PBF — Audit Report / Information 2023

Nov 14, 2023

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Stock Code:1760

PANION & BF BIOTECH INC.

Parent Company Only Financial Statements

With Independent Auditors' Report For the Years Ended December 31, 2023 and 2022

Address: 16F., No. 3, Park St., Nangang Dist., Taipei City, Taiwan (R.O.C.) Telephone: (02)2655-8218

The independent auditors' report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' report and parent company only financial statements, the Chinese version shall prevail.

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Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors' Report 4. Parent Company Only Statements of Financial Position 5. Parent Company Only Statements of Comprehensive Income 6. Parent Company Only Statements of Changes in Equity 7. Parent Company Only Statements of Cash Flows 8. Notes to the Parent Company Only Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) Application of new and revised standards, amendments and interpretations (4) Summary of material accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses due to major disasters (11) Subsequent events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information List of major account titles

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KPMG

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Independent Auditors' Report

To the Board of Directors of PANION & BF BIOTECH INC.:

Opinion

We have audited the accompanying parent company only financial statements of PANION & BF BIOTECH INC. ("the Company"), which comprise the statements of financial position as of December 31, 2023 and 2022, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the accompanying financial position of the Company as of December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and Attestation Engagements of Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements for the year ended December 31, 2023. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1. Revenue recognition

Please refer to notes 4(n) and 6(o) for the related disclosures on revenue recognition.

Description of key audit matter:

Revenue is one of the key performance indicators for evaluating the financial and operational performance of the Company. The risk for the revenue being recognized in an incorrect period or being recognized with incorrect amounts presents a material misstatement to the parent company only financial statements. Therefore, revenue recognition was considered one of the key audit matters in our audit.

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

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How the matter was addressed in our audit:

Testing the effectiveness of the internal control over sales and receivable collection processes, including the evaluation of when to recognize the revenue from those significant contracts with customers; evaluating the sales to the top ten customers by considering the product type, the significant unusual changes in their receivables turnover ratio, and the changes, such as amount and ranking, in the current period to the last quarter, and to the same period in the prior year; selecting sales transactions throughout the year and within a period before and after the year-end, and vouching them with the related supporting documents to evaluate whether the revenue has been recognized in the correct accounting period and assess if the significant sales returns and allowances occur in the subsequent period.

2. Subsequent measurement of inventories

Please refer to notes 4(g), 5 and 6(c) for the related disclosures on subsequent measurement of inventories.

Description of key audit matter:

The inventories of the Company are mainly pharmaceutical drugs, health supplements, chemical products and test reagents. The products may be outdated or no longer meet the market demand due to the rapid development of new products. In addition, the price competition in the same industry, and the demand on related products and their prices which may fiercely fluctuate, may result in a risk wherein the cost of inventories may exceed its net realizable value. The subsequent measurement of inventories relies on the management's subjective judgment using internal and external evidences. Therefore, the subsequent measurement of inventories was considered one of the key audit matters in our audit.

How the matter was addressed in our audit:

Assessing the rationality of accounting policy for inventory subsequent measurement; obtaining the documents on inventory subsequent measurement to determine whether they are in compliance with the accounting policy; understanding the rationality of sales prices adopted by the management, selecting samples and verifying the accuracy of net realizable value of inventories by examining relevant documents, and determining the reasonableness of the inventory provision recognized by the management.

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

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company's financial reporting process.

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Auditors' Responsibilities for the Audit of the Financial Statements

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

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the parent company only financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the audit.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements for the year ended December 31, 2023 and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors' report are Lu, Lily and Chao, MinJu.

KPMG

Taipei, Taiwan (Republic of China) March 7, 2024

Notes to Readers

The accompanying parent company only financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such parent company only financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and parent company only financial statements, the Chinese version shall prevail.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) PANION & BF BIOTECH INC.

Parent Company Only Statements of Financial Position

December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note 6(a)) 1151 Notes receivable (notes 6(b) and (o)) 1161 Notes receivable－related parties (notes 6(b), (o) and 7) 1170 Accounts receivable, net (notes 6(b) and (o)) 1181 Accounts receivable－related parties (notes 6(b), (o) and 7) 1200 Other receivables 1220 Current income tax assets 130x Inventories (note 6(c)) 1410 Prepayments (note 7) 1479 Other current assets Total current assets Non-current assets: 1510 Financial assets measured at fair value through profit and loss－non- current (note 6(d)) 1550 Investments accounted for using equity method (note 6(e)) 1600 Property, plant and equipment (notes 6(f) and 8) 1755 Right-of-use assets (note 6(g)) 1780 Intangible assets (note 6(h)) 1840 Deferred tax assets (note 6(l)) 1915 Prepayments for equipment 1920 Refundable deposits (note 8) Total non-current assets 1xxx Total assets	December 31, 2023 Amount % $ 410,033 15 92,109 3 25,577 1 163,200 6 15,654 1 3,194 - 5,920 - 324,716 12 12,882 - 120 - 1,053,405 38 22,220 1 905,193 33 668,132 25 28,185 1 883 - 24,582 1 - - 14,567 1 1,663,762 62 $ 2,717,167 100	December 31, 2022 Amount % 331,616 12 87,214 3 31,435 1 153,775 6 23,061 1 34 - 5,378 - 336,791 12 15,036 1 231 - 984,571 36 35,193 1 1,014,921 37 664,743 24 24,500 1 1,444 - 21,122 1 6,750 - 13,117 - 1,781,790 64 2,766,361 100 Liabilities and Equity Current liabilities: 2100 Short-term loans (notes 6(i) and 8) 2170 Accounts payable (note 7) 2200 Other payables (notes 6(l), (p), 7 and 9) 2230 Current tax liabilities 2280 Current lease liabilities (note 6(j)) 2399 Other current liabilities Total current liabilities Non-Current liabilities: 2570 Deferred tax liabilities (note 6(l)) 2580 Non-current lease liabilities (note 6(j)) 2640 Net defined benefit liability－non-current (note 6(k)) 2645 Guarantee deposits 2650 Credit balance of investments accounted for using equity method (notes 6(e) and 9) Total non-current liabilities Total liabilities 31xx Equity attributable to owners of parent (note 6(m)): 3110 Common stock 3200 Capital surplus Retained earnings: 3310 Legal reserve 3320 Special reserve 3350 Unappropriated earnings Subtotal Other equity: 3410 Foreign currency translation differences for foreign operations Total equity Total liabilities and equity	December 31, 2023	December 31, 2023		December 31, 2022 Amount % 250,000 9 119,010 4 248,024 9 24,448 1 11,113 - 42,123 2 694,718 25 19,729 1 14,463 1 11,122 - 2,592 - 16,624 1 64,530 3 759,248 28 857,391 31 871,174 31 74,519 3 37,371 1 188,497 7 300,387 11 (21,839) (1) 2,007,113 72 2,766,361 100
			Amount	%

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) PANION & BF BIOTECH INC.

Parent Company Only Statements of Comprehensive Income

For the years ended December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Common Share)

4000 Operating revenue (notes 6(o) and 7) 5000 Operating costs (notes 6(c), (k), 7 and 9) Gross profit 5910 Less: Net changes in unrealized profit from intercompany sales 5900 Gross profit 6000 Operating expenses (notes 6(b), (k) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit losses Total operating expenses 6900 Operating income 7000 Non-operating income and expenses (notes 6(d), (e), (q) and 7): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Finance costs 7375 Share of losses of subsidiaries and joint ventures 7635 Losses on financial assets measured at fair value through profit and loss Total non-operating income and expenses Profit from continuing operations before tax 7950 Less: Income tax expenses (note 6(l)) Net income 8300 Other comprehensive income (loss) (notes 6(e), (k) and (l)): 8310 Items that will not be reclassified subsequently to profit or loss 8311 Gains on remeasurements of defined benefit plans 8349 Less: income tax related to items that will not be reclassified subsequently to profit or loss Total items that will not be reclassified subsequently to profit or loss 8360 Items that may be reclassified subsequently to profit or loss 8361 Foreign currency translation differences for foreign operations 8380 Share of other comprehensive income of joint ventures 8399 Less: income tax related to items that will be reclassified subsequently to profit or loss Total items that may be reclassified subsequently to profit or loss 8300 Other comprehensive income, net of tax Total comprehensive income Earnings per share (note 6(n)) 9710 Basic earnings per share (expressed in New Taiwan dollars) 9810 Diluted earnings per share (expressed in New Taiwan dollars)	2023 Amount % $ 1,614,316 100 635,208 40 979,108 60 (47) - 979,155 60 383,217 24 133,896 8 199,096 12 155 - 716,364 44 262,791 16 5,782 - 30,917 2 (444) - (5,387) - (127,588) (8) - - (96,720) (6) 166,071 10 88,852 5 77,219 5 565 - 113 - 452 - (1,557) - (669) - - - (2,226) - (1,774) - $ 75,445 5 $ 0.90 $ 0.90	2022 Amount % 2,112,014 100 811,597 39 1,300,417 61 (1,694) - 1,302,111 61 369,391 17 171,391 8 230,015 11 185 - 770,982 36 531,129 25 1,499 - 34,311 2 10 - (3,801) - (128,216) (6) (103,081) (5) (199,278) (9) 331,851 16 149,506 7 182,345 9 6,038 - 1,207 - 4,831 - 12,296 1 3,236 - - - 15,532 1 20,363 1 202,708 10 2.13 2.12

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) PANION & BF BIOTECH INC.

Parent Company Only Statements of Changes in Equity

For the years ended December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2022 Appropriation and distribution: Legal reserve Special reserve appropriated Cash dividends Cash dividends from capital surplus Net income for the year Other comprehensive income for the year Total comprehensive income for the year Balance at December 31, 2022 Appropriation and distribution: Legal reserve Cash dividends Cash dividends from capital surplus Net income for the year Other comprehensive income for the year Total comprehensive income for the year Balance at December 31, 2023	Common stock		Capital surplus				Retained earnings	Retained earnings	Retained earnings			Foreign currency translation differences for foreign operations	Foreign currency translation differences for foreign operations	Total equity
					Legal reserve		Special reserve	Unappropriated earnings			subtotal
	$ 857,391 - - - - - - - 857,391 - - - - - - $ 857,391		903,755 - - - (32,581) - - - 871,174 - - (4,287) - - - 866,887		63,848 10,671 - - - - -		37,283 - 88 - - - -		108,108 (10,671) (88) (96,028) - 182,345 4,831 187,176 188,497 (18,718) (167,191) - 77,219 452 77,671 80,259		209,239 - - (96,028) - 182,345 4,831 187,176 300,387 - (167,191) - 77,219 452 77,671 210,867		(37,371) - - - - - 15,532 15,532 (21,839) - - - - (2,226) (2,226) (24,065)	1,933,014 - - (96,028) (32,581) 182,345 20,363 202,708 2,007,113 - (167,191) (4,287) 77,219 (1,774) 75,445 1,911,080
					-		-
					74,519 18,718 - - - -		37,371 - - - - -
					-		-
					93,237		37,371

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) PANION & BF BIOTECH INC.

Parent Company Only Statements of Cash Flows

For the years ended December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Income before tax Adjustments: Adjustments to reconcile profit and loss Depreciation expense Amortization expense Expected credit loss Net loss (gain) on financial assets measured at fair value through profit or loss Interest expense Interest income Dividend income Share of losses of subsidiaries and joint ventures accounted for using equity method Loss on disposal of property, plant and equipment Net changes in unrealized profit from intercompany sales Total adjustments to reconcile profit and loss Changes in operating assets and liabilities relating: Net changes in operating assets: Financial assets mandatorily measured at fair value through profit or loss Notes receivable Notes receivable－related parties Accounts receivable Accounts receivable－related parties Other receivables Inventories Prepayments Other current assets Total net changes in operating assets Net changes in operating liabilities: Accounts payable Other payables Other current liabilities Net defined benefit liability Total net changes in operating liabilities Total net changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Income taxes paid Net cash flows from operating activities Cash flows from investing activities: Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Decrease in other receivables－related parties Increase in prepayments for equipment Interest received Dividends received Net cash flows used in investing activities Cash flows from financing activities: Increase in short-term loans Decrease in short-term loans Guarantee deposits received Repayment of the principal portion of lease liabilities Cash dividends paid Interest paid Net cash flows from (used in) financing activities Effect of exchange rates on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year	2023 $ 166,071 104,830 561 155 (2,077) 5,387 (5,782) (2,275) 127,588 265 (47) 228,605 - (4,895) 5,858 (9,580) 7,407 (3,160) 12,075 2,154 111 9,970 11,400 (43,505) 3,489 (175) (28,791) (18,821) 209,784 375,855 (115,453) 260,402 15,050 (3,270) (86,824) - (1,450) - - - 5,782 2,275 (68,437) 720,000 (650,000) 4,797 (11,780) (171,478) (5,080) (113,541) (7) 78,417 331,616 $ 410,033	2022 331,851 94,076 560 185 103,081 3,801 (1,499) (1,541) 128,216 280 (1,694) 325,465 (29,964) (7,681) 4,501 (19,601) (12,662) 1,436 14,541 (9,550) (231) (59,211) (5,815) 60,964 2,226 (317) 57,058 (2,153) 323,312 655,163 (103,762) 551,401 15,000 (347,559) (142,071) 202 - 7,144 18,000 (6,750) 1,499 1,541 (452,994) 1,395,000 (1,195,000) 399 (11,175) (128,609) (3,745) 56,870 - 155,277 176,339 331,616

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

For the years ended December 31, 2023 and 2022

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

(1) Company history

PANION & BF BIOTECH INC. (the “Company”) was established on January 7, 1976, as a corporation limited by shares in accordance with the Republic of China (“ROC”) Company Act. The Company is a PIC/S GMP certified manufacturer, and is mainly engaged in the manufacture and sales of pharmaceutical, cosmeceutical, supplement, diagnostic and medical device.

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

The parent company only financial statements were authorized for issuance by the Board of Directors on March 7, 2024.

(3) Application of new and revised standards, amendments and interpretations:

• (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. ("FSC") which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2023:

• ●Amendments to IAS 1 “Disclosure of Accounting Policies”

• ●Amendments to IAS 8 “Definition of Accounting Estimates”

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

The Company has initially adopted the new amendment, which do not have a significant impact on its financial statements, from May 23, 2023:

• ●Amendments to IAS 12 “International Tax Reform—Pillar Two Model Rules”

• (b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2024, would not have a significant impact on its financial statements:

• ●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”

(Continued)

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PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The Company does not expect the following new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

• ●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”

• ●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”

• ●Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information”

• ●Amendments to IAS 21 “Lack of Exchangeability”

(4) Summary of material accounting policies:

The material accounting policies applied in the preparation of the parent company only financial statements are set out below. These accounting policies have been applied consistently to all periods presented in these parent company only financial statements.

(a) Statement of compliance

The accompanying parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

• (b) Basis of preparation

• (i) Basis of measurement

The parent company only financial statements have been prepared on a historical cost basis except otherwise specified in the notes to accounting policies.

• (ii) Functional and presentation currency

The Company determined its functional currency based on the primary economic environment in which the Company operates. The parent company only financial statements are presented in New Taiwan dollars, which is the Company's functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

(c) Foreign currencies

• (i) Foreign currency transactions

Transactions in foreign currencies are translated into the functional currency at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the spot rate at that date. Exchange differences are recognized in profit or loss.

Non-monetary items denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

(Continued)

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PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(ii) Foreign operations

The assets and liabilities of foreign operations are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

(d) Classification of current and non-current assets and liabilities

Cash or cash equivalents, excluding the asset that is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period, and assets held for trading purposes and expected to be converted to cash within twelve months after the reporting period are classified as current assets; all other assets are classified as non-current assets.

Liabilities that are held primarily for the purpose of trading and must be settled within twelve months after the reporting period are classified as current liabilities; all other liabilities are classified as non-current liabilities.

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

The Company's time deposits are held for short-term commitments rather than for investment or other purposes. These time deposits are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. As such, the time deposits are recorded under cash and cash equivalents.

(f) Financial instruments

(i) Financial assets

The Company classifies financial assets into the following categories: financial assets measured at amortized cost and financial assets measured at fair value through profit or loss (FVTPL).

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

(Continued)

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PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• 1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• ‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• 2) Financial assets measured at fair value through profit or loss

All financial assets not classified as measured at amortized cost or fair value through other comprehensive income (FVOCI) are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

• 3) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, notes and accounts receivable, other receivables, and refundable deposits, etc.) and contract assets.

Loss allowance for notes and accounts receivable and contract assets are measured at an amount equal to lifetime ECL. Other financial assets measured at amortized cost are considered reasonable and supportable information that are relevant and available, without undue cost or effort. This includes both quantitative and qualitative information, as well as analysis, based on the Company's historical experience, informed credit assessment, and forward-looking information. Loss allowance for other financial assets measured at amortized cost are measured by using the 12-month ECL, in which the credit risk did not increase significantly since initial recognition. If, on the other hand, there has been a significant increase in credit risk since initial recognition, a loss allowance is recognized at an amount equal to the lifetime ECL.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss.

(Continued)

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PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof; the Company usually determines the financial assets with no reasonable expectations of recovery when the debtors' assets or income sources cannot generate sufficient cash flows to repay the financial assets. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

4) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definition of financial liabilities and equity instruments.

2) Equity instruments

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

4) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligation has been discharged or cancelled or has expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(Continued)

13

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• 5) Offsetting of financial assets and liabilities

The Company presents financial assets and liabilities on a net basis when the Company has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(g) Inventories

The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition.

Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. When the cost of inventories is higher than the net realizable value, inventories are written down to net realizable value, and the write-down amount is charged to current year's cost of goods sold. If net realizable value increases in the future, the cost of inventories is reversed within the original write-down amount, and such reversal is treated as a reduction of cost of goods sold.

• (h) Investments accounted for using equity method

Investments accounted for using the equity method include investments in associates and joint ventures. Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies. A joint venture is a joint arrangement whereby the Company has joint control of the arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control, and the Company has rights to the net assets of the arrangement.

Investments in associates and joint ventures are accounted for using the equity method and are recognized initially at cost. The cost of the investments includes transaction costs. The carrying amount of the investment in associates and joint ventures includes goodwill arising from the acquisition less any accumulated impairment losses.

The parent company only financial statements include the Company's share of the profit or loss and other comprehensive income of those associates and joint ventures, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate or a joint venture's equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual proportionate share.

Unrealized gains resulting from transactions between the Company and an associate or a joint venture are eliminated only to the extent of unrelated Company's interests in the associate or the joint venture. Unrealized losses are eliminated in the same way as unrealized gains, but only if there is no evidence of impairment losses.

When the Company's share of losses of an associate or a joint venture equals or exceeds its interests in an associate or a joint venture, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate or the joint venture.

(Continued)

14

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

The Company discontinues the use of the equity method and measures the retained interest at fair value from the date when its investment ceases to be an associate or a joint venture. The difference between the fair value of retained interest and proceeds from disposing, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Company accounts for all the amounts previously recognized in other comprehensive income in relation to that investment on the same basis as would have been required if the associates or the joint ventures had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Company reclassifies the gain or loss from equity to profit or loss when the equity method is discontinued. If the Company's ownership interest in an associate or a joint venture is reduced while it continues to apply the equity method, the Company reclassifies the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest to profit or loss.

When the Company subscribes to additional shares in an associate or a joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Company's proportionate interest in the net assets of the associate or the joint venture. The Company records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Company's ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(i)

Investment in subsidiaries

When preparing the parent company only financial statements, the investments in subsidiaries are recognized by the Company using the equity method. Under the equity method, the net income, other comprehensive income, and equity in the parent company only financial statements are equivalent to those attributable to the shareholders of the parent company in the consolidated financial statements.

Changes in the Company's ownership interest in subsidiaries that do not result in the Company losing control over its subsidiaries are accounted for as equity transactions.

(j) Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. Interest expenses that are directly attributable to bringing the asset to the condition necessary for its intended use are capitalized as costs of the assets.

Subsequent expenditures should be recognized as part of the carrying amount of an item of property, plant and equipment, if it is probable that the future economic benefits associated with the expenditure will flow to the Company and the amount can be reliably measured. The carrying amount of the replaced part should be derecognized. Routine maintenance expenditures for items of property, plant and equipment are recognized in profit or loss as incurred.

(Continued)

15

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as those of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses.

Except that land is not depreciated, depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives. The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

follows:
Buildings	6~50 years
Machinery equipment	1~21 years
Other equipment	1~20 years

Depreciation methods, useful lives, and residual values are reviewed at each annual reporting date and adjusted if appropriate when the expectations differ from the previous estimates.

(k) Lease

(i) Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease.

(ii) As a leasee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at, or before, the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by using the impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the incremental borrowing rate. Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term and in future lease payments the lease liability is remeasured. The Company remeasures the lease liabilities with a corresponding adjustment to the carrying amount of the right-of-use asset, or in profit and loss, if the carrying amount of the right-of-use asset has been reduced to zero.

(Continued)

16

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

The Company has elected not to recognize the right-of-use assets and lease liabilities for its short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(l) Intangible assets

Patent is measured at cost, less accumulated impairment losses. Amortization begins when the asset is available for use, with the estimated useful lives 5 to 15 years on a straight-line basis, and is recognized in profit or loss.

Residual values, useful lives and amortization methods are reviewed at each annual reporting date. Any changes will be treated as changes in the accounting estimates.

Goodwill is measured at cost, less accumulated impairment losses. The Company conducts an impairment test at the end of each annual reporting period. An impairment loss is recognized by the amount which the carrying amount exceeds its recoverable amount. Reversal of an impairment loss in the subsequent periods for goodwill is prohibited.

－ (m) Impairment non-financial assets

With regard to non-financial assets (other than inventories, deferred tax assets and employee benefits), the Company assesses at the end of each reporting period whether there is any indication that an impairment loss has occurred and estimates the recoverable amount for assets with an indication of impairment. If it is not possible to determine the recoverable amount for the individual asset, then the Company will have to determine the recoverable amount for the asset's cashgenerating unit.

The recoverable amount for an individual asset or a cash generating unit is the higher of its fair value less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. Impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount, increasing the individual asset's or cash-generating unit's carrying amount to its estimated recoverable amount. The reversal of an impairment loss of an individual asset or cash-generating unit cannot exceed the carrying amount of the individual asset or cash-generating unit, less any depreciation or amortization, had it not recognized an impairment loss.

(n) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company's main types of revenue are explained below.

(Continued)

17

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(i) Sale of goods

The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(ii) Patent licensing

The Company grants its patent licenses to customers, and receives royalty fees based on the contract terms. The Company recognizes revenue when the performance obligation has been satisfied, the control of the licenses has been transferred, and the customer can direct the use of the licenses and obtains the benefits. A sales-based royalty fee is recognized only when the later of the subsequent sale occurs, and the performance obligation to which the royalty fees has been allocated has been satisfied.

• (iii) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(o) Government Grants

The Company recognizes government grants related to assets as deferred income at fair value if there is reasonable assurance that they will be received, and the Company will comply with the conditions associated with the grant; they are then recognized in profit or loss as other income on a systematic basis. Grants that compensate the Company for expenses or losses incurred are recognized in profit or loss on a systematic basis in the periods in which the expenses or losses are recognized.

(p) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(Continued)

18

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(ii) Defined benefit plans

The Company's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date (market yields of highquality corporate bonds or government bonds) on bonds that have maturity dates approximating the terms of the Company's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, expenses resulting from the portion of the increased benefit relating to past service by employees are recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses; (2) the return on plan assets excluding the amounts included in net interest on the net defined benefit liability (assets); and (3) any change in the effect of the asset ceiling, excluding the amounts included in net interest on the net defined benefit liability (assets); the Company recognizes the remeasurements of the defined benefit liability (asset) in other comprehensive.

The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, any change in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost that had not previously been recognized.

• (iii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(Continued)

19

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(q) Share-based payments

The grate-date fair value of equity-settled share-based payments awards granted to employees is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards whose related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

(r) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS 37.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following: :

• (i) Temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and at the time of the transaction (i) affects neither accounting nor taxable profits (losses) and (ii) does not give rise to equal taxable and deductible temporary differences;

• (ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.

• (iii) Initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

The Company offsets deferred tax assets and liabilities only if the following criteria are both met:

• (i) The Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

• (ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• 1) levied by the same taxable entity; or

(Continued)

20

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• 2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

The Company and a domestic subsidiary file income tax returns under the linked-tax system and elect to file income tax returns under the linked-tax system with the Company as the taxpayer, and to file additional income tax returns on undistributed earnings with the subsidiary that have been held for 12 months or more in a taxable year in accordance with the Income Tax Act. The Company proportionately allocates the effect on current income tax expense (benefit), deferred income tax and income tax payable (refundable) resulting from the adoption of the linked-tax system between the Company and the subsidiary.

(s) Earnings per share

The Company discloses its basic and diluted earnings per share attributable to common stockholders of the Company. Basic earnings per share is calculated as the profit attributable to common stockholders of the Company divided by the weighted average number of common stocks outstanding. Diluted earnings per share is calculated as the profit attributable to common stockholders of the Company divided by the weighted average number of common stock outstanding after adjustment for the effects of all potentially dilutive ordinary shares.

(t) Segment information

The Company has disclosed segment information in the consolidated financial statements, and hence does not disclose such information in the parent company only financial statements.

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

In preparing these parent company only financial statements, the management has made judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed by the management on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

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

Subsequent measurement of inventories is the main accounting assumption and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next year.

(Continued)

21

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

Subsequently, inventories are measured at the lower of cost or net realizable value. The Company assesses the net realizable value of inventories for normal waste, short shelf life, and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. There may be significant changes in the net realizable value of inventories due to future market prices and, future demand and supply.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash on hand Demand deposits and foreign currency demand deposits Time deposits Cash and cash equivalents in the consolidated statement of cash flows	December 31, 2023 $ 398 262,237 147,398 $ 410,033	December 31, 2022
		336 177,626 153,654
		331,616

Please refer to note 6(r) for the disclosure of the Company's interest rate risk and the sensitivity analysis related to the financial assets and liabilities.

• (b) Notes receivable, accounts receivable, and overdue receivables

Notes receivable Notes receivable－related parties Accounts receivable Accounts receivable－related parties Overdue receivables Less: loss allowance (overdue receivables included)	December 31, 2023 $ 92,109 25,577 163,228 15,654 317 345 $ 296,540	December 31, 2022
		87,214 31,435 153,776 23,061 1,577 1,578
		295,485

(Continued)

22

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

The Company applies the simplified approach of IFRS 9 to provide for its expected credit losses, i.e., the use of lifetime expected credit loss provision for notes receivable, accounts receivable, and overdue receivables. To measure the expected credit losses, notes receivable, accounts receivable, and overdue receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward-looking information. The Company' s analysis of the expected credit loss of its notes receivable, accounts receivable, and overdue receivables was as follows:

Not past due Past due within 30 days Past due 31~60 days Past due 61~90 days Past due 91~120 days Past due over 181 days Not past due Past due within 30 days Past due 31~60 days Past due 61~90 days Past due over 181 days	December 31, 2023	December 31, 2023
	Gross carrying amount Weight average expected credit loss rate $ 294,174 0% 1,684 0% 378 0% 31 0% 280 3.25% 338 100% $ 296,885 December 31, 2022		Loss allowance for lifetime expected credit loss
			- - - - 7 338
			345
		Weight average expected credit loss rate 0% 0.11% 0.32% 0.39% 100%	Loss allowance for lifetime expected credit loss
			- 1 - - 1,577
			1,578

The movement in the loss allowance for impairment with respect to notes receivable, accounts receivable, and overdue receivables was as follows:

Balance at the beginning of the period Impairment losses Amount written off Balance at the end of the period	2023 $ 1,578 155 (1,388) $ 345	2022
		1,393 185 -
		1,578

The Company had not pledged its notes receivable, accounts receivable, and overdue receivables as collateral or factor them for cash.

(Continued)

23

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(c) Inventories

Merchandise and finished goods Work in process Raw materials Supplies	December 31, 2023 $ 150,903 38,397 94,663 40,753 $ 324,716	December 31, 2022
		146,989 40,119 99,937 49,746
		336,791

In addition to the normal cost of goods sold, the following items were included in the Company's operating costs:

Losses on market price decline Physical count variance Unallocated production overhead The Company had not pledged its inventory as collateral. Financial assets measured at fair value through profit or loss Mandatorily measured at fair value through profit or loss Current: Beneficiary certification Non-current: Unlisted stocks – domestic companies G Innings Medical Ltd. Neolink Capital Corp. Total	2023 $ 16,545 2 24,321 $ 40,868 December 31, 2023 $ - 2,728 19,492 22,220 $ 22,220	2022
		20,527 31 -
		20,558
		December 31, 2022
		-
		2,728 32,465
		35,193
		35,193

(d) Financial assets measured at fair value through profit or loss

Neolink Capital Corp. carried out a capital reduction in December 2023 and 2022, respectively, wherein the amount of $15,050 thousand and $15,000 thousand share capital had been returned to the Company, and 1,505 thousand and 1,500 thousand of its shares which were held by the Company, were cancelled. As a result, the Company recovered the original investment cost of $15,050 thousand and $15,000 thousand, and reduced the number of shares by 1,505 thousand and 1,500 thousand shares.

(Continued)

24

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

The Company invested beneficiary certificate Spectra SPC-Powerfund through Ayers Alliance Financial Group Limited. On December 22, 2022, the Company submitted its request for a complete fund-redemption of the investment of 950,519 units. However, the fund redemption payment has not been received prior to the stipulated payment date. An event of default occurs.

The Company received notification related to Spectra SPC-Powerfund from Ayers Alliance Financial Group Limited on March 3, 2023, informing that, based upon the terms of its offering memorandum, the Board of Spectra SPC has declared a suspension of calculation of Net Asset Value of Spectra SPC attributed to Spectra SPC-Powerfund and a deferral of redemption of Participating Shares with immediate effect from March 1, 2023 until further notice.

Based on Ayers Alliance Financial Group Limited's notification in March 2023:

• (i) Ayers Alliance Financial Group Limited is experiencing issues arising out of the highly unusual delay in the settlement of obligations by third parties towards Ayers Alliance Financial Group Limited.

• (ii) Starting from March 13, 2023, Ayers Alliance Financial Group Limited will not be accepting any deposits from existing clients and will not be onboarding any new clients.

(iii) All Ayers Alliance Financial Group Limited clients' accounts will be inactive.

In summary, the Company has already submitted a request to Ayers Alliance Financial Group Limited for a complete fund-redemption of the investment in the Spectra SPC-Powerfund in accordance with the agreement. However, the fund redemption payment has not been received prior to the stipulated payment date. Despite several requests by the Company, Ayers Alliance Financial Group Limited and Spectra SPC-Powerfund have still not provided the Company with the basic information such as the address of their operation unit and contact details. In addition, considering all the factors including whether Ayers Alliance Financial Group Limited and Spectra SPCPowerfund will continue to operate, the existence of the company and the fair value of the assets of Spectra SPC-Powerfund, the financial asset losses of $99,751 thousand have been recorded on December 31, 2022.

In the morning on April 21, 2023, the Company read an announcement on STI's website (www.stifg.com) that Spectra SPC-Powerfund has decided to initiate liquidation procedures.

The Company has appointed lawyers to attend the first liquidator's hearing. According to the hearing bundle, the liquidator considered the Company as a potential creditor.

Spectra SPC-Powerfund held the first creditors' meeting on July 7, 2023 at 10:00 a.m. (Taipei time). According to the document provided and the explanation given by the liquidator in the meeting, a brief update of the status is as follows:

• (i) Spectra SPC-Powerfund's broker, City Credit Capital (Labuan) Ltd. (“ CCCL” ), is under liquidation. In the creditors' meeting, the chairman only briefly reported that CCCL is severely balance sheet insolvent.

• (ii) The liquidator has been notified by the joint administrators who were appointed by the directors of City Credit Capital (UK) LIMITED (“CCCL(UK)”), a broker, of Spectra SPCPowerfund, CCCL(UK) has entered into administration due to financial difficulties.

(Continued)

25

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

Regarding the subsequent liquidation matters of Spectra SPC-Powerfund and the recovery of investment, the Company has instructed its legal advisors to take subsequent legal actions.

• (e) Investments accounted for using equity method

The Company's investments accounted for using the equity method was as follows:

Subsidiaries Credit balance of investments accounted for using equity method: Joint ventures	December 31, 2023 $ 905,193 December 31, 2023 $ 31,308	December 31, 2022
		1,014,921
		December 31, 2022
		16,624

(i) Subsidiaries

Please refer to the consolidated financial statements.

The Company owned 100 ％ of the shares in Cheng Fong Chemical Co., Ltd.. During the Board of Directors meeting held on January 7, 2022, Cheng Fong Chemical Co., Ltd. resolved to increase its capital and issue 30,000 thousand new shares, each with a par value of $10, amounting to $300,000 thousand. All the new shares were subscribed by the Company. The registration was completed on January 28, 2022.

(ii) Joint ventures

Weigao Panion Biotech Holding Company Limited is the Company's only Joint Ventures. Its main business activities are the research and development of new drugs and sells drugs in China.

The following table summarizes the financial information of Weigao Panion Biotech Holding Company Limited as included in its own financial statements,

Percentage ownership interest Non-current assets Current assets Non-current liabilities Current liabilities Net assets Cash and cash equivalents Non-current financial liabilities (excluding accounts payable and other payables and provision)

(Continued)

26

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

The Company's share of net assets Elimination of unrealized profit on downstream sales Carrying amount of interest in joint venture Operating revenue Net losses for the year from the continuing operations Other comprehensive income Total comprehensive income The Company's share of total comprehensive income	December 31, 2023 $ 53,300 (84,608) $ (31,308) 2023 $ - $ (31,851) (1,521) $ (33,372) $ (14,684)	December 31, 2022 67,984 (84,608) (16,624) 2022 - (18,593) 7,353 (11,240) (4,946)

(iii) Collateral

The Company did not pledge any collateral on investments accounted for using the equity method.

(f) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company were as follows:

Cost of deemed cost: Balance at January 1, 2023 Additions Disposals Reclassification Balance at December 31, 2023 Balance at January 1, 2022 Additions Disposals Reclassification Balance at December 31, 2022 Depreciation and impairment: Balance at January 1, 2023 Depreciation Disposals Balance at December 31, 2023 Balance at January 1, 2022 Depreciation Disposals Balance at December 31, 2022	Land $ 155,012 - - - $ 155,012 $ 155,012 - - - $ 155,012 $ - - - $ - $ - - - $ -	Buildings and Constructions 175,725 8,066 (4,443) 47,162 226,510 176,451 960 (3,126) 1,440 175,725 63,347 6,326 (4,443) 65,230 60,970 5,503 (3,126) 63,347	Machinery equipment 316,256 22,751 (66,407) 9,116 281,716 245,345 34,064 (10,943) 47,790 316,256 140,333 49,015 (66,142) 123,206 104,239 46,767 (10,673) 140,333	Other equipment 231,090 28,145 (22,560) 20,366 257,041 173,998 23,270 (12,126) 45,948 231,090 85,868 38,131 (22,560) 101,439 67,028 30,754 (11,914) 85,868	Constructions in process 76,208 31,414 - (69,894) 37,728 81,459 87,672 - (92,923) 76,208 - - - - - - - -	Total 954,291 90,376 (93,410) 6,750 958,007 832,265 145,966 (26,195) 2,255 954,291 289,548 93,472 (93,145) 289,875 232,237 83,024 (25,713) 289,548

(Continued)

27

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

Carrying amount: Balance at December 31, 2023 Balance at December 31, 2022	Land $ 155,012 $ 155,012	Buildings and Constructions 161,280 112,378	Machinery equipment 158,510 175,923	Other equipment 155,602 145,222	Constructions in process 37,728 76,208	Total 668,132
						664,743

As of December 31, 2023 and 2022, the property, plant and equipment of the Company had been pledged as collateral for long-term loans and credit lines; please refer to note 8.

(g) Right-of-use assets

The cost, depreciation, and impairment of the land, buildings and constructions, and other equipment that the Company leases were as follows:

Cost: Balance at January 1, 2023 Additions Write-off Balance at December 31, 2023 Balance at January 1, 2022 Additions Balance at December 31, 2022 Depreciation and impairment: Balance at January 1, 2023 Depreciation Write-off Balance at December 31, 2023 Balance at January 1, 2022 Depreciation Balance at December 31, 2022 Carrying amount: Balance at December 31, 2023 Balance at December 31, 2022	Land, buildings and constructions $ 46,751 13,517 (9,014) $ 51,254 $ 34,567 12,184 $ 46,751 $ 24,353 10,104 (9,014) $ 25,443 $ 14,413 9,940 $ 24,353 $ 25,811 $ 22,398	Other equipment 4,368 1,526 - 5,894 3,801 567 4,368 2,266 1,254 - 3,520 1,154 1,112 2,266 2,374 2,102	Total 51,119 15,043 (9,014)
			57,148
			38,368 12,751
			51,119
			26,619 11,358 (9,014)
			28,963
			15,567 11,052
			26,619
			28,185
			24,500

(Continued)

28

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(h) Intangible assets

The cost, amortization, and impairment of the Company's intangible assets were as follows:

Cost: Balance at December 31, 2023 (as of balance at January 1, 2023) Balance at December 31, 2022 (as of balance at January 1, 2022) Amortization and impairment Balance at January 1, 2023 Amortization Balance at December 31, 2023 Balance at January 1, 2022 Amortization Balance at December 31, 2022 Carrying Amount: Balance at December 31, 2023 Balance at December 31, 2022	Patent
	$ 18,087 $ 18,087 $ 16,643 561 $ 17,204 $ 16,083 560 $ 16,643 $ 883 $ 1,444

• (i) Long-term loans and short-term loans

• (i) Short-term loans

Unsecured bank loans Secured bank loans Unsecured bank loans Total		December	31, 2023	31, 2023
	Currency	Range of interest rates (%)	Year of maturity Amount 2024 $ 320,000 31, 2022
	NTD	1.783~1.800 December
	Currency	Range of interest rates (%)	Year of maturity Amount 2023 $ 50,000 2023 200,000 $ 250,000	Amount
	NTD NTD	1.725 1.531

As of December 31, 2023 and 2022, the unused credit lines of the Company's short-term loans were amounted to $780,000 thousand and $550,000 thousand, respectively.

(ii) Long-term loans

As of December 31, 2023 and 2022, the unused credit lines of the Company's long term loans were amounted to $0 thousand and $300,000 thousand, respectively.

(Continued)

29

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(iii) Bank loan collateral

For the details of assets pledged as collateral, please refer to note 8.

(j) Lease liabilities

The carrying amounts of the Company's lease liabilities were as follows:

Current Non-current	December 31, 2023 $ 11,766 $ 17,076	December 31, 2022
		11,113
		14,463

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

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expenses relating to short-term leases	2023 $ 312 $ 4,928	2022
		363
		5,878

The amounts recognized in the statement of cash flows for the Company were as follows:

Total cash outflow for leases	2023 $ 17,010	2022
		17,415

(k) Employee benefits

(i) Defined benefit plans

The present value of the defined benefit obligations and the fair value adjustments of the plan assets for the Company were as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit asset	December 31, 2023 $ 61,886 (51,504) $ 10,382	December 31, 2022 61,530 (50,408) 11,122

The Company makes defined benefit plan contributions to the pension fund account at Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standard) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

(Continued)

30

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• 1) Composition of plan assets

The Company allocates pension funds in accordance with the "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund", and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from the two-year time deposits with the interest rates offered by local banks.

The Company's Bank of Taiwan labor pension reserve account balance amounted to $51,504 thousand as of December 31, 2023. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

• 2) Movements in present value of the defined benefit obligations

The movements in present value of the Company's defined benefit obligations were as follows:

Defined benefit obligation at January 1 Current service costs and interest Remeasurements of the net defined benefit asset －Actuarial gains and losses arising from changes in financial assumptions Benefits paid Defined benefit obligation at December 31	2023 $ 61,530 1,165 (209) (600) $ 61,886	2022 64,754 673 (2,342) (1,555) 61,530

• 3) Movements in fair value of plan assets

The movements in the fair value of the Company's plan assets were as follows:

Fair value of plan assets at January 1 Interest income Remeasurements of the net defined benefit asset －The return on plan assets (excluding amounts included in the interest during this period) Contributions made Benefits paid Fair value of plan assets at December 31	2023 $ 50,408 719 356 621 (600) $ 51,504	2022 47,277 276 3,696 714 (1,555) 50,408

(Continued)

31

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• 4) Expenses recognized in profit or loss

The Company's expenses recognized on profit or loss were as follows:

Current service costs Net interest on the defined benefit asset Operating costs and expenses 5) Actuarial assumptions	2023 $ 284 162 $ 446	2022
		290 107
		397

The Company's significant actuarial assumptions used in calculating the present value of the defined benefit obligation at the reporting date were as follows:

Discount rate Future salary increases	December 31, 2023 December 31, 2022 % 1.375 % 1.500 % 3.000 % 3.000

The expected contribution to be made by the Company to the defined benefit plans for the one-year period after the 2023 reporting date is $636 thousand.

The weighted average lifetime of the defined benefits plans is 9.37 years.

• 6) Sensitivity analysis

As of December 31, 2023 and 2022, the effect of changes in the principle actuarial assumptions on the present value of the defined benefit obligations were as follows:

At December 31, 2023 Discount rate Future salary increases At December 31, 2022 Discount rate Future salary increases	Impact on the defined benefit obligations Increased 0.25% Decreased 0.25% $ (717) 747 714 (690) (786) 809 779 (758)

The above sensitivity analysis is based on the effect of changes in a single assumption under the condition that other assumptions remain constant. In practice, many changes in assumptions may be linked together. The method used for the sensitivity analysis and calculation of the net defined benefit pension asset is the same.

The method used for sensitivity analysis for this year is the same as the method used in the previous year.

(Continued)

32

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(ii) Defined contribution plans

The Company allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The Company's pension costs under the defined contribution method were $13,610 thousand and $12,947 thousand for the years ended December 31, 2023 and 2022, respectively.

(l) Income taxes

(i) Income tax expenses

The Company's income tax expenses consisted of the following:

2023 Current income tax expense Current period $ 92,383 Adjustment for prior periods 42 92,425 Deferred tax expense (benefit) The origination and reversal of temporary differences (3,573) Income tax expense from continuing operations $ 88,852 The Company's income tax expense (benefit) recognized 2023 Items that may not be reclassified into profit and loss: Remeasurements of defined benefit plan $ 113 Reconciliations of the Company's income tax expense and income before tax

2022 147,017 3,560 150,577 (1,071) 149,506 2022 1,207 were as follows:

Income before tax Income tax using the Company's domestic tax rate Effect of tax rates in foreign jurisdiction Adjustments according to tax laws Adjustments on prior years' tax expense Income tax expense	2023 $ 166,071 $ 33,214 33,091 22,505 42 $ 88,852	2022
		331,851
		66,370 30,461 49,115 3,560
		149,506

(Continued)

33

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

The Company and its subsidiary, Cheng Fong Chemical Co., Ltd., file tax returns under the linked-tax system, and the related payable due to the related party as of December 31, 2023 and 2022 was as follows:

and 2022 was as follows:
Payable due to associate (recorded under other payables－related parties)	December 31, 2023 $ 5,669	December 31, 2022
		5,619

• (ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets and liabilities

The Company is not able to assure that the temporary differences associated with investments in subsidiaries, as of December 31, 2023 and 2022, will be reversed in the foreseeable future, or to consider it is probable that taxable profit will be sufficient to allow the temporary differences to be deducted. A deferred tax asset for these temporary differences is therefore not recognized. Details are as follows:

Aggregate amount of temporary differences related to investments in subsidiaries Unrecognized deferred tax assets	December 31, 2023 $ 118,187 $ 23,637	December 31, 2022
		67,981
		13,596

The Company is able to control the timing of the reversal of the temporary differences associated with investments in subsidiaries as of December 31, 2023 and 2022, and considers it probable that the temporary differences will not reverse in the foreseeable future. Hence, such temporary differences are not recognized under deferred tax liabilities. Details are as follows:

• 2) Recognized deferred tax assets and liabilities

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

Deferred tax assets

Balance at January 1, 2023 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2023	Defined benefit plans $ 541 - (113) $ 428	Loss from investment using equity method 11,856 2,803 - 14,659	Allowance for inventory devaluation loss 8,725 770 - 9,495	Others - - - -	Total 21,122 3,573 (113) 24,582

(Continued)

34

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

Defined benefit plans Loss from investment using equity method Allowance for inventory devaluation loss Balance at January 1, 2022 $ 3,495 10,220 6,934 Recognized in profit or loss (1,747) 1,636 1,791 Recognized in other comprehensive income (1,207) - - Balance at December 31, 2022 $ 541 11,856 8,725 Deferred tax liabilities Balance at December 31, 2023 (as of balance at January 1, 2023) Balance at December 31, 2022 (as of balance at January 1, 2022)	Others Total 609 21,258 (609) 1,071 - (1,207) - 21,122 Reserve for land value increment tax $ 19,729 $ 19,729

• (iii) Income tax examination

The tax authorities have examined the income tax returns of the Company through 2020.

(m) Share capital and other equity

(i) Issuance of common stock

As of December 31, 2023 and 2022, the total value of authorized ordinary shares amounted to $1,000,000 thousand, with a par value of $10 per share, of which 85,739 thousand shares were outstanding. All issued shares were paid up upon issuance.

(ii) Capital surplus

The balances of the Company's capital surplus were as follows:

Paid-in capital in excess of par value Employee share options	December 31, 2023 $ 861,407 5,480 $ 866,887	December 31, 2022
		865,694 5,480
		871,174

In accordance with the ROC Company Act, realized capital surplus can be used to increase share capital or to distribute as cash dividends after offsetting losses. The aforementioned capital surplus includes share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital surplus to increase share capital shall not exceed 10 percent of the actual share capital amount.

(Continued)

35

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

The Company's Articles of Incorporation revised on June 9, 2020, provided that the Company may distribute legal reserve and capital surplus in compliance with laws and regulations. For distribution by way of new shares issuance, a resolution shall be passed during the general meeting of shareholders; for distribution by way of cash, a resolution shall be passed by the Board of Directors with at least two-thirds of the directors present and a majority of the directors agree, and shall be reported to the general meeting of shareholders.

Details of cash dividends from capital surplus, please refer to note 6(m) (iii) Retained earnings.

(iii) Retained earnings

The Company's Articles of Incorporation provided that, when allocating the net profits for each fiscal year, the Company should first pay income tax, offset its prior years' deficits, and appropriate 10% of net income to legal reserve until the accumulated legal reserve capital equals the Company's paid-in capital. The Company may also appropriate special reserve capital based on business needs and in compliance with laws and regulations. After the above appropriations, current and prior-period earnings that remain undistributed will be proposed for distribution by the Board of Directors. For distribution by way of new shares issuance, a resolution shall be passed during the general meeting of shareholders; for distribution by way of cash, a resolution shall be passed by the Board of Directors with at least two-thirds of the directors present and a majority of the directors agree, and shall be reported to the general meeting of shareholders.

The Company's dividend policy adopts the principle of prudence with consideration of its profitability and financial structure and future development. The Company stipulated a dividend policy that distributes at least 40% of accumulated earnings as shareholders' dividends and at least 10% of the distribution shall be by way of cash. However, the Board of Directors may adjust the percentage of distribution based on the actual operating performances upon the approval from the general meeting of the shareholders.

1) Legal reserve

If the Company experienced profit for the year, the distribution of the statutory earnings reserve, either by new shares or by cash, shall be decided at the shareholders' meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 percent of the paid-in capital.

2) Special reserve

In accordance with the rules issued by the FSC, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of other shareholders' equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders' equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

(Continued)

36

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

3) Distribution of earnings

The amounts of cash dividends on the appropriations of 2022 and 2021 earnings and the distribution of cash dividends from capital surplus were approved during the board meeting on March 30, 2023 and March 15, 2022, respectively. The appropriations and dividends per share were as follows:

Dividends distributed to common stockholders: Cash－retained earnings Cash－capital surplus Total	2022 Amount per share Total amount $ 1.95 167,191 0.05 4,287 $ 171,478	2022 Amount per share Total amount $ 1.95 167,191 0.05 4,287 $ 171,478	2021	2021
	Amount per share		Amount per share 1.12 0.38	Total amount
	$ 1.95 0.05			96,028 32,581
				128,609

The amounts of cash dividends on the appropriation of 2023 earnings and the distribution of cash dividends from capital surplus were approved by the Board of Directors on March 7, 2024. The appropriations and dividends per share were as follows:

Dividends distributed to common stockholders: Cash－retained earnings Cash－capital surplus Total	2023	2023
	Amount per share Total amount $ 0.80 68,591 0.70 60,018 $ 128,609	Total amount
		68,591 60,018

(n) Earnings per share

The calculation of the Company's basic and diluted earnings per share were as follows:

i) Basic earnings per share

2023 Net income attributable to common shareholders of the Company $ 77,219 Weighted-average number of common shares outstanding 85,739 Basic earnings per share (New Taiwan Dollar) $ 0.90	2022
	182,345
	85,739
	2.13

(Continued)

37

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

ii) Diluted earnings per share 2023 Net income attributable to common shareholders of the Company $ 77,219 Weighted-average number of common shares outstanding 85,739 Influence of potentially dilutive shares Remuneration to employees 52 Weighted-average number of shares outstanding (diluted) 85,791 Diluted earnings per share (New Taiwan Dollar) $ 0.90 (o) Revenue from contracts with customers (i) Disaggregation of revenue 2023 Primary geographical markets: Taiwan $ 1,183,900 United States 405,235 China, Hong Kong and Macau 10,729 Korea 13,760 Other 692 $ 1,614,316 Major products/services lines: Pharmaceutical $ 740,579 Supplement 295,732 Cosmeceutical 83,055 Diagnostic 80,774 Medical device 8,941 Milestone payments - Sales royalty fee 405,235 $ 1,614,316	2022
	182,345
	85,739 89
	85,828
	2.12
	2022
	1,688,958 401,088 13,061 - 8,907
	2,112,014
	724,221 183,929 64,308 724,639 4,998 8,831 401,088
	2,112,014

(Continued)

38

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

(ii) Contract balances

Notes receivable Notes receivable－related party Accounts receivable Accounts receivable－related party Overdue receivables Less: allowance for impairment Total	December 31, 2023 $ 92,109 25,577 163,228 15,654 317 345 $ 296,540	December 31, 2022 87,214 31,435 153,776 23,061 1,577 1,578 295,485	January 1, 2022
			79,533 35,936 134,364 10,399 1,388 1,393
			260,227

For details on notes receivable, accounts receivable, overdue receivables and allowance for impairment, please refer to note 6(b)

(p) Remuneration to employees and directors

The Company's articles of incorporation provided that the Company should contribute no less than 2% of profit as employee remuneration and less than 5% as directors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.

The remuneration to employees can be in the form of stock or cash, wherein the recipients may include the employees of the Company's affiliated who meet certain specific conditions set forth by the Board of Directors. The remuneration to directors can only be in the form of cash.

For the years ended December 31, 2023 and 2022, the Company accrued its remuneration to employees amounting to $3,496 thousand and $14,587 thousand, respectively, and remuneration to directors amounting to $5,244 thousand and $18,233 thousand, respectively. These amounts are calculated by using the Company's pre-tax net profit for the period before deducting the amount of the remuneration to the employees and directors, multiplied by the distribution ratio of remuneration to the employees and directors under the Company's articles of association. The remunerations were expensed under operating expenses during each period. Related information would be available at the Market Observation Post System website. The amounts, as stated in these financial statements, are identical to those of the actual distributions for 2023 and 2022.

(q) Non-operating income and expenses

• (i) Interest income

Interest income from bank deposits	2023 $ 5,782	2022
		1,499

(Continued)

39

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(ii) Other income Dividend income Other income－others Management service income Others Subtotal of other income – others Total other income (iii) Other gains and losses Losses on disposal of property, plant and equipment, net Foreign exchange gains (losses), net Gains on financial assets measured at fair value through profit and loss Other gains and losses, net (iv) Financial costs Interest expenses	2023 $ 2,275 10,430 18,212 28,642 $ 30,917 2023 $ (265) (2,256) 2,077 $ (444) 2023 $ 5,387	2022 1,541 30,801 1,969 32,770 34,311 2022 (280) 290 - 10 2022 3,801

(r) Financial instruments

• (i) Credit risk

1) Credit risk exposure

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

2) Concentration of credit risk

The Company's notes and accounts receivable concentrated on related parties and one of the major customers, wherein the related parties balances accounted for 14% and 18% of the total notes and accounts receivable as of December 31, 2023 and 2022, and this customer's balance accounted for 17% and 8% of the total notes and accounts receivable as of December 31, 2023 and 2022.

(Continued)

40

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(ii) Liquidity Risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2023 Non-derivative financial liabilities Short-term loans Accounts payable (including related parties) Other payables (including related parties) Lease liabilities Guarantee deposit December 31, 2022 Non-derivative financial liabilities Short-term loans Accounts payable (including related parties) Other payables (including related parties) Lease liabilities Guarantee deposit	Carrying amount $ 320,000 130,410 210,453 28,842 7,389 $ 697,094 $ 250,000 119,010 248,024 25,576 2,592 $ 645,202	Contractua l cash flows 321,471 130,410 210,453 29,670 7,389 699,393 251,628 119,010 248,024 26,072 2,592 647,326	Less than 1 year 321,471 130,410 210,453 12,152 4,797 679,283 251,628 119,010 248,024 11,384 - 630,046	1-5 years - - - 16,238 2,592 18,830 - - - 14,688 2,592 17,280	More than 5 years
					- - - 1,280 -
					1,280
					- - - - -
					-

The Company does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

(Continued)

41

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• (iii) Currency Risk

• 1) Exposure to Foreign Currency Risk

The Company's significant exposure to foreign currency risk were as follows:

Financial assets Monetary items USD JPY EUR CNY HKD VND Financial Liabilities Monetary items USD JPY CNY VND	December 31, 2023 Foreign Currency Exchange Rate TWD $ 5,896 30.7080 181,060 112 0.2175 25 5 33.9600 174 754 4.3260 3,262 57 3.9329 226 488,379 0.0013 619 - - - 9 0.2175 2 - - - 398,078 0.0013 504	December 31, 2023 Foreign Currency Exchange Rate TWD $ 5,896 30.7080 181,060 112 0.2175 25 5 33.9600 174 754 4.3260 3,262 57 3.9329 226 488,379 0.0013 619 - - - 9 0.2175 2 - - - 398,078 0.0013 504	December 31, 2022	December 31, 2022
	Foreign Currency $ 5,896 112 5 754 57 488,379 - 9 - 398,078	Exchange Rate 30.7080 0.2175 33.9600 4.3260 3.9329 0.0013 - 0.2175 - 0.0013	Foreign Currency 5,575 3,394 - 522 - - 9 - 109 -	Exchange Rate TWD 30.7250 171,304 0.2323 788 - - 4.4060 2,300 - - - - 30.7250 277 - - 4.4060 480 - -

• 2) Sensitivity Analysis

The Company's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, financial assets measured at fair value through profit and loss, accounts receivable and accounts payable that are denominated in foreign currency.

A strengthening (weakening) of 1% of the NTD against the USD, JPY, EUR, CNY, HKD and VND as of December 31, 2023 and 2022 would have increased (decreased) the net income before tax for the year ended December 31, 2023 and 2022 by $1,849 thousand and $1,736 thousand, respectively. The analysis assumes that all other variables remain constant and is performed on the same basis for both periods.

• 3) Foreign Exchange gain and loss on monetary items

Due to the numerous types of functional currency of the Company, the Company disclose its exchange gains and losses of monetary items aggregately. The Company's net exchange gain (loss), including realized and unrealized, were $(2,256) thousand and $290 thousand for the years ended December 31, 2023 and 2022, respectively.

(Continued)

42

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(iv) Interest rate analysis

The Company's exposure to interest rate risk were as follows:

Instruments with variable interest rates Bank deposits Long and short-term loans	Carrying Amount	Carrying Amount
	December 31, 2023 $ 409,635 $ 320,000	December 31, 2022
		331,280
		250,000

The following sensitivity analysis is based on the risk exposure of the interest rate on derivative and non-derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is on the basis of the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 1% when reporting to management internally, which also represents the management of the Company's assessment on the reasonably possible interval of interest rate change.

If the interest rate had increased or decreased by 1% with all other variable factors remaining constant, the Company's net income before tax will have increased or decreased by $896 thousand and $813 thousand, for the years ended December 31, 2023 and 2022, respectively.

(v) Fair value information

1) Categories and fair value of financial instruments

The carrying amount and fair value of the financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, disclosure of fair value information is not required:

Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss		December 31, 2023	December 31, 2023	December 31, 2023
	Carrying Amount $ 22,220		Fair Value
		Level 1 Level 2 - - December 31, 2022		Level 3 22,220	Total 22,220
			Fair Value
		Level 1 -	Level 2 -	Level 3 35,193	Total 35,193

(Continued)

43

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• 2) Valuation techniques and assumptions used in fair value determination -Non-derivative financial instruments

If a financial instrument has a quoted price in an active market, the market price is established as the fair value. Quoted prices from an exchange and actively traded government bonds traded over the counter are used as the basis for the fair value measurement of listed equity instruments and debt instruments with quoted prices in active markets.

A financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's-length basis. If the above-mentioned conditions are not met, the market would be considered as inactive. Generally, wide bidask spreads, increases in bid-ask spreads or low transaction volumes are indicators of an inactive market.

For equity instruments that there is no quoted price available, the Company uses the discounted cash flow model to estimate their fair values. The estimation is based on the investee's expected future cash flows, discounted to their present value using the discount rate that reflects the time value of money and the riskiness of the investment.

• 3) Fair value hierarchy

The Company used the fair value that can be observed in the market to measure the value of assets and liabilities. Fair values levels are based on the degree in which the fair value can be observed and grouped into Levels 1 to 3 as follows:

• a) Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

• b) Level 2: inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• c) Level 3: inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

• 4) Reconciliation of Level 3 fair values

Balance at January 1, 2023 Recognize in profit or loss Return of capital Balance at December 31, 2023	Mandatorily measured at fair value through profit or loss $ - - - $ -	Unquoted equity instruments 35,193 2,077 (15,050) 22,220	Total 35,193 2,077 (15,050) 22,220

(Continued)

44

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

Balance at January 1, 2022 Recognize in profit or loss Return of capital Reclassified from Level 1 Balance at December 31, 2022	Mandatorily measured at fair value through profit or loss $ - (99,751) - 99,751 $ -	Unquoted equity instruments 53,523 (3,330) (15,000) - 35,193	Total 53,523 (103,081) (15,000) 99,751 35,193

In accordance with IFRS 13 Fair Value Measurement, the reliability and restrictions of the information used in measuring fair value should be regularly evaluated. The Company can no longer obtain the quoted price of Spectra SPC-Powerfund, and the current volume and level of activity of the fund exists significant uncertainty. The Company, therefore, reclassified its level of fair value hierarchy from Level 1 to Level 3, and recorded the losses under loss on financial assets measured at fair value through profit and loss.

• 5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

Valuation Significant Unobservable Item Technique Inputs Financial assets at Income  Discount rate (7.000% at fair value through Approach December 31, 2022) － profit or loss  Sustainable growth rate equity investments without an active (1.50% at December 31, 2022) market

• Sustainable growth rate (1.50% at December 31, 2022)

• Discount for lack of marketability (30% at December 31, 2022)

• Minority interest discount (26.49% at December 31, 2022)

Inter-relationship between significant unobservable inputs and fair value measurement

• The estimated fair value would decrease if the discount rate was higher

• The higher the sustainable growth rate, the higher the estimated fair value

• The estimated fair value would decrease if the liquidity discount was higher

• The estimated fair value would decrease if the minority interest discount was higher

(Continued)

45

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

Item Financial assets at fair value through profit or loss– venture capital and equity investments without an active market Financial assets at fair value through profit or loss– foreign fund	Valuation Technique Asset approach Asset approach	Significant Unobservable Inputs
		Net asset value Net asset value, liquidity, marketability and credit risk adjustment (including risk of default) were 100%

Inter-relationship between significant unobservable inputs and fair value measurement The estimated fair value would increase if the net asset value was higher.

• The estimated fair value would increase if the net asset value was higher

• The estimated fair value would decrease if the liquidity discount was higher

• The estimated fair value would decrease if the credit risk was higher

• (vi) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The Company's measurement for fair values for financial instruments is reasonable. However, a different valuation technique or possible changes to one or more assumptions would have different effects. For fair value measurement in Level 3, changing in assumptions would have the following effects:

December 31, 2022 Financial assets at fair value through profit or loss Equity investments without an active market	Inputs Discount rate Sustainable growth rate	Increase/ Profit or loss decrease Favorable Unfavorable 1% $ 149 (102) 1% 115 (78)

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique.

(Continued)

46

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(s) Financial risk management

• (i) Overview

The Company has exposure to the following risks arising from financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

This note discloses information about the Company's exposure to each of the above risks, the objectives, policies and processes for measuring and managing risks, and the Company's management of capital. Please see other related notes for quantitative information.

(ii) Risk management framework

The Board of Directors of the Company is full responsible for the establishment and management of the Company's risk management framework and policies.

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company's Board of Directors oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by Internal Audit which undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board of Directors.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company's receivables from customers.

1) Notes and accounts receivable

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company's customer base, including the default risk of the customer segmentation to which customers belong, as these factors may have an influence on credit risk.

(Continued)

47

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, when available, and, in some cases, bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval; these limits are reviewed on a periodic basis.

The Company discloses the estimation of notes and accounts receivable's loss with allowance for bad debt account. Allowance for bad debt account is composed with specific losses and batch of unrecognized losses components. Unrecognized losses components are determined by historically statistical data from similar financial assets.

2) Investments

The credit risk exposure in the bank deposits, fixed income investment and other financial instruments are measured and monitored by the Company's finance department and reported to the management by authority. Since those who transact with the Company are banks with good credit standing, there are no non-compliance issues. Hence, there is no significant credit risk.

3) Guarantees

As of December 31, 2023 and 2022, the Company has no outstanding guarantees.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The Company uses activity-based costing to estimate the cost of its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments. The Company aims to maintain the level of its cash and cash equivalents at an amount in excess of the expected cash flows on operating expenses and financial liabilities. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Company has unused short-term bank facilities of $780,000 thousand and $850,000 thousand, respectively, as of December 31, 2023 and 2022.

(v) Market risk

Market risk is the risk that changes in interest rate, foreign exchange rates or the price of financial products will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company's bank deposits are exposed to the cash flow risk arising from changes in interest rates. However, the impact of the cash flow risk arising from changes in interest rate is not expected to be significant.

(Continued)

48

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(t) Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. Capital consists of ordinary shares, capital surplus, retained earnings, and other equity of the Company. The Board of Directors monitors the return on capital as well as the level of dividends to common stockholders.

Debt-to-capital ratios as of December 31, 2023 and 2022 were as follows:

Debt-to-capital ratios as of December 31, 2023 and 2022 were	as follows:
Total liabilities Less: cash and cash equivalents Net debt Total equity Debt-to-capital ratio	December 31, 2023 $ 806,087 410,033 $ 396,054 $ 1,911,080 % 21	December 31, 2022
		759,248 331,616
		427,632
		2,007,113
		% 21

As of December 31, 2023, there were no changes in the Company's approach of capital management.

(u) Investing and financing activities not affecting current cash flow

The Company's investing and financing activities which did not affect the current cash flow in the years ended December 31, 2023 and 2022, were derived from the acquisition of its right-of-use assets from its lease liabilities

(v) Reconciliations of liabilities arising from financing activities

The reconciliations of liabilities arising from financing activities in the years ended December 31, 2023 and 2022 were as follows:

Short-term loans Lease liabilities Total liabilities from financing activities	January 1, 2023 $ 250,000 25,576 $ 275,576	Cash flows 70,000 (12,082) 57,918	Non-Cash Changes Acquisition of right-of- use assets Effect of movements in exchange rates Interest Expense - - - 15,043 (7) 312 15,043 (7) 312	Non-Cash Changes Acquisition of right-of- use assets Effect of movements in exchange rates Interest Expense - - - 15,043 (7) 312 15,043 (7) 312	December 31, 2023
			Acquisition of right-of- use assets - 15,043 15,043	Effect of movements in exchange rates - (7) (7)
					320,000 28,842
					348,842

(Continued)

49

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

Short-term loans Lease liabilities Total liabilities from financing activities	January 1, 2022 $ 50,000 23,999 $ 73,999	Cash flows 200,000 (11,537) 188,463	Non-Cash	Changes Interest Expense - 363 363	December 31, 2022
			Acquisition of right-of-use assets - 12,751 12,751
					250,000 25,576
					275,576

(7) Related-party transactions:

(a) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the subsidiaries.

(b) Name and relationship with related parties

The following are entities that have had transactions with related parties during the periods covered in parent company only financial statements.

Name of related party Bowlin Biotech Corp. Bowlin Holding Co., Ltd. (Cayman) Bowlin Holding Co. Ltd.

Bowlin Holding (HK) Co., Limited

Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada

Zhuhai Baozhan Trade Co., Ltd.

Zhuhai Panion & BF Biotech Inc.

Zhuhai Panion Innovation Biotech Co., Ltd.

Cheng Fong Chemical Co., Ltd.

Shining Biomedical Company Ltd.

Te-Yang Tsai

Yubo IP Studio

Weigao Panion Biotech Holding Company Limited

Relationship with the Company Subsidiaries

Subsidiaries Subsidiaries

Subsidiaries Subsidiaries

Subsidiaries

Subsidiaries

Subsidiaries

Subsidiaries

Other related party

First-degree relative of the Company's general manager

Its responsible person is a first-degree relative of the Company's general manager

Joint venture

Shandong Weigao Panion Pharmaceutical Joint venture Company Limited

(Continued)

50

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

Name of related party	Relationship with the Company
Shanghai Weigao Panion Pharmaceutical	Joint venture
Company Limited
Panion Charity Foundation	Other related party

• (c) Significant transactions with related parties

(i) Sales

The amounts of significant sales transactions between the Company and its related parties were as follows:

Subsidiaries Zhuhai Panion & BF Biotech Inc. Zhuhai Panion Innovation Biotech Co., Ltd. Cheng Fong Chemical Co., Ltd. Other related parties Shining Biomedical Company Ltd.	2023 $ 3,960 114 - 120,018 $ 124,092	2022
		5,390 229 5 124,504
		130,128

The terms with related parties were not significantly different from those provided to other customers.

(ii) Interest income

The interest charged by the Company to its related parties were as follows:

			2023		2022
	Subsidiaries
	Cheng Fong Chemical Co., Ltd.	$		28		43
(iii)	Consultant Fees
	The consultant fees that the Company paid to its related parties		were as follows:
			2023		2022
	Other related parties	$	2,320			2,042
(iv)	Donation

The donations that the Company made to its related parties were as follows:

Other related parties	2023 $ 300	2022
		300

(Continued)

51

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(v) Service revenue

The Company provided administrative services to its related parties The service revenue was recorded under non-operating income and expenses – other income as follows:

Subsidiaries Bowlin Holding Co. Ltd. Cheng Fong Chemical Co., Ltd. (vi) Receivable due from related parties	2023 $ 3,230 7,200 $ 10,430	2022
		23,601 7,200
		30,801

The receivables due from related parties were as follows:

Account Notes receivable – related party Accounts receivable – related party related party Accounts receivable – related party	Relationship Other related parties Shining Biomedical Company Ltd. Subsidiaries Zhuhai Panion Innovation Biotech Co., Ltd. Zhuhai Panion & BF Biotech Inc. Other related parties Shining Biomedical Company Ltd.	December 31, 2023 $ 25,577 113 2,081 13,460 $ 41,231	December 31, 2022
			31,435 - 1,301 21,760
			54,496

(vii) Purchase

The amounts of purchases transactions between the Company and its related parties were as follows:

Subsidiaries Cheng Fong Chemical Co., Ltd. Zhuhai Panion & BF Biotech Inc. Zhuhai Panion Innovation Biotech Co., Ltd.	2023 $ 12,597 2,489 2,228 $ 17,314	2022
		2,204 1,215 450
		3,869

The terms with related parties were not significantly different from those provided by other vendors.

(Continued)

52

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(viii) Payable due to related parties

The payables due from related parties were as follows:

Account Relationship Other payables Subsidiaries Cheng Fong Chemical Co., Ltd. Accounts payable Subsidiaries Zhuhai Panion & BF Biotech Inc. Zhuhai Panion Innovation Biotech Co., Ltd. Cheng Fong Chemical Co., Ltd. Other payables Other related parties (d) Key management personnel compensation Key management personnel compensation comprised: Short-term employee benefits Post-employment benefits (8) Pledged assets: The carrying values of pledged assets were as follows: Pledged Assets Object Property, plant, and equipment: Land Short & long-term loans Buildings Short & long-term loans	December 31, 2023 $ 5,669 - 88 2,504 754 $ 9,015 2023 $ 44,047 1,023 $ 45,070 December 31, 2023 $ 155,012 161,280 $ 316,292	December 31, 2022
		5,619 304 178 - 643
		6,744
		2022
		81,917 978
		82,895
		December 31, 2022
		155,012 112,378
		267,390

(Continued)

53

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(9) Commitments and contingencies:

• (a) In July 2001, the Company signed a patent license agreement with Chen Hsing Hsu to obtain the right to put the patent on Nephoxil, a new drug for kidney disease, into practice, and further amended the agreement in August 2005. The terms and conditions in the agreement stipulated that the Company shall pay Chen Hsing Hsu royalty fees based on the net sales of the licensed products. The Company recorded its royalty payments due to Chen Hsing Hsu arising from the patent license agreement under operating costs.

The patents on Nephoxil in the United States, Taiwan and Japan have all expired as of November 14, 2022. The Company has terminated the above patent license agreement in accordance with the terms set forth in the agreement. The termination was effective upon the aforementioned patent expiration date.

• (b) The Company and Shandong Weigao Pharmaceutical Company Limited (“ Shandong Weigao” ) entered into a joint venture agreement on February 24, 2015 to establish a Company Weigao Panion Biotech Holding Company (“ Weigao Panion” ), with the companies holding of 49% and 51%, respectively. The Company then invested in Shandong Weigao Panion Pharmaceutical Company Limited (“Shandong Weigao Panion”) through Weigao Panion. The Company granted licenses to Shandong Weigao Panion through Weigao Panion with its patent rights to develop, manufacture and exclusively sell Nephoxil in mainland China, and the license fees for the rights granted were amounted to CNY 150,000 thousand, including the down payment of CNY 30,000 thousand and the milestone payment of CNY 120,000 thousand. The Company recognized the down payment and the milestone payments of each phase based on the development progress of Nephoxil, and reinvested part of the milestone payment in Weigao Panion, and Shandong Weigao would also invest according to the original shareholdings.

The Company had recognized revenue of $42,975 thousand (including the milestone payment of CNY 10,000 thousand), $44,388 thousand including the (milestone payment of CNY 10,000 thousand), $23,200 thousand (including the milestone payment of CNY 5,000 thousand) and $84,490 thousand (including the down payment CNY 12,000 thousand and the milestone payment of CNY 4,900 thousand) in the years ended December 31, 2020, 2019, 2018 and 2015, respectively. The unrealized profit balances were $84,608 thousand for both periods (recorded under the Company's credit balance of investments accounted for using equity method).

The Company entered into a consulting contract with the third parties, separately. The contract provided that the Company shall pay relevant expenses to each third party based on the down payment and the milestone payments of each stage in accordance with the above-mentioned patent license agreement, amounting to a total of CNY 10,500 thousand. The Company made consulting costs payments of $1,719 thousand (CNY 400 thousand), $1,776 thousand (CNY 400 thousand), $928 thousand (CNY 200 thousand) and $25,749 thousand (CNY 5,176 thousand) in the years 2020, 2019, 2018 and 2015, respectively. In addition, the contract stipulated that each counterparty to the contract may subscribe to buy 2.5% of Weigao Panion shares at the same cost as the Company's original investment cost to Weigao Panion. The subscriptions were completed in 2016.

(10) Losses due to major disasters: None.

(11) Subsequent events: Please refer to notes 6(m).

(Continued)

54

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(12) Other:

• (a) A summary of personnel costs, depreciation, depletion and amortization is as follows:

Function Account	2023	2023	2023	2022	2022	2022
	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Personnel costs Salaries Labor and health insurance Pension Remuneration to directors Other personnel expense Depreciation Amortization	95,607 10,149 4,486 - 6,240 59,197 -	213,756 20,527 9,570 13,650 8,913 45,633 561	309,363 30,676 14,056 13,650 15,153 104,830 561	96,356 9,442 4,351 - 6,546 47,426 -	248,158 18,597 8,993 26,695 9,238 46,650 560	344,514 28,039 13,344 26,695 15,784 94,076 560

The Company's number of employees and additional information on employee benefits for the years ended December 31, 2023 and 2022 were as follows:

Number of employees Number of non-employees directors Average employees' benefit Average salary Adjustment of employees' average salary Supervisor remuneration

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

• (i) In accordance with the Company's ‘ Rules for Distribution Compensation to Directors and Independent Directors, the Company should contribute $50,000~$120,000 to each independent director on a monthly basis, the amounts of compensation should be reviewed by the Compensation Committee and reported to the Board of Directors. Different levels of compensation are determined by the responsibility, functions and riskiness that is accounted by each director in the functional committee.

• (ii) The managers' salary includes their basic salary, year-end bonus, and performance bonus which is evaluated based on their achievement of the performance index.

• (iii) The employees' salary includes their basic salary, year-end bonus, performance bonus and employee remuneration. The employees' salary will be adjusted according to their performance evaluation and price index.

(Continued)

55

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• (b) The Company is the patentee and the licensor of the patents related to Auryxia (ferric citrate) in the United States, and the above-mentioned patents have been listed in the Orange Book ("Approved Drug Products with Therapeutic Equivalence Evaluations"). Since the fourth quarter of 2018, seven generic drug companies, listed here in the order received: Lupin Atlantis Holdings SA, Teva Pharmaceuticals USA Inc., Chemo Research SL, Mylan Pharmaceuticals Inc., Lupin Limited, Watson Laboratories Inc. and Par Pharmaceuticals Inc. had filed the drug registration to sell their products, i.e., Auryxia's generic drugs with the FDA, claiming that their products were not infringing all, or part of, the Company's Orange Book listed patents or claiming that the Company's Orange Book listed patents to be wholly or partly ineffective or invalid. The Company, its licensee, Keryx Biopharmaceuticals Inc. (hereinafter Keryx, currently the subsidiary of Akebia Therapeutics Inc.), and Professor Chen Hsing Hsu, had filed the related patents' infringement litigations acting as coplaintiff against the above seven companies to assert their interests, claiming that the generic drug registration of the above seven companies shall not be approved during the patent terms or before the patents expire.

In August 2019, the Company and Keryx had settled the aforementioned patent infringement litigations and entered into the settlement and the license agreement with Par Pharmaceuticals Inc.(“Par”) to solve the lawsuit caused by the Auryxia's generic drug registration, and the Company and Keryx granted a license to Par to market its generic drug of Auryxia in the United States from March 20, 2025 or any earlier point of time, provided that the customary conditions in the similar type of the settlements are satisfied. In addition, the settlement and the license agreement are confidential and shall be under the review of the Federal Trade Commission and the United States Department of Justice. Thereafter, the Company and Keryx had settled with Teva Pharmaceuticals USA Inc. and Watson Laboratories Inc. in April 2020, with Lupin Atlantis Holdings SA and Lupin Limited in September 2020, with Chemo Research SL in March 2021, and with Mylan Pharmaceuticals Inc. in September 2021. In summary, the Company had settled with all the above seven generic drug companies, and the terms and the conditions of each agreement are substantially identical.

In February 2023, Zydus Worldwide DMCC as the eighth generic drug company has submitted Abbreviated New Drug Application to the United States Food and Drug Administration seeking approval to commercially market generic versions of Auryxia. Zydus claims that no valid and enforceable claims of parts of the Company's and Keryx's Orange Book listed patents will be infringed by its product. The Company, as co-plaintiff, with its licensee Keryx has filed a complaint for patent infringement against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc., and Zydus Lifesciences Limited, requesting the effective date of FDA approval of ANDA be the date which is not earlier than the later of the expiration of the patents-in-suit.

In May 2023, the Company and Keryx had settled with Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc. and Zydus Lifesciences Limited, and entered into a settlement and license agreement. The terms and the conditions of this agreement are substantially identical with the above agreements.

(Continued)

56

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company:

• (i) Loans to other parties:

													(In Tho	usands of N	ew Taiwan	Dollars)
Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Colla	teral	Individual funding loan limits	Maximum limit of fund financing
													Item	Value
0 1 1	The Company Bowlin Holding (HK) Co., Limited Bowlin Holding (HK) Co., Limited	Cheng Fong Chemical Co., Ltd. Zhuhai Panion Innovation Biotech Co.,Ltd Zhuhai Panion & BF Biotech Inc.	Other receivables －related party Other receivables －related party Other receivables －related party	Yes Yes Yes	80,000 15,354 15,354	80,000 - -	- - -	2.20 2.40 2.40	2 2 2	- - -	Operating Capital Operating Capital Operating Capital	- - -	- - -	- - -	191,108 13,178 (Note 5) 13,178 (Note 5)	764,432 26,355 (Note 5) 26,355 (Note 5)

Note 1: The upper limit of the aggregate amount of the loans to all parties is forty percent (40%) of the Company's net worth.

Note 2: The upper limit of total amount of the loans to a single party is ten percent (10%) of the Company's net worth.

Note 3: The upper limit of the aggregate amount of the loans to all parties is forty percent (40%) of Bowlin Holding (HK) Co., Limited's net worth.

Note 4: The upper limit of total amount of the loans to a single party is twenty percent (20%) of Bowlin Holding (HK) Co., Limited's net worth.

Note 5: Bowlin Holding (HK) Co., Limited had increased its capital in Zhuhai Panion Innovation Biotech Co., Ltd. in October 2023, and terminated the line of credit provided to Zhuhai Panion & BF Biotech Inc. in the board of directors meeting held on November 7, 2023.

• (ii) Guarantees and endorsements for other parties: None.

• (iii) Securities held as of December 31, 2023 (excluding investment in subsidiaries, associates and joint ventures):

					(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of holder	Category and name of security	Relationship with company	Account title		Ending balance			Remark
				Shares/Units	Book value	Percentage of ownership	Fair value
The Company The Company The Company Cheng Fong Chemical Co., Ltd.	Beneficiary certification: Spectra SPC-Powerfund Stock: G Innings Medical Ltd. Neolink Capital Corp. Ta-Yuan Cogeneration Company, Limited	- - - -	Financial assets measured at fair value through profit or loss－current Financial assets measured at fair value through profit or loss－non-current Financial assets measured at fair value through profit or loss－non-current Financial assets measured at fair value through profit or loss－non-current	950,519 420,000 1,995,000 959,231	- 2,728 19,492 45,323	% - % 9 % 4 % 1	- 2,728 19,492 45,323

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of TWD300 million or 20% of the capital stock: None.

• (v) Acquisition of individual real estate with amount exceeding the lower of TWD300 million or 20% of the capital stock: None.

• (vi) Disposal of individual real estate with amount exceeding the lower of TWD300 million or 20% of the capital stock: None.

(Continued)

57

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of TWD100 million or 20% of the capital stock:

							(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of company	Related party	Nature of relationship		Transaction details			Transactions with terms different from others		Notes receiv receivable ( Accoun	able/ Accounts Notes payable/ ts payable)	Remarks
			Purchase /Sale	Amount	Percentage of total purchases (sales)	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes receivable/account s receivable (Notes payable/ Accounts payable)
The Company	Shining Biomedical Company Ltd.	Other related party	(Sales)	(120,018)	(7)	120 days	Not significant different from those to third party	Not significant different from those to third party	39,037	% 13

(viii) Receivables from related parties with amounts exceeding the lower of TWD100 million or 20% of the capital stock: None.

(ix) Trading in derivative instruments: None.

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2023 (excluding information on investees in Mainland China):

The following is the information on investees for the years Mainland China):	The following is the information on investees for the years Mainland China):	The following is the information on investees for the years Mainland China):	The following is the information on investees for the years Mainland China):	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in	ended December 31, 2023 (excluding information on investees in
				(In Thousands of New Taiwan Dollars)
Name of investor	Name of investee	Location	Scope of business	Original cost		Ending balance			Net income of investee	Investment income (losses) (note 4)	Note
				December 31, 2023	December 31, 2022	Shares	Percentage of ownership	Book value
The Company The Company The Company The Company The Company Bowlin Biotech Corp. Bowlin Holding Co., LTD. (Cayman) Bowlin Holding Co., LTD. (Cayman)	Bowlin Biotech Corp. Bowlin Holding Co., Ltd. (Cayman) Bowlin Holding Co., Ltd. Cheng Fong Chemical Co., Ltd. Weigao Panion Biotech Holding Company Limited Bowlin Holding Co., Ltd. Bowlin Holding (HK) Co., Limited Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada	United States of America Cayman Island Africa Taiwan Hong Kong Africa Hong Kong Macau	Investment Investment Investment Manufacture and sales of active pharmaceutical ingredient Investment Investment Investment Trading	69,990 127,013 74,795 863,513 127,770 69,608 116,539 5,661	69,990 123,743 74,795 863,513 127,770 69,608 109,985 9,213	2,305 4,354,450 2,500,000 42,132,000 33,567,071 2,200,000 3,979,345 -	% 100.00 % 100.00 % 53.19 % 100.00 % 44.00 % 46.81 % 100.00 % 100.00	28,247 70,592 32,082 774,272 (31,308) 29,393 65,889 2,171	(4,368) (40,875) (9,331) (60,903) (31,851) (9,331) (38,951) (24)	(4,223) (40,875) (4,798) (63,677) (14,015) - - -	Notes 5, 6, & 7 Note 2 Notes 3, 7 &8 Notes 3 & 5

Note 1: Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD 1 to NTD 30.708).

Note 2: The investment income (losses) that Bowlin Biotech Corp. recognized due to its investment in Bowlin Holding Co., Ltd. was included in the investment income (losses) that the Company recognized due to its investment in Bowlin Biotech Corp.

Note 3: The investment income (losses) that Bowlin Holding Co., Ltd. (Cayman). recognized due to its investment in Bowlin Holding (HK) Co., Limited and Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada was included in the investment income (losses) that the Company recognized due to its investment in Bowlin Holding Co., Ltd. (Cayman).

Note 4: The investment income (losses) was recognized based on the financial statements audited by the auditor of the Company.

Note 5: Zhuhai Baoyi Biotech Co., Ltd was stuck off from the registry and liquidated on March 13, 2023. Its remaining liquidation assets of USD 112,181.72 were returned to Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada. Then, Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada returned its capital of USD 112,181.72 to Bowlin Holding Co., Ltd. (Cayman), and reduced its registered capital on July 25, 2023. The relevant alternation registered procedures have been completed.

Note 6: The Company's Board of Directors resolved on May 11, 2023, to increase its investment in Bowlin Holding Co., Ltd. (Cayman) in cash by RMB 750 thousand. The increased capital was fully remitted to Bowlin Holding Co., Ltd. (Cayman) on July 18, 2023. The relevant alternation registered procedures were completed.

Note 7: Bowlin Holding Co., Ltd. (Cayman)'s Board of Directors resolved during its meeting held on January 11, 2023, and May 8, 2023, to increase its capital in Bowlin Holding (HK) Co., Limited in cash by RMB 1,500 thousand. The increased capital was remitted to Bowlin Holding (HK) Co., Limited on July 24, 2023. The relevant alternation registered procedures were completed. Bowlin Holding (HK) Co., Limited invested in and remitted RMB 1,500 thousand Zhuhai Panion & BF Biotech Inc. on July 25, 2023. The relevant alternation registered procedures were completed.

Note 8: On August 7, 2023, Bowlin Holding (HK) Co., Limited's Board of Directors resolved to convert its loans of USD 500 thousand to Zhuhai Panion Innovation Biotech Co., Ltd. into capital, and also increase its investment in cash by USD 500 thousand. The increase cash capital was remitted to Zhuhai Panion Innovation Biotech Co., Ltd. on September 20, 2023. The relevant alternation registered procedures were completed.

(Continued)

58

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

(c) Information on investment in mainland China:

(i) The names of investees in Mainland China, the main businesses and products, and other information:

							(In thousands of New Taiwan Dollars)	(In thousands of New Taiwan Dollars)	(In thousands of New Taiwan Dollars)	(In thousands of New Taiwan Dollars)	(In thousands of New Taiwan Dollars)	(In thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of capital surplus	Method of investment (note 1)	Accumulated outflow of investment from Taiwan as of January 1, 2023	Investm	ent flows	Accumulated outflow of investment from Taiwan as of December 31, 2023	Net income (losses) of the investee	Percentage of ownership	Investment income (losses) (note 2)	Book value	Accumulated remittance of earnings in current period
					Outflow	Inflow
Zhuhai Baozhan Trade Co., Ltd Zhuhai Panion & BF Biotech Inc. Zhuhai Baoyi Biotech Co., Ltd Zhuhai Panion Innovation Biotech Co., Ltd Shandong Weigao Panion Pharmaceutical Company Limited Shanghai Weigao Panion Pharmaceutical Company Limited	Trading Manufacture of cosmeceutical Trading Trading Manufacture and sales of drugs Manufacture and sales of drugs	71,882 97,966 (Note 5) - (Note 4) 66,552 (Note 6) 238,483 15,342	Note 1-2(1) Note 1-2(2) Note 1-2(3) Note 1-2(2) Note 1-2(4) Note 1-3	71,882 91,390 4,647 33,402 126,971 -	- 3,288 - - - -	- - - - - -	71,882 94,678 (Note 5) 4,647 (Note 4) 33,402 126,971 -	(2,198) (38,602) - (18,387) (31,593) (14,041)	% 100.00 % 100.00 % 100.00 % 100.00 % 44.00 % 44.00	(2,198) (38,602) - (18,387) (13,901) (6,178)	64,508 (37,388) - 44,650 28,577 563	- - - - - -

Note 1: The method of investment is divided into the following of four categories.

• (1) Invest directly in a company in Mainland China

(2) Trough the establishment of third-region companies then investing in Mainland China

• 1) Through Bowlin Holdings Co., Ltd. then investing in Mainland China

• 2) Through Bowlin Holding (HK) Co., Limited. then investing in Mainland China

• 3) Through Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada then investing in Mainland China

• 4) Through Weigao Panion Biotech Holding Company Limited then investing in Mainland China

• (3) other methods: through Shandong Weigao Panion Pharmaceutical Company Limited

Note 2: The investment income (losses) was recognized under the equity method based on the financial statements audited by the auditor of the Company.

Note 3: Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD 1 to 30.708).

Note 4: Zhuhai Baoyi Biotech Co., Ltd was stuck off from the registry and liquidated on March 13, 2023. Its remaining liquidation assets of USD 112,181.72 were returned to Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada. Then, Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada returned its capital of USD 112,181.72 to Bowlin Holding Co., Ltd. (Cayman), and reduced its registered capital on July 25, 2023. The relevant alternation registered procedures have been completed.

Note 5: Bowlin Holding Co., Ltd. (Cayman)'s Board of Directors resolved during its meeting held on January 11, 2023, and May 8, 2023, to increase its capital in Bowlin Holding (HK) Co., Limited in cash by RMB 1,500 thousand. The increased capital was remitted to Bowlin Holding (HK) Co., Limited on July 24, 2023. The relevant alternation registered procedures were completed. Bowlin Holding (HK) Co., Limited invested in and remitted RMB 1,500 thousand Zhuhai Panion & BF Biotech Inc. on July 25, 2023. The relevant alternation registered procedures were completed.

Note 6: On August 7, 2023, Bowlin Holding (HK) Co., Limited's Board of Directors resolved to convert its loans of USD 500 thousand to Zhuhai Panion Innovation Biotech Co., Ltd. into capital, and also increase its investment in cash by USD 500 thousand. The increase cash capital was remitted to Zhuhai Panion Innovation Biotech Co., Ltd. on September 20, 2023. The relevant alternation registered procedures were completed.

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2023	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
327,957 (USD 6,523 ) (CNY29,506 ) (Notes 3 and 4)	357,304 (USD 7,373 ) (CNY30,256 ) (Notes 3 and 4)	1,146,648 (Note 1)

Note 1:Sixty percent (60%) of the Company's net worth.

Note 2:Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD 1 to TWD 30.708/ CNY 1 to TWD 4.326).

(Continued)

59

PANION & BF BIOTECH INC. Notes to the Parent Company Only Financial Statements

• Note 3:Zhuhai Baoyi Biotech Co., Ltd. was stuck off from the registry on March 13, 2023. Its remaining liquidation assets were returned to Pou Ling Sang Kei Macau Sociedade Unipessoal Limitada in accordance with the investment structure. As requested by the regulations, the Company has reported the cancellation of its indirect investment in Zhuhai Baoyi Biotech Co., Ltd. in the Mainland China, to the Investment of Commission, Ministry of Economic Affairs (hereinafter "the Investment of Commission"), and was recorded by the Investment of Commission on July 10, 2023. The Company was authorized, to indirectly invest in Zhuhai Panion & BF Biotech Inc., by the Investment of Commission on July 12, 2023. The investment method was Bowlin Holding Co., Ltd. (Cayman) invested in Bowlin Holding (HK) Co., Limited, wherein CNY 750 thousand was from the Company's cash investment in Bowlin Holding Co., Ltd. (Cayman), and another CNY 750 thousand was from part of the above-mentioned remaining liquidation assets, and then invested in Zhuhai Panion & BF Biotech Inc. through Bowlin Holding (HK) Co., Limited. On July 25, 2023, a total increase cash capital of CNY 1,500 thousand was remitted to Zhuhai Panion & BF Biotech Inc. from Bowlin Holding (HK) Co., Limited.

• Note 4:The Company was authorized by the Investment of Commission to indirectly invest in Zhuhai Panion Innovation Biotech Co., Ltd. The investment method was Bowlin Holding (HK) Co., Limited converted its loans of USD 500 thousand to Zhuhai Panion Innovation Biotech Co., Ltd. into capital, and also increase its investment in cash by USD 500 thousand. On September 20, 2023, Bowlin Holding (HK) Co., Limited has remitted the increase cash capital of USD 500 thousand to Zhuhai Panion Innovation Biotech Co., Ltd.

• (iii) Significant transactions in China:

The significant direct and indirect transactions between the Company and the investees in Mainland China, please refer to note 7 “Related-party transactions”.

(Continued)

60

PANION & BF BIOTECH INC.

Notes to the Parent Company Only Financial Statements

• (d) Major shareholders:

		Unit: share
Shareholding Shareholder's Name	Shares	Percentage
PANION INVESTMENTS CO., LTD. Citi Custodian UOB Kay Hian (Hong Kong) - Customer Dedicated Account	15,831,336 6,439,000	% 18.46 % 7.51

(14) Segment information:

Please refer to the year 2023 consolidated financial statements.

61

PANION & BF BIOTECH INC.

Statement of cash and cash equivalents

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Type Cash and cash equivalents Bank deposits	Description Amount $ 398 Demand deposits 226,463 Foreign currency deposits USD 1,096 thousand＠30.7080 33,662 EUR 5 thousand＠33.96 174 JPY 112 thousand＠0.2175 25 HKD 57 thousand＠3.9329 226 CNY 247 thousand @4.3260 1,068 VND 488,379 thousand＠0.0013 619 Time deposit USD 4,800 thousand (maturity date: January 5, 2024 to March 5, 2024) 147,398 Subtotal 409,635 $ 410,033

62

PANION & BF BIOTECH INC.

Statement of notes receivable

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Customer name Related parties: Shining Biotech Company Ltd. Non-related parties: C830034 L600001 Others (amount individually less than 5%) Subtotal Total	Description Arising from operating activities Arising from operating activities 〃 〃	Amount Remark $ 25,577 5,698 21,421 64,990 92,109 $ 117,686

63

PANION & BF BIOTECH INC.

Statement of accounts receivable

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Customer name Related parties: Shining Biotech Company Ltd. Zhuhai Panion & BF Biotech Inc. Zhuhai Panion Innovation Biotech Co., Ltd Subtotal Non-related parties: L600001 Others (amount individually less than 5%) Subtotal Less: loss allowance Total	Description Arising from operating activities 〃 〃 Arising from operating activities 〃	Amount Remark $ 13,460 2,081 113 15,654 28,339 134,889 163,228 28 163,200 $ 178,854

64

PANION & BF BIOTECH INC.

Statement of inventories

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Item Merchandise and finished goods Work-in-process Raw materials Supplies Total Less: allowance for losses	Amount Cost Net realizable value (NBV) Remark $ 172,302 354,879 Market value is represented by NRV 50,680 38,397 〃 100,998 94,663 〃 48,210 40,753 〃 372,190 528,692 47,474 $ 324,716

Statement of prepayments

Item Prepaid expenses Prepayment for purchases	Description	Amount Remark $ 11,858 1,024 $ 12,882

65

PANION & BF BIOTECH INC.

Statement of changes in financial assets measured at fair value through profit or loss - non-current

For the year ended December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Financial instrument name G Innings Medical Ltd. Neolink Capital Corp.	Beginning balance Number of shares Fair value 420,000 $ 2,728 3,500,000 32,465 $ 35,193	Increase Number of shares Amount - - - 2,077 2,077	Decrease Number of shares Amount - - 1,505,000 15,050 15,050	Ending balance Number of shares Fair value 420,000 2,728 1,995,000 19,492 22,220	Ending balance Number of shares Fair value 420,000 2,728 1,995,000 19,492 22,220	Collateral or pledge Remark None None Note 1
	Number of shares	Number of shares - -	Number of shares - 1,505,000	Number of shares
	420,000 3,500,000			420,000 1,995,000

Note 1: The increase was due to the unrealized valuation gain of $2,077 thousand, and the decrease was due to the return of capital reduction of $15,050 thousand.

66

PANION & BF BIOTECH INC.

Statement of changes in investments accounted for under equity method

For the year ended December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Name Bowlin Biotech Corp. Bowlin Holding Co., Ltd. (Cayman) Bowlin Holding Co., Ltd. Cheng Fong Chemical Co., Ltd. Credit balance of investments accounted for using equity method Weigao Panion Biotech Holding Company Limited	Beginning balance Number of shares Amount 2,305 $ 32,992 4,250,000 107,515 2,500,000 37,470 42,132,000 836,944 $ 1,014,921 33,567,071 (16,624)	Inc	rease Amount - 4,350 (Notes 2 & 5) - 1,005 (Note 5) 5,355 -	Dec	rease Amount 4,745 (Note 1) 41,273 (Note 3) 5,388 (Note 4) 63,677 (Note 6) 115,083 14,684 (Note 7)		Ending balanc	e Amount 28,247 70,592 32,082 774,272 905,193 (31,308)	Market price or net assets value Unit price Gross value 12,843.45 29,604 15.85 68,997 13.45 33,624 18.38 774,272 906,497 1.59 53,300	Collateral or pledge Remark None Nome None None None
	Number of shares	Number of shares - 104,450 (Note 2) - - (Note 2) -		Number of shares - - - - -		Number of shares 2,305 4,354,450 2,500,000 42,132,000 33,567,071	Ownership (％) 100.00 100.00 53.19 100.00 44.00		Unit price 12,843.45 15.85 13.45 18.38 1.59
	2,305 4,250,000 2,500,000 42,132,000 33,567,071

Note1: Included investment losses of $(4,223) thousand, and cumulated translation differences of $(522) thousand.

Note2: Due to an increase in the investment.

Note3: Included investment losses of $(40,875) thousand, cumulated translation differences of $(445) thousand and unrealized gains on affiliate transactions of $47 thousand.

Note4: Included investment losses of $(4,798) thousand, and cumulated translation differences of $(590) thousand.

Note5: Due to share-based payment.

Note6: Included investment losses of $(60,903) thousand, intangible assets amortization $(3,536) thousand, and unrealized gains on affiliate transactions of $762 thousand.

Note7: Included investment losses of $(14,015) thousand, and cumulated translation differences of $(669) thousand.

67

PANION & BF BIOTECH INC.

Statement of short-term loans

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Type Secured loan Unsecured loan Unsecured loan	Lender Chang Hwa Bank Chang Hwa Bank Taiwan Cooperative Bank	Ending balance $ - 200,000 120,000 $ 320,000	Term 2024 2024 2024	Rang of interest rates (%) 1.8 1.8 1.783	Line of Credit 460,000 440,000 200,000	Pledged as collateral Remark Office in Nangang, and land and buildings in Pingzhen None None

68

PANION & BF BIOTECH INC.

Statement of accounts payable

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Vendor name Related parties: Cheng Fong Chemical Co., Ltd. Zhuhai Panion Innovation Biotech Co., Ltd. Subtotal Non-related parties: AO28814153 AP04351082 AP59369419 Others (amount individually less than 5%) Subtotal	Description Arising from operating activities 〃 Arising from operating activities 〃 〃 〃	Amount Remark $ 2,504 88 2,592 7,372 8,793 7,630 104,023 127,818 $ 130,410

69

PANION & BF BIOTECH INC.

Statement of other payables

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Vendor name Related parties: Accrued expenses – bonuses Accrued expenses – payroll and year-end bonuses Accrued expenses – commission Accrued payables on equipment and construction Other (amount individually less than 5%) Subtotal Non-related parties: Cheng Fong Chemical Co., Ltd. Others (amount individually less than 5%) Subtotal	Description CIT on profit-making business under the linked-tax system	Amount Remark $ 31,787 52,001 21,771 22,945 75,526 204,030 5,669 754 6,423 $ 210,453

70

PANION & BF BIOTECH INC.

Statement of other current liabilities

December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Item Temporary receipts and receipts on behalf of others Accrued business tax Others (amount individually less than 5%)	Description	Amount Remark $ 39,745 3,919 1,948 $ 45,612

Statement of operating revenue

For the year ended December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Item Pharmaceutical Supplement Cosmeceutical Diagnostic Medical device Sales royalty fee	Volume	Amount Remark $ 740,579 295,732 83,055 80,774 8,941 405,235 $ 1,614,316
	- - - - - -

71

PANION & BF BIOTECH INC.

Statement of operating costs

For the year ended December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Item Cost of finished goods sold: Raw materials: Beginning raw materials inventory Add: purchase Less: ending raw materials inventory Disposal Transfer to expenses Raw materials subtotal Supplies: Beginning supplies inventory Add: purchases Less: ending supplies inventory Disposal Transfer to expenses Supplies subtotal Cost of raw material and supplies used in production Direct labor Manufacturing expenses Manufacturing costs Add: beginning work-in-process inventory Less: ending work-in-process inventory Disposal Transfer to expenses Cost of goods manufactured Add: beginning finished goods inventory Add:Purchase Less: ending finished goods inventory Less:Disposal Transfer to expenses Physical count variance Cost of finished goods sold Cost of merchandise sold: Beginning merchandise inventory Add: purchase Less: ending merchandise inventory Less:Transfer to expenses Cost of merchandise sold Cost of goods sold Physical count variance Losses on market price decline Unallocated production overhead Others Total operating costs	Amount	Amount
	Subtotal Total $ 106,658 220,386 100,998 3,691 3,893 218,462 56,905 123,660 48,210 1,107 2,119 129,129 347,591 51,913 160,031 559,535 52,129 50,680 4,585 9,199 547,200 136,054 21,207 145,586 3,314 7,886 2 547,673 28,671 39,772 26,716 1,156 40,571 588,244 2 16,545 24,321 6,096 $ 635,208	Total
		547,673 40,571
		588,244 2 16,545 24,321 6,096

72

PANION & BF BIOTECH INC.

Statement of selling expenses

For the year ended December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Item Salary Printing expenses Channel expenses Commission expenses Shipping expenses Others (amount individually less than 5%)	Description	Amount Remark $ 119,817 20,315 68,170 64,434 52,527 57,954 $ 383,217

Statement of administrative expenses

Item Salary Remuneration to directors Professional services fee Miscellaneous expense Others (amount individually less than 5%)	Description	Amount Remark $ 56,429 13,650 7,091 7,177 49,549 $ 133,896

73

PANION & BF BIOTECH INC.

Statement of research and development expenses

For the year ended December 31, 2023

(All amounts expressed in thousands of New Taiwan dollars)

Item Salary Clinical trial expense Product development expense Depreciation expenses Others (amount individually less than 5%)	Description	Amount Remark $ 37,510 59,404 34,102 35,414 32,666 $ 199,096

Please refer to note 6 (f) for the statement of change in property, plant and equipment.

Please refer to note 6 (f) for the statement of change in accumulated depreciation of property, plant and equipment.

Please refer to note 6 (g) for the statement of change in right-of-use assets.

Please refer to note 6 (g) for the statement of change in accumulated depreciation of right-of-use assets.

Please refer to note 6 (h) for the statement of change in intangible assets.

Please refer to note 6 (q) for the details of other income.

Please refer to note 6 (q) for the details of other gains or losses, net.

Please refer to note 6 (q) for the details of finance costs.