(17) Employee benefits

1. Defined contribution plan

The obligation for contributions under the defined contribution plan is recognized as an expense during the period in which the employees provide services.

Defined benefit plan

The Consolidated Company’s net obligation to a defined benefit plan is measured by discounting the present value of future benefits earned by the employee’s current or prior period of service, less the fair value of the plan assets.

The defined benefit obligation is actuated annually by a qualified actuary using the projected unit benefit method. When the results of the calculation are probable to be favorable to the Consolidated Company, an asset is recognized to the extent of the present value of any economic benefits that may be obtained by returning a contribution from the plan or reducing future contributions to the plan. Any minimum funding requirement is taken into account in calculating the present value of economic benefits.

The remeasurement of the net defined benefit obligation, including actuarial gains and losses, compensation for plan assets (excluding interest), and any change in the impact of asset limits (excluding interest) is recognized immediately in other comprehensive income and accumulated in retained earnings. The Consolidated Company determines net interest expense (income) for net defined benefit liabilities (assets) using the net defined benefit liabilities (assets) and discount rate determined at the beginning of the annual reporting period. Net interest expense and other costs for defined benefit plans are recognized in profit or loss.

~ 34~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

When a plan is revised or curtailed, changes in benefits related to prior period service costs or curtailment gains or losses are recognized immediately in profit or loss. The Consolidated Company recognizes gain or loss on the settlement of defined benefit plans when settlement occurs.

Short-term employee benefits

Short-term employee benefit obligations are recognized as an expense when services are provided. If the Consolidated Company has a present legal or constructive obligation to pay for services rendered by employees in the past and the obligation can be estimated reliably, the amount is recognized as a liability.

(18) Share-based payment transactions

Equity-settled share-based payment agreements recognize an expense and increase relative equity over the vesting period of the award at the grant date fair value. The expense recognized is adjusted for the number of awards that are expected to qualify for the service condition and the non-market vesting condition, and the final amount recognized is measured based on the number of awards that qualify for the service condition and the non-market vesting condition on the vesting date.

The non-vested conditions regarding share-based payment awards are reflected in the measurement of the fair value of the share-based payment awards at the date of grant and no adjustment is required to be made to verify the difference between the expected and actual results.

The fair value amount of the share appreciation rights payable to employees for cash settlement is recognized as an expense and an increase in the relative liability in the period in which the employees reach the point where they can receive unconditional compensation. The liability is remeasured at the fair value of the share appreciation rights at each reporting date and settlement date, and any change is recognized in profit or loss.

(19) Income tax

Income taxes include current and deferred income tax asset. Except those related to enterprise consolidation and items directly recognized as equities or other comprehensive income, Current tax and deferred income tax asset shall be recognized as gains and losses.

Current taxes include expected payable income taxes or receivable tax rebates of the annual taxation (losses) calculated according to the legal tax rate or substantial legal tax rate on the report day, and any unappropriated retained earnings plus 10% income tax recognized as tax expense in the shareholders meeting resolution year calculated according to the adjustments to the payable income taxes in the previous year and the provisions of income tax laws.

Deferred income tax is recognized for temporary differences between the carrying amounts of assets and liabilities at the reporting date and their tax bases. Deferred income tax is not recognized for the following temporary differences:

~ 35~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Temporary differences arising from the initial recognition of assets or liabilities in transactions that are not business combinations and, at the time of the transaction, (i) do not affect either accounting profit or taxable income (loss) and (ii) do not result in taxable and deductible temporary differences in equal amounts.
Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.
Original recognition of business reputation

Deferred income tax assets are recognized for unused tax losses and unused income tax credits in subsequent periods to the extent that it is probable that future taxable income will be available against which the temporary differences can be deducted. Deferred income tax assets are reassessed at each reporting date and reduced to the extent that it is not probable that the related income tax benefit will be realized, or to the extent that it becomes probable that sufficient taxable income will be available to allow the reversal of the original reduction.

Deferred income tax assets are measured according to the tax rate in the current period when the expected capital is realized or liabilities are liquidated and based on the legal tax rate or substantial legal tax rate on the report day.

Only when the Consolidated Company shall meet the following conditions at the same time, can the deferred income tax assets and deferred tax liabilities offset with each other:

Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and
Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax;
(1) Same subject of tax payment; or
(2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated.
(20) Business combination

Goodwill is measured at the fair value of the consideration transferred at the date of acquisition, including the amount of any non-controlling interest attributable to the acquiree, less the net amount of identifiable assets acquired and liabilities assumed (usually the fair value). If the resulting balance is negative, the Consolidated Company reassesses whether all assets acquired and liabilities assumed have been correctly identified before recognizing gain recognized in bargain purchase transaction in profit or loss.

Transaction costs associated with a business combination, except for those related to the issuance of debt or equity instruments, are recognized as expenses of the Consolidated Company immediately upon incurrence.

~ 36~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Non-controlling interest of the acquiree, which is a present ownership interest and the holder of which is entitled to a proportionate share of the net assets of the enterprise at the time of liquidation, is measured at fair value at the acquisition date or at the present ownership instrument's proportionate share of the recognized amount of the acquiree's identifiable net assets, at the option of the Consolidated Company, on a transaction by transaction basis. Other non-controlling interests are measured at their fair values on the acquisition date or on other bases as prescribed by IFRSs recognized by the FSC.

(21) Earnings per share

The Consolidated Company lists the basic and diluted earnings per share of holders of common stock equity of the Company. The basic earnings per share of the Consolidated Company shall be calculated with the gains and losses of the holders of common stock equity of the Company divided by the weighted mean of current outstanding common shares. Diluted earnings per share shall be calculated after adjusting the influence of all potential diluted common shares of the gains and losses of the holders of common stock equity of the Company and the weighted mean of current outstanding common shares. The potential diluted common shares of the Consolidated Company include convertible corporate bonds and stock options for employees.

(22) Segmental Information

An operating segment is a component of the Consolidated Company that engages in operating activities that may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the Consolidated Company. The operating results of all operating segments are reviewed regularly by the Consolidated Company's chief operating decision maker to make decisions about the allocation of resources to the segment and to evaluate its performance. Separate financial information is available for each operating segment.

V. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties

Management is required to make judgments, estimates and assumptions in preparing the Consolidated Financial Statements that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from estimates.

The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced.

~ 37~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The following assumptions and estimates are subject to significant risks of material adjustments to the carrying amounts of assets and liabilities in the next financial year, and the related information is as follows:

Inventory Evaluation

Since inventory must be measured at the lower of cost or net realizable value, the Consolidated Company estimates the reported amount of inventory due to normal wear and tear, obsolescence, or no market sale value daily and reduces the cost of inventory to net realizable value. The net realizable value of inventories may change significantly due to rapid changes in the industry and the introduction of new products. Please refer to Note VI (4) for the inventory assessment.

VI. Descriptions for Important Accounting Items

(1) Cash and cash equivalents

riptions for Important Accounting Items Cash and cash equivalents
Petty cash Checks and demand deposits Time deposits Cash and cash equivalents listed on the Statement of Cash Flows	Dec. 31, 2023 $ 3,585 4,035,836 9,093,070 $ 13,132,491	Dec. 31, 2022 6,331 3,662,736 3,421,237 7,090,304

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Consolidated Company are seen in Note VI (26).

(2) Financial assets and liabilities

1. Financial assets measured at FVTPL

Financial assets mandatorily measured at FVTPL: Current: Non-hedging derivative financial assets Embedded derivative instruments - redemption right Non-derivative financial assets Shares of listed ("OTC") companies Emerging stock Subtotal Non-current: Non-hedging derivatives Embedded derivatives—right of redemption Non-derivative financial assets Private equity funds Subtotal Total	Dec. 31, 2023 $ 187 53,290 7,307	Dec. 31, 2022 163 62,313 16,531
	60,784	79,007
	2,205 24,711	- -
	26,916	-
	$ 87,700	79,007

Please refer to Note VI (14) for the disclosure of embedded derivatives of the convertible bonds issued by the Consolidated Company.

~ 38~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Please refer to Note VI (27) for the amount recognized in profit or loss based on fair value remeasurement.

Financial assets measured at FVTOCI

Equity instruments measured at FVTOCI: Non-current: Domestic listed stock - Chailease Finance Co., Ltd. Domestic listed stock - Hotai Finance Co., Ltd. Domestic unlisted (or OTC) stock—SteadyBeat Technology Corporation Domestic unlisted (or OTC) stock—G-sau Co., Ltd Domestic unlisted (or OTC) stock`－`AICP Technology Corporation Total	Dec. 31, 2023 50,125 28,710 1,129 15 -	Dec. 31, 2022 50,125 28,800 4,426 169 -
	$ 79,979	83,520

The Consolidated Company’s investments in these equity instruments are not held for trading purposes and have been designated as measured at FVTOCI.

The Consolidated Company recognized dividend income from equity instruments measured at fair value through other comprehensive income, amounting to NT$2,298 thousand in 2023 and NT$1,946 thousand in 2022.

On February 20, 2023, December 29, 2023, and September 30, 2022, the Consolidated Company adjusted its investment portfolio for asset allocation considerations to diversify risk, selling specified investments in SteadyBeat Technology Corporation measured at fair value through other comprehensive income. The fair values at the time of disposal were NT$4,889 thousand, NT$2,544 thousand, and NT$1,422 thousand, respectively, with accumulated gains or losses on disposal of NT$0 thousand.

For information on market risks, refer to note 6(27)5.

As of December 31, 2023, and December 31, 2022, there were no financial assets of the Consolidated Company provided as collateral for pledges.

(3) Notes receivable, accounts receivable and other receivables

Notes receivable Accounts receivable Other receivables Less: provisions	Dec. 31, 2023 $ 305,564 9,312,888 509,221 10,493		Dec. 31, 2022 203,501 10,532,266 387,133 28,267 11,094,633
	$ 10,117,180

For the changes in the provisions for notes and accounts receivable for the years 2023 and 2022, please refer to Note VI (27) 1. (3) Statement of Impairment Losses.

~ 39~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(4) Inventory

Merchandises Finished goods Work in process Raw materials	Dec. 31, 2023 $ 602,757 829,978 770,644 453,934	Dec. 31, 2022 777,610 1,334,030 843,056 606,436
	$ 2,657,313	3,561,132

The Consolidated Company’s inventory as of December 31, 2023 and 2022 including allowance for inventory losses are NT$445,445 thousand and NT$438,7320 thousand respectively.

The Consolidated Company recognized inventory-related expenses (gain) as follows:

Cost of goods sold Inventory valuation and disposal loss Total	2023 $ 12,901,388 101,013	2022 15,063,852 97,602
	$ 13,002,401	15,161,454

As of December 31, 2023 and 2022, the Consolidated Company’s inventories were not pledged as security.

(5) Investments accounted for using the equity method

The Consolidated Company's investments accounted for using the equity method as of the reporting date are listed as follows:

Associates	Dec. 31, 2023 $ 81,730	Dec. 31, 2022 -

1. Associates

On July 24, 2023, the Consolidated Company acquired a 21.01% interest in I-See Vision Technology Inc. for NT$94,000 thousand in cash, thereby obtaining significant influence over the company.

The Consolidated Company's investments in associates that are individually not significant are accounted for using the equity method, and their aggregated financial information is as follows. This financial information is included in the Consolidated Company's consolidated financial reports:

Year-end aggregated carrying amount of equity in individually not significant associates Attributable to the Consolidated Company: Total comprehensive income (i.e., net profit (loss) of continuing operations for the period)	Dec. 31, 2023 $ 81,730	Dec. 31, 2022 -
	2023 $ (17,259)	2022
		-

~ 40~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

2. Guarantees

There are no pledges as guarantees for the Consolidated Company's investments accounted for using the equity method.

(6) Changes in ownership interests in subsidiaries
Acquisition of subsidiaries

On October 27, 2023, the Consolidated Company acquired a 31.65% stake in ZhongShan HuiXing Electronics Co., Ltd. (HuiXing Electronics) for NT$10,175 thousand in cash. HuiXing Electronics is a manufacturer of electronic connectors, and the acquisition is expected to increase the Consolidated Company's market share in China.

From the acquisition date to December 31, 2023, HuiXing Electronics contributed revenues and a net loss of NT$203,265 thousand and NT$9,071 thousand, respectively. Had this acquisition occurred on January 1, 2023, management estimates that the Consolidated Company's revenues and net loss would have increased by NT$481,612 thousand and NT$25,055 thousand, respectively. In determining these amounts, management assumed that the acquisition took place on January 1, 2023, and that the provisional fair value adjustments arising on the acquisition date were the same.

The costs associated with this acquisition transaction have been recognized under "Other Expenses" in the consolidated statement of comprehensive income.

The main categories of consideration transferred, assets acquired, and liabilities assumed, and the amount of goodwill recognized on the acquisition date are as follows:

(1) Net cash outflow from acquisition of subsidiaries

Consideration paid in cash $ 10,175 Less: Cash and cash equivalents acquired 64,251 $ (54,076)

~ 41~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) Identifiable assets acquired and liabilities assumed

The fair values of the identifiable assets acquired and liabilities assumed at the date of acquisition were as follows:

Current Assets
Cash and cash equivalents
Notes receivable, accounts receivable, and other receivables
Inventories
Other current assets
Non-current Assets
Property, plant, and equipment
Intangible assets
Other non-current assets
Current Liabilities
Notes payable, accounts payable, and other payables
Contract liabilities – Current
Other non-current liabilities – Other
Fair value of identifiable net assets

$ 64,251
185,511
92,408
649
95,464
23
7,639
(433,406)
(3,696)
(698)
$
8,145

The Consolidated Company will keep the above matters under review during the measurement period. If new information becomes available within one year of the acquisition date regarding facts and circumstances existing at the acquisition date that would identify adjustments to the provisional amounts described above or any additional provisions for liabilities existing at the acquisition date, the accounting for the acquisition will be modified.

(3) Goodwill

Goodwill recognized from acquisitions is as follows:

Consideration transferred Plus: Non-controlling interests (measured at the proportionate share of the identifiable net assets) Less: Fair value of identifiable net assets Goodwill	$ 10,175 5,567 (8,145) $ 7,597

2. Acquisition of additional equity interests in subsidiaries

On November 7, 2022, the consolidated company increased its stake in Lomites Co., Ltd. by NT$600 thousand in cash, resulting in an increase in its stake in Lomites Co., Ltd. by 0.32%.

~ 42~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The effect of the change in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to the owners of parent is as follows:

Carrying amount of non-controlling interests acquired Consideration paid to non-controlling interests Capital reserves - the difference between the actual acquisition or disposal price and the carrying amount of the subsidiary	2023	2022
	$ - -	548 (600) (52)
	$ -

Disposal of partial subsidiary shares without loss of control

In November 2023, the Consolidated Company disposed of 0.88% of its equity interest in Lomites Co., Ltd. for NT$1,100 thousand.

In March 2023, the Consolidated Company disposed of 0.01% of its equity interest in Lintes Technology Co., Ltd. for NT$900 thousand.

The changes in the Consolidated Company's ownership interests in the above subsidiaries had the following impact on the equity attributable to the parent company's shareholders:

Carrying amount of the disposed subsidiary shares Consideration received from non-controlling interests Capital reserve – difference between the actual price of acquisition or disposal of subsidiary shares and the carrying value	2023 $ (1,059) 2,000 $ 941

The Consolidated Company did not subscribe to the subsidiary's cash capital increase in proportion to its shareholding, which did not result in a loss of control.

In November 2023, ZhongShan HuiXing Electronics Co., Ltd. issued 385 thousand new shares, raising a total of NT$1,667 thousand. The Consolidated Company’s ownership in ZhongShan HuiXing Electronics Co., Ltd. decreased by 1.59% due to not subscribing to the new shares.

On December 15, 2022, Compertum Microsystems Inc. issued 5,206 thousand new shares in a capital increase, raising a total of NT$52,060 thousand. The consolidated company subscribed to 2,265 thousand shares, with a subscription amount of NT$22,645 thousand. As a result, the consolidated company increased its stake in Compertum Microsystems Inc. by 0.61% because it did not subscribe in proportion to its shareholding.

On April 29, 2022, Lomites Co., Ltd. issued 10,000 thousand new shares in a capital increase, raising a total of NT$100,000 thousand. The consolidated company subscribed to 9,950 thousand shares, with a subscription amount of NT$99,500 thousand. As a result, the consolidated company's stake in Lomites Co., Ltd. decreased by 0.40% because it did not subscribe in proportion to its shareholding.

~ 43~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

On April 15, 2022, Lerain Technology Co., Ltd. issued 1,215 thousand new shares in a capital increase, raising a total of NT$85,050 thousand. Because the consolidated company did not subscribe, its stake in Lerain Technology Co., Ltd. decreased by 0.70%.

On February 25, 2022, Lintes Technology Co., Ltd. issued 3,500 thousand new shares in a capital increase, raising a total of NT$332,500 thousand. The consolidated company subscribed to 1,368 thousand shares, with a subscription amount of NT$129,993 thousand. As a result, the consolidated company's stake in Lintes Technology Co., Ltd. decreased by 0.76% because it did not subscribe in proportion to its shareholding.

The effect of changes in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to owners of parent was as follows:

Increase in equity after issuance of new shares by subsidiaries Amount not subscribed in proportion to shareholding Capital reserves - recognition of changes in ownership interests in subsidiaries	2023 $ 441 -	2022 325,061 (252,138) 72,923
	$ 441

The exercise of the conversion right of the unsecured convertible corporate bonds of the subsidiary did not result in a loss of control.

The subsidiary, Lintes Technology Co., Ltd., issued 1,644 thousand new shares in 2023 due to bondholders exercising their conversion rights, resulting in a 0.34% decrease in the Consolidated Company's equity in Lintes Technology Co., Ltd.

The subsidiary, Lintes Technology Co., Ltd., issued 1,367 thousand new shares in 2022 due to the bondholders exercising their conversion rights, resulting in a decrease of 1.13% in the consolidated company's stake in Lintes Technology Co., Ltd.

The changes in the Consolidated Company's ownership interests in the subsidiaries for 2023 and 2022 increased the equity attributable to the parent company's shareholders by NT$15,266 thousand and NT$54,712 thousand, respectively.

The subsidiary issued restricted employee stock options without resulting in loss of control.

The subsidiary, Lintes Technology Co., Ltd., issued 358 thousand restricted shares to employees on August 25, 2023, decreasing the Consolidated Company’s equity in Lintes Technology Co., Ltd. by 0.29%.

The change in the Consolidated Company’s ownership interests in the subsidiary for 2023 increased the equity attributable to the parent company's shareholders by NT$7,277 thousand.

~ 44~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

7. Subsidiary employee stock options expired

In 2023, 5.5 thousand restricted shares held by departing employees of the subsidiary Lintes Technology Co., Ltd. expired, increasing the Consolidated Company’s equity in Lintes Technology Co., Ltd. by 0.01%.

The changes in the Consolidated Company’s ownership interests in the subsidiary for 2023 increased the equity attributable to the parent company's shareholders by NT$124 thousand.

(7) Subsidiaries with significant non-controlling interests

The non-controlling interests of subsidiaries that are material to the Consolidated Company are as follows:

Name of subsidiary Lintes Technology Co., Ltd.	Principal place of business/country of incorporation Taiwan	The percentage of ownership interests and voting interests in all non-controlling interests	The percentage of ownership interests and voting interests in all non-controlling interests
		Dec. 31, 2023	Dec. 31, 2022
		50.39%	49.76%

The aggregate financial information of the above subsidiaries is as follows. The financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) approved by the Financial Supervisory Commission (FSC), and the financial information represents amounts before the elimination of intercompany transactions:

1. Comprehensive financial information of Lintes Technology Co., Ltd.:

Current assets Non-current assets Current liabilities Non-current liabilities Less: Non-controlling interests Equity attributable to owners of Lintes Technology Co., Ltd. Closing balance of non-controlling interests attributable to the Consolidated Company	Dec. 31, 2023 $ 2,528,937 1,246,610 (584,325) (179,677) 119,813	Dec. 31, 2022 3,115,748 1,062,281 (1,060,878) (258,033) 145,853
	$ 2,891,732	2,713,265
	$ 1,457,195	1,350,148

~ 45~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Operating revenue Net profit for the period Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Other comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Total of comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Net income of the Consolidated Company for the period attributable to non-controlling interests Comprehensive income of the Consolidated Company for the period attributable to non-controlling interests Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Increase in cash and cash equivalents Dividends paid to non-controlling interests	2023 $ 2,454,917	2022 3,369,201 570,248 14,084 277 570,525 14,084 280,498 280,715 2022 500,397 (420,111) 296,556 (3,102) 373,740 52,954
	$ 396,730
	$ (21,150)
	$ (7,265)
	$ 389,465
	$ (21,150)
	$ 198,978
	$ 195,353
	2023 $ 880,699 (278,397) (404,383) (8,455)
	$ 189,464
	$ 139,489

~ 46~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(8) Property, plant and equipment

The changes in the costs of the property, plant and equipment, losses on depreciation and impairment of the Consolidated Company are as follows:

Land $ 767,108 109,366 - - - - (1,276) (38,442) 154	Buildings 2,523,944 200,235 320 - 909,717 - (4,121) (15,770) (98,389)	Machinery equipment 4,086,610 760,270 66,730 11,795 116,285 (150,332) - (27,679) (115,143)	Other 6,264,473 191,175 14,632 74,162 896,741 (261,440) - (19,597) (115,904)	Outstanding work and equipment to be inspected 1,375,401 1,397,741 28,717 31,244 (1,922,743) - - - (25,970)
$ 836,910	3,515,936	4,748,536	7,044,242	884,390
$ 241,919 131,296 - 173,500 218,230 - - 2,163	1,646,343 469,162 789 330,115 23,638 - - 53,897	3,721,293 425,575 17,095 167,558 - (316,536) - 71,625	4,811,867 613,038 11,096 1,123,013 - (352,971) - 58,430	1,133,105 2,038,548 - (1,794,186) - - (23,925) 21,859
$ 767,108	2,523,944	4,086,610	6,264,473	1,375,401
$ - - - - - - -	459,743 144,709 - - (387) (593) (10,586)	1,953,192 368,306 1,234 (92,587) (1,203) - (32,440)	3,732,721 1,653,393 20,503 (210,936) (6,846) - (78,123)	- - - - - - -
$ -	592,886	2,196,502	5,110,712	-
$ - - - - -	366,833 83,432 - 4,352 5,126	1,893,006 314,184 (295,539) - 41,541	2,412,502 1,638,289 (343,212) - 25,142	- - - - -
$ -	459,743	1,953,192	3,732,721	-
$ 836,910	2,923,050	2,552,034	1,933,530	884,390
$ 767,108	2,064,201	2,133,418	2,531,752	1,375,401

~ 47~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The subsidiary, LOTES VIET NAM COMPANY LIMITED (LOTES VIET NAM), acquired land use rights in 2021 for the construction of a new factory, with an acquisition cost of NT$299,921 thousand recorded as right-of-use assets. LOTES VN CO., LTD. has begun construction of a new factory building. As of December 31, 2023, and 2022, the cumulative expenditures for the construction were NT$578,057 thousand and NT$399,060 thousand, respectively.

The subsidiary, Lotes Zhongshan Co., Ltd, acquired the land use rights for the construction of the new plant in 2017, and the acquisition cost was NT$183,934 thousand to list right-of-use assets in the account. As of December 31, 2023, and 2022, the cumulative expenditures for the construction of the factory building (including tax), recorded under buildings and structures, amounted to NT$1,621,212 thousand and NT$1,614,359 thousand, respectively, with the property deed acquired in 2022.

The subsidiary, Lotes Hengnan Co., Ltd., acquired the land use rights for the construction of the new plant in 2016, and the acquisition cost was NT$9,878 thousand to list right-of-use assets in the account. As of December 31, 2023, and 2022, the cumulative expenditures for the construction of the factory building (including tax), recorded under buildings and structures, amounted to NT$342,401 thousand and NT$347,224 thousand, respectively, with the property deed acquired in 2023.

The subsidiary Lotes Zhongshan in April 2019 signed a contract for pre-purchase of building construction and a decoration contract with Zhongshan City Weili Real Estate Development Co., Ltd. and Tianjin Xinhongyuanchuang Architectural Decoration Engineering Co., Ltd. respectively. As of 2023, it has paid RMB 10,881 thousand and RMB 3,285 thousand respectively (recorded as buildings and constructions), and obtained the property certificate in 2022.

As of December 31, 2023 and December 31, 2022, property, plant and equipment were used as collateral for loans and financing lines. Please refer to Note VIII for details.

(9) Right-of-use assets

The changes in the cost and depreciation of the right-of-use assets recognized by the consolidated company for leasing land, buildings, and other equipment are as follows:

Other

			Other
Cost of right-of-use assets: Balance on January 1, 2023 Addition Decrease Effect of change in exchange rate Balance on December 31, 2023 Balance on January 1, 2022 Addition Decrease Effect of change in exchange rate	Land $ 666,442 113,434 - (40,101)	Buildings 604,356 396,528 (146,166) (14,608)	equipment 12,816 3,994 (3,120) (124)	Total 1,283,614 513,956 (149,286) (54,833)
	$ 739,775	840,110	13,566	1,593,451
	$ 636,586 4,707 - 25,149	552,848 133,405 (83,774) 1,877	403 12,848 (411) (24)	1,189,837 150,960 (84,185) 27,002

~ 48~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Balance on December 31, 2022 Depreciation of right-of-use assets: Balance on January 1, 2023 Depreciation for the period Decrease Effect of change in exchange rate Balance on December 31, 2023 Balance on January 1, 2022 Depreciation for the period Decrease Effect of change in exchange rate Balance on December 31, 2022 Book value: December 31, 2023 December 31, 2022	$ 666,442 604,356 12,816 1,283,614
	$ 37,066 260,333 3,344 300,743 15,133 143,278 4,081 162,492 - (139,032) (3,120) (142,152) (1,900) (4,385) (60) (6,345)
	$ 50,299 260,194 4,245 314,738
	$ 21,033 140,064 251 161,348 17,711 154,929 3,363 176,003 - (32,786) (257) (33,043) (1,678) (1,874) (13) (3,565)
	$ 37,066 260,333 3,344 300,743
	$ 689,476 579,916 9,321 1,278,713
	$ 629,376 344,023 9,472 982,871

(10) Investment property

The changes in the investment property of the Consolidated Company are as follows:

Self-owned assets Land Buildings Cost or deemed cost: Balance on January 1, 2023 $ 42,34 22,710 Additions - - Reclassified to property, plant, and equipment 1,27 4,121 Effect of change in exchange rate - - Balance on December 31, 2023 $ 43,62 26,831 Balance on January 1, 2022 $ 260,57 46,348 Reclassified to property, plant, and equipment (218,230 (23,638) Effect of change in exchange rate - - Balance on December 31, 2022 $ 42,34 22,710 Losses on depreciation and impairment: Balance on January 1, 2023 $ - 2,832 Depreciation - 847 Reclassified to property, plant, and equipment - 593 Impairment losses - - Effect of change in exchange rate - - Balance on December 31, 2023 $ - 4,272 Balance on January 1, 2022 $ - 6,668 Depreciation - 516 Reclassified to property, plant, and equipment - (4,352) Effect of change in exchange rate - - Balance on December 31, 2022$ - 2,832 Book value: December 31, 2023 $ 43,622 22,559	Self-owned assets Land Buildings Cost or deemed cost: Balance on January 1, 2023 $ 42,34 22,710 Additions - - Reclassified to property, plant, and equipment 1,27 4,121 Effect of change in exchange rate - - Balance on December 31, 2023 $ 43,62 26,831 Balance on January 1, 2022 $ 260,57 46,348 Reclassified to property, plant, and equipment (218,230 (23,638) Effect of change in exchange rate - - Balance on December 31, 2022 $ 42,34 22,710 Losses on depreciation and impairment: Balance on January 1, 2023 $ - 2,832 Depreciation - 847 Reclassified to property, plant, and equipment - 593 Impairment losses - - Effect of change in exchange rate - - Balance on December 31, 2023 $ - 4,272 Balance on January 1, 2022 $ - 6,668 Depreciation - 516 Reclassified to property, plant, and equipment - (4,352) Effect of change in exchange rate - - Balance on December 31, 2022$ - 2,832 Book value: December 31, 2023 $ 43,622 22,559	Right-of-use assets Land 37,731 256,488 - (4,691)	Total 102,787 256,488 5,397 (4,691)
	$ 43,62 26,831	289,528	359,981
		37,198 - 533	344,122 (241,868) 533
	$ 42,34 22,710	37,731	102,787
		2,138 3,886 - 4,863 (175)	4,970 4,733 593 4,863 (175)
	$ - 4,272	10,712	14,984
	- 6,668 - 516 - (4,352) - -	1,585 532 - 21	8,253 1,048 (4,352) 21
$	- 2,832	2,138	4,970
$	43,622 22,559	278,816	344,997

~ 49~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

December 31, 2022 Fair value: December 31, 2023 December 31, 2022	$ 42,346 19,878 35,593 97,817	$ 42,346 19,878 35,593 97,817
		$ 410,733
		$ 162,684

As of December 31, 2023 and December 31, 2022, the Consolidated Company’s investment properties were not pledged as security.

(11) Intangible assets

The changes in the cost and amortization of the intangible assets of the Consolidated Company are as follows:

$	Computer Software 322,973 29,856 - (16,663) (3,421) (3,471)	Other 600 - 7,622 - - -
$	329,274	8,222
$	306,888 30,457 (17,005) 2,633	600 - - -
$	322,973	600
$	141,504 57,954 - - (16,663) (1,485) (1,527)	- 1 7,597 2 - - -
$	179,783	7,600
$	101,904 55,711 (17,005) 894	- - - -
$	141,504	-
$	149,491	622
$	181,469	600

~ 50~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(12) Short-term loans

The details, conditions and terms of the short-term loans of the Consolidated Company are as follows:

	Dec. 31, 2023
Currency NTD	Interest rate range	Maturity 2024
	1.80%~1.90% Dec. 31, 2022
Currency USD NTD	Interest rate range 5.55% 1.55%~1.80%	Maturity 2023 2023

For information on the Consolidated Company's exposure to interest rate and foreign currency risks, please refer to Note 6(27). Additionally, for details on the Consolidated Company's assets pledged as collateral for bank loans, refer to Note 8, and for the issuance of guarantee notes due to bank loans and financing limits, refer to Note 9.

(13) Long-term loans

The breakdown of the Consolidated Company's long-term loans is as follows:

Bank loans—credit loans (The expiry date is May 2025) Bank loans—guaranteed loans (The expiry date is May 2037) Subtotal Less: portion due within one year Total Remaining credit Interest rate range	Dec. 31, 2023 $ - -		Dec. 31, 2022 9,855 155,775 165,630 15,861 149,769 6,845 1.75%~2.11%
	- -
	$ -
	$ -
	-

For details of the guarantees provided by the Consolidated Company for bank loans using assets pledged as collateral, please refer to Note VIII.

~ 51~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(14) Bonds payable

Information on the issuance of unsecured convertible bonds by the Consolidated Company is as follows:

Total amount of convertible bonds issued Cumulative amount of redemptions Accumulated converted amount Unamortized balance of discount on bonds payable Bonds payable at the end of the period Embedded derivative - right of redemption(reported as financial assets measured at FVTPL) Equity components - conversion rights (reported in capital reserves - stock options) Equity component - Conversion rights (listed under the changes in the net value of the subsidiary's equity recognized using the equity method and non-controlling interests) Right of redemption valuation benefit (loss) (reported in other gains and losses) Interest expense	Dec. 31, 2023 $ 1,300,000 - (333,200) (32,645)	Dec. 31, 2022 1,300,000 (2,800) (1,161,600) (3,151) 132,449 163 - 25,680 2022 (323) 9,513
	$ 934,155
	$ 2,392
	$ 114,556
	$ 16,078
	2023 $ 1,468
	$ 14,086

The Company's first domestic unsecured convertible corporate bonds.
(1) Issuance details

On August 19, 2021, the Company issued 10,000 domestic first three-year unsecured convertible bonds with a coupon rate of 0%, which are repayable in cash at par on maturity.

The conversion price was set at $563.2 per share at the time of issuance, and the conversion price will be adjusted according to the formula specified in the terms of the issuance if the conversion price of the Company’s common shares is adjusted in accordance with the terms of the issuance. The conversion price on December 31, 2022 was $535. There is no reset clause for the bonds.

The Company redeems the outstanding bonds at par value in cash if one of the following conditions is met:

A. The closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.

~ 52~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

B. If the closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.
(2) Conversion details

In 2022, bondholders have requested the conversion of 9,333 of the Company's first three-year unsecured convertible corporate bonds, respectively. The book amount at the time of conversion totals $915,969 thousand. The net change in capital surplus generated by the bond conversion during the current period is $895,831 thousand. Also, the share capital generated by the bond conversion is $17,352 thousand. Please refer to note VI (21) for details on the share conversion.

(3) Repurchase details

The Company's first domestic three-year unsecured convertible bonds were redeemed and trading on the counter ceased on December 9, 2022.

The Company's second domestic unsecured convertible bonds
(1) Issuance Details

On March 9, 2023, the Company issued 10,000 zero percent coupon, three-year unsecured convertible bonds, which will be repaid at maturity in cash based on the face value of the bonds.

The conversion price was initially set at NT$862.1 per share at issuance. If any adjustments to the conversion price occur according to the terms provided in the issuance related to the Company’s common shares, the conversion price is adjusted accordingly. As of December 31, 2023, the conversion price was NT$829.9. These bonds do not have reset clauses.

The right to redeem the bonds for cash at face value applies if one of the following conditions is met:

A. From the day after three months following the issuance until forty days before the end of the issuance period, if the closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by at least 30% for thirty consecutive trading days.
B. From the day after three months following the issuance until forty days before the end of the issuance period, if the outstanding balance of the bonds is less than 10% of the original total amount issued.

~ 53~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) Conversion Details

During the year 2023, bondholders requested the conversion of 1,181 of the Company's second three-year unsecured convertible bonds. The total book value at the time of conversion was NT$113,861 thousand. The net change in capital reserves resulting from these conversions was NT$112,143 thousand, and an additional NT$1,423 thousand was generated in paid-in capital due to these conversions. For details on the conversion of share capital, please refer to note 6(21).

The first domestic unsecured convertible corporate bonds of the subsidiary, Lintes Technology Co., Ltd.

(1) Issuance details

The subsidiary, Lintes Technology Co., Ltd., issued 3,000 domestic first unsecured convertible corporate bonds with a coupon rate of 0% on January 19, 2022. These bonds are due for a one-time cash repayment at maturity according to the bond par value.

The conversion price was set at NT$123.4 per share at issuance. When there are adjustments to the ordinary shares of the subsidiary, Lintes Technology Co., Ltd., that meet the terms of issuance, the conversion price is adjusted according to the formula specified in the terms. As of December 31, 2023, and 2022, the conversion prices were NT$116.4 and NT$120.3, respectively. This bond does not have a reset clause.

If any of the following conditions regarding the redemption rights are met, the subsidiary, Lintes Technology Co., Ltd., will recover the outstanding bonds in cash at face value:

A. From the day after three months after the issuance of the bond until forty days before the end of the issuance period, if the closing price of the common shares of the subsidiary, Lintes Technology Co., Ltd., on the Taiwan Stock Exchange, exceeds the current conversion price of the bond by 30% (inclusive) or more for thirty consecutive business days.
B. From the day after three months after the issuance of the bond until forty days before the end of the issuance period, if the outstanding balance of the bond is less than 10% of the original total issuance amount.

(2) Conversion details

In 2023 and 2022, holders of Lintes Technology Co., Ltd.'s first domestic three-year unsecured convertible bonds exercised their conversion rights, obtaining 422 thousand and 1,367 thousand ordinary shares of Lintes Technology Co., Ltd., respectively.

~ 54~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(15) Lease liabilities

The book values of the lease liabilities of the Consolidated Company are	The book values of the lease liabilities of the Consolidated Company are	The book values of the lease liabilities of the Consolidated Company are	as follows:
		Dec. 31, 2023	Dec. 31, 2022
Current	$	129,085	110,281
Non-current	$	487,452	260,380
For the maturity analysis, please refer to Note VI (27).
The amounts recognized in profit or loss are as follows:
		2023	2022
Interest expense for lease liabilities	$	34,122	22,673
Changes in lease payments not included in the	$	12,421	13,394
measurement of lease liabilities
Income from the sublease of right-of-use assets	$	30,898	28,417
Expenses for short-term leases	$	7,045	6,753
Cost of low-value leased assets (excluding low-value	$	328	354
leases under short-term leases)
The amounts recognized in the Statement of Cash Flows are as follows:
		2023	2022
Total cash outflow from leases	$	303,803	280,625

1. Lease of land, premises and buildings

The Consolidated Company leases land, premises and buildings for plant, office space and staff quarters. The lease term of the plant and office space is usually one to ten years, and the lease term of the staff quarters is three to eight years. Part of the lease includes an option to extend the lease at the end of the lease term. In cases where it is not reasonably determined to exercise an optional extension of lease term, the relevant benefits for the period covered by the option are not included in the lease liabilities.

The Consolidated Company is a sublease of right-of-use assets by business lease.

2. Other leases

The leasing period of machines and other equipment leased by the Consolidated Company shall be two to six years. In addition, the lease term of some lease contracts of the Consolidated Company is one year, and these leases are short-term subject leases. The Consolidated Company chooses to apply the exemption of relevant right-of-use assets and lease liabilities.

(16) Refund liabilities - current

Refund liabilities - current	Dec. 31, 2023 $ 420,182	Dec. 31, 2022 384,044

The refund liabilities are mainly the prepayments to customers for the sales discount and defects of electronic components.

~ 55~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(17) Provision for liabilities

Provision for liabilities - non-current Employee benefits	Dec. 31, 2023 $ 43,534	Dec. 31, 2022 41,410

Employee benefits are estimated under the Consolidated Company’s defined benefit plan. Please refer to Note VI (19).

(18) Operating lease

The Consolidated Company leases its investment real estate, which is classified as an operating lease because almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (10) for details of the investment real estate.

The maturity analysis of lease payments is presented in the following table for the total undiscounted lease payments to be received after the reporting date:

Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2023 $ 484 130	Dec. 31, 2022 130 -
	$ 614	130

In year 2023 and 2022, the income tax generated in the investment property from rentals were NT$555 thousand and NT$580 thousand, respectively, and the direct operating expenses (including maintenance) incurred in the investment property from rentals were NT$826 thousand and NT$408 thousand, respectively.

(19) Employee benefits

1. Defined benefit plans

A reconciliation of the present value of the Company's defined benefit obligation to the fair value of plan assets is as follows:

the fair value of plan assets is as follows:
Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability	Dec. 31, 2023 $ 79,676 (36,142)	Dec. 31, 2022 78,993 (37,583)
	$ 43,534	41,410

The Consolidated Company's employee benefit liabilities are as follows:

Paid leave liability	Dec. 31, 2023 $ 30,013	Dec. 31, 2022 27,802

The Company's defined benefit plan is contributed to the Bank of Taiwan's Labor Retirement Reserve Fund. Retirement payments to each employee under the Labor Standards Act are based on the basis of the number of years of service and the average salary for the six months prior to retirement.

~ 56~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(1) Composition of plan assets

The Company's pension fund under the Labor Standards Act is managed by the Bureau of Labor Funds, Ministry of Labor (hereinafter referred to as the Bureau of Labor Funds). According to the "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund", the minimum annual earnings to be distributed to the fund shall not be less than the earnings calculated based on the two-year time deposit interest rate of the local bank.

As of the date of this report, the balance of the Bank of Taiwan's Labor Retirement Reserve Fund was $36,412 thousand. For information on the use of the Labor Pension Fund assets, including the fund yield and fund asset allocation, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

(2) Changes in the present value of the defined benefit obligation

The changes in the present value of the Company's defined benefit obligation for fiscal 2023 and 2022 are as follows:

2023 Defined benefit obligation at January 1 $ 78,993 Current service cost and interest 1,485 Remeasurement of net defined benefit liability (asset) 2,583 Benefits planned to be paid (3,385) Defined benefit obligation at December 31 $ 79,676	2023 Defined benefit obligation at January 1 $ 78,993 Current service cost and interest 1,485 Remeasurement of net defined benefit liability (asset) 2,583 Benefits planned to be paid (3,385) Defined benefit obligation at December 31 $ 79,676	2022 78,057 1,128 (192) -
	$ 79,676	78,993

(3) Changes in the fair value of plan assets

The changes in the fair value of the Company's defined benefit plan assets for fiscal 2023 and 2022 are as follows:

fiscal 2023 and 2022 are as follows:	fiscal 2023 and 2022 are as follows:
2023 Fair value of plan assets as of January 1 $ 37,583 Interest income 486 Remeasurement of net defined benefit liability (asset) 291 Amount contributed to the plan 1,167 Benefits paid under the plan (3,385) Fair value of plan assets at December 31 $ 36,142		2022 32,837 228 2,598 1,920 -
	$ 36,142	37,583

~ 57~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(4) Expenses recognized in profit or loss

The expenses recognized in profit or loss in fiscal 2023 and 2022 were as follows:

Current service cost Net interest on net defined benefit liability Operating cost Promotion expense Administration expense R&D expense	2023 $ 468 531	2022 587 313
	$ 999	900
	$ 102 424 318 155	106 362 295 137
	$ 999	900

(5) Remeasurement of net defined benefit liability (asset) recognized as other comprehensive income

The remeasurements of net defined benefit liability (asset) recognized as other comprehensive income in fiscal 2023 and 2022 are as follows:

Accumulated balance as of January 1 Recognized in the current period Accumulated balance as of December 31	2023 $ 938 (2,292)	2022 (1,852) 2,790
	$ (1,354)	938

(6) Actuarial assumptions

The significant actuarial assumptions used to determine the present value of the Company's defined benefit obligation at the end of the financial reporting period are as follows:

Discount rate Future salary increases	Dec. 31, 2023 1.20% 2.00%	Dec. 31, 2022
		1.30% 2.00%

The Company anticipates making contributions to defined benefit plans amounting to NT$1,185 thousand and NT$1,149 thousand within one year following the reporting dates of 2023 and 2022, respectively.

The weighted-average duration of the defined benefit plan for 2023 is 9 years.

~ 58~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(7) Sensitivity analysis

The effect of changes in key actuarial assumptions on the present value of the defined benefit obligation as of December 31, 2023 and 2022 are as follows:

December 31, 2023 Discount rate Future salary increases December 31, 2022 Discount rate Future salary increases	Effect on the defined benefit obligation Increase of 0.25% Decrease of 0.25% $ (1,835) 1,899 1,879 (1,825) (1,918) 1,987 1,968 (1,909)
	Increase of 0.25% $ (1,835) 1,879 (1,918) 1,968

The sensitivity analysis above analyzes the effect of changes in a single assumption with other assumptions held constant. In practice, changes in many assumptions may be linked. The sensitivity analysis is consistent with the methodology used to calculate the net pension liability on the balance sheet.

The methodology and assumptions used in preparing the sensitivity analysis are the same as those used in the previous period.

2. Defined contribution plan

As to the defined contribution plan, the Consolidated Company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of Labor Insurance, the Consolidated Company will not assume the legal or constructive obligations of paying extra amount.

The pension expense under the defined contribution retirement funds of the Consolidated Company for year 2023 and 2022 were NT$17,427 thousand and NT$16,866 thousand respectively, which have been contributed to the Bureau of Labor Insurance.

In accordance with the pension insurance system established by the government of the People’s Republic of China, the subsidiaries in Mainland China make monthly contributions to employees’ pension insurance based on a certain percentage of their salaries and wages. The monthly pension plan is administered and arranged by the government, and the above-mentioned company has no further obligation other than to make monthly contributions. The related pension expense for 2023 and 2022 were NT$357,922 thousand and NT$351,027 thousand, respectively.

~ 59~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(19) Income tax

1. The details of the income tax expense of the Consolidated Company are as follows: 2023 2022 Income tax expense for the period Current income tax $ 1,682,633 1,860,954 Tax on unappropriated retained earnings 174,484 70,405 Prior period current income tax adjustment (6,561) (128,480) 1,850,556 1,802,879 Deferred income tax expense Other deferred income tax expense (benefit) (58,803) (21,707) Adjustments from prior years 1,694 (685) Income tax expense $ 1,793,447 1,780,487 A breakdown of the Consolidated Company's income tax expense (benefit) recognized under other comprehensive income is as follows: 2023 2022 Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurements of defined benefit plan $ (458) 558 Components of other comprehensive income that will be reclassified to profit or loss: Exchange differences on translation $ (1,794) 830 The relationship adjustment between the Consolidated Company’s income tax expense (benefit) and pre-tax net income for 2023 and 2022 is as follows: 2023 2022 Net profit before tax $ 7,520,492 8,188,567 Income tax based on domestic tax rate 2,560,937 2,853,679 Adjustments based on local tax laws (921,533) (1,041,473) Unrecognized deferred tax assets from current taxable losses - 27,041 Recognition of previously unrecognized tax losses (15,574) - Adjustments to current income taxes for prior periods (4,867) (129,165) Additional tax levied on unappropriated retained earnings 174,484 70,405 Total $ 1,793,447 1,780,487	1. The details of the income tax expense of the Consolidated Company are as follows: 2023 2022 Income tax expense for the period Current income tax $ 1,682,633 1,860,954 Tax on unappropriated retained earnings 174,484 70,405 Prior period current income tax adjustment (6,561) (128,480) 1,850,556 1,802,879 Deferred income tax expense Other deferred income tax expense (benefit) (58,803) (21,707) Adjustments from prior years 1,694 (685) Income tax expense $ 1,793,447 1,780,487 A breakdown of the Consolidated Company's income tax expense (benefit) recognized under other comprehensive income is as follows: 2023 2022 Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurements of defined benefit plan $ (458) 558 Components of other comprehensive income that will be reclassified to profit or loss: Exchange differences on translation $ (1,794) 830 The relationship adjustment between the Consolidated Company’s income tax expense (benefit) and pre-tax net income for 2023 and 2022 is as follows: 2023 2022 Net profit before tax $ 7,520,492 8,188,567 Income tax based on domestic tax rate 2,560,937 2,853,679 Adjustments based on local tax laws (921,533) (1,041,473) Unrecognized deferred tax assets from current taxable losses - 27,041 Recognition of previously unrecognized tax losses (15,574) - Adjustments to current income taxes for prior periods (4,867) (129,165) Additional tax levied on unappropriated retained earnings 174,484 70,405 Total $ 1,793,447 1,780,487	1. The details of the income tax expense of the Consolidated Company are as follows: 2023 2022 Income tax expense for the period Current income tax $ 1,682,633 1,860,954 Tax on unappropriated retained earnings 174,484 70,405 Prior period current income tax adjustment (6,561) (128,480) 1,850,556 1,802,879 Deferred income tax expense Other deferred income tax expense (benefit) (58,803) (21,707) Adjustments from prior years 1,694 (685) Income tax expense $ 1,793,447 1,780,487 A breakdown of the Consolidated Company's income tax expense (benefit) recognized under other comprehensive income is as follows: 2023 2022 Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurements of defined benefit plan $ (458) 558 Components of other comprehensive income that will be reclassified to profit or loss: Exchange differences on translation $ (1,794) 830 The relationship adjustment between the Consolidated Company’s income tax expense (benefit) and pre-tax net income for 2023 and 2022 is as follows: 2023 2022 Net profit before tax $ 7,520,492 8,188,567 Income tax based on domestic tax rate 2,560,937 2,853,679 Adjustments based on local tax laws (921,533) (1,041,473) Unrecognized deferred tax assets from current taxable losses - 27,041 Recognition of previously unrecognized tax losses (15,574) - Adjustments to current income taxes for prior periods (4,867) (129,165) Additional tax levied on unappropriated retained earnings 174,484 70,405 Total $ 1,793,447 1,780,487
	2,560,937 (921,533) - (15,574) (4,867) 174,484	2,853,679 (1,041,473) 27,041 - (129,165) 70,405
	$ 1,793,447	1,780,487

~ 60~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

2. Deferred tax assets and liabilities

(1) Unrecognized deferred tax assets

The items not recognized as deferred tax assets of the Consolidated Company are as follows:

Inventory devaluation losses Tax losses	Dec. 31, 2023 $ - 52,747	Dec. 31, 2022 2,886 47,457
	$ 52,747	50,343

In accordance with the Income Tax Act, losses for the previous ten years may be deducted from net income before income tax is assessed. These items are not recognized as deferred tax assets because it is not probable that the Consolidated Company will have sufficient taxable income in the future to utilize the temporary differences.

Domestic subsidiaries, according to the Income Tax Act and approved by the tax authorities, can deduct losses from the previous ten years from the current year's net income for tax assessment purposes. As of December 31, 2023, for taxable losses not yet recognized as deferred tax assets by the Consolidated Company, the deduction periods are as follows:

Ememe Robot Co., Ltd.:

Year of loss 2013 (Approved) 2014 (Approved) 2015 (Approved) 2016 (Approved) 2017 (Approved) 2018 (Approved) 2019 (Approved) 2020 (Approved) 2021 (Approved) 2022 (Declared) 2023 (Estimated)	Losses not yet deducted $ 14,550 6,246 8,951 10,166 6,828 3,237 2,609 629 158 78 15 $ 53,467	Last year to be deducted
		2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Compertum Microsystems Inc.:

Year of loss 2019 (Approved) 2020 (Approved) 2021 (Approved) 2022 (Declared) 2023 (Estimated)	Losses not yet deducted $ 519 29,317 39,512 45,162 35,411 $ 149,921	Last year to be deducted
		2029 2030 2031 2032 2033

~ 61~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

GOOD NEWS MEDICAL CO., LTD.:

Year of loss 2020 (Approved) 2021 (Approved) 2022 (Declared) 2023 (Estimated)	Losses not yet deducted $ 1,203 3,743 4,498 7,805 $ 17,249	Last year to be deducted
		2030 2031 2032 2033

Lomites Co., Ltd.:

Year of loss 2020 (Approved) 2021 (Approved) 2022 (Declared) 2023 (Estimated)	Losses not yet deducted $ 64 5,623 14,827 22,585 $ 43,099	Last year to be deducted
		2030 2031 2032 2033

(2) Deferred tax assets recognized

Inventory valuation and obsolescence losses Undistributed pension costs Loss on decline in value of fixed assets and idle assets Refund liabilities Unrealized exchange loss Estimated payables Remeasurement of defined benefit plans Taxable losses Exchange differences on translation Derivative valuation losses Lease liabilities Other Deferred tax assets Deferred income tax liabilities recognized Unrealized exchange gain Investment income recognized by the equity method Gain recognized in bargain purchase transaction Unrealized gains on financial assets Right-of-use assets Deferred income tax liabilities	Dec. 31, 2023 $ 66,024 203 44 84,037 49,316 45,562 8,886 - 2,736 - 148,902 6,361	Dec. 31, 2022 66,843 237 44 76,809 890 55,234 8,428 527 942 1,693 85,303 165
	$ 412,071	297,115
	Dec. 31, 2023 $ 83,145 522 948 - 142,025	Dec. 31, 2022 2,606 67,787 1,045 1,955 81,040
	$ 226,640	154,433

(3) Deferred income tax liabilities recognized

~ 62~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

3. Income tax assessment

The profit-seeking enterprise income tax filings of the Company and its domestic subsidiaries—Jiayu Investment Co., Ltd., Ememe Robot Co., Ltd., Compertum Microsystems Inc., GOOD NEWS MEDICAL CO., LTD., Lomites Co., Ltd., Lintes Technology Co., Ltd., and Genie Precision Machine Co., Ltd.—have been approved by the tax authorities up to the fiscal year 2021.

4. Global Minimum Tax

The Consolidated Company's subsidiaries operating in Vietnam have obtained additional tax incentives, resulting in an effective tax rate below 15%.

The Consolidated Company recognizes supplementary taxes as current income tax when incurred, and temporary exemptions are applied to the related deferred income tax accounting for supplementary taxes, as detailed in Note (4).

(21) Capital and other equity

As of December 31, 2023 and 2022, the total authorized capital stock of the Company were all NT$1,550,000 thousand with a par value of $10 per share, and the actual amount issued were NT$1,113,298 and NT$1,068,762 thousand respectively.

In 2023, due to convertible bondholders exercising their conversion rights, the Company issued 142 thousand new shares. The issuance is pending legal registration and thus is recorded under bond conversion entitlement certificates at NT$1,423 thousand.

On November 10 and December 15, 2022, the board of directors resolved to issue 3,500 thousand new shares via a cash capital increase at NT$10 per share and an issue price of NT$660 per share, with April 7, 2023, set as the base date for the capital increase. This capital increase was approved by the Financial Supervisory Commission and legally registered on April 25, 2023.

In the 2022 fiscal year, the Company issued 1,735 thousand new shares due to the convertible bondholders exercising their conversion rights. Apart from a part of the issued shares that are still being processed due to the relevant legal registration procedures, listed as convertible bond certificates worth $9,536 thousand, the rest were completed in April, June, September, and December of 2022.

In 2021, due to convertible bondholders exercising their conversion rights, the Company issued 117 thousand new shares. Since the legal registration process was not yet completed, it is recorded under bond conversion entitlement certificates at NT$1,167 thousand, and the registration was completed in April 2022.

~ 63~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

1. Capital reserves

The components of the Company’s capital reserve are as follows:

. Capital reserves The components of the Company’s capital reserve	are as follows:
Premium of issued shares Convertible bond conversion premium Treasury stock transactions Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options Convertible bond stock options Expired subscription rights	Dec. 31, 2023 $ 6,951,216 1,266,891 423 522,172 40,330 114,556 805		Dec. 31, 2022 4,628,739 1,139,407 423 498,123 40,330 - - 6,307,022
	$ 8,896,393

In accordance with the Companies Act, capital reserves are required to cover losses first before new shares or cash can be issued in proportion to the shareholders’ original shares. Realized capital reserves referred to in the preceding paragraph include premiums from the issuance of shares in excess of par value and proceeds from gifts received. In accordance with the Regulations Governing the Issuer’s Offerings and Issuance of Marketable Securities, the aggregate amount of capital reserves that may be capitalized each year shall not exceed 10% of the paid-in capital.

2. Retained earnings

In accordance with the Company's Articles of Incorporation, after the final settlement of each year’s earnings, the Company shall first complete tax contributions, make up for prior years’ deficits, and set aside 10% as a legal reserve, except when the legal reserve has reached the total capital level. Subsequently, according to the laws, the special reserve may be set aside or reversed; if there are any profits remaining, along with accumulated undistributed profits, the board of directors will prepare a profit distribution proposal for resolution at the shareholder's meeting. The distribution of shareholder dividends must not be less than 20% of the net amount of the year's after-tax profits after legally mandated profit reserves have been deducted.

The Company will take into account the environment and growth of the Company and the distribution of earnings should take into account the Company’s future capital expenditure budget and capital requirements, and pay cash dividends of not less than 10% of the dividends distributed in the current year.

(1) Legal reserve

If the Company has no deficit, it may, by resolution of the shareholders in general meeting, issue new shares or cash out of the legal reserve to the extent that such reserve exceeds 25% of the paid-in capital.

~ 64~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) Special reserve

When the Company distributes the distributable profit, the net decrease in other equity items occurring in the year is added to the undistributed profit of the current period along with other items beyond the net profit after tax. A special reserve is set aside from the undistributed profit of the previous period. For accumulated decrease in other equity items of previous periods, an equal amount of special reserve shall be set aside from the undistributed profit of previous periods and cannot be distributed. When there is a reversal of other decreases in equity, profits can be distributed for the reversed part.

(3) Earnings distribution

The Company resolved the profit distribution for the fiscal years 2022 and 2021 at the annual general shareholders' meetings held on June 16, 2023, and June 17, 2022, respectively. The amounts distributed as dividends to shareholders are as follows:

Distributed to the holders of ordinary shares: Cash	2022 Payout ratio (NT$) Amount $ 25.18 2,803,575	2022 Payout ratio (NT$) Amount $ 25.18 2,803,575	2021 Payout ratio (NT$) Amount 15.92 1,695,646	2021 Payout ratio (NT$) Amount 15.92 1,695,646
	Payout ratio (NT$) $ 25.18		Payout ratio (NT$) 15.92

On March 12, 2024, the Company’s board of directors proposed the following 2023 earnings distribution:

Distributed to the holders of ordinary shares: Cash	2023 Payout ratio (NT$) Amount $ 26.00 2,898,275

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders’ Meeting is available on the “Market Observation Post System (MOPS)”

~ 65~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

3. Other equity

Exchange differences on translation of foreign operations $ (319,295) (449,712) - -	Unrealized gain (loss) on financial assets measured at FVTOCI (19,758) - 3,944 -	Unearned compensation - - - (6,162)	Total (339,053) (449,712) 3,944 (6,162)
$ (769,007)	(15,814)	(6,162)	(790,983)
$ (669,055) (51)	(13,278) -	- -	(682,333) (51)
	(13,278) - (6,480)	- - -	(682,384) 349,811 (6,480)
$ (319,295)	(19,758)	-	(339,053)

(22) Share-based payment

The Consolidated Company has the following share-based payment transactions:

Cash capital increase reserved for employee stock options	Cash capital increase reserved for employee stock options	Restricted Stock for Employees
TheCompany Lintes Technology	Lerain Technology
		Lintes Technology
2023.03.08 2022.01.31 350 thousand shares 431 thousand shares Current employees of the Consolidated Company Current employees of the subsidiary Immediate vesting Immediate vesting $ 161.00 $ 25.02	2022.03.29 122 thousand shares Current employees of the subsidiary Immediate vesting $ 0.30	2023.08.25 358 thousand shares Eligible employees of subsidiaries From the grant date to 6, 18, and 30 months of continuous employment, and upon achieving individual performance metrics or corporate operational goals set by the company: $ 69.61

~ 66~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

1. Cash capital increase reserved for employee subscription

The Company’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $52,309 thousand recognized in fiscal 2023.

In 2022, the subsidiary, Lintes Technology Co., Ltd., recognized a cost of $10,789 thousand for share-based employee compensation arising from the cash capital increase reserved for employees to subscribe for shares.

The costs recognized by the subsidiary, Lerain Technology Co., Ltd., for share-based employee compensation arising from the cash capital increase reserved for employees to subscribe for shares in 2022 was $36 thousand.

2. Restricted stock for employees

On June 15, 2023, the shareholder meeting of Lintes Technology Co., Ltd. resolved to issue restricted stock for employees, with August 25, 2023, as the base date for the capital increase (grant date). A total of 358 thousand shares were issued. The rights to the shares allocated to employees before fulfilling the vesting conditions are restricted, including prohibitions against selling, pledging, transferring, gifting to others, creating any encumbrance, or disposing of in any other manner. Other rights include, but are not limited to, entitlement to dividends, bonuses, statutory reserves, and capital reserves rights, as well as rights to subscribe to new shares in a cash capital increase, identical to those of the company’s already issued ordinary shares.

(23) Earnings per share

The calculation of basic earnings per share and diluted earnings per share of the Consolidated Company is as follows:

Consolidated Company is as follows:
Basic earnings per share: Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Basic earnings per share Diluted earnings per share: Net profit attributable to the Company in the year Dilutive potential ordinary shares: Convertible bond Net income attributable to equity holders of the Company’s common stock (adjusted for the effect of dilutive potential common stock) Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares: Employee bonuses Convertible bond Weighted average common shares outstanding (adjusted for the effect of dilutive potential common stock) Diluted earnings per share	2023 $ 5,593,032	2022 6,255,931
	110,416	106,539
	$ 50.65	58.72
	$ 5,593,032 9,302	6,255,931 5,897
	$ 5,602,334	6,261,828
	110,416 244 964	106,539 309 1,337
	111,624	108,185
	$ 50.19	57.88

~ 67~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(24) Revenue from contracts with customers

Please refer to Note XIV (3) and (4) for the disclosure of disaggregation of revenue for the major products and major regional markets.
Balance of contract

nce of contract
Contract liabilities	Dec. 31, 2023	Dec. 31, 2022 54,427	Jan. 1, 2022 97,494
	$ 30,617

The beginning balances of contract liabilities as of January 1, 2023 and 2022 were recognized as income of NT$45,847 thousand dollars and NT$80,636 thousand dollars respectively.

(25) Non-operating revenue/expense
Interest income

The breakdown of interest income of the Consolidated Company is as follows:

Interest on bank deposits	2023 $ 325,532	2022 46,801

Other income

The details of other income of the Consolidated Company are as follows:

		2023	2022
Dividend income	$	4,003	5,535
Income from molding		150,533	170,481
Income from compensation		1,451	5,189
Income from rentals		34,175	35,076
Income from subsidies		68,668	59,899
Others		153,457	91,522
	$	412,287	367,702
3. Other gains and losses
The details of other gains and losses of the Consolidated		Company are as follows:
		2023	2022
Foreign exchange gain	$	20,150	613,970
Net profit (loss) from financial assets (liabilities)
measured at FVTPL:
Derivatives:
Forward foreign exchange contracts		-	(8,390)
Embedded derivative		1,468	(323)
Financial products		-	1,296
Non-derivatives
Stock		9,547	(6,884)

~ 68~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Private equity funds Net gain from bond buyback Loss from the disposal of property, plant and equipment Lease modification interest Impairment losses on non-financial assets Other Total	(289) - - 35 (35,805) (28,364) 607 146 (37,320) - (33,256) (11,199)
	$ (74,898) 560,287

4. Financial costs

The details of the financial costs of the Consolidated Company are as follows:

Bank loans Lease liabilities Conversion of corporate bonds	2023	2022 22,923 22,673 9,513
	$ 22,910 34,122 14,086
	$ 71,118	55,109

(26) Compensation to employees and directors

In accordance with the Company’s Articles of Incorporation, no less than 3% of the Company’s annual profits shall be appropriated to the Compensation of Employees and no more than 3% to the Compensation of Directors; however, if the Company has accumulated losses, it shall retain the amount of compensation in advance and appropriate the Compensation of Employees and Directors in proportion to the aforementioned. The former Compensation of employees to whom stock or cash is issued may include employees of a subordinate company who meet certain criteria.

For the fiscal years 2023 and 2022, the estimated compensation amounts for employees were NT$202,700 thousand and NT$221,300 thousand, respectively, and for directors, both were NT$4,480 thousand. These estimations were based on pre-tax profits before employee and director compensation, multiplied by the distribution ratios set out in the Company’s Articles of Incorporation. These costs were reported as operating costs or expenses for the respective periods and were paid entirely in cash. Detailed information can be found on the Market Observation Post System. The amounts distributed as employee and director compensation as resolved by the board of directors match the estimated amounts in the consolidated financial reports for 2023 and 2022.

~ 69~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(27) Information on financial instruments and fair value

1. Credit risk

(1) Credit risk exposure

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $23,246,086 thousand and $18,178,606 thousand as of December 31, 2023 and 2022 respectively.

(2) Credit risk concentration risk

In order to reduce the credit risk of accounts receivable, the Consolidated Company continually evaluates the financial position of its customers and adjusts the terms of transactions between them if necessary. As of December 31, 2023 and 2022, the Consolidated Company had 7 and 5 different customers, respectively with accounts receivable balances exceeding 5% of total accounts receivable for a single customer. The Consolidated Company periodically evaluates the probability of recovery of accounts receivable and presents Provisions, and the total loss is always within management’s expectations.

(3) Impairment loss

The Consolidated Company uses a simplified method of estimating expected credit losses for all of its notes and accounts receivable, which is to measure expected credit losses over the life of the notes and accounts receivable, and for this purpose, the notes and accounts receivable are grouped by common credit risk characteristics that represent the ability of customers to pay all amounts due under contractual terms and are included in forward-looking information. The expected credit losses on the Consolidated Company’s notes and accounts receivable are analyzed as follows:

	Dec. 31, 2023	Expected credit loss in the duration of provision 77 267 3,275 52 196 3,612
Book value of notes and accounts receivable $ 9,310,187 279,125 24,870 236 392 3,642	Weighted average expected credit loss rate
	0.00% 0.10% 13.17% 22.03% 50.00% 99.18%
$ 9,618,452		7,479

~ 70~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

	Dec. 31, 2022	Expected credit loss in the duration of provision 369 1,119 6,380 6,222 466 10,689
Book value of notes and accounts receivable	Weighted average expected credit loss rate 0.00% 0.38% 8.94% 38.21% 49.79% 98.72%
$ 10,343,048 293,326 71,344 16,285 936 10,828
$ 10,735,767		25,245

The changes in the provisions for notes and accounts receivable of the Consolidated Company are as follows:

Opening balance Acquired through business combinations Recognition of impairment losses (reversal gains) Write-offs for the period Foreign currency translation (losses) gains Closing balance	2023
	$ 7,479 25,245

2. Liquidity risk

The contracts of financial liabilities are sorted by their maturity dates as follows. The

estimated interests are included, but the effect of net value agreement is excluded.

Book value $ 1,580,000 934,155 5,209 1,822,819 1,859,015 616,537	Cash flow from the contract 1,594,090 966,800 5,209 1,822,819 1,859,015 758,012	Within 6 months 591,019 - 5,209 1,822,819 1,859,015 82,043	6 12 months 1,003,071 - - - - 78,590	2-5years - 881,900 - - - 227,871	More than 5 years - - - - - 230,523
$ 6,817,735	7,005,945	4,360,105	1,081,661	1,109,771	230,523
$ 1,906,775 132,449 165,630 8,504 2,351,503 1,937,095 370,661	1,920,045 135,600 187,005 8,504 2,351,503 1,937,095 412,713	917,667 - 9,890 8,504 2,351,503 1,937,095 69,614	1,002,378 - 9,032 - - - 58,102	- 135,600 37,288 - - - 181,577	- - 113,784 - - - -
$ 6,872,617	6,952,465	5,294,273	1,069,512	354,465	113,784

~ 71~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The Consolidated Company does not anticipate that the cash flows analyzed at maturity date will alter significantly or that the actual amounts will vary significantly.

Market risk—exchange rate risk
(1) Exposure to exchange rate risk

The Consolidated Company’s financial assets and liabilities exposed to significant foreign currency exchange rate risk are as follows:

	Financial assets Currency USD RMB HKD JPY EUR INR VND Financial liabilities Currency USD RMB JPY EUR Financial assets Currency USD RMB HKD JPY EUR INR Financial liabilities Currency USD RMB EUR MOP		Dec. 31, 2023
		$

		$

		$ $	Foreign currency (Note) 642,058 236,085 45 305,602 1,160 4 267,351 1,173 272 8

~ 72~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Note: The foreign currencies denominated in the non-functional currencies of the consolidated entities include items that have been eliminated in the consolidated financial statements for inter-group transactions.

Due to the variety of functional currencies of the Consolidated Company, information on exchange gains and losses on monetary items is presented on a consolidated basis. Foreign currency exchange gains and losses (including realized and unrealized) amounted to a gain of $20,150 thousand and $613,970 thousand in fiscal 2023 and 2022, respectively.

(2) Sensitivity analysis

The Consolidated Company's exchange rate risk arises mainly from cash and cash equivalents denominated in foreign currencies, financial assets at FVTPL, accounts receivable and other receivables, short-term loans, accounts payable and other payables, which generate foreign currency exchange gains or losses upon translation. As of December 31, 2023 and 2022, when NTD depreciates or appreciates by 1% against the foreign currencies held by the Consolidated Company, with all other factors held constant, net income after tax would increase or decrease by $92,191 thousand and $101,146 thousand for year 2023 and 2022, respectively. The same basis was used for the analysis of both periods.

4. Market risk—changes in interest rates

The interest rate risk of the Consolidated Company mainly comes from the bank deposit and loan of floating rate, so the interest rate change will cause the effective interest rate of bank deposit and loan to change accordingly, and the future cash flow will fluctuate.

The following sensitivity analysis is based on the risk of interest rate shocks reported by financial instruments on the date of coverage. For floating rate liabilities, the analysis is based on the assumption that the reported amount of daily outstanding liabilities is current throughout the year. The rate of change used by the Consolidated Company in reporting interest rates to the main management is 1% up or down, which represents the management’s assessment of the reasonable range of possible interest rate changes.

The Consolidated Company’ financial assets with variable interest rates as of December 31, 2023 and 2022 were NT$4,086,086 thousand and NT$3,744,810 thousand, respectively, and its financial liabilities were NT$0 thousand and NT$242,405 thousand, respectively. If interest rates had increased or decreased by 1%, the Consolidated Company’ net income would have increased or decreased by NT$32,689 thousand and NT$28,019 thousand for year 2023 and 2022, respectively, with all other variables held constant.

~ 73~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

5. Market risk—fair value

(1) Fair value and carrying amount

The management of the Consolidated Company believes that non-derivative short-term financial instruments should be estimated at their fair value based on their book value on the balance sheet, and that their book value should be a reasonable basis for the estimated fair value because of the near expiry date of such commodities. This method is applied to cash and equivalent cash, notes receivable and payable, accounts receivable and payable, other receivables and payables, deposit margin and borrowings.

In addition to the above financial instruments, the fair value and book value information of the remaining financial instruments, investment properties and corporate bonds payable of the Consolidated Company on the financial reporting date are as follows:

Measured at fair value: Financial assets: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value Non-financial assets: Investment property Financial liabilities Bonds payable	Dec. 31, 2023 Book value Fairvalue $ 87,700 87,700 79,979 79,979 Dec. 31, 2023 Book value Fairvalue $ 344,997 410,733 934,155 934,870	Dec. 31, 2022 Book value Fairvalue 79,007 79,007 83,520 83,520 Dec. 31, 2022 Book value Fairvalue 97,817 162,684 132,449 131,573
	Book value $ 344,997 934,155	Book value 97,817 132,449

(2) The evaluation techniques used to determine fair value are as follows
A. When financial assets are quoted publicly in an active market, this market price is the fair value. When market prices are not available, estimates are made by reference to quoted counterparties or using valuation techniques. The estimates and assumptions used are consistent with the information used by market participants as estimates and assumptions in pricing financial instruments.
B. The fair value of investment properties is based on the evaluations of independent evaluators with recognized professional qualifications and recent experience in the area and type of investment properties evaluated.

~ 74~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(3) Fair value hierarchy

The following table analyzes the fair value hierarchy of financial instruments, investment properties and corporate bonds payable by valuation. Each fair value hierarchy is defined as follows:

A. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.
B. Level 2: Input parameters for an asset or liability are observable either directly (i.e., prices) or indirectly (i.e., derived from prices), except for publicly quoted prices included in Level 1.
C. Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable parameters).

Level 1 $ 53,290 78,835	Level 2 7,307 -	Level 3 27,103 1,144
$ 132,125	7,307	28,247
$ -	-	410,733
$ -	-	934,870
Level 1 $ 62,313 78,925	Level 2 16,531 -	Level 3 163 4,595
$ 141,238	16,531	4,758
$ -	-	162,684
$ -	-	131,573

(4) Transfer between the Level 1 and the Level 2

The Consolidated Company does not have any transfers between 2023 and 2022.

~ 75~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(5) Statement of changes in financial assets (liabilities) classified as Level 3 at fair value

Unit: NT$1,000

					2023	2023
			Total profit or loss				Increase			Decrease
				Recognized
			Recognized	in other						Sales,
		Opening	in profit or	comprehensi	Issuance		or	Transferred		disposal or	Closing
Name		balance	loss	ve income	purchase				to level 3	settlement	balance
Financial assets measured at FVTPL	$	163	1,179	-		26,200			-	(439)	27,103
Financial assets measured at FVTOCI		4,595	-	3,982	-				-	(7,433)	1,144
	$	4,758	1,179	3,982		26,200			-	(7,872)	28,247
					2022
			Total profit or loss				Increase			Decrease
				Recognized
			Recognized	in other						Sales,
		Opening	in profit or	comprehensi	Issuance		or	Transferred		disposal or	Closing
Name		balance	loss	ve income	purchase				to level 3	settlement	balance
Financial assets measured at FVTPL	$	65,757	(323)	-			150		-	(65,421)	163
Financial assets measured at FVTOCI		10,956	-	(4,939)	-				-	(1,422)	4,595
	$	76,713	(323)	(4,939)			150		-	(66,843)	4,758
The above included		gains	and losses	are reported		in “other gains				and losses” and
“unrealized valuation	gains (losses) on financial assets						at FVTOCI”,			which	relate to
assets still held as of December			31, 2023 and 2022 as follows:
								2023		2022
Total gain or loss
Recognized in profit (losses) (reported in “other					$				1,025		253
gains and losses”)
Recognized in other	comprehensive income								(154)		(5,295)
(reported in “unrealized valuation gains (losses) on
financial assets at FVTOCI”)

(6) Quantitative information on fair value measurements of significant unobservable inputs (Level 3)

The Consolidated Company’s financial assets primarily classified at fair value through profit or loss as Level 3 include derivative financial instruments, equity securities investments, private equity fund investments, and financial assets at fair value through other comprehensive income—equity securities investments. Quantitative information on significant unobservable inputs is as follows:

~ 76~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Item Financial assets measured at FVTPL - Embedded derivatives - right of redemption Financial assets measured at FVTPL - investment in private equity fund Financial assets measured at FVTOCI - investment in equity instruments with no active market Financial assets measured at FVTOCI - investment in equity instruments with no active market	Valuation techniques Binary tree method for pricing convertible bond Net asset value approach Comparable Company Analysis Net asset value approach	Significant unobservable inputs ‧Volatility as of December 31, 2023, and December 31, 2022, were 36.41%~41.78% and 41.43%, respectively ‧Net asset value ‧Price-to-NAV (Net Asset Value) ratio as of December 31, 2023, and December 31, 2022, were 1.630 and 1.475, respectively ‧Lack of market liquidity discount as of December 31, 2023, and December 31, 2022, were 15.70% and 15.80%, respectively ‧Net asset value	Relationship between significant unobservable inputs and fair value
			‧The higher the volatility, the higher the fair value ‧Higher net asset value leads to higher fair value ‧The higher the multiplier, the higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value ‧The fair value is positively correlated

(7) Valuation process for fair value classified in Level 3

The Company uses unobservable inputs for its fair value measurements and classifies its fair value in Level 3. The source of the input value for this level is the price provided by reference to counterparty quotations or market comparable companies’ net market value multipliers, etc., and the relevant quotations and valuation information are appropriately maintained. The results are subsequently reviewed to ensure consistency with the valuation sources and the reasonableness of the valuation results.

(8) Sensitivity analysis of fair value to reasonably possible alternative assumptions for

Level 3 fair value measurements

The Company’s fair value measurements of financial instruments are reasonable, but the use of different valuation models or valuation parameters may result in different valuation results. For financial instruments classified in Level 3, if the valuation parameters are changed, the impact on the profit or loss or other comprehensive income for the period is as follows:

~ 77~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

December 31, 2023 Financial assets measured at FVTPL Embedded derivatives - right of redemption Financial assets measured at FVTOCI Investments in equity instruments with no active market December 31, 2022 Financial assets measured at FVTPL Embedded derivatives - right of redemption	Input value	Upward or downward changes	Fair value changes reflected in profit or loss for the period	Fair value changes reflected in profit or loss for the period	Fair value changes reflected in other comprehensive income Favorable changes Unfavorab le changes - - - - 1 (2) 1 (2) - - - -
			Favorable changes	Unfavorab le changes	Favorable changes
	Volatility Stock price Net market value multiplier Lack of marketability discount Volatility Stock price	5% 10% 7% 7% 5% 10%	$ 385 1,664 - - 68 81	(1,013) (1,055) - - (68) (54)	- - 1 1 - -

Favorable and unfavorable changes in fair value represent fluctuations in fair value, which are calculated using valuation techniques based on various degrees of unobservable input parameters. If the fair value of a financial instrument is affected by more than one input, the above table reflects only the effect of changes in a single input and does not take into account the correlation and variability among the inputs.

(28) Financial risk management

The Consolidated Company is exposed to the following risks from the engagement of financial instruments:
(1) Credit risk

(2) Liquidity risk

(3) Market risk

This note presents the Consolidated Company’s risk information for each of these risks and the Consolidated Company’s objectives, policies and procedures for measuring and managing risk. For further quantitative disclosures, please refer to the respective notes to the consolidated financial statements.

2. Risk management structure

The Chairman has the sole responsibility for establishing and overseeing the Consolidated Company’s risk management structure and reports regularly to the Board on its operations.

~ 78~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The Consolidated Company’s risk management policy is designed to identify and analyze the risks faced by the Consolidated Company, to set appropriate risk limits and controls, and to monitor compliance with the risks and risk limits. The Consolidated Company develops a disciplined and constructive control environment through training, management guidelines and operating procedures to enable all employees to understand their roles and responsibilities.

The Audit Committee of the Consolidated Company oversees how management monitors compliance with the Consolidated Company’s risk management policies and procedures and reviews the appropriateness of the Consolidated Company’s risk management framework in relation to the risks it is exposed to. Internal auditors assist the Consolidated Company’s Audit Committee in its oversight role. These personnel conduct regular and exceptional reviews of risk management controls and procedures and report the results of these reviews to the Audit Committee.

Credit risk

Credit risk is the risk of financial loss arising from the failure of the Consolidated Company’s customers or counterparties to fulfill their contractual obligations, mainly from the Consolidated Company’s accounts receivable from customers and investments in securities.

(1) Accounts receivable and other receivables

The Consolidated Company’s credit risk exposures are primarily depended on each customer’s individual circumstances. However, management also considers statistical information about the Consolidated Company’s customer base, including the risk of default in the customer’s industry and country, as these factors may affect credit risk. Approximately 73% and 72% of the Consolidated Company’s revenue for 2023 and 2022, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

The Consolidated Company has established a credit policy whereby the Consolidated Company is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms. Credit sales limits are established on an individual customer basis and are reviewed periodically; customers who do not meet the Group’s benchmark credit rating may only transact business with the Consolidated Company on a pre-collection basis.

In monitoring customers’ credit risk, customers are grouped according to their credit characteristics, including whether they are individuals or legal entities, age of accounts, maturity dates and pre-existing financial difficulties. The Consolidated Company maintains a Provisions account to reflect estimates of losses on accounts receivable and other receivables.

~ 79~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) Use of funds

The Consolidated Company’s investments in equity securities are placed through a centralized trading market and therefore have no significant credit transaction risk.

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and reported to the Chairman of the Board of Directors by the Consolidated Company’s finance department. Since the Consolidated Company’s counterparties are creditworthy banks and financial institutions with investment grade or above, there are no significant performance concerns and therefore no significant credit risk.

4. Liquidity risk

Liquidity risk is the risk that the Consolidated Company will not be able to deliver cash or other financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Consolidated Company’s approach to manage liquidity risk is to ensure that the Consolidated Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Consolidated Company’s reputation. In addition, the Consolidated Company has entered into unused borrowing lines totaling $3,403,056 thousands and $3,641,250 thousand, repectively as of December 31, 2023 and 2022 to cover unanticipated payments.

5. Market risk

Market risk is the risk that changes in market prices, such as changes in exchange rates, interest rates, and prices of equity instruments, will affect the Consolidated Company’s revenue or the value of financial instruments held by the Consolidated Company. The objective of market risk management is to manage the exposure to market risk to an acceptable level and to optimize investment returns.

The Consolidated Company engages in derivative transactions in order to manage market risk. All transactions are executed in accordance with the guidelines of the Board of Directors.

(1) Exchange rate risk

The Consolidated Company uses derivative transactions to hedge exchange rate risk due to its exposure to exchange rate risk arising from sales and purchase transactions that are not denominated in each Group Enterprise’s functional currency. Gains or losses on foreign currency assets and liabilities arising from changes in exchange rates are largely offset against natural hedges. Derivative transactions can help the Consolidated Company reduce, but still not completely eliminate, the impact of changes in foreign currency exchange rates.

~ 80~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The Consolidated Company periodically reviews individual foreign currency assets and liabilities for exposures and hedges against such exposures.

(2) Interest rate risk

The Consolidated Company’s interest rate risk arises primarily from variable rate bank deposits and short-term loans, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term loans change.

(3) Equity instrument price risk

If the price of equity securities changes at the reporting date (the same basis is used for both periods of analysis and other changes are assumed to be constant), the effect on the consolidated profit and loss items would be as follows:


Other comprehensiv e income after tax $ 800		Other comprehensi ve income after tax 835


$ (800)	(606)		(835)	(788)

(29) Capital management

It is the Board’s policy to maintain a sound capital base to maintain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Consolidated Company’s share capital, capital surplus and retained earnings. The Board of Directors controls the rate of return on capital and also controls the level of dividends on ordinary shares.

In order to maintain or adjust its capital structure, the Consolidated Company may adjust dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to settle liabilities.

The Consolidated Company controls its capital on a debt-to-capital ratio basis. The ratio is calculated by dividing net debt by total capital. Net debt is total liabilities less cash and cash equivalents as shown on the balance sheet. Total capital represents all components of equity (i.e., equity, capital surplus, retained earnings and other equity) plus net debt. The debt-to-capital ratio at the reporting date is as follows:

debt-to-capital ratio at the reporting date is as follows:
Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2023 $ 8,571,397 (13,132,491)		Dec. 31, 2022 8,868,067 (7,090,304) 1,777,763 24,512,876 6.76%
	$ (4,561,094)
	$ 29,381,002
		(18.38)%

~ 81~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Changes in the debt-to-capital ratio as of December 31, 2023, were mainly due to operational profits, increased cash levels, and decreased net debt.

(30) Investment and fund-raising activities for non-cash transactions

The information on non-cash investment and financing activities of the consolidated company for the 2023 and 2022 fiscal years is as follows:

For details on the conversion of convertible corporate bonds into common shares, please refer to Note VI (14).
For details on obtaining right-of-use assets through leasing, please refer to Note VI (9) and (15).

The adjustments of liabilities arising from financing activities of the consolidated company in 2023 and 2022 are as follows:

Short-term loans Bonds payable Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	Jan. 1, 2023 Cash flow $ 1,906,775 (317,432) 132,449 1,079,877 165,630 (165,630) 370,661 (284,009)	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2023 (10,000) 657 - 1,580,000 (278,171) - - 934,155 - - - - 540,337 (10,452) - 616,537
	$ 2,575,515 312,806	252,166 (9,795) - 3,130,692

Short-term loans Bonds payable Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	Jan. 1, 2022 Cash flow $ 1,142,178 714,342 911,927 343,468 44,405 121,225 506,589 (260,133)	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2022 - 50,255 - 1,906,775 (1,122,946) - - 132,449 - - - 165,630 118,081 6,124 - 370,661
	$ 2,605,099 918,902	(1,004,865) 56,379 - 2,575,515

VII. Related Party Transactions

(1) Parent company and ultimate controller: The Company is the ultimate controller of the Consolidated Company and the Consolidated Company’s subsidiaries.
(2) Names and relationships of related parties

The related parties that had transactions with the Company during the period covered by these consolidated financial statements are as follows:

Name of related parties Relationship with the Company

LeRain Technology Co., Ltd. Key management personnel

An associate of the Consolidated Company Including the directors, managers and their families and spouses

Note: Transactions with related parties are disclosed only for the period with associates.

~ 82~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(3) Material transactions with the related parties

Amounts payable to related parties

The details of the Consolidated Company’s payables to related parties are as follows:

Accounting Item	Related Party Category	Dec. 31, 2023 $ 49	Dec. 31, 2022 -
Accounts payable	Associates

2. Purchases

The amount of purchases from related parties by the Consolidated Company is as follows:

Associate	2023 $ 91	2022 -

The purchase prices from related parties are not significantly different from those from general suppliers. The payment terms are three months, which are not significantly different from those of general suppliers.

3. Non-operating income

Associate	2023 $ 56	2022 -

Mainly rental income from parking spaces.

4. Leases

The Consolidated Company leases a warehouse from key management personnel and signed a one-year lease agreement based on the rental rates of nearby areas, with a total contract value of NT$60 thousand. Interest expenses recognized for 2023 and 2022 were NT$1 thousand each, with lease liabilities as of December 31, 2023, and 2022 amounting to NT$59 thousand and NT$0 thousand, respectively.

(4) Major management personnel transactions

Related compensation includes:

Short-term employee benefits Post-employment benefits Share-based payment	2023 $ 128,611 1,313 8,766	2022 211,794 1,328 430 213,552
	$ 138,690

For details on share-based payments, please refer to note 6 (22).

~ 83~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

VIII. Pledged Assets

The carrying value of the assets pledged as collateral by the Consolidated Company was as follows:

Name of asset Property, plant and equipment	Dec. 31, 2023 $ 204,260	Dec. 31, 2022 246,448

IX. Significant Contingent Liabilities and Unrecognized Contractual Commitments

(1) Significant unrecognised contract commitments:

The Consolidated Company's significant construction contracts signed but not yet paid for as of December 31, 2023, are as follows:

for as of December 31, 2023, are as follows:
	Unit: NT$1,000	in foreign currency
		Dec. 31, 2023
Significant construction contract amounts in:
RMB		$	41,408
VND			17,340,908
NTD			10,131

(2) The issuance of guarantee notes for bank loans, financing lines and derivative financial commodity transactions:

Guaranteed notes	Dec. 31, 2023 $ 2,887,704	Dec. 31, 2022 5,020,405

X. Significant Disaster Loss: None.

XI. Significant Post-Period Events:

(1) On February 26, 2024, the board of directors of Lintes Technology Co., Ltd. resolved:
To meet the operational needs of Lintes Thailand, a wholly-owned subsidiary, it is proposed to increase its capital by up to THB 155,000 thousand (approximately NT$141,000 thousand), with a par value of THB 10 per share. The funds will be transferred in installments according to the financial needs of Lintes Thailand.
Some employees allocated restricted stock under the employee stock option plan did not meet the vesting conditions. As a result, Lintes Technology Co., Ltd. repurchased these restricted stocks at the issuance price. Besides the share capital of NT$55 thousand already recovered by December 31, 2023, an additional NT$11 thousand in share capital was recovered prior to this board meeting. The board resolved to cancel the aforementioned issued share capital of NT$66 thousand (i.e., 6,600 shares), reducing the total issued shares from 62,642,311 shares to 62,635,711 shares. The record date for the capital reduction is set for March 6, 2024.

~ 84~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) To raise funds for constructing the Longtan factory building, purchasing machinery for the Longtan factory, and making long-term equity investments in Lintes Thailand, Lintes Technology Co., Ltd., resolved on November 8, 2023, to issue the second series of domestic unsecured convertible corporate bonds. These were approved by the competent authority on December 20, 2023. The unsecured convertible bonds, totaling 3,000 units with a face value of NT$100 thousand each, have a coupon rate of 0% and a term of three years. The funds totaling NT$344,232 thousand were fully collected on January 17, 2024.

XII. Others

(1) Employee benefits, depreciation, depletion, and amortization functions are summarized below:

below:
Function Nature	2023			2022
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salary expenses Labor insurance and health insurance expenses Pension expenses Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	3,878,365 590,300 4,922 - 192,162 1,714,558 2,302	1,934,546 186,402 15,467 6,695 112,828 619,075 55,653	5,812,911 776,702 20,389 6,695 304,990 2,333,633 57,955	4,960,411 619,006 3,157 - 237,096 1,679,313 2,254	1,820,365 159,252 14,609 8,817 150,098 533,643 53,457	6,780,776 778,258 17,766 8,817 387,194 2,212,956 55,711

(2) Seasonality of operations:

The Company’s operations are subject to seasonal fluctuations due to the downstream computer industry.

~ 85~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

XIII. Disclosing Information

(1) Major transaction details

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Company should disclose the following information about major transactions for year 2022:

1. Capital lending to others:

Unit: NT$1,000

No.	Lender	Borrower	Item	Related party	Max amount for the period	Closing balance	Actual amount	Interest rate	Nature of the lending (Note 1)	Transaction amount	Purpose for lending	Allowance for bad debt	Collateral	Collateral	Lending limit for single party (Note 2)	Overall lending limit (Note 2)
													Name	Value
1	Lintes Technology Co.,Ltd.	Genie Precision Machine Co., Ltd.	Other receivables - related parties	Yes	30,000	30,000	29,000	1.72	2	-	To repay loan	-	None	-	289,173	1,156,693

Note 1: The following are the descriptions of the funds lending.

(1) Those who have business dealings.

(2) When there is a need for short-term financing.

Note 2: (1) The amount of the Company’s financing to a single party shall not exceed 20% of the Company’s net worth.

The total amount of funds lent by the Company to others shall not exceed 40% of the Company’s net worth.

(2) Lintes Technology Co., Ltd. must not lend more than 10% of its net value to a single entity.

Lintes Technology Co., Ltd.'s total amount of funds lent to others must not exceed 50% of its net value.

a. For those with business transactions, the total amount of funds lent must not exceed 10% of the company's net value.

b. For those needing short-term funding, the total amount of funds lent must not exceed 40% of the company's net value.

2. Endorsement:

Unit: NT$1,000/1,000 in foreign currency

No.	Endorseme nt provider	Endorsee	Endorsee	Ceiling on amount of endorsement for an enterprise (Note 2)	Balance of the ceiling endorsement fee in the period	Ending balance of the endorsement fee	Amount actually used	Amount of endorsemen t backed by assets	Percentage of the accumulated amount of endorsement in the net value of current financial statement(%)	Ceiling on amount of endorsement (Note 2)	Endorsement made by parent company to subsidiary	Endorsement made by subsidiary to parent company	Endorseme nt made to any party in Mainland China
		Company Name	Relatio nship (Note 1)
0 0 1 2	The Company " Lotes Guangzhou Co., Ltd. Lintes Technology Co., Ltd.	REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. REKA Technology Co., Ltd. Genie Precision Machine Co., Ltd.	2 2 1 2	5,554,612 5,554,612 2,061,227 1,445,866	537,920 628,400 (USD20,000) 97,275 (USD3,000) 146,600	- 153,525 (USD5,000) 92,115 (USD3,000) 130,000	- - - -	- - - -	0.00% 0.55% 0.89% 4.50%	13,886,529 13,886,529 5,153,069 2,891,732	Y " N Y	N " " "	N Y N "

Note 1: There are seven types of relationship between the Endorser and Endorsee, which can be marked:

(1) Companies with business dealings.

(2) Companies in which the company directly and indirectly holds more than 50% of the voting rights.

(3) Companies that hold more than 50% of the voting rights in the company, both directly and indirectly.

(4) The Company owns, directly and indirectly, more than 90 percent of the voting shares.

(5) Company that is mutually insured under a contract between its peers or co-manufacturers based on the need to perform the work.

(6) Company in which all of the contributory shareholders have given their endorsement in proportion to their shareholding in the joint venture.

~ 86~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(7) Intercompany performance guarantees and guarantees for pre-sale contracts in accordance with the Consumer Protection Act.

Note 2: (1) The amount of the Company’s guarantee for a single corporate endorsement shall not exceed 20% of the net worth of the Company.
The aggregate amount of the Company’s guarantees under external endorsement shall not exceed 50% of the net worth of the Company.
(2) The amount of Lotes Guanghou Co., Ltd’s guarantee for a single corporate endorsement is limited to not more than 20% of the net worth of the company.
The aggregate amount of Lotes Guanghou Co., Ltd’s external endorsement guarantees is limited to an amount not exceeding 50% of the Company’s net worth.
(3) The amount of Lintes Technology Co., Ltd.’s guarantee for a single corporate endorsement is limited to not more than 50% of the net worth of the company.
The aggregate amount of Lintes Technology Co., Ltd.’s external endorsement guarantees is limited to an amount not exceeding 100% of the Company’s net worth.
Securities held at the end of fiscal period (excluding the equity of controlled by subsidiaries, affiliated companies, or joint company):

Unit: NT$ 1,000

Holding company	Category and name of security	Relationship with the issuer of the security	Accounting item	End of the period	End of the period	End of the period	End of the period	Maximum shareholding or capitalization in theperiod	Remark
				Shares	Book value	Shareholding ratio	Fair value
Lotes Co., Ltd. " " " Zhaxi Investment Co., Ltd. " " " " Lintes Technology Co., Ltd. "	VSO ELECTRONICS CO., LTD. NEXUS CVC Partners Fund LP - private equity fund SteadyBeat Technology Corporation G-sau Co., Ltd. Grand-Tek Technology Co., Ltd. LIAN HONG ART CO., LTD. OTO PHOTONICS, INC. LUCEMITEK CO., LTD. AICP Technology Corporation Chailease Holding Company Limited Class A Preferred Shares Hotai Finance Co., Ltd. Class A Preferred Shares	None " " " " " " " " " "	Financial assets measured at FVTPL - current Financial assets measured at FVTPL – non-current Financial assets measured at FVTOCI - non-current " Financial assets measured at FVTPL - current " " " Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-current "	90,800 - 212,020 300,000 392,815 1,088,719 1,368,800 1,169,977 400,000 512,000 300,000	7,307 24,711 1,129 15 18,364 34,926 - - - 50,125 28,710	0.24 % - % 2.17 % 10.38 % 1.31 % 2.87 % 4.10 % 17.33 % 5.33 % 0.34 % 0.60 %	7,307 24,711 1,129 15 18,364 34,926 - - - 50,125 28,710	0.49% - % 4.35% 12.10% 1.31% 2.91% 4.10% 17.33% 5.33% 0.34% 0.60%	Note Note

Note: All of them were recognized in losses.

The cumulative purchase or sale of the same securities amounted to at least NT$300 million or 20% of the paid-in capital:

Unit: NT$1,000/1,000 in foreign currency

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counterparty	Nature of Relationship	Beginning Balance(Note 1)	Beginning Balance(Note 1)	Acquisition(Note 1)	Acquisition(Note 1)	Disposal(Note 1)	Disposal(Note 1)	Disposal(Note 1)	Disposal(Note 1)	Ending Balance(Note 1)	Ending Balance(Note 1)
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Value	Gain/Loss on Disposal	Shares	Amount
Lotes Co., Ltd. Lintes Technology Co., Ltd.	Lotes Viet Nam Company Limited Lintes Technology (Thailand) Co., Ltd	Investments accounted for using the equity method "	Lotes Viet Nam Company Limited Lintes Technology (Thailand) Co., Ltd	Note2 Note2	42,200,000 6,400,000	1,295,75 (USD42,200 57,70 (THB64,000	1 ) 32,429,000 9 ) 32,200,000	995,732 (USD32,429) 290,609 (THB258,000) (USD1,888)	- -	- -	- -	- -	74,629,000 38,600,000	2,291,483 (USD74,629) 348,318 (THB322,000) (USD1,888)

Note 1: Conversion into New Taiwan Dollars is based on the exchange rate on the balance sheet date.

Note 2: The subsidiary's issued securities were acquired through cash capital increase.

~ 87~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Acquisition of real property amounting to NT$300 million or 20% or more of the paid-in capital:

capital:	capital:	capital:	capital:	capital:	capital:	capital:
							Unit: NT$1,000
The company which acquired the property	Name of asset	Date of occurrence	Amount of transaction (Note 2)	Payment condition (Note 2)	Counterparty of transaction	Relation	If the counterparty is a related party, the information of its previous transfer shall be provided				Reference for pricing	Purpose of the acquisition and the condition of use	Other agreed matters
							Owner	Relationship with the issuer	Date of transfer	Amount
Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. LOTES VIET NAM COMPANY LIMITED Zhongshan Dezhi Real Estate Development and Operation Co.,Ltd.	Plant (Note 1) " Plant (Note 1) Land use rights	2017.10 ~ 2023.02.28 2019.10 ~ 2023.12 2022.03~ 2023.12 2023.02.10	1,793,895 348,891 598,866 249,876	1,621,212 342,401 578,057 249,876	Chongqing Chuangyou Construction Group, etc. " VITECCONS CONSTRUCTION INVESTMENT JOINT STOCK COMPANY Zhongshan Municipal Natural Resources Bureau	None " " "	- - - -	- - - -	- - - -	- - - -	Tendering " Tendering Transaction prices for governmental construction land use rights	Construction of self-use plant " Construction of self-use plant Business development	None " " "

Note 1: Build the factory by own contracting committee.

Note 2: The conversions were made at the exchange rates prevailing on the balance sheet date.

Disposal of real property amounting to NT$300 million or 20% or more of paid-in capital: None.
The amount of sales to or from related parties is at least $100 million or 20% of the paid-in capital:

Unit: NT$ 1,000

The company which purchases (sells) products	Name of transaction counterparty	Relationship	Transaction status	Transaction status	Transaction status	Transaction status	Situation and reason for the conditions of transaction to be different from the ordinary ones	Situation and reason for the conditions of transaction to be different from the ordinary ones	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Remark
			Purchases (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " " " " " Lotes Guangzhou Co., Ltd. " " " " " Lintes Technology (Suzhou) Co., Ltd. Lotes Hengnan Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. Guangzhou Leside Technology Co., Ltd. " "	The Company Lotes Suzhou Co., Ltd. The Company Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. " Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Lotes Zhongshan Co., Ltd. " REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lintes Technology Co., Ltd. Lotes Zhongshan Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. REKA Technology Co., Ltd. Lotes Zhongshan Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd.	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " " " " " " " Subsidiary The surrogate parent company are the same parent company " The surrogate parent company are the same parent company " " "	Net sales Net purchases Net sales Net purchases " Net sales Net purchases Net sales Net purchases Net sales Net purchases " " Net sales " Net sales " Net sales Net purchases Net sales "	1,316,107 1,386,087 9,413,378 6,196,311 1,015,488 137,972 6,317,936 1,521,821 612,492 146,863 766,171 238,052 333,391 138,369 1,359,338 363,754 132,314 200,420 441,350 707,026 877,230	94.26 % 99.27 % 67.35 % 44.98 % 7.37 % 0.99 % 45.86 % 10.89 % 13.30 % 2.09 % 16.64 % 5.17 % 7.24 % 1.97 % 97.93 % 26.86 % 9.77 % 18.04 % 22.21 % 33.88 % 42.04 %	`月結`90 `天` " " " " " " " " " " " " " " `月結`90 `天` " " " "	- - - - - - - - - - - - - - - - - - - - -	No significant difference " " " " " " " " " " " " " " No significant difference " " " "	211,845 (236,004) 3,499,107 (2,235,650) (162,900) 46,373 (1,602,945) 736,376 (307,353) 50,325 (273,713) (88,375) (48,422) 9,266 521,489 104,324 61,828 8,954 (236,064) 285,299 411,039	89.64% (99.76)% 56.60% (48.90)% (3.56)% 0.75% (35.06)% 11.91% (30.66)% 1.77% (27.31)% (8.82)% (4.83)% 0.33% 97.00% 19.61% 11.62% 2.36% (23.56)% 26.96% 38.84%

~ 88~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Amounts due from related parties amounting to at least NT$100 million or 20% of paid-in capital:

Unit: NT$ 1,000

Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the related party	Turnover ratio	Past due receivables from the related party	Past due receivables from the related party	Amounts due from related parties recovered after the period	Allowance for losses
					Amount	Handling
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " " " " Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guangzhou Co., Ltd. " Lotes Zhongshan Co., Ltd. " " " Lotes Hengnan Co., Ltd. " Guangzhou Leside Technology Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd.	Parent company " Lotes Guangzhou Co., Ltd. Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Zhongshan Huixing Electronics Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. Guangzhou Leside Technology Co., Ltd. Zhongshan Huixing Electronics Co., Ltd. REKA Technology Co., Ltd. Lotes Zhongshan Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lintes Technology Co., Ltd.	Subsidiary " The surrogate parent company are the same parent company " " " " Parent company The surrogate parent company are the same company " " " " " " " " " Subsidiary	211,845 3,499,107 273,713 484,934 736,376 159,096 236,004 949,431 2,235,650 673,231 1,602,945 307,353 236,064 145,838 162,900 104,324 285,299 411,039 521,489	5.00 3.49 3.14 - 2.60 1.30 4.78 - 4.18 - 4.37 1.90 1.95 1.55 6.35 4.59 3.45 2.49 2.42	- - - - - - - - - - - - - - - - - - -		210,728 1,655,927 124,363 139,518 286,103 45,796 215,585 - 1,155,908 57,217 982,560 165,056 114,741 17,429 61,891 70,312 148,347 203,652 203,495	- - - - - - - - - - - - - - - - - - -

Engagement in derivative transactions: None.

~ 89~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Business relationships and material transactions between parent and subsidiaries: Business relationships and significant intercompany transactions in 2023

Unit: NT$ 1,000

				Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
No.	Name	Transaction with	Relationship	Transaction in 2023
				Subject	Amount	Term	Operating revenue Accounting for total assets
0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 2 2 3 3 3 3 3 3 3 3 3 3 4 4 5 5 5 5 5 6 6 6 6 7 8	The Company " " " Lotes Guangzhou Co., Ltd. " " " " " " " " " " " Lotes Suzhou Co., Ltd. " REKA Technology Co., Ltd. " " " " " " " " " Lintes Technology (Suzhou) Co., Ltd. " Lotes Zhongshan Co., Ltd. " " " " Guangzhou Leside Technology Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd.	Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " REKA Technology Co., Ltd. " " " Lotes Zhongshan Co., Ltd. " " " " Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Xincheng Development Co., Ltd. " Lotes Hengnan Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " Guangzhou Leside Technology Co., Ltd. " Good Hope Investments Limited Zhongshan Huixing Electronics Co., Ltd. Lintes Technology Co., Ltd. " Lotes Hengnan Co., Ltd. " Guangzhou Leside Technology Co., Ltd. " Zhongshan Huixing Electronics Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. " REKA Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd.	1 1 1 1 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Net purchases Accounts payable Net purchases Accounts payable Sales revenue Purchases for the period Accounts receivable Accounts payable Accounts payable Other receivables Sales of fixed asset Purchases for the period Sales revenue Purchases for the period Purchases for the period Sales revenue Sales revenue Accounts receivable Purchases for the period Sales revenue Accounts payable Purchases for the period Accounts payable Accounts receivable Sales revenue Accounts receivable Other payables Accounts receivable Sales revenue Accounts receivable Purchases for the period Accounts payable Sales revenue Accounts receivable Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable Sales revenue Sales revenue	1,316,107 211,845 9,413,378 3,499,107 6,196,331 766,171 2,235,650 273,713 307,353 673,231 155,016 612,492 146,863 238,052 333,391 138,369 1,386,087 236,004 1,015,488 137,972 162,900 6,317,936 1,602,945 484,934 1,521,821 736,376 949,431 159,096 1,359,338 521,489 363,754 104,324 441,350 236,064 145,838 877,230 411,039 707,026 285,299 200,420 132,314	Same as general transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	5.38% 0.56% 38.45% 9.22% 25.31% 3.13% 5.89% 0.72% 0.81% 1.77% 0.41% 2.50% 0.60% 0.97% 1.36% 0.57% 5.66% 0.62% 4.15% 0.56% 0.43% 25.80% 4.22% 1.28% 6.22% 1.94% 2.50% 0.42% 5.55% 1.37% 1.49% 0.27% 1.80% 0.62% 0.38% 3.58% 1.08% 2.89% 0.75% 0.82% 0.54%

Note 1: The number should be filled in as follows:

0 refer to parent company
Subsidiaries are numbered by company, starting with the Arabic numeral 1. Note 2: The type of relationship with the counterparty is indicated below:
Parent company to subsidiaries
Subsidiaries to parent company
Subsidiaries to subsidiaries

~ 90~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) Information on Reinvestment Business:

Information on the Company’s investees in 2023was as follows (excluding investees in

China):

China):	China):	China):	China):
				Unit: NT$1,000
Name of the company investing	Name of investee company	Location	Main business	Initial investment amount (Note 1)		Shares held at the end of the fiscal period			Maximum shareholding or capitalization in the period	Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remarks
				End of this period	End of the previous year	Shares	Percentage	Book value
The Company " " " " " " " " " " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. " " " Good News Medical Co., Ltd. Lintes Technology Co., Ltd. Lintes Technology Co., Ltd. " " " Jilong Co., Ltd.	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. Lomites Co., Ltd. I-See Vision Technology Inc. LOTES VIET NAM COMPANY LIMITED Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited Ememe Robot Co., Ltd. Compertum Microsystems Inc. Good News Medical Co., Ltd. Lintes Technology Co., Ltd. FELICITY NEWS LIMITED Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Lerain Technology Co., Ltd. Jilong Co., Ltd. LINTES TECHNOLOGY (THAILAND) CO., LTD. Rihui Co., Ltd.	Samoa " " Anguilla Taiwan America Germany Taiwan " " Vietnam Hong Kong Samoa Hong Kong " " Taiwan " " " British Virgin Islands " Taiwan " Samoa Thailand Samoa	Holding and investment " " " General investment Market development Market development Design, test and sale of chips Manufacturing and trading of mechanical equipment and electronic parts Design, research and development, and manufacturing services for contact lenses Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Sales of connectors for the information industry, communications industry, and consumer electronics industry Sales of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Holding and reinvestment Manufacturing of electrical and audio-visual electronic products Manufacturing of electronic components Manufacturing and sales of machinery and equipment, electronic components, and optical instruments Manufacturing of electronic parts and components, other electrical and electronic machinery and equipment Holding and reinvestment Manufacturing and sales of optical molds Manufacturing of electronic components Design, test and sale of chips Holding and reinvestment Manufacturing, processing, and trading of wires, cables, and electronic components Holding and reinvestment	799,865 12,321 614,604 15,353 690,000 76,763 3,398 47,321 123,800 94,000 2,291,483 799,865 3,071 3,110 614,614 15,353 69,600 60,866 6,360 616,859 1,013 164,833 20,279 5,471 151,990 348,318 151,990	799,996 12,323 614,704 15,355 690,000 76,775 3,272 47,321 124,900 - 1,295,962 799,996 3,071 3,110 614,715 15,355 69,600 60,866 6,360 616,919 - 164,833 20,279 5,471 152,015 57,709 152,015	26,050,000 401,281 20,016,426 500,000 72,300,000 2,500,000 100,000 4,732,059 12,380,000 9,400,000 74,629,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 4,331,380 636,000 31,075,140 33,000 14,671,000 1,443,135 547,059 4,950,000 38,600,000 4,950,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 15.74% 99.04% 21.01% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.78% 25.44% 49.61% 100.00% 60.00% 10.59% 1.82% 100.00% 100.00% 100.00%	9,949,958 2,035,859 4,351,613 201,685 1,493,390 88,500 4,744 30,534 83,364 47,666 1,894,288 10,306,155 1,356 1,085,047 4,387,190 201,685 (8,184) 9,656 1,941 1,434,537 1,037 180,123 3,217 3,530 547,774 344,599 547,774	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 15.74% 99.92% 21.01% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.78% 25.44% 50.24% - % 60.00% 10.59% 1.82% 100.00% 100.00% 100.00%	1,600,810 194,701 878,688 23,890 190,233 5,925 254 6,476 (22,585) (183,101) (147,235) 1,600,810 (19) 194,719 878,688 23,890 (15) (35,411) (7,805) 396,730 12 (52,241) (35,411) 6,475 81,966 (3,216) 81,966	1,699,504 194,701 871,190 23,890 190,458 5,925 254 1,330 (22,916) (21,474) (147,235) 1,600,810 (19) 194,719 878,688 23,890 (14) (11,252) (1,986) 197,752 12 (31,800) (3,749) 118 80,006 (3,216) 80,006	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

Note 1: The original investment amount was converted into New Taiwan dollars using the exchange rate at the balance sheet date.

Note 2: The investment income or loss recognized in the current period includes adjustments for unrealized gains or losses from intercompany transactions.

~ 91~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(3) Investment in China:

Names of investee companies in Mainland China, major business activities, and other related information:

Unit: NT$ 1,000

Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Investment method (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or recovered	Amount remitted or recovered	Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscalperiod	Shareholding ratio	Gain/loss in investment recognized in the fiscal period (Note 2)	Carrying amount of investment at the end of the fiscalperiod	Investment income remitted back to Taiwan by the end of the fiscalperiod	Amount remitted or recovered
					Remitted	Recovered
Lotes Guangzhou Co., Ltd. Lotes Suzhou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Zhongshan Jinmeida Metal Surface Treatment Co., Ltd. Guangzhou Dezhi Technology Co., Ltd. Zhongshan DeZhi Real Estate Development Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd. ZhongShan HuiXing Electronics Co., Ltd. Ningbo Huili Electronic Technology Co., Ltd. Guangzhou Jiashimei Trading Co., Ltd.	Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Development and production of the measurement instruments for optical communication, optical transceivers of 10GB/s or above and relevant technical support Manufacturing of robotic arms, automation equipment and relevant components Manufacturing connectors for telecommunication industry and for consumer electronics industry, and manufacturing of robotic arms, automation equipment and relevant components Surface treatment of metal products and plastic products Development of real estate, lease of premises, landscape design and interior decorating Surface treatment of metal products and plastic products Manufacturing of computers, communication, and other electronic equipment Real estate development, house rental, landscape design, and interior decoration Research, testing and development R&D and sales of electronic components, automobile components and accessories, computers and accessories, development of molds and the import and export of goods and technologies Manufacturing of connectors for the information technology, communication industries, and consumer electronics Manufacturing of connectors for the information technology, communication industries, and consumer electronics Engaging in the manufacture and sale of audio equipment, Class II medical devices, mechanical equipment, electronic components, and optical instruments	819,824 613,769 15,353 1,131,511 151,990 108,175 3,028,900 263,947 99,521 44,482 2,164 253,130 20,337 6,923 33,318 4,327 1,013	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (2)	782,978 613,769 15,355 - 151,990 - - - - - - - - - - - -	- - - - - - - - - - - - - - - - 1,013	- - - - - - - - - - - - - - - - -	782,978 613,769 15,353 - 151,990 - - - - - - - - - - - 1,013	1,600,810 878,688 23,890 203,962 78,175 18,397 979,691 33,677 1,013 (824) (41) (10) 79,413 8,858 (34,126) (2,291) 12	100.00% 100.00% 100.00% 100.00% 49.61% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00% 30.06% 51.00% 100.00%	100.00% 100.00% 100.00% 100.00% 50.24% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00% 31.65% 51.00% 100.00%	1,699,523B 871,189B 23,890B 184,741B 37,809C 18,397B 979,691B 33,677B 485B (3,621)B (41)B (8,232)B 79,413B 4,517B (2,795)B (1,168)B 12B	9,949,927 4,351,473 201,685 1,686,900 307,641 168,785 5,301,921 300,699 98,642 98,978 2,124 244,950 190,634 6,108 227 1,057 1,037	- - - - - - - - - - - - - - - - -

~ 92~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Note 1: There are six types of investments:

  - (1) Investment in Chinese Corporation via Third Region Remittance.

  - (2) Establishment of a company to reinvest in a continental company through a third regional investment.

  - (3) Reinvest in Chinese companies by re-investing in existing companies in third regions.

  - (4) Direct Investment

  - (5) Others.

  - (6) N/A.

Note 2: (1) The investment gain or loss recognized in the current period has been reconciled with the unrealized gain or loss from intercompany transactions.
- (2) Basis of recognition of investment income and loss is divided into the following four categories, which should be noted:
  - A. Financial statements audited by an international accounting firm with a cooperative relationship with the CPA firms in Taiwan
  - B. Financial statements audited by the parent company’s certified accountant in Taiwan
  - C. Financial statements audited by the subsidiary's certified accountant in Taiwan D. Other
Note 3: The balance sheet date exchange rates are used to translate the paid-in capital and remittance of cumulative investment amounts into New Taiwan dollars.
Investment ceiling in Mainland China:

Company name	Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA
Lotes Co.,Ltd.	$1,412,100 thousand	$1,559,749 thousand	$16,663,835 thousand
Lintes Technology Co., Ltd.	$151,990 thousand	$151,990 thousand	$1,735,039 thousand
GOOD NEWS MEDICAL CO., LTD.	$1,013 thousand	Note 2	$4,579 thousand

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date.

Note 2: As the relevant statutory filing procedures have not yet been completed, the approved investment amount is not yet available.

3. Significant transactions with the investee companies in China:

Please refer to the “Information on Significant Transactions” and “Business Relationships and Significant Transactions between Subsidiaries and Parents” for details of significant direct or indirect transactions between the Company and its investees in Mainland China in fiscal 2023, which have been eliminated in the preparation of the consolidated financial statements.

~ 93~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(4) Information on Major Shareholders:

ation on Major Shareholders:
Shares Name of Major Shareholder	Shares held	Shareholding %
Chin-LingInvestment Co.,Ltd.	10,956,237	9.82%
JiamingInvestment Co.,Ltd.	9,797,037	8.78%

Note:

(1) The information on major shareholders in this table is based on the last business day of each quarter and is calculated based on the total number of common shares and preferred shares held by shareholders who have completed the delivery of unregistered shares (including treasury shares) of the Company of at least 5%. The number of shares recorded in the Company’s financial statements and the actual number of shares delivered without physical registration may differ depending on the basis of computation.
(2) The above information is revealed by the trustee’s opening of a trust account with individual subaccounts of the principal if the shareholder has delivered his or her shares to the trust. As for any shareholder holding more than 10% of the shares of the Company in accordance with the Securities and Exchange Act, the shareholdings include its own shares plus the shares it has delivered to the trust and has the right to decide on the use of the trust property, etc. Please refer to the Market Observation Post System for information on insider shareholdings.

XIV. Segmental Information

(1) General information

The Company’s main business is the trading of various hardware and tool parts, the manufacturing, processing and trading of various terminals and their finished connectors, the import and export trade of the preceding items, and the agency of the preceding items related to domestic and foreign manufacturers’ products in the tender quotation and distribution business.

(2) Information on reportable segment profit or loss, assets, liabilities and their measurement basis and reconciliation

The Consolidated Company’s major decisions are based on the performance appraisal and resource allocation by the production regions. After analysis, the two regions meet the conditions of consolidation into a single operating segment, therefore the Consolidated Company as a whole is a single operating segment, and the information of segment profit or loss, segment assets and segment liabilities are consistent with the financial statements.

~ 94~

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(3) Product and labor provision information

The Consolidated Company’s revenue information from external customers is as

follows:

Product and labor	2023 $ 7,139,280 6,495,604 3,273,846 3,224,559 2,298,452 1,325,145 726,577	2022 7,211,569 8,145,108 3,565,682 3,487,379 2,961,513 931,868 796,015 27,099,134
DT Server NB Strategic Projects LINTES(High Speed Cable) Automotive Other Total
	$ 24,483,463

(4) Geographical information

The geographical information of the consolidated company is as follows, categorized based on the geographic location of the customers.

Area Revenue from external customers: Taiwan Mainland China Other Total Area Non-current assets Taiwan Mainland China Other	2023 $ 2,902,628 17,890,444 3,690,391	2022 4,182,196 19,633,031 3,283,907 27,099,134 Dec. 31, 2022 1,464,157 8,365,737 1,079,935 10,909,829
	$ 24,483,463
	Dec. 31, 2023 $ 1,295,998 7,945,559 2,035,392 $ 11,276,949

~ 95~

AI assistant

LOTES — Audit Report / Information 2023

52339_rns_2023-11-14_d685303a-2b57-4755-aec4-702e5e05e694.pdf

Lotes Co., Ltd. and Subsidiaries

Consolidated Financial Statements and Accountant’s Audit Report

2023 & 2022

Notice to Readers

Table of Contents

Declaration

Independent Auditor’s Report

Audit opinion

Key audit matters

Emphasis of Matter

Other Matters

Responsibility from management level and governing unit towards the consolidated financial statements

Responsibility of accountants’ audit on the consolidated financial statements

Consolidated Balance Sheet

December 31, 2023 and 2022

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income

From January 1 to December 31, 2023 and 2022

Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Changes in Equity

From January 1 to December 31, 2023 and 2022

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows

From January 1 to December 31, 2023 and 2022

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows (Continued)

From January 1 to December 31, 2023 and 2022

Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements

2023 & 2022

(All amounts are in NT$ thousands unless otherwise stated)

I. Company History

II. Date and Procedures of Approval of Financial Statement

III. Application of New and Revised Standards and Interpretations

IV. Summary of Major Accounting Policies

2. Functional currency and presentation currency

(3) Consolidation basis

1. Subsidiaries included in the consolidated financial statements

(4) Foreign currency

1. Foreign currency trading

1. Financial assets

(4) Financial liabilities

(5) Derecognition of financial liabilities

(6) Offset between financial assets and liabilities

3. Derivative financial instruments

(8) Inventory

(9) Investments in Associates

2. Subsequent costs

(13) Intangible assets

1. Recognition and measurement

2. Subsequent expenditure

3. Amortization

(14) Non-financial asset impairment

1. Defined contribution plan

(21) Earnings per share

V. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties

VI. Descriptions for Important Accounting Items

1. Financial assets measured at FVTPL

(4) Inventory

(5) Investments accounted for using the equity method

1. Associates

2. Guarantees

(2) Identifiable assets acquired and liabilities assumed

(3) Goodwill

2. Acquisition of additional equity interests in subsidiaries

7. Subsidiary employee stock options expired

(7) Subsidiaries with significant non-controlling interests

1. Comprehensive financial information of Lintes Technology Co., Ltd.:

(8) Property, plant and equipment

Other

(10) Investment property

(11) Intangible assets

(12) Short-term loans

(14) Bonds payable

(2) Conversion Details

(1) Issuance details

LOTES Audit Report / Information 2023