Primax — Interim / Quarterly Report 2018

Nov 14, 2018

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Stock Code:4915

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

With Independent Auditors’ Review Report for the Three Months Ended March 31, 2018 and 2017

Address: No. 669, Ruey Kuang Road, Neihu, Taipei Telephone: (02)2798-9008

The independent auditors’ review report and the accompanying consolidated 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’ review report and consolidated financial statements, the Chinese version shall prevail.

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Table of contents

		Contents	Page
1.	Cover Page		1
2.	Table of Contents		2
3.	Independent Auditors’ Review Report		3
4.	Consolidated Balance Sheets		4
5.	Consolidated Statements of Comprehensive Income		5
6.	Consolidated Statements of Changes in Equity		6
7.	Consolidated Statements of Cash Flows		7
8.	Notes to the Consolidated Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the consolidated financial statements	8
	(3)	New standards, amendments and interpretations adopted	8～13
	(4)	Summary of significant accounting policies	14～22
	(5)	Significant accounting assumptions and judgments, and major sources	22
		of estimation uncertainty
	(6)	Explanation of significant accounts	22～52
	(7)	Related-party transactions	52～53
	(8)	Pledged assets	53
	(9)	Significant commitments and contingencies	53～54
	(10)	Losses due to major disasters	54
	(11)	Subsequent events	54
	(12)	Other	54
	(13)	Other disclosures
		(a) Information on significant transactions	55～59
		(b) Information on investees	60
		(c) Information on investments in mainland China	60～61
	(14)	Segment information	62

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Independent Auditors’ Review Report

To the board of directors of PRIMAX ELECTRONICS LTD.:

Introduction

We have reviewed the accompanying consolidated balance sheets of the PRIMAX ELECTRONICS LTD. and its subsidiaries as of March 31, 2018 and 2017, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2018 and 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standards (“ IASs” ) 34, “ Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

Except as explained in the Basis for Qualified Conclusion paragraph, we conducted our reviews in accordance with Statement of Auditing Standards 65, “ Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of the consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As stated in Note 4(b), the consolidated financial statements included the financial statements of certain nonsignificant subsidiaries, which were not reviewed by independent auditors. These financial statements reflect total assets amounting to NT$4,752,505 thousand and NT$1,558,936 thousand, constituting 15.5% and 5.2% of consolidated total assets as of March 31, 2018 and 2017, respectively. Total liabilities amounting to NT$2,644,484 thousand and NT$1,852,664 thousand, constituting 15.3% and 10.4% of consolidated total liabilities as of March 31, 2018 and 2017, respectively, and total comprehensive income (loss) amounting to income NT$16,116 thousand and loss NT$88,811 thousand, constituting 3.5% and 1,134.0% of consolidated comprehensive income (loss) for the three months ended March 31, 2018 and 2017, respectively.

Furthermore, as stated in Note 6(g), the investments accounted for using equity method of the PRIMAX ELECTRONICS LTD. and its subsidiaries in its investee companies of NT$1,430,935 thousand as of March 31, 2018, and its related share of profit of associates accounted for using equity method of gain NT$2,361 thousand for the three months ended March 31, 2018, were recognized solely on the financial statements prepared by these investee companies, but not reviewed by independent auditors.

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Qualified Conclusion

Except for the adjustments, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries and equity accounted investee companies described in the Basis for Qualified Conclusion paragraph above been reviewed by independent auditors, based on our reviews and the review report of another auditor (please refer to Other Matter paragraph), nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the PRIMAX ELECTRONICS LTD. and its subsidiaries as of March 31, 2018 and 2017, and of its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IASs 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Other Matter

We did not review the financial statements of Tymphany Worldwide Enterprises Ltd., a subsidiary of the PRIMAX ELECTRONICS LTD. and its subsidiaries. Those financial statements were reviewed by another auditor, whose review report has been furnished to us, and our conclusion, insofar as it relates to the amounts included for Tymphany Worldwide Enterprises Ltd., is based solely on the review report of another auditor. The financial statements of Tymphany Worldwide Enterprises Ltd. reflect total assets amounting to NT$6,697,259 thousand and NT$4,975,022 thousand, constituting 21.8% and 16.5% of the related consolidated total assets, as of March 31, 2018 and 2017, respectively, and with operating revenue amounting to NT$3,796,226 thousand and NT$2,829,895 thousand, constituting 31.9% and 22.0% of the related consolidated operating revenue for the three months ended March 31, 2018 and 2017, respectively.

The engagement partners on the reviews resulting in this independent auditors’ review report are MEI-PIN WU and CHI-LUNG YU.

KPMG

Taipei, Taiwan (Republic of China) May 11, 2018

Notes to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and its 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 review such consolidated financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ review report and the accompanying consolidated 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’ review report and consolidated financial statements, the Chinese version shall prevail.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards as of March 31, 2018 and 2017

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2018, December 31 and March 31, 2017 (Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note 6(a)) 1110 Current financial assets at fair value through profit o loss (note 6(b)) 1170 Notes and accounts receivable, net (note 6(e)) 1180 Accounts receivable from related parties, net (notes 6(e) and 7) 1200 Other receivables, net 1310 Inventories (note 6(f)) 1470 Other current assets Non-current assets: 1550 Investments accounted for using equity method (note 6(g)) 1523 Non-current available-for-sale financial assets (note 6(d)) 1517 Non-current financial assets at fair value through other comprehensive income (note 6(c)) 1600 Property, plant and equipment (note 6(j)) 1760 Investment property, net (note 6(k)) 1780 Intangible assets (note 6(l)) 1840 Deferred tax assets 1985 Long-term prepaid rents 1990 Other non-current assets (note 8) Total assets	March 31, 2018 Amount % $ 4,523,636 15 r 151,443 1 8,949,526 29 99,125 - 612,625 2 6,013,255 20 420,468 1 20,770,078 68 1,430,935 4 - - 388,682 1 4,400,026 14 35,098 - 2,702,707 9 566,273 2 212,971 1 214,628 1 9,951,320 32 $ 30,721,398 100	December 31, 2017 Amount % 7,821,011 21 141,151 - 13,014,207 35 105,911 - 737,687 2 6,791,093 18 530,360 1 29,141,420 77 - - 402,997 1 - - 4,437,684 12 35,214 - 2,730,188 7 548,995 1 217,520 1 261,125 1 8,633,723 23 37,775,143 100	March 31, 2017 Amount % 4,883,779 16 118,443 - 10,121,289 34 69,223 - 260,988 1 5,397,286 18 325,440 1 21,176,448 70 - - 910,470 3 - - 4,369,909 14 35,561 - 2,644,006 9 558,185 2 237,920 1 178,176 1 8,934,227 30 30,110,675 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note 6(m)) 2170 Notes and accounts payable 2120 Current financial liabilities at fair value through profit or loss (note 6(b)) 2200 Other payables 2201 Salaries payable (note 6(s)) 2300 Other current liabilities 2320 Long-term borrowings, current portion (note 6(n)) 2365 Current refund liabilities Non-Current liabilities: 2540 Long-term borrowings (note 6(n)) 2630 Long-term deferred revenue (note 6(j)) 2600 Other non-current liabilities Total liabilities Equity attributable to owners of parent: 3110 Ordinary shares (note 6(r)) 3140 Capital collected in advance 3200 Capital surplus (note 6(r)) 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings (note 6(r)) 3400 Other equity interest 36XX Non-controlling interests(note 6(i)) Total equity Total liabilities and equity	March 31, 2018		December 31, 2017	December 31, 2017		March 31, 2017 Amount % - - 11,267,072 37 98,297 - 3,575,500 12 468,624 2 336,829 1 215,556 1 - - 15,961,878 53 111,111 - 1,301,288 4 469,099 2 1,881,498 6 17,843,376 59 4,447,543 15 630 - 882,416 3 788,634 3 97,300 - 5,197,855 17 (397,818) (1) 1,250,739 4 12,267,299 41 30,110,675 100
						Amount	%
						995,638 16,350,178 103,107 3,991,128 1,105,153 433,894 135,555 -
						23,114,653
						83,333 1,039,581 555,774
						1,678,688
						24,793,341

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2018 and 2017

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

4000 Operating revenue (notes 6(u), 6 (v) and 7) 5000 Operating costs (notes 6(f), (p), (s), (w) and 12) Gross profit Operating expenses (notes 6(p), (s), (w) and 12): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses Net operating income Non-operating income and expenses: 7010 Other income (note 6(x)) 7020 Other gains and losses (note 6(y)) 7060 Share of profit of associates accounted for using equity method (note 6(g)) 7050 Finance costs Total non-operating income and expenses Profit before tax 7950 Less: income tax expense (note 6(q)) Profit 8300 Other comprehensive income (loss): 8310 Components of other comprehensive income that will not be reclassified to profit or loss: 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss: 8361 Exchange differences on translation of foreign operation’s financial statements 8362 Unrealized gains on available-for-sale financial assets 8399 Income tax expense related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income (loss) after tax Comprehensive income Profit attributable to: 8610 Owners of parent 8620 Non-controlling interests (note 6(i)) Comprehensive income attributable to: 8710 Owners of parent 8720 Non-controlling interests (note 6(i)) Earnings per share (note 6(t)) 9710 Basic earnings per share (NT dollars) 9810 Diluted earnings per share (NT dollars)	For the three	months ended March 31 2017 % Amount % 100 12,881,184 100 88 11,265,889 88 12 1,615,295 12 2 304,233 2 3 306,314 2 5 471,139 4 10 1,081,686 8 2 533,609 4 - 50,725 - 2 16,907 - - - - - (11,234) - 2 56,398 - 4 590,007 4 1 137,735 1 3 452,272 3 - - - - - - - - - 1 (446,064) (3) - 1,624 - - - - 1 (444,440) (3) 1 (444,440) (3) 4 7,832 3 418,436 3 - 33,836 - 3 452,272 3 4 2,108 - - 5,724 - 4 7,832 - 0.80 0.95 0.79 0.94
	2018	% 100 88 12 2 3 5 10 2 - 2 - - 2 4 1 3 - - - 1 - - 1 1 4 3 - 3 4 - 4 0.80 0.79
	Amount $ 11,883,748 10,423,317 1,460,431 283,144 381,862 551,018 1,216,024 244,407 36,137 177,590 2,361 (7,631) 208,457 452,864 106,934 345,930 (14,315) - (14,315) 127,969 - - 127,969 113,654 $ 459,584 $ 352,493 (6,563) $ 345,930 $ 459,496 88 $ 459,584 $ $

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity For the three months ended March 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2017 Profit Other comprehensive income Comprehensive income Compensation cost of share-based payment Amortization expense of restricted employee stock Issuance of restricted stock Exercise of employee stock options Issuance of ordinary shares for employee stock option Balance at March 31, 2017 Balance at January 1,2018 Effects of retrospective application Balance at January 1, 2018 after adjustments Profit Other comprehensive income Comprehensive income Retirement of restricted stock Compensation cost of share-based payment Amortization expense of restricted employee stock Issuance of restricted stock Issuance of ordinary shares for employee stock option Balance at March 31, 2018							Equity attributable to	Equity attributable to	Equity attributable to	Equity attributable to	Equity attributable to	owners of parent	owners of parent	owners of parent	owners of parent						Non- controlling interests Total equity
	Share capital				Capital surplus		Retained earnings					Other equity interest						Total equity attributable to owners of parent
												Exchange differences on translation of Unrealized gains (losses) from financial assets measured at fair value operation’s financial statements through other comprehensive income			Unrealized gains (losses) on available- for-sale financial assets	Unearned employee compensation
	Ordinary shares		Capital collected in advance				Legal reserve		Special reserve	Unappropriated retained earnings
	$ 4,421,343 - - - - - 24,500 - 1,700 $ 4,447,543 $ 4,456,883 - 4,456,883 - - - - - - 11,000 1,280 $ 4,469,163		3,024		791,466		788,634		97,300		4,779,419		(259,911) - (417,952) (417,952) - - - - - (677,863) (372,554) - (372,554) - 121,318 121,318 - - - - - (251,236)	-	405,466		(27,017) - - - - 12,182 (112,210) - - (127,045) (95,806) - (95,806) - - - 4,820 - 27,275 (84,370) - (148,081)		10,999,724		1,244,734 12,244,458 33,836 452,272 (28,112) (444,440) 5,724 7,832 281 937 - 12,182 - - - 1,890 - - 1,250,739 12,267,299 1,596,530 12,981,802 - - 1,596,530 12,981,802 (6,563) 345,930 6,651 113,654 88 459,584 - - 680 2,027 - 27,275 - - - - 1,597,298 13,470,688
			- -		- -		- -		- -		418,436 -			- -	- 1,624
			-		-		-		-		418,436			-	1,624
					656 - 87,710 - 2,584		- - - - -		- - - - -		- - - - -			- - - - -	- - - - -
					882,416		788,634		97,300		5,197,855			-	407,090
					1,232,490 -		982,041 -		97,300 -		5,008,344 42,573			- 30,916
					1,232,490		982,041		97,300		5,050,917			30,916
					- -		- -		- -		352,493 -
					-		-		-		352,493
							- - - - -		- - - - -		- - - - -
							982,041		97,300		5,403,410

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the three months ended March 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation and amortization Bad debt expense and sales returns and discounts Expected credit loss for bad debt expense Interest expense Interest income Compensation cost of share-based payment Losses related to inventories Share of profit of associates accounted for using equity method Loss on disposal of property, plant and equipment Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Financial assets at fair value through profit or loss Notes and accounts receivable Accounts receivable from related parties Other receivable Inventories Other current assets Other operating assets Changes in operating assets Financial liabilities at fair value through profit or loss Notes and accounts payable Salaries payable Other payable Other current liabilities Refund liabilities Other operating liabilities Changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash outflow generated from operations Interest received Interest paid Income taxes paid Net cash used in operating activities Cash flows from (used in) investing activities: Acquisition of available-for-sale financial assets Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of unamortized expense Other investing activities Net cash flows used in investing activities Cash flows from (used in) financing activities: Decrease in short-term borrowings Repayments of long-term borrowings Increase in guarantee deposits received Exercise of employee share options Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the three months ended March 31 2018 2017 $ 452,864 590,007 390,115 370,529 - (52,919) 12 - 6,650 10,808 (35,384) (48,459) 29,302 13,119 37,388 101,685 (2,361) - 4,084 1,315 429,806 396,078 (10,292) 22,874 4,117,345 3,535,503 6,786 33,618 125,062 234,423 740,024 1,171,576 111,249 114,799 (39) 13,261 5,090,135 5,126,054 (7,396) (52,133) (5,518,300) (5,625,846) (617,282) (677,559) (716,674) (440,617) (74,029) (14,031) (106,699) - (137,108) (3,062) (7,177,488) (6,813,248) (2,087,353) (1,687,194) (1,657,547) (1,291,116) (1,204,683) (701,109) 35,384 48,459 (6,632) (10,791) (164,159) (35,654) (1,340,090) (699,095) - (21,045) (1,428,574) - (329,393) (300,349) 1,811 338 (17,587) (17,476) 40,358 1,566 (1,733,385) (336,966) (230,685) - (107,776) (274,444) 47,399 22,799 - 1,890 (291,062) (249,755) 67,162 (190,321) (3,297,375) (1,476,137) 7,821,011 6,359,916 $ 4,523,636 4,883,779

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) As of March 31, 2018 and 2017 Reviewed only, not audited in accordance with the generally accepted auditing standards PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

March 31, 2018 and 2017

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

(1) Company history

PRIMAX ELECTRONICS LTD. (the “Company”), formerly known as Hong Chuan Investments Ltd., was incorporated on March 20, 2006, and registered under the Ministry of Economic Affairs, ROC. The Company changed its name to Hong Chuan Electronics Ltd. and Primax Electronics Ltd. in October 2007 and February 2008, respectively. The address of the Company’s registered office is No. 669, Ruey Kuang Road, Neihu, Taipei.

Primax Electronics Holdings, Ltd. (Primax Holdings, formerly known as Apple Holdings Ltd.) acquired all shares of the Company from YWAN PANG Management Limited on April 2, 2007. The investment was approved by the Investment Commission, Ministry of Economic Affairs. However, all shares of the Company were sold by Primax Holdings to its stockholders in October 2009.

Based on the resolution approved by the Company’ s board of directors on November 5, 2007, the Company resolved to acquire and merge with Primax Electronics Ltd. (“Primax”, a listed company) on December 28, 2007. The Company is the surviving company, and Primax was dissolved upon completion of the merger.

The consolidated financial statements of the Company as at and for the three months ended March 31, 2018, comprised the Company and subsidiaries (together referred to as “the Group”). The major business activities of the Group were the manufacture and sale of multi-function printers, scanners, digital camera modules, computer mice, keyboards, track pads, mobile phone accessories, consumer electronics products, shredders, amplifiers, speakers, audio systems and industrial automation parts. Please refer to note 14 for further information.

The Company’ s common shares were registered with the Financial Supervisory Commission, ROC (“FSC”) on June 22, 2012, and listed on the Taiwan Stock Exchange (“TWSE”) on October 5, 2012.

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

The consolidated financial statements were authorized for issuance by the board of directors on May 11, 2018.

(3) New standards and interpretations adopted:

• (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 following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018. In addition, based on the announcement issued by the FSC on December 12, 2017, the Group can, and therefore, elected to early adopt the amendments to IFRS 9 “ Prepayment features with negative compensation” . The related new standards, interpretations and amendments are as follows:

(Continued)

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendment to IFRS 2 “Classification and Measurement of Share-based	January 1, 2018
Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4	January 1, 2018
Insurance Contracts”
IFRS 9 “Financial Instruments”	January 1, 2018
Amendments to IFRS 9 “Prepayment features with negative compensation”	January 1, 2019
IFRS 15 “Revenue from Contracts with Customers”	January 1, 2018
Amendment to IAS 7 “Statement of Cash Flows -Disclosure Initiative”	January 1, 2017
Amendment to IAS 12 “Income Taxes- Recognition of Deferred Tax Assets for	January 1, 2017
Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”	January 1, 2018
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12	January 1, 2017
Amendments to IFRS 1 and Amendments to IAS 28	January 1, 2018
IFRIC 22 “Foreign Currency Transactions and Advance Consideration”	January 1, 2018

Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

• (i) IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes a comprehensive framework by five steps for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”. The Group applies this standard retrospectively with the cumulative effect, it need not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Group recognizes the cumulative effect upon the initially application of this Standard as an adjustment to the opening balance of retained earnings on January 1, 2018.

The Group uses the practical expedients for completed contracts, which means it need not restate those contracts that have been completed on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

• 1) Sales of goods

For the sale of products, revenue was recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods.

(Continued)

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) Rending of services

The Group provides services, such as model research, development, and design, to customers. If the services under a single arrangement are rendered in different reporting periods, then the consideration is allocated on a relative fair value basis between the different services. Revenue was recognized using the stage-of-completion method. Under IFRS 15, the total consideration in the service contracts will be allocated to all services based on their stand-alone selling prices. The stand-alone selling prices will be determined based on the list prices at which the Group sells the services in separate transactions.

3) Impacts on financial statements

The following tables summarize the impacts of adopting IFRS15 on the Group’ s consolidated financial statements:

Impacted line items on the consolidated balance sheet Accounts receivable Impact on assets Other payables Refund liabilities Impact on liabilities	March 31, 2018
	Balances prior to the adoption of IFRS 15 Impact of changes in accounting policies $ (26,733) 26,733 $ 26,733 $ (977,239) 977,239 - (1,003,972) $ (26,733)	Balance upon adoption of IFRS 15

• (ii) IFRS 9 “Financial Instruments”

IFRS 9 “ Financial Instruments” replaces IAS 39 “ Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Group adopted the consequential amendments to IFRS 7 “Financial Instruments: Disclosures” that are applied to disclosures about 2018 but generally have not been applied to comparative information.

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

• 1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available-for-sale. Under IFRS

(Continued)

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4(c).

The adoption of IFRS 9 did not have any significant impact on its accounting policies on financial liabilities.

• 2)

• Impairment of financial assets

IFRS 9 replaces the incurred loss model in IAS 39 with the expected credit loss (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39, please see note 4(c).

3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below:

• ‧Differences in the carrying amounts of financial assets resulting from the adoption of IFRS 9 are recognized in retained earnings and other equity interest as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.

• ‧The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:

  • － The determination of the business model within which a financial asset is held.

  • － The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

  • － The designation of certain investments in equity instruments not held for trading as at FVOCI.

• ‧If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Group assumed that the credit risk on its asset will not increase significantly since its initial recognition.

• 4)

• Classification of financial assets on the date of initial application of IFRS 9

The following table shows the measurement categories and the carrying amount of the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group’s financial assets as of January 1, 2018. (The measurement categories and the carrying amount of financial liabilities do not change.)

(Continued)

12

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets Cash and cash equivalents Derivative instruments Investment in equity instruments Receivables, net Other financial assets (Guarantee deposits paid)	IAS39		IFRS9
	Measurement categories Loans and receivables Held-for-trading Available-for-sale (note 1) Loans and receivables (note 2) Loans and receivables	Carrying amount	Measurement categories Carrying amount Amortized cost 7,821,011 Mandatorily at FVTPL 141,151 FVOCI 402,997 Amortized cost 13,857,805 Amortized cost 90,805
		7,821,011 141,151 402,997 13,857,805 90,805

Note1: These equity securities (including financial assets measured at cost) represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI. Accordingly, an increase of $402,997 thousand in those assets recognized, and a decrease of $42,573 thousand in the other equity interests, as well as the increase of $42,573 thousand in retained earnings were recognized on January 1, 2018.

• Note2: Notes receivables, accounts receivables, lease receivables and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on 1 January, 2018:

FVOCI Beginning balance of available-for-sale (including measured at cost) (IAS 39) Available-for-sale reclassified to FVOCI Total	2017.12.31 IAS 39 Carrying amount $ 402,997 - $ 402,997	Reclassifications (402,997) 402,997 -	Remeasurements - - -	2018.1.1 IFRS 9 Carrying amount 402,997	2018.1.1 2018.1.1 Adjustments of retained earnings Adjustments of other equity interest - - 42,573 (42,573) 42,573 (42,573)

There is no material impact on the Group’s basic or diluted earnings per share for the three months ended March 31, 2018 and 2017.

(Continued)

13

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

As of the date the following IFRSs that have been issued by the IASB, but not yet endorsed by the FSC:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between Effective date to an Investor and Its Associate or Joint Venture” be determined by IASB IFRS 16 “Leases” January 1, 2019 IFRS 17 “Insurance Contracts” January 1, 2021 IFRIC 23 “Uncertainty over Income Tax Treatments” January 1, 2019 Amendments to IAS 28 “Long-term interests in associates and joint ventures” January 1, 2019 Annual Improvements to IFRS Standards 2015–2017 Cycle January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” January 1, 2019

Those which may be relevant to The Group are set out below:

Issuance / Release Dates January 13, 2016

Standards or Interpretations Content of amendment IFRS 16 “Leases” The new standard of accounting for lease is amended as follows: ‧ For a contract that is, or contains, a lease, the lessee shall recognize a right-of-use asset and a lease liability in the balance sheet. In the statement of profit or loss and other comprehensive income, a lessee shall present interest expense on the lease liability separately from the depreciation charge for the right-of-use asset during the lease term.

‧A lessor classifies a lease as either a finance lease or an operating lease, and therefore, the accounting remains similar to IAS 17.

The Group is evaluating the impact on its consolidated financial position and consolidated financial performance upon the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Group completes its evaluation.

(Continued)

14

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(4) Summary of significant accounting policies:

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Report by Securities Issuers (“ the Regulation” ) and guidelines of IAS 34 “Interim Financial Reporting” which are endorsed and issued into effect by FSC and do not include all of the information required by the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the FSC (hereinafter referred to IFRS endorsed by the FSC) for full annual consolidated financial statements.

Except the following accounting policies mentioned below, the significant accounting policies adopted in the consolidated financial statements are the same as those in the consolidated financial statement for the year ended December 31, 2017. For the related information, please refer to note 4 of the consolidated financial statements for the year ended December 31, 2017.

(b) Basis of consolidation

• (i) List of subsidiaries in the consolidated financial statements

The details of the subsidiaries included in the consolidated financial statements are as follows:

Name of investor	Name of subsidiary	Principal activities Holding company Holding company Holding company Market development and customer service Holding company Market development and customer service Holding company Holding company and customer service Holding company	Percentage of shareholding March 31, 2018 December 31, 2017 March 31, 2017 Description % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % - % - (note 1) (note 10) % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 70.00 (note 2)	Percentage of shareholding March 31, 2018 December 31, 2017 March 31, 2017 Description % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % - % - (note 1) (note 10) % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 70.00 (note 2)
			March 31, 2018	December 31, 2017 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % - % 100.00 % 100.00
The Company The Company The Company The Company The Company The Company The Company Primax Cayman Diamond	Primax Industries (Cayman) Holding Ltd. (Primax Cayman) Primax Technology (Cayman) Holding Ltd. (Primax Tech.) Destiny Technology Holding Co., Ltd. (Destiny BVI.) Primax Destiny Co., Ltd. (Destiny Japan) Diamond (Cayman) Holdings Ltd. (Diamond) Gratus Technology Corp. (Gratus Tech.) Primax AE (Cayman) Holdings Ltd. (Primax AE) Primax Industries (Hong Kong) Ltd. (Primax HK) Tymphany Worldwide Enterprises Ltd. (TWEL)		% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00

(Continued)

15

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investor	Name of subsidiary	Principal activities Manufacture of multifunctional peripherals, computer mice, mobile phone accessories, consumer electronics products, and shredders Manufacture of computer, peripherals and keyboards Manufacture of computer peripherals and keyboards Sale of multi- function printers and computer peripheral devices and market development and customer service Research and development of computer peripheral devices and software Sale of audio accessories, amplifiers and their components Manufacture, research and development, design, and sale of audio accessories, amplifiers and their components Market development and customer service of amplifiers and their components Research and development, design, and sale of audio accessories, amplifiers and their components and holdings	Percentage of shareholding March 31, 2018 December 31, 2017 March 31, 2017 Description % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % - % - % 100.00 (note 3) % 66.44 % 66.44 % - (note 4) % - % - % 100.00 (note 5) % 100.00 % 100.00 % - (note 6)	Percentage of shareholding March 31, 2018 December 31, 2017 March 31, 2017 Description % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % 100.00 % 100.00 % 100.00 (note 10) % - % - % 100.00 (note 3) % 66.44 % 66.44 % - (note 4) % - % - % 100.00 (note 5) % 100.00 % 100.00 % - (note 6)
			March 31, 2018	December 31, 2017 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % - % 66.44 % - % 100.00
Primax HK and Primax Tech. Dongguan Primax Electronic & Telecommunication Products Ltd. (PCH2) Primax HK Primax Electronics (KS) Corp., Ltd. (PKS1) Primax HK Primax Electronics (Chongqing) Corp., Ltd. (PCQ1) Primax Tech. Polaris Electronics Inc. (Polaris) Destiny BVI. Destiny Electronic Corp. (Destiny Beijing) TWEL Tymphany HK Ltd. (TYM HK) TWEL Premium Loudspeakers (Hui Zhou) Co., Ltd. (Premium Hui Zhou) TWEL TYP Enterprise, Inc. (TYP) Premium Hui ZhouTymphany Acoustic Technology HK Ltd. (TYM Acoustic HK)			% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % - % 66.44 % - % 100.00

(Continued)

16

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investor	Name of subsidiary	Principal activities Manufacture, research and development, design and sale of audio accessories, amplifiers and their components Research and development, design of audio accessories, amplifiers and their components Manufacture, install and repair of audio accessories and their components Market development and customer service of amplifiers and their components Sale of audio accessories, amplifiers and their components Research and development, design of audio accessories, amplifiers and their components Sale of audio accessories, amplifiers and their components Manufacture, research and development, design and sale of audio accessories, amplifiers and their components Manufacture, research and development, design and sale of audio accessories, amplifiers and their components Research and development, design , and sale of audio accessories, amplifiers and their components	Percentage of shareholding March 31, 2018 December 31, 2017 March 31, 2017 Description % 100.00 % 100.00 % - (note 7) % 100.00 % 100.00 % - (note 6) % 100.00 % 100.00 % - (note 8) (note 10) % 100.00 % 100.00 % - (notes 5) % 100.00 % 100.00 % - (note 3) % 100.00 % 100.00 % - (note 9) % 100.00 % 100.00 % 100.00 % - % - % 100.00 (note 4) % - % - % 100.00 (note 7) % 100.00 % 100.00 % 100.00	Percentage of shareholding March 31, 2018 December 31, 2017 March 31, 2017 Description % 100.00 % 100.00 % - (note 7) % 100.00 % 100.00 % - (note 6) % 100.00 % 100.00 % - (note 8) (note 10) % 100.00 % 100.00 % - (notes 5) % 100.00 % 100.00 % - (note 3) % 100.00 % 100.00 % - (note 9) % 100.00 % 100.00 % 100.00 % - % - % 100.00 (note 4) % - % - % 100.00 (note 7) % 100.00 % 100.00 % 100.00
			March 31, 2018	December 31, 2017 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % - % - % 100.00
Premium Hui ZhouDongguan Tymphany Acoustic Technology Co., Ltd. (Tymphany Dongguan) TYM Acoustic HKTYMPHANY ACOUSTIC TECHNOLOGY (UK) LIMITED (TYM UK) TYM Acoustic HKTymphany Acoustic Technology Europe, s.r.o (TYM Acoustic Europe) TYM Acoustic HKTYP TYM Acoustic HKTYM HK TYM Acoustic HKTymphany Acoustic Technoloigy Limited (TYM Acoustic) TYM HK TYMPHANY LOGISTICS, INC (TYML) TYM HK Premium Hui Zhou TYM HK Tymphany Dongguan Tymphany Dongguan Dong Guan Dong Cheng Tymphany Acoustic Technology Co., Ltd. (TYDC)			% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % - % - % 100.00

(Continued)

17

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Note 1: The Company was incorporated in January 2018.

• Note 2: TWEL was incorporated in October 2013, acquiring all shares of TYM HK by issuing new ordinary shares. The Company acquired 70% of the shares of TWEL by cash through its subsidiary Diamond on January 10, 2014. Therefore, the Company indirectly acquired all shares of subsidiaries through TWEL, and included them in the consolidated financial statements from the same date. Also the Group acquired 5.5% of the shares of TWEL by cash and 24.5% of the shares of TWEL by exchanging the shares of Premium Hui Zhou on October 31, 2017.

• Note 3: TYM HK was originally a 100% owned subsidiary of TWEL; however, after the restructuring of the Group in the third quarter of 2017, TYM HK became 100% owned subsidiary of TYM Acoustic HK.

• Note 4: Premium Hui Zhou was originally a 100% owned subsidiary of TYM HK; however, after the restructuring of the Group in the third quarter of 2017, Premium Hui Zhou became 100% owned subsidiary of TWEL. TWEL owned Premium Hui Zhou decrease to 66.44% due to the shares exchange and exercise of employee stock option in the fourth quarter of 2017.

• Note 5: TYP was originally a 100% owned subsidiary of TWEL; however, after the restructuring of the Group in the third quarter of 2017, TYP became 100% owned subsidiary of TYM Acoustic HK.

Note 6: The Company was incorporated in January 2017.

• Note 7: Tymphany Dongguan was originally a 100% owned subsidiary of TYM HK; however, after the restructuring of the Group in the third quarter of 2017, Tymphany Dongguan became 100% owned subsidiary of Premium Hui Zhou.

Note 8: TYM Acoustic HK acquired all shares of Bang & Olufsen s.r.o (renamed as Tymphany Acoustic Technology Europe, s.r.o. after merger) by cash on June 1, 2017.

Note 9: The Company was incorporated in December 2017.

Note 10: The Company is a non-significant subsidiary, and its financial statements have not been reviewed.

• (c) Financial instruments (applicable from January 1, 2018)

• (i) Financial assets

Financial assets are classified into the following categories: measured at amortized cost, FVOCI and FVTPL.

The Group shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

• 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 accumulated gain or loss on derecognition is recognized in profit or loss.

(Continued)

18

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) FVOCI

A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI, and accumulated in equity–unrealized gains (losses) from FVOCI. On derecognition, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss.

Dividend income derived from equity investments is recognized on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

3) FVTPL

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at 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.

• 4) Assemessment of whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, principal is defined as the fair value of the financial assets on initial recognition. Interest is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

‧contingent events that would change the amount or timing of cash flows;

‧terms that may adjust the contractual coupon rate, including variable rate features;

‧prepayment and extension features; and

(Continued)

19

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• ‧terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features)

• 5) Impairment of financial assets

The Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, financial assets measured at amortized costs, notes and accounts receivable, other receivables, guarantee deposit paid and other financial assets, etc.).

The Group measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

‧Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for accounts receivables are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment as well as forward-looking information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 61 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 361 days past due or the borrower is unlikely to pay its credit obligations to the Group in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

(Continued)

20

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is creditimpaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is creditimpaired includes the following observable data:

• ‧significant financial difficulty of the borrower or issuer;

• ‧a breach of contract such as a default or being more than 361 days past due;

• ‧the lender of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

• ‧it is probable that the borrower will enter bankruptcy or other financial reorganization; or

• ‧the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. The Group recognizes the amount of ECL (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

• 6) Derecognition of financial assets

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

(ii) Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Any attributable transaction costs thereof are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in the line item of non-operating income and expenses of other gains and losses. When the fair value of a derivative instrument is positive, it is classified as a financial asset, whereas when the fair value is negative, it is classified as a financial liability.

(Continued)

21

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(d) Revenue from contracts with customers (applicable from January 1, 2018)

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group 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 Group’s main types of revenue are explained below:

(i) Sale of goods

The Group manufactures computer peripherals and non-computer peripherals and sales them to customers. The Group 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, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

The Group often offers discounts to its customers based on aggregate sales of components. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate the discounts, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. A refund liabilities is recognized for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales of components are made with a credit term of 45 days to 90 days, which is consistent with the market practice.

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

(ii) Rending of services

The Group provides services, such as model research, development, and design to customers. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

• (iii) Financing components

The Group 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 group does not adjust any of the transaction prices for the time value of money.

(Continued)

22

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(e) Income taxes

The income tax expenses have been prepared and disclosed in accordance with paragraph B12 of International Financial Reporting Standards 34 “Interim Financial Reporting”.

Income tax expenses for the period are best estimated by multiplying pre-tax income for the interim reporting period by the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period.

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled, and be recognized directly in equity or other comprehensive income as tax expense.

(f) Employee benefits

The pension cost in the consolidated financial statements was calculated and disclosed on a year-todate basis by using the actuarially determined pension cost rate at the end of the prior fiscal year adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events.

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

The preparation of the consolidated financial statements in conformity with the Regulations and IFRSs (in accordance with IAS 34 “Interim Financial Reporting” and endorsed by the FSC) requires management to make 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.

The preparation of the consolidated financial statements, estimates and underlying assumptions are reviewed on an ongoing basis which are in conformity with the consolidated financial statements for the year ended December 31, 2017. For the related information, please refer to note 5 of the consolidated financial statements for the year ended December 31, 2017.

(6) Explanation of significant accounts:

Except for the following disclosures, there is no significant difference as compared with those disclosed in the consolidated financial statements for the year ended December 31, 2017. Please refer to Note 6 of the 2017 annual consolidated financial statements.

(a) Cash and cash equivalents

Cash on hand Demand accounts and checking deposits Time deposits Cash and cash equivalents in the consolidated statements of cash flows	March 31, 2018 $ 3,424 3,260,142 1,260,070 $ 4,523,636	December 31, 2017 March 31, 2017 3,279 3,109 6,022,395 1,991,924 1,795,337 2,888,746 7,821,011 4,883,779

(Continued)

23

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (b) Financial assets and liabilities at fair value through profit or loss

• (i) Details of financial instruments were as follows:

Mandatorily measured at FVTPL: Derivative instruments not used for hedging Forward exchange contracts Foreign exchange swap contracts Non-derivative financial assets Mutual funds Financial assets held-for-trading: Derivative instruments not used for hedging Forward exchange contracts Foreign exchange swap contracts Financial liabilities held-for-trading: Derivative instrument not used for hedging Forward exchange contracts Foreign exchange swap contracts	March 31, 2018 $ 62,346 86,955 2,142 $ 151,443 March 31, 2018 $ (91,915) (3,796) $ (95,711)	December 31, 2017 March 31, 2017 125,940 86,437 15,211 32,006 141,151 118,443 December 31, 2017 March 31, 2017 (69,167) (65,027) (33,940) (33,270) (103,107) (98,297)

(ii) The Group held the following derivative instruments as held-for trading financial assets, without the application of hedge accounting, were classified as mandatorily measured at fair value through profit or loss as of March 31, 2018 and held-for-trading financial instruments as of December 31 and March 31, 2017:

(Continued)

24

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

	March 31, 2018
Derivative financial instruments	Nominal amount (inthousands)	Maturity date Predetermined rate April 2, 2018~ August 7, 2018 28.755~29.689 April 2, 2018~ May 30, 2018 29.046~29.337 April 9, 2018~ July 19, 2018 6.2821~6.6085 April 16 2018~ July 11, 2018 28.896~29.708
Forward exchange contracts －buy USD / sell TWD Forward exchange contracts －buy TWD / sell USD Forward exchange contracts －buy CNY/ sell USD Foreign exchange swap contracts －swap in TWD / swap out USD	USD 530,000 USD 109,000 USD 99,300 USD 339,000

	December 31, 2017	Maturity date Predetermined rate January 4, 2018~ June 26, 2018 29.437~30.021 January 4, 2018~ March 26, 2018 29.792~30.328 January 19, 2018~ April 19, 2018 6.6085~6.6677 January 19, 2018~ April 19, 2018 6.5475~6.6875 January 12, 2018~ February 9, 2018 30.052~30.232 January 5, 2018~ June 26, 2018 29.583~30.0155 Maturity date Predetermined rate April 7, 2017~ June 5, 2017 30.028~30.982 April 7, 2017~ June 2, 2017 30.055~32.008 April 12, 2017 31.953 April 10 2017~ June 5, 2017 30.210~30.944
Derivative financial instruments	Nominal amount (inthousands)
Forward exchange contracts －buy USD / sell TWD Forward exchange contracts －buy TWD / sell USD Forward exchange contracts －buy USD / sell CNY Forward exchange contracts －buy CNY/ sell USD Foreign exchange swap contracts －swap in USD/ swap out TWD Foreign exchange swap contracts －swap in TWD / swap out USD	USD 299,000 USD 276,500 USD 75,000 USD 66,000 USD 103,500 USD 116,000 March 31, 2017
Derivative financial instruments	Nominal amount (inthousands)
Forward exchange contracts －buy USD / sell TWD Forward exchange contracts －buy TWD / sell USD Foreign exchange swap contracts －swap in USD / swap out TWD Forward exchange contracts －swap in TWD / swap out USD	USD 194,000 USD 153,200 USD 20,000 USD 80,300

(Continued)

25

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Financial assets at FVOCI

Equity investments at FVOCI Stocks listed in domestic markets–Global TEK Stocks unlisted in domestic markets–WK Technology Fund IV Ltd. Stocks unlisted in domestic markets–Green Rich Technology Co., Ltd. Stocks unlisted in domestic markets–Changing Information Technology Inc. Stocks unlisted in domestic markets–Syntronix Corp. Equities unlisted in foreign markets–Grove Ventures L.P. (USD 550 thousand) Stocks unlisted in foreign markets–WK Global Investment III Ltd. (USD 193 thousand) Total

March 31, 2018

$ 360,905 2,004 2,000 2,102 49 16,016 5,606 $ 388,682

(i) The Group designated the investments above as equity securities as at FVOCI because these equity securities represent those investments that the Group intends to hold for long-term for strategic purposes and not for sale. These investments were classified as available-for-sale financial assets as of December 31 and March 31, 2017.

No strategic investments were disposed in the three months ended March 31, 2018, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

(ii) The Group did not provide any of the aforementioned financial assets as collateral.

(d) Available-for-sale financial assets

	December 31,	December 31,	March 31,
		2017	2017
Stocks listed in domestic markets	$	-	496,404
Stocks unlisted in domestic markets		380,835	382,517
Stocks unlisted in foreign markets		22,162	31,549
	$	402,997	910,470

(i) These investments were classified as financial assets at FVOCI as of March 31, 2018. Please refer to note 6(c).

• (ii) The Group did not provide any of the aforementioned financial assets as collateral.

(Continued)

26

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (e) Notes and accounts receivable (including related parties)

Notes receivable Accounts receivable Accounts receivable – related parties Less: allowance for doubtful accounts allowance for sales returns and discounts Total	March 31, 2018 $ 232,125 8,841,932 99,125 (124,531) - $ 9,048,651	December 31, 2017 March 31, 2017 175,324 114,869 13,019,199 10,145,830 105,911 69,223 (127,640) (89,204) (52,676) (50,206) 13,120,118 10,190,512

(i) The Group did not provide any of the aforementioned notes and accounts receivable (including related parties) as collateral.

• (ii) The Group applies the simplified approach to provide for its ECL, the use of lifetime ECL provision for all notes and accounts receivables, on March 31, 2018. To measure the ECL, notes and accounts receivable have been grouped based on shared credit risk characteristics and customer’s ability to pay all the amounts due based on the terms of the contract as well as incorporated forward looking information. The ECL allowance provision analysis as of March 31, 2018 was as follows:

Current Past due 0 to 30 days Past due 31 to 60 days Past due 61 to 90 days Past due 91 to 180 days Past due 181 to 360 days More than 361 days past due	Carrying amounts of notes and accounts receivable (including related parties) $ 8,474,025 329,782 47,111 81,572 61,701 1,411 177,580 $ 9,173,182	Lifetime ECL rate Loss allowance provision of lifetime ECL 0% - 3% 9,745 1% 479 9% 7,430 15% 9,210 1% 17 55% 97,650 124,531

(Continued)

27

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) As of December 31 and March 31, 2017, the Group applies the incurred loss model to consider the loss allowance provision of notes and accounts receivable, and the aging analysis of notes and accounts receivable, which were past due but not impaired, was as follows:

Past due 0 to 30 days Past due 31 to 90 days Past due 91 to 180 days Past due 181 to 360 days More than 361 days past due	December 31, 2017 March 31, 2017 $ 827,739 702,674 62,006 14,771 9,641 196,806 2,218 989 91,632 - $ 993,236 915,240

(iv) The movement in the allowance for notes and accounts receivable was as follows:

Balance on January 1, 2018 and 2017 per IAS 39 Adjustment on initial application of IFRS 9 Balance on January 1, 2018 per IFRS 9 Impairment losses recognized (reversed) Effect of exchange rate changes Balance on March 31, 2018 and 2017	For the three months ended March, 2018 $ 127,640 - 127,640 12 (3,121) $ 124,531	For the three months ended March, 2017
		Individually assessed impairment Collectively assessed impairment - 99,936 - (4,823) - (5,909) - 89,204

• (v) The Company entered into agreements with banks to sell its accounts receivable without recourse. According to the agreements, within the limit of its credit facilities, the Company does not need to guarantee the capability of its customers to pay for reasons other than commercial disputes when transferring its accounts receivable. The Company receives partial advances upon sales of accounts receivable and pays interest calculated based on the interest rates agreed for the period through the collection of the accounts receivable. The remaining amounts are received upon the collection of the accounts receivable, and are recorded as other receivables. In addition, the Company shall pay handling charges based on a fixed rate. As of March 31, 2018, December 31 and March 31, 2017, the details of transferred accounts receivable which conformed to the criteria for derecognition were as follows:

(Continued)

28

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

			March 31, 2018
Buyer Mega International Commercial Bank HSBC Bank Bank of Taiwan EnTie Bank	Amount sold NT$ $ - - - 129,419 $ 129,419	Credit facilities US$ (expressed in thousand) 15,000 45,000 29,250 9,000 98,250	Cash received in advance NT$ Interest rate Guarantee (promissory note) expressed in thousands - - US$ 3,750 - - US$ 13,500 - - NT$ 210,000 - - - - December 31, 2017	Amount derecognized NT$ Amount not received NT$ - - - - - - - 129,419 - 129,419
Buyer Mega International Commercial Bank HSBC Bank Bank of Taiwan EnTie Bank		Credit facilities US$ (expressed in thousand) 15,000 45,000 29,250 7,000 96,250	Cash received in advance NT$ Interest rate Guarantee (promissory note) expressed in thousands - - US$ 3,750 - - US$ 13,500 - - NT$ 210,000 - - - - March 31, 2017	Amount derecognized NT$ Amount not received NT$ - - - - - - - 81,751 - 81,751
Buyer Mega International Commercial Bank HSBC Bank Bank of Taiwan		Credit facilities US$ (expressed in thousand) 20,000 64,400 26,000 110,400	Cash received in advance NT$ Interest rate Guarantee (promissory note) expressed in thousands - - US$ 5,000 - - US$ 58,000 - - NT$ 772,200 -	Amount derecognized NT$ Amount not received NT$ - - - - - - - -

(vi) Please refer to note 9 for guarantee notes provided by the Company to sell its accounts receivable.

(f) Inventories

Raw materials Semi-finished goods and work in process Finished goods and merchandise	March 31, 2018 $ 1,858,368 1,287,881 2,867,006 $ 6,013,255	December 31, 2017 March 31, 2017 1,797,211 1,266,667 1,351,885 1,291,194 3,641,997 2,839,425 6,791,093 5,397,286

(Continued)

29

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group did not provide any of the aforementioned inventories as collateral. The Group recognized the following items as cost of goods sold:

nized the following items as cost of goods sold:
		For the three months	ended March 31
		2018	2017
Losses on inventory valuation	$	(22,283)	(48,066)
Unallocated manufacturing overhead resulting from
the actual production being lower than the normal
capacity		(16,661)	(35,906)
Losse on disposal of inventories		-	(19,545)
Gains on physical inventories		1,556	1,832
	$	(37,388)	(101,685)

(g) Investments accounted for using equity method

The Group’s investments accounted for using the equity method are individually insignificant. The related information included in the consolidated financial statements was as follows:

Carrying amount of individually insignificant associates’ equity Attributable to the Group: Profit Other comprehensive income Comprehensive income	March 31, 2018 December 31, 2017 March 31, 2017 $ 1,430,935 - - For the three months ended March 31 2018 2017 $ 2,361 - - - $ 2,361 -	March 31, 2018 December 31, 2017 March 31, 2017 $ 1,430,935 - - For the three months ended March 31 2018 2017 $ 2,361 - - - $ 2,361 -	March 31, 2018 December 31, 2017 March 31, 2017 $ 1,430,935 - - For the three months ended March 31 2018 2017 $ 2,361 - - - $ 2,361 -
			2018 2017 $ 2,361 - - - $ 2,361 -

In order to expand the business scale and strengthen the Company’s competitiveness in the market, the Group acquire 37% shares of Belfast Limited, a company that engages in the manufacturing of electric power steering system and adaptive front lighting system, with amount of USD$48,100 by participating in its capital increase by cash, and purchasing its outstanding shares, and obtain significant influence over Belfast Limited in January 2018.

Investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on the financial statements that have not been reviewed.

(Continued)

30

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Acquisition of subsidiaries

Based on the resolution approved during the board of directors’ meeting of TWEL, one of the main subsidiaries of the Company, held on March 13, 2017, acquired all shares of Bang & Olufsen s.r.o.(renamed as TYM Acoustic Europe after merger) amounting to EUR$18,000 through TYM Acoustic HK. Through this transaction, the Company will establish the market for its audio products in Europe, strengthen the cooperation with its clients and expand its technique, manufacturing process and global market. The purchase agreement was settled on June 1, 2017.

(i) Consideration transferred

According to the share purchase agreement, the consideration transferred was EUR$18,000. As of December 31, 2017, TYM Acoustic HK deposited EUR$1,500 in Escrow Account based on the share purchase agreement.

The seller raised an objection against the net assets of TYM Acoustic Europe on July 31, 2017. Both the seller and the Group resolved that TYM Acoustic Europe should pay an additional amount of $40,689 (EUR$1,139) to the seller on September 5, 2017.

(ii) Obtaining control

The Company indirectly holds 66.44% of TYM Acoustic Europe’s shares through TWEL. The Company has included TYM Acoustic Europe in its consolidated financial statements since the settlement date.

• (iii) According to IFRSs, the fair value of net assets acquired should be measured on the acquisition date. Therefore, the Company evaluated the fair value and useful lives of intangible assets at the time of acquisition. As of the reporting date, the Company had engaged experts to evaluate the fair value of identifiable net assets, and based on the analysis results, the fair value of consideration transferred, assets acquired, and liabilities assumed at the date of acquisition were as follows:

Items Consideration transferred Cash Fair value of identifiable assets acquired and liabilities assumed Cash acquired Accounts receivable Other receivables Inventories Other current assets Property, plant and equipment Other non-current assets Accounts payable Other payables Other current liabilities Identifiable net assets Goodwill	Amount
	$ 653,796 7,158 402,115 5,592 411,816 8,813 33,358 935 (313,464) (14,238) (73,092) 468,993 $ 184,803

(Continued)

31

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) Material non-controlling interests of subsidiaries

The Material non-controlling interests of subsidiaries were as follows:

Name of subsidiaries	Main operation place Business/Registered Country	Proportion of Ownership and Voting Rights Held by Non-controlling Interests March 31, 2018 December 31, 2017 March 31, 2017 % 33.56 % 33.56 % 30
		March 31, 2018 % 33.56

The following information on the aforementioned subsidiaries have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Included in these information are the fair value adjustment made during the acquisition and relevant difference in accounting principles between the Group as at the acquisition date. Intra-group transactions were not eliminated in this information.

TWEL and its subsidiaries:

March 31, 2018 Current assets $ 6,618,907 Non-current assets 3,442,791 Current liabilities (5,172,271) Non-current liabilities (129,897) Net assets $ 4,759,530 Non-controlling interests $ 1,597,298 Operating revenue Profit Other comprehensive income Comprehensive income Profit attributable to non-controlling interests Comprehensive income attributable to non-controlling interests	December 31, 2017 March 31, 2017 10,455,985 4,364,113 3,479,864 3,299,077 (9,105,990) (3,268,643) (72,344) (225,418) 4,757,515 4,169,129 1,596,530 1,250,739 For the three months ended March 31 2018 2017 $ 3,804,004 2,877,049 $ (19,557) 112,785 19,818 (93,708) $ 261 19,077 $ (6,563) 33,836 $ 88 5,724

(Continued)

32

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Net increase (decrease) in cash and cash equivalents Dividends paid to non-controlling interests	For the three months ended March 31 2018 2017
	$ (298,551) 400,325 (43,868) (63,294) (241,039) (691) 34,229 (65,493) $ (549,229) 270,847 $ - -

(j) Property, plant and equipment

The cost, depreciation, and impairment loss of the property, plant and equipment of the Group for the three months ended March 31, 2018 and 2017, were as follows:

Cost or deemed cost: Balance on January 1, 2018 Additions Disposals Reclassifications Effect of exchange rate changes Balance on March 31, 2018 Balance on January 1, 2017 Additions Disposals Disposal of subsidiaries Effect of exchange rate changes Balance on March 31, 2017 Depreciation and impairments loss: Balance on January 1, 2018 Depreciation Disposals Reclassifications Effect of exchange rate changes Balance on March 31, 2018 Balance on January 1, 2017 Depreciation Disposals Reclassifications Effect of exchange rate changes Balance on March 31, 2017	Land $ 134,701 - - - - $ 134,701 $ 134,701 - - - - $ 134,701 $ - - - - - $ - $ - - - - - $ -	Buildings, leasehold improvement, and additional equipment 3,809,364 37,221 (33,799) 15,294 48,313 3,876,393 3,802,758 22,149 (1,771) 39,601 (194,144) 3,668,593 1,830,962 54,446 (33,799) 49 23,327 1,874,985 1,731,111 55,820 (1,771) - (88,670) 1,696,490	Machinery and equipment 6,024,654 36,420 (42,839) 39,419 83,400 6,141,054 5,672,304 140,500 (61,396) 99,245 (318,819) 5,531,834 4,311,178 262,019 (37,053) (12,923) 61,709 4,584,930 3,632,382 254,841 (59,660) (152) (209,984) 3,617,427	Office and other equipment 597,200 12,027 (6,550) 14,858 7,407 624,942 510,457 9,252 (3,695) 2,179 (27,474) 490,719 399,884 16,700 (6,441) 3,511 5,099 418,753 383,934 13,329 (3,778) (58) (21,206) 372,221	Construction in progress and testing equipment 413,789 156,943 - (75,208) 6,080 501,604 347,678 57,028 - (156,014) (16,801) 231,891 - - - - - - - - - - - -	Government grants Total (2,284) 10,977,424 - 242,611 - (83,188) - (5,637) (32) 145,168 (2,316) 11,276,378 (16,286) 10,451,612 - 228,929 - (66,862) - (14,989) 897 (556,341) (15,389) 10,042,349 (2,284) 6,539,740 - 333,165 - (77,293) - (9,363) (32) 90,103 (2,316) 6,876,352 (13,237) 5,734,190 (1,226) 322,764 - (65,209) - (210) 765 (319,095) (13,698) 5,672,440

(Continued)

33

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Carrying amounts: Balance on January 1, 2018 Balance on March 31, 2018 Balance on January 1, 2017 Balance on March 31, 2017	Land $ 134,701 $ 134,701 $ 134,701 $ 134,701	Buildings, leasehold improvement, and additional equipment 1,978,402 2,001,408 2,071,647 1,972,103	Machinery and equipment 1,713,476 1,556,124 2,039,922 1,914,407	Office and other equipment 197,316 206,189 126,523 118,498	Construction in progress and testing equipment 413,789 501,604 347,678 231,891	Government grants Total - 4,437,684 - 4,400,026 (3,049) 4,717,422 (1,691) 4,369,909

• (i) The unamortized deferred revenue of equipment subsidy amounted to $808,207, $946,180 and $1,209,931 as of March 31, 2018, December 31, 2017 and March 31, 2017 respectively.

• (ii) The Group did not provide any of the aforementioned property, plant and equipment as collateral.

• (k) Investment property

Carrying amounts: Balance on January 1, 2018 Balance on March 31, 2018 Balance on January 1, 2017 Balance on March 31, 2017	Land $ 16,249 $ 16,249 $ 16,249 $ 16,249	Buildings and other equipment Total 18,965 35,214 18,849 35,098 19,428 35,677 19,312 35,561

• (i) The were no significant additions, disposal, or recognition and reversal of impairment losses of investment property for the three months ended March 31, 2018 and 2017. Please refer to Note 6(j) of the consolidated financial statements for the year ended December 31, 2017 for other further information.

• (ii) The fair value of the investment property was not significantly different from those disclosed in the Note 6(j) of the consolidated financial statements for the year ended December 31, 2017.

• (iii) The Group did not provide any of the aforementioned investment property as collateral.

(Continued)

34

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(l) Intangible assets

The carrying amounts of the intangible assets of the Group for the three months ended March 31, 2018 and 2017, were as follows:

Carrying amounts: Balance on January 1, 2018 Balance on March 31, 2018 Balance on January 1, 2017 Balance on March 31, 2017	Goodwill	Customer Relationships 433,019 415,049 504,899 486,929	Technology	Trademarks, Patents and Copyrights Total 19,080 2,730,188 17,881 2,702,707 23,864 2,673,670 22,652 2,644,006
	$ 2,025,495 $ 2,027,665 $ 1,850,383 $ 1,850,383		252,594
			242,112
			294,524
			284,042

• (i) There were no significant additions, disposal, or recognition and the reversal of impairment losses of intangible assets for the three months ended March 31, 2018 and 2017. Please refer to Note 6(k) of the consolidated financial statements for the year ended December 31, 2017 for other further information.

(ii) The Group did not provide any of the aforementioned intangible assets as collateral.

(m) Short-term borrowings

The details were as follows:

Unsecured bank loans Unused credit lines Annual interest rates	March 31, 2018 $ 764,953 $ 18,189,297 1.20%~2.93%	December 31, 2017 March 31, 2017 995,638 - 17,453,299 14,790,839 0.97%~4.96% 1.09%~1.43%

• (n) Long-term borrowings

March 31, 2018

Unsecured bank loans Less: current portion Unused credit lines	Currency	Annual interest rate	Maturity year Amount 2020 $ 111,112 (55,556) $ 55,556 $ -
	TWD	1.35%~1.48%

(Continued)

35

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Unsecured bank loans Less: current portion Unused credit lines Unsecured bank loans Less: current portion Unused credit lines		December 31, 2017 Annual interest rate Maturity year Amount 1.19%~1.48% 2018~2020 $ 218,888 (135,555) $ 83,333 $ - March 31, 2017 Annual interest rate Maturity year Amount 1.19~1.48% 2018~2020 $ 326,667 (215,556) $ 111,111 $ -
	Currency	Annual interest rate
	TWD
	Currency	Annual interest rate
	TWD	1.19~1.48%

• (i) Pursuant to the loan agreements with CTBC Bank, the Company has to maintain the following financial ratios calculated based on the Company’ s semi-annual audited (reviewed) consolidated financial statements. The financial covenants include (1) a current ratio of not less than 100%; (2) a financial debt ratio of not greater than 75%; (3) an interest coverage ratio of not less than 400%; and (4) stockholders’ equity of not less than $4,000,000. If the Company violates the financial covenants, the banks have the right to charge a default penalty or to require the Company to improve its financial ratios.

The Company has already paid the bank loans back to CTBC Bank in January 2018.

• (ii) Please refer to note 9 for the details of the outstanding guarantee notes.

• (o) Operating lease

• (i) Lessee

Non-cancellable operating lease rentals payable were as follows:

Less than one year Between one and five years More than five years	March 31, 2018 $ 268,897 465,371 457,431 $ 1,191,699	December 31, 2017 March 31, 2017 299,316 219,463 489,361 317,263 461,370 212,913 1,250,047 749,639

The Group leases a number of offices and warehouses and pieces of equipment under operating leases. The lease terms are between 1 and 18 years.

(Continued)

36

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Lessor

The Group leases out its investment property under operating leases. Please refer to note 6(k) for further information. Non-cancellable operating leases receivable were as follows:

Less than one year Between one and five years	March 31, 2018 $ 1,297 275 $ 1,572	December 31, 2017 March 31, 2017 1,484 707 - - 1,484 707

• (p) Employee benefits

• (i) Defined benefit plans

There was no material volatility of the market, no material reimbursement and settlement or other material one time events since prior fiscal year. As a result, the pension cost in the accompanying interim period was measured and disclosed according to the actuarial report as of December 31, 2017 and 2016.

(ii) Defined contribution plans

The Company contribute the pension cost on the defined contribution plans to the labor pension account at the Bureau of Labor Insurance. Subsidiaries other than the Company set up their defined contribution plans in accordance with the regulations of their respective countries.

• (iii) The Group recognized its pension costs and recorded them as operating costs and operating expenses.

Defined benefit plans Defined contribution plans Total	For the three months ended March 31
	2018 2017 $ 428 501 87,185 83,706 $ 87,613 84,207

(q) Income taxes

• (i) Income tax expense for the period is best estimated by multiplying the profit before tax of the reporting period by the effective annual tax rate as forecasted by the management.

According to the amendments to the “Income Tax Act” enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income

tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing with 2018. The Company reflects the change in the tax rate by an adjustment of deferred income tax benefit $19,199 to the estimated annual effective income tax rate.

(Continued)

37

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) The details of the Group’s income tax expenses were as follows:

The details of the Group’s income tax expenses were as	follows:
Income tax expense	For the three months ended March 31
	2018 2017 $ 106,934 137,735

• (iii) There were no income tax recognized in equity or other comprehensive income.

• (iv) Except for 2014, the Company’s income tax returns have been examined by the tax authority through the years to 2015.

(r) Capital and other equity

Except for the following disclosure, there was no significant change for capital and other equity for the three months ended March 31, 2018 and 2017. For the related information, please refer to note 6(q) of the consolidated financial statements for the year ended December 31, 2017.

(i) Ordinary shares

As of March 31, 2018, December 31 and March 31, 2017, the nominal ordinary shares amounted to $5,500,000. Par value of each share is $10 (dollars), which means in total there were 550,000 thousand authorized common shares, of which 446,916, 445,688 and 444,754 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

Reconciliation of shares outstanding was as follows:

Balance on January 1 Exercise of employee stock options Issuance of restricted stock Balance on March 31		Ordinary shares (in thousands of shares)
		For the three months ended March 31
		2018 2017 445,688 442,134 128 170 1,100 2,450 446,916 444,754

(Continued)

38

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Capital surplus

The balances of capital surplus were as follows:

Additional paid-in capital Employee stock options Restricted employee stock options Long-term investment	March 31, 2018 $ 584,584 234,002 182,606 303,000 $ 1,304,192	December 31, 2017 March 31, 2017 545,657 522,237 233,624 228,500 150,209 131,679 303,000 - 1,232,490 882,416

(iii) Retained earnings

According to the articles of the Company, when allocating the earnings for each year, the Company shall first offset its losses in previous year and set aside a legal capital reserve at 10% of the earing left over, until the accumulated legal capital reserve has equaled the total capital of the Company; then set aside a special capital reserve in accordance with relevant laws, the balance of the earnings shall combined into an aggregate amount of undistributed earnings, which shall become the aggregate distributable earnings to be distributed by the directors’ distribution proposals according to the resolution adopted at the shareholders’ meeting.

The Company is at the growth stage and considers its future cash demand, long-term financial plans, benefits to shareholders, and balanced dividends. Earnings distribution is made by stock dividend and cash dividend. The cash dividend shall not be less than 10 percent of the total dividends and could be adjusted depending on the Company’s operating condition.

On March 13, 2018, the board of directors’ meeting resolved to appropriate the 2017 earnings. On May 25, 2017, the shareholders’ meeting resolved to distribute the 2016 earnings. The distributions were NT$3.2 and 2.5 (dollars) per share, which amounted to $1,430,068 and $1,111,886, respectively.

(s) Share-based payment

Except for the following disclosure, there were no significant changes for share-based payment for the three months ended March 31, 2018 and 2017. Please refer to note 6(r) of the consolidated financial statements for the year ended December 31, 2017 for further information.

After the shareholders’ meeting on May 25, 2017, the Company decided to issue 2,000 thousand shares of restricted stock to those full-time employees who meet the Company’s requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors’ meeting resolved to issue 1,100 thousand shares on January 31, 2018.

As of March 31, 2018, the arrangements of the Group for share-based payment were as follows:

(i) Employee stock options and share-based payment

(Continued)

39

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 1) The related information on compensatory employee stock option plans was as follows:

Outstanding on January 1 Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding on March 31 Exercisable on March 31	For the three months ended March 31 2018 2017 Weighted- average exercise price Stock options (in thousands) Weighted- average exercise price Stock options (in thousands) - - 22.16 957 - - - - - - - - - - 25.20 (75) - - - - - - 21.90 882 - - 21.90 882
	2018 Weighted- average exercise price Stock options (in thousands) - - - - - - - - - - - - - -
	Weighted- average exercise price - - - - - - -

2) As of March 31, 2018 and December 31 and March 31 2017, the information on the employee stock option plans outstanding was as follows:

Employee stock option plan 1 Employee stock option plan 2 Employee stock option plan 3 -Issued in November 2011 Employee stock option plan 3 -Issued in October 2012 Outstanding at end of year		March 31, 2018 - - - - -	December 31, 2017 March 31, 2017 - - - 211 - - - 671 - 882

• 3) The related information on compensatory employee stock option plans of the Group was as follows:

Outstanding on January 1 Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding on March 31 Exercisable on March 31	For the three months ended March 31	For the three months ended March 31
	2018 Weighted- average exercise price Stock options (in thousands) - - - - - - - - - - - - - -	2017
	Weighted- average exercise price - - - - - - -	Weighted- average exercise price Stock options (in thousands) 18.27 3,308 - - - - - - - - 18.27 3,308 - -

(Continued)

40

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Restricted stock

1) As of March 31, 2018, the outstanding restricted stock of the Company was as follows:

Grant date Fair value on grant date (per share) Exercise price Granted units (thousand shares) Vesting period	Plan 1 (note 1) October 1, 2013 November 20, 2013 February 10, 2014 July 17, 2014 22.80 25.15 27.30 52.00 Free grants Free grants Free grants Free grants 1,450 186 135 220 1~3 years (notes 2 and 3) 1~2 years (notes 3 and 4) 1~2 years (notes 3 and 4) 1~2 years (note 3)	Plan 2 (note 1) February 24, 2015 August 18, 2015 43.70 38.40 Free grants Free grants 1,225 1,775 1~3years (note 2 and 3) 1~3 years (note 2)	Plan 3 (note 1) Plan 4 (note 1) February 13, 2017 September 7, 2017 February 8, 2018 45.80 75.40 76.70 Free grants Free grants Free grants 2,450 550 1,100 1~3 years (note 2) 1~3 years (note 2) 1~3 years (note 2)

• Note 1: Plan 1 –After the stockholders’ meeting on June 25, 2013, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company’s requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors’ meeting resolved to issue 1,450 thousand shares, 186 thousand shares, 135 thousand shares, and 220 thousand shares on August 13 and November 12, 2013, and January 22 and June 27, 2014, respectively.

• Plan 2 –After the stockholders’ meeting on June 24, 2014, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company’s requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors’ meeting resolved to issue 1,225 thousand shares and 1,775 thousand shares on January 28 and August 13, 2015, respectively.

• Plan 3 –After the shareholders’ meeting on June 20, 2016, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company’s requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors’ meeting resolved to issue 2,450 thousand shares and 550 thousand shares on January 23 and August 10, 2017, respectively.

• Plan 4 –After the shareholders’ meeting on May 25, 2017, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company’ s requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors’ meeting resolved to issue 1,100 thousand shares on January 31, 2018.

• Note 2: If the employees continue to provide service to the Company and meet the prior year’s performance indicator, 30% of the restricted stock shall be vested in year 1 after the grant date, and the remaining 30% and 40% shall be vested in year 2 and year 3, respectively, after the grant date.

(Continued)

41

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• Note 3: If the employees continue to provide service to the Company and meet the prior year’s performance indicator, 50% of the restricted stock shall be vested in year 1 after the grant date, and the remaining 50% shall be vested in year 2 after the grant date.

• Note 4: If the employees continue to provide service to the Company and meet the prior year’s performance indicator, the restricted stock shall be vested in year 1 after the grant date.

The restricted stock is kept by a trust, which is appointed by the Company, before it is vested. These shares shall not be sold, pledged, transferred, gifted, or, by any other means, disposed of to third parties during the custody period. The voting rights of these shares are executed by the custodian, and the custodian will act based on law and regulations. If the shares remain unvested after the vesting period, the Company will cancel the unvested shares thereafter.

• 2) The related information on restricted stock of the Company was as follows:

(Thousand shares) Outstanding on January 1 Granted during the year Forfeited during the year Vesting during the year Expired during the year Outstanding on March 31	For the three months ended March 31 2018 2017 3,934 1,771 1,100 2,450 - - (1,027) (289) (101) - 3,906 3,932

(iii) Expenses and liabilities attributable to share-based payment were as follows:

Expenses attributable to employee stock options Restricted stock Total Salaries payable: Current	For the three months ended March 31
	2018 2017 $ 2,027 937 27,275 12,182 $ 29,302 13,119 $ - 1,938

(Continued)

42

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Earnings per share

The calculation of basic earnings and diluted earnings per share were as follows:

(i) Basic earnings per share

Profit attributable to owners of parent Weighted-average number of ordinary shares (thousand shares) Basic earnings per share (NT dollars) (ii) Diluted earnings per share Profit attributable to owners of parent Weighted-average number of ordinary shares (diluted) (thousand shares) Diluted earnings per share (NT dollars) Weighted-average number of ordinary shares on March 31 (basic) Exercise of employee stock options Estimated effect of employee stock bonuses Effect of restricted stock Weighted-average number of ordinary shares on March 31 (diluted)	For the three months ended March 31 2018 2017	For the three months ended March 31 2018 2017
	2018
	$ 352,493 418,436 442,384 440,499 $ 0.80 0.95 For the three months ended March 31 2018 2017 $ 352,493 418,436 445,183 444,049 $ 0.79 0.94 For the three months ended March 31 2018 2017
		442,384 440,499 59 508 867 1,869 1,873 1,173 445,183 444,049

(Continued)

43

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(u) Revenue from contracts with customers

(i) Disaggregation of revenue

Goods sold Service rendered Mainland China Americas Other	For the three months ended March 31, 2018
	Computer Peripherals

For details on revenue for the three months ended March 31, 2017, please refer to note 6(v).

• (ii) Contract balances

Notes and accounts receivable (including related parties) Less: allowance for impairment	March 31, 2018 January 1, 2018 $ 9,173,182 13,300,434 (124,531) (127,640) $ 9,048,651 13,172,794

For details on accounts receivable and allowance for impairment, please refer to note 6(e).

• (v) Operating revenue

The details of operating revenue for the three months ended March 31, 2017, was as follows:

Goods sold Services rendered Total	For the three months ended March 31, 2017
	$ 12,589,535 291,649 $ 12,881,184

(Continued)

44

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(w) Employee and directors’ and supervisors’ remuneration

In accordance with the Articles of incorporation, the Company should contribute 2 to 10 percent of the profit as employee remuneration and less than 2 percent 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 recipients of shares and cash may include the employees of the Company’s affiliated companies who meet certain conditions.

Details of remuneration to employees and directors for the three months ended March 31, 2018 and 2017, were as follows:

2017, were as follows:
Employee remuneration Directors’ remuneration	For the three months ended March 31
	2018 2017 $ 12,555 17,215 6,411 8,611 $ 18,966 25,826

The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company’s articles. These remunerations were expensed under operating costs or operating expenses during each period. The differences between the amounts distributed and those accrued in the financial statements, if any, are accounted for as changes in accounting estimate and recognized as profit or loss in the distribution year.

The differences between the amounts approved in the directors’ meeting and those recognized in the financial statements for the distributions of earnings for 2017 and 2016 were as follows:

Employee remuneration–Stock Employee remuneration–Cash Director’s remuneration Employee remuneration–Stock Employee remuneration–Cash Director’s remuneration	2017 Actual earnings distributed Accrued in the financial statement Difference $ - - - 68,260 68,182 (78) 34,000 34,094 94 2016 Actual earnings distributed Accrued in the financial statement Difference $ - - - 74,000 74,000 - 36,800 36,803 3

The differences were accounted for as changes in accounting estimates and recognized as profit or loss in the year 2018 and 2017. Information about the remuneration to employee and directors approved in the board of directors’ meetings can be accessed in the Market Observation Post System website.

(Continued)

45

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(x) Other income

The details of other income was as follows:

Interest revenue of cash in banks Rent revenue Other	For the three months ended March 31 2018 2017 $ 35,384 48,459 414 1,750 339 516 $ 36,137 50,725

(y) Other gains and losses

The details of other gains and losses were as follows:

Net gains on financial assets/liabilities measured at FVTPL Foreign currency exchange gains (losses), net Net losses on disposal of property, plant and equipment Other	For the three months ended March 31 2018 2017 $ 64,288 25,036 34,096 (25,800) (4,084) (1,315) 83,290 18,986 $ 177,590 16,907

(z) Financial instruments

(i) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments:

Carrying amount March 31, 2018 Non-derivative financial liabilities: Short-term borrowings $ 764,953 Notes and accounts payable 10,831,878 Other payables 1,121,121 Refund liabilities 977,239 Long-term borrowings 111,112 Guarantee deposits 221,566 Derivative financial liabilities: 95,711 Outflow - Inflow - $ 14,123,580	Contractual cash flows 765,388 10,831,878 1,121,121 977,239 112,784 221,566 - 2,042,816 (1,941,466) 14,131,326	Within 6 months 765,388 10,831,878 1,121,121 977,239 28,477 - - 2,042,816 (1,941,466) 13,825,453	6~12 months - - - - 28,289 - - - - 28,289	1~2 years - - - - 56,018 - - - - 56,018	2~5 years Over 5 years - - - - - - - - - - - 221,56 - - - - - - - 221,56

(Continued)

46

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Carrying amount December 31, 2017 Non-derivative financial liabilities: Short-term borrowings $ 995,638 Notes and accounts payable 16,350,178 Other payables 2,858,327 Long-term borrowings 218,888 Guarantee deposits 174,167 Derivative financial liabilities: 103,107 Outflow - Inflow - $ 20,700,305 March 31, 2017 Non-derivative financial liabilities: Notes and accounts payable $ 11,267,072 Other payables 2,341,027 Long-term borrowings 326,667 Guarantee deposits 166,036 Derivative financial liabilities: 98,297 Outflow - Inflow - $ 14,199,099	Contractual cash flows 997,078 16,350,178 2,858,327 221,752 174,167 - 3,187,373 (3,089,268) 20,699,607 11,267,072 2,341,027 332,371 166,036 - 2,545,108 (2,444,943) 14,206,671	Within 6 months 997,078 16,350,178 2,858,327 108,721 - - 3,187,373 (3,089,268) 20,412,409 11,267,072 2,341,027 110,089 - - 2,545,108 (2,444,943) 13,818,353	6~12 months - - - 28,532 - - - - 28,532 - - 109,024 - - - - 109,024	1~2 years - - - 56,677 - - - - 56,677 - - 57,051 - - - - 57,051	2~5 years Over 5 years - - - - - - 27,822 - - 174,167 - - - - - - 27,822 174,167 - - - - 56,207 - - 166,036 - - - - - - 56,207 166,036

The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

(ii) Currency risk

1) Exposure to foreign currency risk

The Group’s significant exposure to foreign currency risk was as follows:

F	inancial assets Monetary items USD:CNY USD:HKD USD:TWD USD:EUR inancial liabilities Monetary items USD:CNY USD:HKD USD:TWD USD:EUR	M	arch 31, 201	8		Dec	ember 31, 20	17 TWD 15,790,922 7,828,236 10,784,026 598,060 12,323,269 7,752,673 10,301,737 214,983	M	arch 31, 2017
		Foreign currency $ 392,740 145,842 234,544 31,698 279,196 152,369 281,588 7,035	Exchange rate 6.288 7.848 29.120 0.8130 6.288 7.848 29.120 0.813	TWD		Foreign currency 529,047 262,270 361,298 20,037 412,867 259,738 345,140 7,203	Exchange rate 6.534 7.817 29.848 0.838 6.534 7.817 29.848 0.838		Foreign currency 285,900 94,684 314,644 - 280,351 80,803 266,401 -	Exchange rate TWD 6.899 8,673,062 7.772 2,872,334 30.336 9,545,040 - - 6.899 8,504,728 7.772 2,451,240 30.336 8,081,541 - -
				11,436,579 4,246,931 6,829,928 923,046 8,130,193 4,436,991 8,199,855 204,859
F

(Continued)

47

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, notes and accounts receivable, other receivables, derivative financial instruments, loans and borrowings, notes and accounts payable, and other payables that are denominated in foreign currency. A weakening (strengthening) of 5% of the TWD, CNY, HKD and EUR against the USD as of March 31, 2018 and 2017, would have increased or decreased the profit before tax by $123,227 and $102,646 for the three months ended March 31, 2018 and 2017, respectively. The analysis is performed on the same basis for both periods.

Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For the three months ended March 31, 2018 and 2017, foreign exchange gain (loss) (including realized and unrealized portions) amounted to gain $34,096 and loss $25,800, respectively.

(iii) Interest rate analysis

Please refer to the note on liquidity risk management and interest rate exposure of the Group’s financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of nonderivative financial instruments on the reporting date. Regarding assets and liabilities with variable interest rates, the analysis is based on the assumption that the amounts of liabilities outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 0.25% when reporting to management internally, which also represents the Group management’ s assessment of the reasonably possible interest rate change.

If the interest rate had increased or decreased by 0.25%, and assumed all other variables remain constant the profit before tax would have increased or decreased by $2,278 and $2,846 for the three months ended March 31, 2018 and 2017, respectively. This is mainly due to borrowings and bank savings with variable interest rates.

(iv) Other price risk:

The changes in the securities price at the reporting date were performed using the same basis for the other comprehensive income before tax as illustrated below:

Price of securities at the reporting date Increasing 10% Decreasing 10%	For the three months ended March 31 2018 2017 Other comprehensive income before tax Other comprehensive income before tax $ 36,091 49,640 $ (36,091) (49,640)

(Continued)

48

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(v) Fair value

• 1) Kinds of financial instruments and fair value

The carrying amount and fair value of the Group’ s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required :

March 31, 2018

Financial assets at FVTPL – current Financial assets at FVOCI– non-current Financial assets measured at amortized cost: Cash and cash equivalents Notes and accounts receivable (including related parties) Other receivables Refundable deposits Total Financial liabilities at FVTPL– current Financial liabilities measured at amortized cost Borrowings Notes and accounts payable Other payables Salaries payable Refund liabilities Guarantee deposits Total	Carrying amounts $ 151,443 $ 388,682 $ 4,523,636 9,048,651 612,625 50,447 $ 14,775,484 $ 95,711 $ 876,065 10,831,878 2,092,312 487,871 977,239 221,566 $ 15,582,642		Fair Value	Fair Value
		Level 1 - 360,905 -	Level 2 - - -	Level 3 Total 151,443 151,443 27,777 388,682 95,711 95,711

(Continued)

49

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets at FVTPL–current Available-for-sale financial assets– non-current Loans and receivables: Cash and cash equivalents Notes and accounts receivable (including related parties) Other receivables Refundable deposits Total Financial liabilities at FVTPL – current Financial liabilities measured at amortized cost Borrowings Notes and accounts payable Other payables Salaries payable Guarantee deposits Total		December 31, 2017	December 31, 2017	December 31, 2017
	Carrying amounts $ 141,151 $ 402,997 $ 7,821,011 13,120,118 737,687 90,805 $ 21,769,621 $ 103,107 $ 1,214,526 16,350,178 3,991,128 1,105,153 174,167 $ 22,835,152		Fair Value
		Level 1 - - -	Level 2 - - -	Level 3 Total 141,151 141,151 402,997 402,997 103,107 103,107

Financial assets at FVTPL – current Available-for-sale financial assets – non-current Loans and receivables: Cash and cash equivalents Notes and accounts receivable (including related parties) Other receivables Refundable deposits Total Financial liabilities at FVTPL – current		March 31, 2017	March 31, 2017	March 31, 2017
	Carrying amounts $ 118,443 $ 910,470 $ 4,883,779 10,190,512 260,988 42,829 $ 15,378,108 $ 98,297		Fair Value
		Level 1 - 496,404 -	Level 2 - - -	Level 3 Total 118,443 118,443 414,066 910,470 98,297 98,297

(Continued)

50

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

March 31, 2017

Financial liabilities measured at amortized cost Borrowings Notes and accounts payable Other payables Salaries payable Guarantee deposits Total	Carrying amounts $ 326,667 11,267,072 3,578,300 468,624 166,036 $ 15,806,699		Fair Value	Fair Value
		Level 1	Level 2	Level 3 Total

• 2) Fair value valuation techniques for financial instruments measured at fair value

If a financial instrument has a quoted price in an active market, the quoted price is used as fair value. The quoted price of a financial instrument obtained from major exchanges and over-the counter markets are the basis used to determine the fair value of a listed company’s stock and the quoted prices in an active market.

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 these conditions can not be reached, then the market is non-active. In general, a market with low trading volume or high bid-ask spreads is an indication of a non-active market.

The Group uses the following methods in determining the fair value of its financial instruments without a quoted price in an active market:

• a) The fair value of derivative instruments is based on quoted prices. When quoted prices are unavailable, the fair value is estimated on the basis of the contract’s spot exchange rate and swap point.

• b) Financial assets at FVOCI – non-current are investments in domestic or foreign non-listed stock. The fair value is based on the market approach of comparable business. For stocks in the emerging market, the estimated fair value is adjusted for the lack of liquidity. When prices listed in the emerging market are unavailable, the fair value is estimated on the basis of unadjusted prior trade prices.

(Continued)

51

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 3) Transfers between Level 1 and Level 3

The Group holds an investment in equity shares of Global TEK, which is classified as FVOCI (available-for-sale financial assets), with a fair value of $360,905, $374,680 and $370,500 on March 31, 2018, December 31 and March 31, 2017, respectively. The fair value of the investment was previously categorized as Level 3 on March 31, 2017. This was because the shares were not based on quoted market price and the fair value was based on the significant unobservable inputs. In February, 2018, Global TEK listed its equity shares on an exchange and they are currently actively traded in that market. Because the equity shares now have a published price quotation in an active market, the fair value measurement was transferred from Level 3 to Level 1 of the fair value hierarchy on March 31, 2018.

• 4) Reconciliation of Level 3 fair values

For the three months ended March 31, 2018 FVTPL FVOCI (available-for- sale financial assets) Total Balance on January 1 $ 38,044 402,997 441,041 Recognized in profit or loss 64,288 - 64,288 Recognized in other comprehensive income - (14,315) (14,315) Acquisition /disposal (46,600) - (46,600) Transfer out of Level 3 - (360,905) (360,905) Balance on March 31 $ 55,732 27,777 83,509	For the three months ended March 31, 2018	For the three months ended March 31, 2018	For the three months ended March 31, 2018	For the three months ended March 31, 2018		For the three months ended March 31,2017 FVTPL Available for sale Total (9,113) 301,397 292,284 20,146 - 20,146 - 91,624 91,624 9,113 21,045 30,158 - - - 20,146 414,066 434,212	For the three months ended March 31,2017 FVTPL Available for sale Total (9,113) 301,397 292,284 20,146 - 20,146 - 91,624 91,624 9,113 21,045 30,158 - - - 20,146 414,066 434,212	For the three months ended March 31,2017 FVTPL Available for sale Total (9,113) 301,397 292,284 20,146 - 20,146 - 91,624 91,624 9,113 21,045 30,158 - - - 20,146 414,066 434,212
	FVTPL	FVOCI (available-for- sale financial assets)		Total				Available for sale Total 301,397 292,284 - 20,146 91,624 91,624 21,045 30,158 - - 414,066 434,212

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

The fair value measurements of the Group which are categorized within level 3 are classified as financial assets and liabilities at FVTPL – derivative financial instruments and financial assets at FVOCI (available-for-sale financial assets) – equity securities. The quantitative information about significant unobservable inputs was as follows:

Item Financial assets at FVOCI (Available- for-sale financial assets) – equity investment without an active market Financial assets and liabilities at FVTPL	Valuation technique (note 1) (note 2)	Significant unobservable inputs Inter-relationships between significant unobservable inputs and fair value (note 1) (note 1) (note 2) (note 2)

(Continued)

52

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• note 1: The fair value is based on the market value, and it has considered the recent financing activities, comparable business, market and other economic conditions etc., to determine the assumptions. Also, the significant unobservable inputs are marketability discount, but any changes of marketability discount would not result in significant potential financial impact, therefore there is no need to show the quantified information on it.

• note 2: The fair value is based on the quotation of a third party, therefore there is no need to show the sensitivity analysis of unobservable inputs.

• (aa) Financial risk management

The Group’s objectives and policies on financial risk management are consistent with note 6(z) of the consolidated financial statements for the year ended December 31, 2017.

• (ab) Capital management

Management believes that the objectives, policies and processes of capital management of the Group has been applied consistently with those described in the consolidated financial statements for the year ended December 31, 2017. Also, management believes that there were no significant changes in the Group’s capital management information as disclosed for the year ended December 31, 2017. Please refer to Note 6(aa) of the consolidated financial statements for the year ended December 31, 2017 for further details.

(7) Related-party transactions:

• (a) Names and relationship of the related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name Relationship Specialty Technologies, LLC (Specialty) Substantive related party

• (b) Significant transactions with related parties

• (i) Sales

The amounts of significant sales by the Group to related parties and the outstanding balances were as follows:

Other related parties	Sales For the three months ended March 31	Sales For the three months ended March 31	Notes March 31, 2018 99,125	and accounts receivable
	For the three month			December 31, 2017 March 31, 2017 105,911 69,223
	2018 $ 78,445	2017 53,211

There were no significant differences in the selling prices and trading terms between the related parties and other customers.

(Continued)

53

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Key management personnel compensation

Key management personnel compensation comprised:

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments	For the three months ended March 31
	2018 2017 $ 49,367 49,061 2,887 - - - - - 13,859 11,034 $ 66,113 60,095

Please refer to note 6(s) for information related to share-based payments.

(8) Pledged assets:

The carrying amounts of pledged assets were as follows:

Pledged assets Other non-current assets – restricted assets	Pledged to secure Guarantee letters issued by bank	March 31, 2018 $ 1,158	December 31, 2017 March 31, 2017 1,142 1,099

(9) Significant commitments and contingencies:

• (a) The Group’s unused letters of credit for guarantee of purchasing materials and borrowings were as follows:

March 31, 2018 $ 291,200	December 31, 2017 March 31, 2017 298,480 -

• (b) For the detail of the Group’s guarantee, please refer to note 13.

• (c) The following are savings accounts provided by the Group to the bank in order for the bank to issue a guarantee letter to customs and Power Supply Bureau as guarantee deposits and power supply guarantee, respectively.

Guarantee letters	March 31, 2018 $ 249,645	December 31, 2017 March 31, 2017 173,837 182,267

(Continued)

54

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (d) Guarantee notes provided as part of agreements with banks to sell accounts receivable and to acquire long-term borrowings were as follows:

Sales of accounts receivable Long-term borrowings	March 31, 2018 $ 712,320 $ 400,000	December 31, 2017 March 31, 2017 724,878 2,683,368 880,000 880,000

(e)	The aggregate unpaid amounts of contracts pertaining	The aggregate unpaid amounts of contracts pertaining	to the purchase of equipment	to the purchase of equipment	were as follows:
			March 31,	December 31,	March 31,
			2018	2017	2017
	Property, plant and equipment	$	98,591	41,209	33,164

(f) The Group entered into lease agreements for its offices and warehouses. Please refer to note 6(o) for future rent payables.

(10) Losses due to major disasters: None

(11) Subsequent events: None

(12) Other:

A summary of employee benefit, depreciation, and amortization expenses by function, is as follows:

By function By item	For the three months ended March 31,2018	For the three months ended March 31,2018	For the three months ended March 31,2018	For the three months ended March 31,2017	For the three months ended March 31,2017	For the three months ended March 31,2017
	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension Others Depreciation Amortization	768,781 29,764 55,514 26,142 297,665 4,704	645,378 40,009 32,099 44,262 35,500 52,130	1,414,159 69,773 87,613 70,404 333,165 56,834	680,444 23,888 55,926 14,411 296,711 4,499	557,786 35,033 28,281 35,811 26,053 43,150	1,238,230 58,921 84,207 50,222 322,764 47,649

(Continued)

55

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions:

The followings were the information on significant transactions required by the Regulations for the Group for the three months ended March 31, 2018:

(i) Lending to other parties:

No.	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	Coll	ateral	Individual funding loan limits	Maximum limit of fund financing
													Item	Value
1 2	PKSI TYM HK	The Company r TYM Acoustic HK r	Other eceivable Other eceivables	Y 〃	423,944 761,124	413,604 569,092	413,604 569,092	- l p 2%	Necessary to oan to other arties 〃	- -	Operating capital Investment capital	- -		- -	850,877 565,919	850,877 565,919

• Note 1: After approval by the Board of directors, PKS1 and TYM HK can lend the individual and total amount shall not exceed its net worth in the latest financial statements to parent company and subsidiaries whose voting shares are 100% owned, directly or indirectly.

Note 2: Related transactions have been eliminated during the preparation of the consolidated financial statements.

• (ii) Guarantees and endorsements for other parties:

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0 1 〃	The Company PCH2 〃	PCH2 PCQ1 PKS1	The subsidiary of Primax HK and Primax Tech. The same parent company 〃	3,562,017 1,549,719 1,549,719	313,404 131,331 164,164	305,760 128,128 160,160	- 17,172 133,326	- - -	% 2.58 % 2.48 % 3.10	9,498,712 4,132,585 4,132,585	Y - -	- - -	Y Y Y

Note 1: The amount of the guarantee to a company shall not exceed 30% of the Company’s net worth in the latest financial statements. The total amount of the guarantee to total company shall not exceed 80% of the Company’s net worth in the latest financial statements.

• Note 2: The amount of the guarantee to a company shall not exceed 30% of the PCH2’s net worth in the latest financial statements. The total amount of the guarantee to total company shall not exceed 80% of the PCH2’s net worth in the latest financial statements.

Note 3: The above counter-parties of guarantee and endorsement are subsidiaries included in the consolidated financial statements.

(Continued)

56

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Securities held at the reporting date (excluding investment in subsidiaries, associates and joint ventures):

Company holding securities	Security type and name	Relationship with company	Account		Ending balance	Ending balance		Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company Primax Tech.	Shares: Green Rich Technology Co., Ltd. WK Technology Fund IV LTD. Changing Information Technology Inc. Formosoft International Inc. Syntronix Corp. Ricavision International Inc. Global TEK Grove Ventures L.P. Shares: Echo. Bahn. WK Global Investment III Ltd.	- - - - - - - - -	Financial assets at FVOCI 〃 〃 〃 〃 〃 〃 〃 Financial assets at FVOCI 〃	359 230 179 53 6 917 5,510 - 400 473	2,000 2,004 2,102 - 49 - 360,905 16,016 383,076 - 5,606 5,606	3.59 0.38 1.62 0.76 0.02 2.04 9.18 3.92 11.90 1.32	2,000 2,004 2,102 - 49 - 360,905 16,016 - 5,606

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the Company’s paid-in capital:

Name of company	Security type and name	Account	Counter- party	Relationship with the company	Beginning Balance	Beginning Balance	Purc	hases		Sa	les		Ending Balance	Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on disposal	Shares	Amount
The Company Primax AE PCH2 PCQ1 Premium Hui Zhou	Shares: Primax AE Belfast Money market fund of RMB Money market fund of RMB Money market fund of RMB	Investment accounted for using equity method 〃 Financial assets at FVTPL 〃 〃	Initial Offerings Initial Offerings 〃 〃 〃	Subsidiary None 〃 〃 〃	- - - - -	- - - - -	48,200 30,279 - - -	1,431,540 1,428,574 1,190,621 572,145 435,567	- - - - -	- - 1,201,630 574,369 438,299	- - 1,196,565 572,931 438,299	- - 11,009 (note 2) 2,224 (note 2) 4,874 (note 2)	48,200 30,279 - - -	1,433,759 (note 1) 1,430,935 (note 1) - - 2,142

Note 1: The difference between the ending balance and the purchasing price is the investment income (losses) accounted by using equity method. Note 2: Gains of disposal include valuation and exchange differences on translation.

• (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the Company’s paid-in capital: None

• (vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the Company’s paid-in capital: None

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the Company’s issued capital:

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/ (Sale)	Amount	Percentage of total purchases (sales)	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company 〃 〃 〃 PCH2 PKS1 PCQ1 Polaris Premium Hui Zhou Tymphany Dongguan TYDC TYM Acoustic HK TYM Acoustic Europe 〃 〃 〃	PCH2 PKS1 PCQ1 Polaris The Company The Company The Company The Company TYM HK TYM HK TYM HK TYM Acoustic Europe TYM Acoustic HK Premium Hui Zhou Tymphany Dongguan TYDC	The subsidiary of Primax HK The subsidiary of Primax HK The subsidiary of Primax HK The subsidiary of Primax Tech The parent of Primax Cayman The parent of Primax Cayman The parent of Primax Cayman The parent of Primax Tech The subsidiary of TYM Acoustic HK The subsidiary of TYM Acoustic HK The subsidiary of TYM Acoustic HK Subsidiary Parent The parent of TYM Acoustic HK The subsidiary of Premium Hui Zhou The subsidiary of Tymphany Dongguan	Purchase Purchase Purchase (Sale) (Sale) (Sale) (Sale) Purchase (Sale) (Sale) (Sale) Purchase (Sale) Purchase Purchase Purchase	5,176,588 274,458 1,306,585 (671,661) (5,176,588) (274,458) (1,306,585) 671,661 (1,205,435) (1,518,662) (523,977) 378,740 (378,740) 1,205,435 1,518,662 523,977	% 76 % 4 % 20 % (9) % (86) % (100) % (88) % 100 % (93) % (95) % (100) % 98 % (92) % 35 % 45 % 15	60 days 〃 60 days 90 days 60 days 〃 〃 90 days 60 days 〃 〃 90 days 〃 〃 〃 〃	Price agreed by both side 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃	The same as general purchasing 〃 〃 The same as general selling 〃 〃 〃 The same as general purchasing The same as general selling 〃 〃 The same as general purchasing The same as general selling The same as general purchasing 〃 〃	(4,569,772) (455,414) (1,306,233) 51,726 4,569,772 455,414 (note 1) 1,306,233 (51,726) 1,631,671 1,996,589 302,528 (394,516) 394,516 (1,631,671) (1,996,589) (302,528)	(71)% (7)% (20)% 1% 82% 100% 92% (100)% 97% 94% 100% (82)% 94% (40)% (49)% (7)%

Note 1: Accounts receivables over payment terms have been classified as other receivables-non-current.

Note 2: Related transactions have been eliminated during the preparation of the consolidated financial statements.

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the Company’s paid-in capital:

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate		Overdue	Amounts received in subsequent period (note 1)	Allowance for bad debts
					Amount	Action taken
PCH2 PKS1 PCQ1 Premium Hui Zhou Tymphany Dongguan TYDC TYM Acoustic Europe	The Company The Company The Company TYM HK TYM HK TYM HK TYM Acoustic HK	The Parent of Primax Cayman The Parent of Primax Cayman The Parent of Primax Cayman The subsidiary of TYM Acoustic HK The subsidiary of TYM Acoustic HK The subsidiary of TYM Acoustic HK Parent	4,569,772 869,018 1,306,233 1,631,671 1,996,589 302,528 394,516	% 3.87 % 2.50 % 3.42 % 2.74 % 1.77 % 11.38 % 3.64	- 413,604 - - - - -	- Reclassify to Long-term payable, and enhance the control of receivables - - - - -	1,412,228 107,823 286,604 882,995 1,392,641 253,241 211,924	- - - - - - -

Note 1: Amounts were collected as of May 11, 2018.

Note 2: Related transactions have been eliminated during the preparation of the consolidated financial statements.

(ix) Trading in derivative instruments: Please refer to note 6(b).

(x) Business relationships and significant intercompany transactions:

No	Name of company	Name of counter-party	Nature of relationship		Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of consolidated total operating revenues or total assets
0 〃 〃 〃 〃 〃 〃 1 〃 2 〃	The Company 〃 〃 〃 〃 〃 〃 Premium Hui Zhou 〃 Tymphany Dongguan 〃	PCH2 〃 PKS1 〃 PCQ1 〃 Polaris TYM HK 〃 〃 〃	The subsidiary of Primax HK 〃 〃 〃 〃 〃 The subsidiary of Primax Tech The subsidiary of TYM Acoustick HK 〃 〃 〃	Purchase Accounts Payable Purchase Accounts Payable Purchase Accounts payable Sale Sale Accounts receivable Sale Accounts receivable	5,176,588 4,569,772 274,458 455,414 1,306,585 1,306,233 671,661 1,205,435 1,631,671 1,518,662 1,996,589	Price agreed by both side 60 days Price agreed by both side 60 days Price agreed by both side 60 days Price agreed by both side Price agreed by both side 60 days Price agreed by both side 60 days	% 43.56 % 14.87 % 2.31 % 1.48 % 10.99 % 4.25 % 5.65 % 10.14 % 5.31 % 12.78 % 6.50

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

No	Name of company	Name of counter-party	Nature of relationship		Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of consolidated total operating revenues or total assets
3 〃 4 〃	TYDC 〃 TYM Acoustick HK 〃	TYM HK 〃 TYM Acoustick Europe 〃	The subsidiary of TYM Acoustick HK 〃 Subsidiary 〃	Sale Accounts receivable Purchase Accounts payable	523,977 302,528 378,740 394,516	Price agreed by both side 60 days Price agreed by both side 90 days	% 4.41 % 0.98 % 3.19 % 1.28

Note 1: Disclosure of the amounts exceeding the lower of NT$100 million.

Note 2: Related transactions have been eliminated during the preparation of the consolidated financial statements.

• (b) Information on investees:

The following is the information on investees for the three months ended March 31, 2018 (excluding information on investees in Mainland China):

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of March 31, 20	Balance as of March 31, 20	18	Net income (losses) of investee	Share of profits/losses of investee	Note
				March 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
The Company 〃 〃 〃 〃 〃 〃	Primax Cayman Primax Tech. Destiny BVI. Destiny Japan Diamond Gratus Tech. Primax AE Total	Cayman Islands Cayman Islands Virgin Island Japan Cayman Islands USA Cayman Islands	Holding company Holding company Holding company Market development and customer service Holding company Market development and customer service Holding company	2,540,588 897,421 30,939 7,032 2,517,298 9,330 1,431,540 7,434,148	2,540,588 897,421 30,939 7,032 2,517,298 9,330 - 6,002,608	8,147,636 285,067 1,050 0.50 84,050 300 48,200	100.00 100.00 100.00 100.00 100.00 100.00 100.00	5,332,688 2,078,772 12,773 17,052 3,115,848 9,694 1,433,759 12,000,586	81,380 30,078 (2,030) 99 (5,315) 285 2,219 106,716	121,090 43,070 (2,030) 99 (5,315) 285 2,219 159,418
Primax Cayman	Primax HK	Hong Kong	Holding company and customer service	2,375,164	2,375,164	602,817	100.00	5,505,093	81,830	81,830
Primax Tech.	Polaris	USA	Sale of multi-function printers and computer peripheral devices	52,680	52,680	1,600	100.00	366,088	2,061	2,061
Diamond	TWEL	Cayman Islands	Holding company	2,711,450	2,711,450	55,001	100.00	3,212,068	10,953	(7,013)
Primax AE	Belfast	Cayman Islands	Holding company	1,428,574	-	30	37.00	1,430,935	6,381	2,361
Premiurn Hui Zhou	TYM Acoustic HK	Hong Kong	Research and development, design, and sale of audio accessories, amplifiers and their components and holding company	19,497	19,497	5,000	100.00	2,447	(159,032)	(159,032)

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of March 31, 2018	Balance as of March 31, 2018	Balance as of March 31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				March 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
TYM Acoustic HK 〃 〃 〃 〃	TYM HK TYP TYM UK TYM Acoustic Europe Tymphany Acoustic	Hong Kong USA USA Czech Taiwan	Holding company and sale of audio accessories, amplifiers and their components Market development and customer service of amplifiers and their components Research and development, design of audio accessories, amplifiers and their components Manufacture, install and repair of audio accessories and their components Research and development, design, and sale of audio accessories, amplifiers and their components	76,280 (note 1) 15 (note 1) 15,631 653,796 48,318	76,280 (note 1) 15 (note 1) 15,631 653,796 -	144,395 0.5 400 187,800 5,000	100.00 100.00 100.00 100.00 100.00	552,504 8,521 17,323 527,535 48,318	(157,865) 524 399 (25,845) -	(154,741) 524 399 (25,845) -
TYM HK	TYML	USA	Sales of audio accessories, amplifiers and their components	6,628	6,628	200	100.00	166	3,853	3,853

Note 1: The amount is the initial investment costs from the original stockholders prior to the acquisition of the Company through Diamond. Note 2: Related transactions have been eliminated during the preparation of the consolidated financial statements.

• (c) Information on investments in mainland China:

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

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2018 (note 2)	Investme	nt flows	Accumulated outflow of investment from Taiwan as of March 31, 2018 (note 2)	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumulated remittance of earnings in current period
					Outflow	Inflow
PCH2 Destiny Beijing PKS1	Manufacture of multifunctional peripherals, computer mice, mobile phone accessories, consumer electronics products, and shredders Research and development of computer peripheral devices and software Manufacture of computer, peripherals and keyboards	2,065,144 40,909 904,258	Indirect investment through Primax Cayman and Primax Tech. Indirect investment through Destiny BVI. Indirect investment through Primax Cayman	1,636,597 31,340 656,656	- - -	- - -	1,594,874 30,576 640,640	90,763 (2,030) (28,428)	100% 100% 100%	90,763 (2,030) (28,428)	5,165,732 12,769 850,877	- - -

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

==> picture [448 x 178] intentionally omitted <==

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

Accumulated Accumulated
outflow of Investment flows outflow of Net
Main Total investment from investment from income Accumulated
businesses amount Method Taiwan as of Taiwan as of (losses) Percentage Investment remittance of
Name of and of paid-in of January 1, 2018 March 31, 2018 of the of income earnings in
investee products capital investment (note 2) Outflow Inflow (note 2) investee ownership (losses) Book value current period
PCQ1 Manufacture of 580,367 Indirect 596,960 - - 582,400 51,177 100% 51,177 1,142,640 -
investment
computer,
through Primax
peripherals and Cayman
keyboards
Premiurm Research and 1,329,117 Indirect 2,507,232 - - 2,446,080 7,485 66.44% 4,973 1,533,945 -
Hui Zhou development, investment
through
design, and sale Diamond
of audio
accessories,
amplifiers and
their components
Tymphany 〃 145,600 〃 14,924 - - 14,560 87,030 66.44% 57,822 292,143 -
Dongguan
TYDC 〃 92,620 〃 - - - - 25,235 66.44% 16,766 82,505 -
----- End of picture text -----

Note 1: The above information on the exchange rate is as follows: HKD:TWD 3.7103; USD:TWD 29.1200; CNY:TWD 4.6310.

Note 2: The difference between the accumulated out flow of investments and paid in capital was derived from the currency exchange on translation, capital increase from retained earning and working capital.

Note 3: Related transactions have been eliminated during the preparation of the consolidated financial statements.

• (ii) Limitation on investment in Mainland China:

Name of Company	Accumulated Investment in Mainland China as of March 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
The Company	5,389,947	6,127,216	None(Note)

Note: The Company has received the Certificate issued by the Industrial Development Bureau, Ministry of Economic Affairs, allowing it to start the operating of its headquarters.

The above investment income (losses) in Mainland China, except for PCH2, was reviewed by the Company’s auditors, Premium Hui Zhou, Tymphany Dongguan and TYDC were reviewed by other auditors, and other information related to subsidiaries came from financial reports prepared by the investees, not reviewed by auditors.

• (iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements for the three months ended March 31, 2018, are disclosed in “ Information on significant transactions” and “Business relationships and significant intercompany transactions.”

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(14) Segment information:

For the three months ended March 31, 2018 and 2017, the Group’s segment information has no significant change. Please refer to note 14 of the consolidated financial statements for the year ended December 31, 2017 for further information.

Revenue External revenue Intra-group revenue Total segment revenue Profit before tax from segments reported Revenue External revenue Intra-group revenue Total segment revenue Profit before tax from segments reported	For the three months ended March 31, 2018	For the three months ended March 31, 2018
	Computer Peripherals Non-computer Peripherals Total $ 4,856,864 7,026,884 11,883,748 - - - $ 4,856,864 7,026,884 11,883,748 $ 313,915 138,949 452,864 For the three months ended March 31, 2017
		Non-computer Peripherals Total 8,123,383 12,881,184 - - 8,123,383 12,881,184 358,295 590,007