REXON — Annual Report 2022

Nov 28, 2022

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Stock Code:1515

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2022 and 2021

Address: No.261, Jen Hwa RD, Tali, Taichung City 412,Taiwan (R.O.C.) Telephone: (04)2491-4141

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

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Table of contents

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

Page

1 2 3 4 5 6 7 8 9 9 9～11 11～25 25～26 27～54 54～55 56 56 56 56 56 57～58 58 59 59 60

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Representation Letter

The entities that are required to be included in the combined financial statements of Rexon Industrial Corp., Ltd. as of and for the year ended December 31, 2022 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10, "Consolidated Financial Statements." endorsed by the Financial Supervisory Commission of the Republic of China. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Rexon Industrial Corp., Ltd. and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: Rexon Industrial Corp., Ltd. Chairman: Guan-Xiang, Wang Date: Febuary 23, 2023

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KPMG

台中市407059西屯區文心路二段201號7樓 電 話 Tel +886 4 2415 9168 7F, No.201, Sec.2, Wenxin Road, 傳 真 Fax +886 4 2259 0196 Taichung City 407059, Taiwan (R.O.C.) 網 址 Web kpmg.com/tw

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Rexon Industrial Corp., Ltd.:

Opinion

We have audited the consolidated financial statements of Rexon Industrial Corp., Ltd. and its subsidiaries (“the Group”), which comprise the consolidated balance sheets of December 31, 2022 and 2021, the consolidated statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

1. Revenue recognition

Please refer to Note 4(o) and Note 6(t) of the consolidated financial statements for accounting policies on revenue recognition and revenue recognition, respectively.

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

4-1

Description of key audit matter:

The Group recognizes revenue when the control over a product has been transferred to the customer as specified on the various sales terms in each individual contract with customers. Revenue is recognized in each individual contract with customers. The improper timing in recongnition of revenue before and after the financial reporting date may materially impact financial statements. Therefore, revenue recognition is one of the key areas our audit focused on.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include testing the effectiveness of internal control on recongnition of revenue; ensuring the transaction conditions and revenue of the sale contracts have been properly recorded; random sampling of sales transactions within a certain period before and after the financial reporting date; analyzing the client contract of the sample; and evaluating the transaction conditions contained in the sales contract to confirm that revenue recognition has been recorded in an appropriate period.

2. Valuation of Inventories

The accounting principle of inventory, refer to consolidated financial statements Note 4 (h), the assessment of accounting estimate and assumption uncertainty, refer to consolidated financial statements Note 5 (b); the explanation of inventory assessment refers to consolidated financial statements Note 6 (e).

Description of key audit matter:

Due to the introduction of new products such as machine tools or fitness machines may cause significant changes in consumer demand, the original product outdated may no longer meet the market demand, or by the electric tool market recession and competitors’ low-cost strategy and other factors so that the sale of related products may be volatile, it easily leads to the cost of inventory may exceed its net realizable value of the risk; therefore, inventory valuation is considered as one of a key audit matter.

How the matter was addressed in our audit:

In relation to the key audit matter above, includes the allowance for uncollectible inventory valuation losses of the Group and the rationale of calculation method, implementation of the sampling procedures to check the inventory and the net realized value to compare with the past period situation and analyze whether the loss of the value of the deposit in the current period is disclosure appropriately.

Other Matter

Rexon Industrial Corp., Ltd. has prepared its parent-company-only financial statements as of and for the years ended December 31, 2022 and 2021, on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

4-2

Those charged with governance (including the Audit Committee) are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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

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

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

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

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit.We remain solely responsible for our audit opinion.

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

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

4-3

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Shyh-Huar, Kuo and Chun-Yuan, Wu.

KPMG

Taipei, Taiwan (Republic of China) Febuary 23, 2023

Notes to Readers

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

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

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2022 and 2021

(Expressed in thousands of New Taiwan Dollar)

Assets Current assets: 1100 Cash and cash equivalents (note 6 (a)) 1110 Current financial assets at fair value through profit or loss 1150 Notes receivable, net (note 6 (c)) 1160 Notes receivable due from related parties, net (note 6 (c) and 7) 1170 Accounts receivable, net (note 6 (c)) 1180 Accounts receivable due from related parties, net (note 6 (c) and 7) 1200 Other receivables, net (note 6 (d)) 1220 Current tax assets 130X Inventories (note 6 (e) ) 1479 Other current assets (note 6 (j)) Non-current assets: 1550 Investments accounted for using equity method, net (note 6 (f)) 1600 Property, plant and equipment (note 6(g) and 8) 1755 Right-of-use assets (note 6 (h)) 1780 Intangible assets (note 6 (i)) 1840 Deferred tax assets (note 6 (q)) 1920 Guarantee deposits paid 1975 Net defined benefit asset, non-current (note 6 (p)) 1990 Other non-current assets(note 6 (j)) Total assets	December 31, 2022 Amount % $ 1,970,759 25 96 - 287 - 31,722 - 737,714 10 8,794 - 277 - 18,332 - 582,816 8 88,463 1 3,439,260 44 16,420 - 3,119,127 40 88,796 1 66,904 1 167,970 2 1,926 - 206,005 3 647,549 9 4,314,697 56 $ 7,753,957 100	December 31, 2021 Amount % 4,574,719 36 96 - 2,276 - 27,543 - 1,717,113 14 11,078 - 140 - - - 1,975,275 16 209,740 2 8,517,980 68 16,712 - 3,266,653 26 122,650 1 62,399 - 84,195 1 9,053 - 90,665 1 351,126 3 4,003,453 32 12,521,433 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note 6 (k) and 8) 2130 Current contract liabilities (note 6 (t)) 2150 Notes payable 2160 Notes payable to related parties(note 7) 2170 Accounts payable 2200 Other payables(note 6 (p)) 2220 Other payables to related parties (note 7) 2230 Current tax liabilities 2250 Current provisions (note 6 (o)) 2280 Current lease liabilities (note 6 (n)) 2320 Long-term borrowing, current portion (note 6 (m) and 8) 2399 Other current liabilities, others (note 6 (l) and (t)) Non-Current liabilities: 2540 Long-term borrowings (note 6 (m) and 8) 2570 Deferred tax liabilities (note 6 (q)) 2580 Non-current lease liabilities (note 6 (n)) Total liabilities Equity attributable to owners of parent: (note 6 (b) and(r)) 3100 Share capital 3200 Capital surplus 3300 Retained earnings 3400 Other equity Total equity attributable to owners of parent: 36XX Non-controlling interests Total equity Total liabilities and equity	December 31, 2022		December 31, 2021 Amount % 802,025 7 543,155 4 1,391,468 11 3,799 - 3,509,685 28 754,642 6 17 - 185,745 2 162,599 1 34,261 - 93,264 1 156,254 1 7,636,914 61 593,333 5 6,491 - 34,292 - 634,116 5 8,271,030 66 1,814,735 14 586 - 2,572,950 21 (163,182) (1) 4,225,089 34 25,314 - 4,250,403 34 12,521,433 100
			Amount %
			$ 801,417 10 38,713 - 436,108 6 94 - 607,955 8 595,537 8 6 - - - 201,389 3 10,501 - 413,033 5 477,632 6 3,582,385 46 637,554 9 - - 24,691 - 662,245 9 4,244,630 55 1,814,735 24 586 - 1,812,259 23 (143,923) (2) 3,483,657 45 25,670 - 3,509,327 45 $ 7,753,957 100

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2022 and 2021

(Expressed in thousands of New Taiwan Dollar , except earnings per share)

4100 Operating revenue, (note 6 (t) and 7) 5000 Operating costs (note 6 (e)、(i)、(p) and 7) Gross profit from operations 6000 Operating expenses(note 6 (i)、(p) and (u)): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Net operating (loss) income 7000 Non-operating income and expenses: 7100 Interest income (note 6 (v)) 7010 Other income (note 6 (v)) 7020 Other gains and losses, net (note 6 (g) and (v)) 7050 Finance costs (note 6 (n) and (v)) 7060 Share of profit of associates accounted for using equity method (note 6 (f)) 7900 Profit (loss) before income tax 7950 Income tax (benefit) expense(note 6 (q)) 8200 (Loss) profit 8300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Gains on remeasurements of defined benefit obligation (note 6 (p)) 8316 Unrealized gains from investments in equity instruments measured at fair value through other comprehensive income (note 6 (r)) 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences on translation(note 6 (r)) 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note 6 (q)) 8300 Other comprehensive income (after tax) 8500 Comprehensive income Profit (loss) attributable to: 8610 Owners of parent 8620 Non-controlling interests Comprehensive income attributable to: 8710 Owners of parent 8720 Non-controlling interests Earnings (losses) per share(NT dollars)(note 6 (s)) 9750 Basic earnings (loss) per share 9850 Diluted earnings (loss) per share	2022 Amount % $ 4,549,308 100 4,394,448 96 154,860 4 258,145 6 183,389 4 142,903 3 584,437 13 (429,577) (9) 5,858 - 19,894 - 25,505 1 (22,439) - 188 - 29,006 1 (400,571) (8) (101,451) (2) (299,120) (6) 82,650 2 - - 82,650 2 24,629 - (4,815) - 19,814 - 102,464 2 $ (196,656) (4) $ (298,921) (6) (199) - $ (299,120) (6) $ (197,012) (4) 356 - $ (196,656) (4) $ (1.65) $ (1.65)	2021 Amount % 18,366,823 100 15,849,053 86 2,517,770 14 561,819 3 314,799 2 215,937 1 1,092,555 6 1,425,215 8 2,030 - 39,792 - (140,611) (1) (7,827) - 518 - (106,098) (1) 1,319,117 7 263,168 1 1,055,949 6 61,559 - 17,184 - 78,743 - (10,883) - 1,588 - (9,295) - 69,448 - 1,125,397 6 1,052,892 6 3,057 - 1,055,949 6 1,125,276 6 121 - 1,125,397 6 5.80 5.76

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Balance on January 1, 2021 Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends of ordinary share Profit for the year ended December 31, 2021 Other comprehensive income for the year ended December 31, 2021 Comprehensive income Changes in ownership interests in subsidiaries Disposal of investments in equity instruments designated at fair value through other comprehensive income Beginning adjustment of net delined benefit assets Balance on December 31, 2021 Balance on January 1, 2022 Appropriation and distribution of retained earnings: Legal reserve Reversal of special reserve Cash dividends of ordinary share Loss for the year ended December 31, 2022 Other comprehensive income for the year ended December 31, 2022 Comprehemsive income Balance on December 31, 2022								Equity attributabl	Equity attributabl	Equity attributabl	e	to owners of	parent	parent								Non- controlling interests	Total equity 3,761,193 - - (653,305) (653,305) 1,055,949 69,448 1,125,397 153 - 16,965 4,250,403 4,250,403
		Share capital		Capital surplus				Retaine	d earnings						Total other equity					Total equity attributable to owners of parent
														Exchange differences on translation of foreign financial statements	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income		Total other equity interest
		Ordinary share				Legal reserve		Special reserve	Unappropriated retained earnings			Total
	$ 1,814,735 - - - - - - - - - - $ 1,814,735 $ 1,814,735 - - - - - - - $ 1,814,735			433		265,379		49,668		1,783,010		2,098,057 - - (653,305) (653,305) 1,052,892 61,559 1,114,451 - (3,218) 16,965 2,572,950 2,572,950 - - (544,420) (544,420) (298,921) 82,650 (216,271) 1,812,259		(156,823) - - - - - (6,359) (6,359) - - - (163,182) (163,182) - - - - - 19,259 19,259 (143,923)		(20,402) - - - - - 17,184 17,184 - 3,218 - - - - - - - - - - -		(177,225) - - - - - 10,825 10,825 - 3,218 - (163,182) (163,182) - - - - - 19,259 19,259 (143,923)		3,736,000		25,193 - - - - 3,057 (2,936) 121 - - - 25,314 25,314 - - - - (199) 555 356 25,670
				- - -		97,724 - -
				-		97,724
				- -		- -
				-		-
				153 - -		- - -
				586		363,103
				586
				- - -																			- - (544,420)
				-																			(544,420)
				- -																			(299,120) 102,464
				-																			(196,656)
				586																			3,509,327

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2022 and 2021

(Expressed in thousands of New Taiwan Dollar)

Cash flows from operating activities: (Loss) profit before tax Adjustments: Adjustments to reconcile profit: Depreciation expense Amortization expense Interest expense Interest income Dividend income Share of profit of associates accounted for using equity method Loss on disposal of property, plant and equipment Impairment loss of property, plant and equipment Gain on lease modification Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: Decrease in financial assets at fair value through profit or loss Decrease (increase) in notes receivable Increase in notes receivable due from related parties Decrease in accounts receivable Decrease (increase) in accounts receivable due from related parties (Increase) decrease in other receivable Decrease (increase) in inventories Decrease (increase) in other current assets Decrease (increase) in other operating assets Total changes in operating assets Changes in operating liabilities: (Decrease) increase in contract liabilities (Decrease) increase in notes payable (Decrease) increase in notes payable to related parties (Decrease) increase in accounts payable (Decrease) increase in other payable Decrease in other payable to related parties (Decrease) increase in other current liabilities Decrease in net defined benefit liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash (outflow) inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows (used in) from operating activities Cash flows used in investing activities: Proceeds from disposal of financial assets at fair value through other comprehensive income Changes in ownership of interest in subsidiaries Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in restricted assets Decrease (increase) in refundable deposits Acquisition of intangible assets Increase in prepayments for business facilities Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase from long-term borrowings Repayments of long-term borrowings Cash dividends paid Payment of lease liabilities Net cash flows (used in) from financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period	2022 $ (400,571) 347,728 17,969 22,439 (5,858) - (188) 4,132 15,971 (39) 402,154 - 1,989 (4,179) 979,399 2,284 (137) 1,392,459 121,277 1,978 2,495,070 (12,611) (955,360) (3,705) (2,901,730) (119,366) (11) (131,663) (32,690) (4,157,136) (1,662,066) (1,259,912) (1,660,483) 5,858 480 (22,190) (197,707) (1,874,042) - - (95,446) 4,243 - 7,127 (22,422) (422,649) (529,147) 3,014,060 (3,014,060) 562,607 (198,174) (544,420) (30,257) (210,244) 9,473 (2,603,960) 4,574,719 $ 1,970,759	2021 1,319,117 263,492 14,665 7,827 (2,030) (13) (518) 4,987 52,723 - 341,133 18,374 (2,167) (21,209) 663,028 (7,726) 382 (879,081) (17,883) (3,318)
		(249,600)
		515,701 602,227 2,956 269,876 233,197 (444) 20,014 (12,061)
		1,631,466
		1,381,866
		1,722,999
		3,042,116 2,030 813 (8,369) (200,424)
		2,836,166
		53,360 153 (502,972) 4,893 8,000 (4,650) (14,355) (498,114)
		(953,685)
		2,016,870 (1,556,357) 851,600 (547,369) (653,305) (29,043)
		82,396
		(3,287) 1,961,590 2,613,129 4,574,719

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022 and 2021

(Expressed in thousands of New Taiwan Dollar unless otherwise specified)

(1) Company history

Rexon Industrial Corp., Ltd. (the “Company”) was incorporated on April 30, 1973 and registered under the Ministry of Economic Affairs, R.O.C. The address of the company’ s registered office is No.261, Renhua Rd., Dali Dist., Taichung City 412, and Taiwan (R.O.C.). The Company’s common shares were listed on the Taiwan Stock Exchange (TWSE) on February 4, 1995. The company’s and its subsidiaries (“together referred to as the Group”) is in the business of manufacturing and selling drills, woodworking tools and fitness equipment.

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

These consolidated financial statements were authorized for issue by the Board of Directors on Febuary 23, 2023.

(3) New standards, amendments and interpretations adopted

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

The Group has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2022:

• ●Amendments to IAS 16 “Property, Plant and Equipment—Proceeds before Intended Use”

• ●Amendments to IAS 37 “Onerous Contracts—Cost of Fulfilling a Contract”

• ●Annual Improvements to IFRS Standards 2018–2020

• ●Amendments to IFRS 3 “Reference to the Conceptual Framework”

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

The Group assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2023, would not have a significant impact on its consolidated financial statements:

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

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

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

(Continued)

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REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The following new and amended standards, which may be relevant to the Group, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 1 “Non- current Liabilities with Covenants”

Content of amendment Effective date per IASB Under existing IAS 1 requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement for at least 12 months after the reporting date. The amendments has removed the requirement for a right to be unconditional and instead now requires that a right to defer settlement must exist at the reporting date and have substance. The amendments clarify how a company classifies a liability that can be settled in its own shares – e.g. convertible debt. January 1, 2024 After reconsidering certain aspects of the 2020 amendments1, new IAS 1 amendments clarify that only covenants with which a company must comply on or before the reporting date affect the classification of a liability as current or non-current. Covenants with which the company must comply after the reporting date (i.e. future covenants) do not affect a liability’ s classification at that date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose information to help users understand the risk that those liabilities could become repayable within 12 months after the reporting date. January 1, 2024

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

(Continued)

11

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

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

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

• ●IFRS16 “Requirements for Sale and Leaseback Transactions”

(4) Summary of significant accounting policies

The significant accounting policies presented in the consolidated financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations” ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission, R.O.C..

(b) Basis of preparation

• (i) Basis of measurement

Except for the following significant accounts, the consolidated financial statements have been prepared on a historical cost basis:

• 1) Financial instruments at fair value through profit or loss are measured at fair value;

• 2) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation.

• (ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollar(NTD), which is the Company’ s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

(Continued)

12

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Basis of consolidation

• (i) Principles of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries. Subsidiaries are entities controlled by the Company. The Company “controls” an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which the control ceases. Intragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. The Group attributes the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests, even if this results in the noncontrolling interests having a deficit balance.

The Group prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Group will attribute it to the owners of the parent.

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

Name of investor The Company The Company The Company Gold Item Gold Tech Group Ltd.	Name of subsidiary Principal activity Power Tool Specialists Inc. (P.T.S.) Merchandise trading Gold Item Group Ltd.(Gold Item) Investing and holding Rexon Technology Corp., Ltd. (Rexon Tech) Manufacture and sale of electric components Gold Tech Group Ltd. Investing and holding Tongxiang Rexon Industrial Co.,Ltd. (Tongxiang Rexon) Manufacture of drills, woodworking tools and fitness equipment	Shareholding
		December 31, 2022 December 31, 2021 96% 96% 100% 100% 82.87% 82.87% 100% 100% 100% 100%

(iii) Subsidiaries excluded from the consolidation financial statements: None.

(d) Foreign currencies

• (i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

(Continued)

13

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income :

1) an investment in equity securities designated as at fair value through other comprehensive income;

2) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• 3) qualifying cash flow hedges to the extent the hedges are effective.

• (ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at average exchange rate. Exchange differences are recognized in other comprehensive income.

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

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

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

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

• (i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is expected to be realized within twelve mouths after the reporting period ; or

• (iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

(Continued)

14

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

An entity shall classify a liability as current when :

• (i) It is expected to settled in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is due to be settled within twelve months after the reporting period; or

• (iv) The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

(f) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(g) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through profit or loss (FVTPL). Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

• 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

(Continued)

15

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• 2) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost 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.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

• 3) Business model assessment

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

• 4) Impairment of financial assets

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

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

• debt securities that are determined to have low credit risk at the reporting date；and

• other debt securities and 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 trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

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.

(Continued)

16

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 180 days past due or the debtor is unlikely to pay its credit obligations to the Group in full.

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

12-month ECL are the portion of ECL 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 ECL is the maximum contractual period over which the Group is exposed to credit risk.

ECL 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). ECL are discounted at the effective interest rate of the financial asset.

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 credit-impaired 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 180 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 gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written 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.

(Continued)

17

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

5) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• (ii) Financial liabilities and equity instrument

• 1) Classification of debt or equity

Debt and equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

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

3) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

4) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(Continued)

18

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(i) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their financial and operating policies.

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

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

Gains and losses resulting from transactions between the Group and an associate are recognized only to the extent of unrelated Group’s interests in the associate.

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

(j) Property, plant and equipment

• (i) Recognition and measurement

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

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(Continued)

19

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that future economic benefits associated with the expenditure will flow to the Group.

• (iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for the current and comparative periods are as follows:

1)	Buildings	2 ~ 60 years
2)	Machinery and equipment	2 ~ 10 years
3)	Mold and tooling equipment	2 ~ 10 years
4)	Office equipment and other facilities	2 ~ 10 years

• 5) The significant portion of building consists of its main building, miscellaneous parts, machinery and equipment, and the estimated useful lives are as following:

Compose item	Useful Lives	Compose item Useful Lives Machinery and equipment: Welding machine and circular saw 10 years Conveyer 10 years Other 5 years
Buildings: Main building Fire engineering Electrical and mechanical in construction Other	41~60 years 43 years 38 years 2 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(k) Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i) As a leasee

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

(Continued)

20

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or

• there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or

• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• there is a change of its assessment on whether it will exercise a extension or termination option; or

• there is any lease modification.

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

(Continued)

21

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

(ii) As a lessor

When the Group acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The Group recognizes lease payments received under operating leases as income on a straightline basis over the lease term as part of ‘other income’.

(l) Intangible assets

(i) Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

(Continued)

22

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Computer software cost 1~10years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(m) Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’ s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(n) Provisions

A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

A provision for warranties is recognized when the underlying products or services are sold, based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

(Continued)

23

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(o) Revenue from contracts with customers

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.

1) Sale of goods

The Group manufactures and sells woodworking tools and fitness equipment to retail stores, fitness club, and fitness equipment specialty chain stores around the world. 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’ s obligation to provide a refund for faulty drilling machine under the standard warranty terms is recognized as a provision for warranty; please refer to note 4(n).

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.

2) 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.

(p) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plans

The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

(Continued)

24

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(q) Income taxes

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

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

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

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

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

(iii) taxable temporary differences arising on the initial recognition of goodwill.

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

(Continued)

25

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Deferred tax assets and liabilities are offset if the following criteria are met:

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

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

• 1) the same taxable entity; or

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

(r) Earnings per share

The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee compensation.

(s) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

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

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

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

(Continued)

26

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (a) Judgment of whether the Group has substantive control over its investees

The Group holds 16% of the outstanding voting shares of Fine Clear Corp., Ltd and is the single largest shareholder of the investee. Although the remaining 84% of Fine Clear Corp., Ltd’s shares are not concentrated within specific shareholders, the Group still cannot obtain more than half of the total number of Fine Clear Corp., Ltd’s directors, and it also cannot obtain more than half of the voting rights at a shareholders’ meeting. Therefore, it is determined that the Group has significant influence on Fine Clear Corp., Ltd.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. These assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

(b) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Group estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note 6(e) for further description of the valuation of inventories.

• (c) Recognition and measurement of provisions

Provision for warranty is estimated when product revenue is recognized. The estimate has been made based on the historical defective rate of the products. The Group regularly reviews the basis of the estimate and, if necessary, amends it as appropriate. There could be a significant impact on provision for warranty for any change in the basis of the estimate.

The Group’s accounting policies and disclosures include the use of fair value to measure its financial and non-financial assets and liabilities. The Group has established relevant internal control system for the fair value. This includes establishing an evaluation team responsible for reviewing all significant fair value (including Level 3 fair value) and reporting directly to the financial executive. The evaluation team regularly reviews the significant unobservable input values and adjustments. If the input values used for measuring the fair values of financial and non-financial instruments come from external third party (such as a broker or a pricing service agency), the evaluation team will evaluate the supporting evidence provided by the third party to ensure the evaluation and the level of fair values conform to IFRS requirements.

The Group strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

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

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

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

(Continued)

27

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Petty cash and cash on hand Checking and demand deposits Cash and cash equivalents in the consolidated statement of cash flows	December 31, 2022 $ 1,651 1,969,108 $ 1,970,759	December 31, 2021
		1,051 4,573,668
		4,574,719

Please refer to note 6(w) for the exchange rate risk, interest rate risk, and sensitivity analysis of the financial assets and liabilities of the Group.

(b) Financial assets at fair value through other comprehensive income

In 2021, the Group has sold equity instrument investment measured at fair value through other comprehensive income for strategic purposes. The shares sold had a fair value of $53,360 thousand. The Group realized a loss of $(3,218) thousand. The gain has been transferred to retained earnings.

(c) Notes and accounts receivables (include related party)

Notes receivable from operating activities Notes receivable from operating activities-related parties Less: Loss allowance Accounts receivable-measured at amortized cost Accounts receivable from related parties-measured at amortized cost Less: Loss allowance	December 31, 2022 $ 287 31,722 - $ 32,009 $ 739,317 8,794 (1,603) $ 746,508	December 31, 2021
		2,276 27,543 -
		29,819
		1,718,716 11,078 (1,603)
		1,728,191

(i) The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, accounts receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provisions were determined as follows:

(Continued)

28

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Current 1 to 90 days past due 91 to 180 days past due 181 to 360 days past due Over 360 days past due Total Current 1 to 90 days past due 91 to 180 days past due 181 to 360 days past due Over 360 days past due Total	December 31, 2022	December 31, 2022	December 31, 2022
	Gross carrying amount Weighted- average loss rate Loss allowance provision $ 645,894 0.04% 273 134,225 0.99% 1,329 - - - - - - 1 100% 1 $ 780,120 1,603 December 31, 2021
	Gross carrying amount $ 885,675 872,018 1,370 549 1 $ 1,759,613	Weighted- average loss rate	Loss allowance provision 184 184 685 549 1 1,603
		0.02% 0.02% 50.00% 100% 100%

(ii) The movement in the allowance for notes and accounts receivables were as follows:

Balance at January 1 (which is balance at December 31)	2022 $ 1,603	2021
		1,603

(iii) None of the receivables was pledged as collateral as of December 31, 2022 and 2021.

(d) Other receivables

Other receivables Less: Loss allowance	December 31, 2022 $ 11,524 (11,247) $ 277	December 31, 2021 11,387 (11,247) 140

(i) As of December 31, 2022 and 2021, there are no other receivables which are past due but not impaired.

(Continued)

29

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) The movement in the allowance for other receivables was as follows:

Balance on January 1 (which is balance at December 31)	2022 $ 11,247	2021
		11,247

(e) Inventories

Finished goods Work in progress Materials Parts Merchandise	December 31, 2022 $ 156,348 52,493 163,768 204,873 5,334 $ 582,816	December 31, 2021
		756,447 220,523 240,165 725,566 32,574
		1,975,275

Details of inventory related losses (profit) were as follows:

Write-down of inventories Inventory scrap loss Inventory deficit (surplus) Revenue from sale of scraps	2022 $ 32,186 5,579 199 (2,834) $ 35,130	2021 3,732 36,501 293 (24,970) 15,556

As of December 31, 2022 and 2021, inventories were not pledged as collateral.

(f) Investments accounted for using equity method

A summary of the Group’s financial information for investments accounted for using equity method at the reporting date is as follows:

Associates	December 31, 2022 $ 16,420	December 31, 2021
		16,712

(Continued)

30

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) Associates

Affiliated company’s information:

Name of Associates Fine Clear Corp., Ltd.	Nature of relationship with the Group Main operating location/ Registered Country of the Company Sale of pneumatic nail gun and accessories, which is the Group’s investment Taiwan	Proportion of shareholding and voting rights	Proportion of shareholding and voting rights
		December 31, 2022	December 31, 2021
		16%	16%

The Group’s financial information for investments accounted for using the equity method that are individually insignificant was as follows:

Carrying amount of individually insignificant associates’ equity Attributable to the Group: Profit from continuing operations Other comprehensive income Comprehensive income	December 31, 2022 $ 16,420 2022 $ 188 - $ 188	December 31, 2021
		16,712
		2021
		518 -
		518

• (ii) As of December 31, 2022 and 2021, the Group did not provide any investments accounted for using the equity method as collateral for its loans.

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group for the years ended December 31, 2022 and 2021, were as follows:

Cost or deemed cost: Balance on January 1, 2022 Additions Disposal Reclassification Effect of movements in exchange rates Balance on December 31, 2022	Land $ 1,139,930 929 - - 288 $ 1,141,147	Buildiings 2,165,757 12,453 - 43,330 14,695 2,236,235	Machinery and equipment 811,116 7,513 (8,951) 33,671 2,354 845,703	Mold and tooling equipment 791,094 29,541 (10,093) 45,118 1,349 857,009	Office equipment and other facilities 177,288 4,177 (17,990) 2,129 1,062 166,666	Construction in Progress - - - - - -	Total 5,085,185 54,613 (37,034) 124,248 19,748 5,246,760

(Continued)

31

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Balance on January 1,2021 Additions Disposal Reclassification Effect of movements in exchange rates Balance on December 31,2021 Depreciation and impairment loss: Balance on January 1, 2022 Depreciation for the year Disposal Impairment loss Effect of movements in exchange rates Balance on December 31, 2022 Balance on January 1,2021 Depreciation for the year Disposal Impairment loss Effect of movements in exchange rates Balance on December 31, 2021 Carrying amounts: Balance on December 31, 2022 Balance on January 1,2021 Balance on December 31, 2021	Land $ 946,564 193,442 - - (76) $ 1,139,930 $ - - - - - $ - $ - - - - - $ - $ 1,141,147 $ 946,564 $ 1,139,930	Buildiings 2,068,956 112,456 - (10,914) (4,741) 2,165,757 866,637 109,987 - - 3,822 980,446 778,946 88,758 - - (1,067) 866,637 1,255,789 1,290,010 1,299,120	Machinery and equipment 725,055 52,579 (157,067) 191,338 (789) 811,116 305,252 102,261 (7,634) - 1,034 400,913 385,480 73,839 (153,759) - (308) 305,252 444,790 339,575 505,864	Mold and tooling equipment 866,514 65,283 (211,954) 71,635 (384) 791,094 528,974 88,742 (8,283) 15,971 619 626,023 625,001 59,082 (207,671) 52,723 (161) 528,974 230,986 241,513 262,120	Office equipment and other facilities 154,644 36,286 (14,764) 1,417 (295) 177,288 117,669 15,085 (12,742) - 239 120,251 119,512 10,917 (12,475) - (285) 117,669 46,415 35,132 59,619	Construction in Progress 79 - - (79) - - - - - - - - - - - - - - - 79 -	Total 4,761,812 460,046 (383,785) 253,397 (6,285) 5,085,185 1,818,532 316,075 (28,659) 15,971 5,714 2,127,633 1,908,939 232,596 (373,905) 52,723 (1,821) 1,818,532 3,119,127 2,852,873 3,266,653

• (i) In response to the need for expansion in the future, the Group bought the farmland near to its factory, costing $316,060 thousand, but the ownership of the land is temporarily not allowed to be transerred to the Group because the farmland is legally for agricultural purpose. Therefore, the farmland now is registered in the name of a shareholder who has the identity of natural person and has pledged to the Group for security concerns.

• (ii) As of December 31, 2022 and 2021,the Group recognized impairment loss of $15,971 thousand and $52,723 thousand for part of the carrying amount of mold equipment that are over the useful life and are expected to scrap.

(iii) Gain or losses of disposal, please refer to Note 6(v).

• (iv) As of December 31, 2022 and 2021, property, plant and equipment of the Group was pledged as collateral for long-term loans; please refer to note 8.

(Continued)

32

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Right-of-use assets

The Group leases many assets including land, buildings and vehicles. Information about leases for which the Group as a lessee was presented below:

Land Cost: Balance at January 1, 2022 $ 86,329 Additions - Reductinns - Effect of movement in exchange rates 914 Balance at December 31, 2022 $ 87,243 Balance at January 1, 2021 $ 58,663 Additions 27,981 Effect of movement in exchange rates (315) Balance at December 31, 2021 $ 86,329 Accumulated depreciation and impairment losses:： Balance at January 1, 2022 $ 6,076 Depreciation for the year 4,158 Reductinns - Effect of movement in exchange rates 50 Balance at December 31, 2022 $ 10,284 Balance at January 1, 2021 $ 2,667 Depreciation for the year 3,423 Effect of movement in exchange rates (14) Balance at December 31, 2021 $ 6,076 Carrying amount: Balance at December 31, 2022 $ 76,959 Balance at January 1, 2021 $ 55,996 Balance at December 31, 2021 $ 80,253	Land		Buildings 51,627 - (36,828) - 14,799 21,388 30,239 - 51,627 22,898 21,062 (30,394) - 13,566 594 22,304 - 22,898 1,233 20,794 28,729	Vehicles 20,899 4,228 (5,049) - 20,078 5,142 15,757 - 20,899 7,231 6,433 (4,190) - 9,474 2,062 5,169 - 7,231 10,604 3,080 13,668	Total 158,855 4,228 (41,877) 914 122,120 85,193 73,977 (315) 158,855 36,205 31,653 (34,584) 50 33,324 5,323 30,896 (14) 36,205 88,796 79,870 122,650

(Continued)

33

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) Intangible assets

The costs, amortization and impairment loss of the intangible assets of the Group for the years ended December 31, 2022 and 2021, were as follows:

Costs: Balance at January 1, 2022 Additions Reductinns Effect of movement in exchange rates Balance at December 31,2022 Balance at January 1, 2021 Additions Effect of movement in exchange rates Balance at December 31,2021 Amortization and impairment Loss: Balance at January 1, 2022 Amortization for the year Reductinns Effect of movement in exchange rates Balance at December 31, 2022 Balance at January 1, 2021 Amortization for the year Effect of movement in exchange rates Balance at December 31, 2021 Carrying value: Balance at December 31,2022 Balance at January 1, 2021 Balance at December 31, 2021	Goodwill $ 43,293 - - $ 43,293 $ 43,293 - - $ 43,293 $ - - - - $ - $ - - - $ - $ 43,293 $ 43,293 $ 43,293	Computer Software 141,692 22,422 (1,949) 111 162,276 127,372 14,355 (35) 141,692 122,586 17,969 (1,949) 59 138,665 107,937 14,665 (16) 122,586 23,611 19,435 19,106	Total 184,985 22,422 (1,949) 111 205,569 170,665 14,355 (35) 184,985 122,586 17,969 (1,949) 59 138,665 107,937 14,665 (16) 122,586 66,904 62,728 62,399

(i) Amortization

The amortization of intangible assets is included in the statement of comprehensive income:

Operating cost Operating expenses	2022 $ 3,967 14,002 $ 17,969	2021
		2,887 11,778
		14,665

(ii) Disclosure on pledges

As of December 31, 2022 and 2021, the intangible assets of the Group were not pledged as collateral.

(Continued)

34

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(j) Other current assets and other non-current assets

The details of other current assets and other non-current assets were as follows:

Other current assets: Prepayments Bussiness tax receivables Others Other non-current assets: Prepayments for equipment Other t-term borrowings Unsecured bank loans Secured bank loans Unused short-term credit lines Range of interest rate		December 31, 2022 39,224 35,379 13,860 88,463 December 31, 2022 642,910 4,639 647,549 December 31, 2022 500,000 301,417 801,417 3,389,004 1.41%~4.785%	December 31, 2021
	$ $		58,328 136,889 14,523
			209,740
			December 31, 2021
	$ $		344,509 6,617
			351,126
			December 31, 2021
	$ $ $		700,000 102,025
			802,025
			3,386,903
			0.67%~4.785%

(k) Short-term borrowings

For the collateral for short-term borrowings, please refer to note 8.

(l) Other current liabilities

The details of other current liabilities were summarized as follows:

Advance receipts Temporary receipt Others	December 31, 2022 $ 3,566 458,352 15,714 $ 477,632	December 31, 2021
		3,572 147,005 5,677
		156,254

Temporary receipt is mainly received from mold sharing payment and cancellation payment.

(Continued)

35

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The cancellation payment of temporary receipts is because the customer has reached an agreement with the Group and paid $1,054,375 thousand (USD$34,601 thousand) to cancel the contractual rights and obligations of both parties due to the cancellation of the order, of which $491,831 thousand, the Group had received it in November, 2021, and was transferred from contract liabilities to temporary receipts. Please refer to at note 6 (t).Remaining payments has been received in November 2022.The Group will then transfer the part of the payment to the supplier in the form of payment on behalf of others or receipts under custody with the agreement. As of December 31, 2022, the remaining balance of temporary receipts for the cancellation payment is $279,101 thousand.

(m) Long-term borrowings

The details of long-term borrowings were as follows:

Currency Secured bank loans NTD Unsecured bank loans NTD Unsecured bank loans USD Less : current portion Total Unused long-term credit lines			December 31, 2022	December 31, 2022
			Rate 0.95%~1.56% 1.55% 5.24%	Maturity year Amount 2025~2026 $ 818,334 2026 170,833 2024 61,420 1,050,587 (413,033) $ 637,554 $ 170,000

Unsecured bank loans Secured bank loans Less: current portion Total Unused long-term credit lines			December 31, 2021	December 31, 2021
		Currency USD NTD	Rate 2.21%~2.3% 0.45%~1.05%	Maturity year Amount 2022 $ 26,597 2024~2025 660,000 686,597 (93,264) $ 593,333 $ 470,000

For the collateral for long-term borrowings, please refer to note 8.

(n) Lease liabilities

Current Non-current	December 31, 2022 $ 10,501 $ 24,691	December 31, 2021
		34,261
		34,292

For the maturity analysis, please refer to note 6(w).

(Continued)

36

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities	2022 $ 506	2021 663

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

Total cash outflow for leases	2022 $ 30,763	2021 29,706

The lease period for the Group’s lease of loands, buildings and vehicles is two to ten years.

(o) Provisions

Balance at January 1, 2022 Provisions made during the year Provisions used during the year Balance at December 31, 2022 Balance at January 1, 2021 Provisions made during the year Provisions used during the year Balance at December 31, 2021	Warranties
	$ 162,599 83,544 (44,754) $ 201,389 $ 165,973 155,503 (158,877) $ 162,599

The provision for warranties relates mainly to automatic facilities and fitness equipment sold during the years ended December 31, 2022 and 2021. The provision is based on estimates made from historical defect rate associated with similar products and services. The Group expects to settle the liability over the next two quarters.

(p) Employee benefits

(i) Defined benefit plans

Reconciliation of the defined benefit obligations at present value and plan asset at fair value were as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit asset	December 31, 2022 $ 167,923 (373,928) $ (206,005)	December 31, 2021 310,038 (400,703) (90,665)

(Continued)

37

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group’s employee benefit liabilities were as follows:

Vacation liability	December 31, 2022 $ 22,397	December 31, 2021
		22,397

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

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

The Group’ s Bank of Taiwan labor pension reserve account balance amounted to $373,928 thousand as of December 31, 2022. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

The movements in present value of the defined benefit obligations of the Group for the years ended December 31, 2022 and 2021, were as follows:

Defined benefit obligations at January 1 Beginning adjustment Current service costs and interest cost Remeasurements of the net defined benefit liability (asset) －Due to experience adjustments of actuarial (losses) gains －Due to changes in financial assumption of actuarial (losses) gains Benefits paid Defined benefit obligations at December 31	2022 $ 310,038 - 3,232 (29,705) (21,289) (94,353) $ 167,923	2021 401,954 (16,808) 4,528 (1,143) (55,689) (22,804) 310,038

(Continued)

38

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Group were as follows:

Fair value of plan assets at January 1 Beginning adjustment Interest income Remeasurement of the net defined benefit liability (asset) －Return on plan assets (excluding interest income) Benefits paid Expected return on plan assets Fair value of plan assets at December 31	2022 $ 400,703 - 2,470 31,656 1,367 (62,268) $ 373,928	2021 402,034 157 2,488 4,727 1,837 (10,540) 400,703

• 4) Expenses recognized in profit or loss

Expenses recognized in profits or losses for the Group were as follows:

Current service costs Net interest of net liabilities (asset) for defined benefit obligations Recognized pension expenses	2022 $ 1,358 (596) $ 762 2022 $ 762	2021 2,139 (100) 2,039 2021 2,039

• 5) Remeasurement in net defined benefit liability (asset) recognized in other comprehensive income

The Group’ s remeasurement in the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2022 and 2021, were as follows:

Cumulative amount at January 1 Recognized during the period Accumulated amount at December 31	2022 $ (91,131) 82,650 $ (8,481)	2021 (152,690) 61,559 (91,131)

(Continued)

39

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increase rate	December 31, 2022 December 31, 2021 % 1.750 % 0.625 % 2.000 % 2.000

The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $935 thousand.

The weighted average lifetime of the defined benefit plans is 12.26 years.

• 7) Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2022 Discount rate Future salary increases December 31, 2021 Discount rate Future salary increases	Influences of defined benefit obligations Increased 0.25% Decreased 0.25% $ (4,294) 4,445 4,337 (4,212) $ (7,271) 7,535 7,269 (7,035)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2022 and 2021.

(ii) Defined contribution plans

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

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $24,447 thousand and $34,984 thousand for the years ended December 31, 2022 and 2021, respectively.

(Continued)

40

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Except for the Company and Rexon Technology Corp., Ltd., other subsidiaries adopted the defined contribution method under their local law, and accordingly, the pension costs were $5,396 thousand and $5,234 thousand.

(q) Income taxes

(i) Income tax (benetit) expense

The components of income tax in the years 2022 and 2021 were as follows:

Current tax (benefit) expense Current period Adjustment for prior periods Deferred tax (benefit) expense Origination and reversal of temporary differences Income tax (benefit) expense	2022 $ - (6,370) $ (6,370) (95,081) $ (101,451)	2021 288,316 (517) 287,799 24,631 263,168

The amounts of income tax recognized directly in other comprehemsive income for 2022 and 2021 were as follows:

Item that may be reclassified subsequently to profit or loss Exchange differences on translation	2022 $ 4,815	2021 (1,588)

Reconciliation of income tax and profit before tax for 2022 and 2021 was as follows:

Profit excluding income tax Income tax using the Company’s domestic tax rate Other tax effect generated from adjustment of tax rule Non-deductible expenses Tax effect of investment loss generated from investment accounted for using equity method Recognition of previously unrecognized tax gains Additional tax on undistributed earnings Income tax (benetit) expense	2022 $ (400,571) $ (80,013) (15,001) 22 (89) (6,370) - $ (101,451)	2021 1,319,117 266,699 (1,143) 880 (3,021) (518) 271 263,168

(Continued)

41

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

December 31, 2022 Tax effect of deductible temporary differences$ 5,111	December 31, 2021
	5,111

• 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 were as follows:

Unrealized inventory valuation loss Provision Unrealized inrestment loss Deferred tax assets: Balance at January 1, 2022 $ 9,168 32,520 5,615 Recognized in profit or loss 6,438 7,758 1,993 Recognized in other comprehensive income - - - Balance at December 31, 2022$ 15,606 40,278 7,608 Balance at January 1,2021 $ 9,168 33,195 - Recognized in profit or loss - (675) 5,615 Recognized in other comprehensive income - - - Balance at December 31, 2021$ 9,168 32,520 5,615 Unrealized investment gains Unrealized exchange gains Deferred tax liabilities: Balance at January 1, 2022 $ - 6,491 Recognized in profit or loss - (6,491) Balance at December 31, 2022 $ - - Balance at January 1, 2021 $ 15,402 288 Recognized in profit or loss (15,402) 6,203 Balance at December 31, 2021 $ - 6,491	Loss deductions - 61,388 - 61,388 - - - - Total	Exchange on translation of foreign financial statement 26,022 - (4,815) 21,207 24,433 - 1,589 26,022 6,491 (6,491) 15,690 (9,199) 6,491	Other 10,870 11,013 - 21,883 378 10,492 - 10,870	Total 84,195 88,590 (4,815)
				167,970
				67,174 15,432 1,589
				84,195
	-

3) Assessment of tax

The income tax returns of the Company and Rexon Tech. for the years through 2020 were assesed by the tax authorities .

(Continued)

42

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(r) Capital and other equity

As of December 31, 2022 and 2021, the authorized capital totaled $3,800,000 thousand, and the total paid-in capital amounted to $1,814,735 thousand with a par value of NT$10 per share on common stock.

Reconciliation of shares outstanding for the years ended December 31, 2022 and 2021 were as follows:

Reconciliation of shares outstanding for the years ended follows:	December 31, 2022 and 2021 wer	December 31, 2022 and 2021 wer
(In thousands of shares) Balance at January 1(which is balance at December 31) (i) Capital Surplus	Ordinary shares
	2022 181,473	2021
		181,473

Balance of capital surplus was as following:

December 31, 2022 Treasury share transactions $ 433 Changes in the net equity value of subsichiaries recognized using the equity method 153 $ 586	December 31, 2021
	433 153
	586

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(ii) Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

The Company shall first take into consideration its current and future development plan, investment environment, capital requirement, the domestic and global competition, as well as the long-term interests of stockholders in determining the stock or cash dividends to be paid. The dividends appropriated for distribution shall not be less than 20% of the current and priorperiod earnings that remain undistributed. The cash dividends shall not be less than 20% of total dividends.

(Continued)

43

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 1) Legal reserve

• When a company incurs no loss, it may, pursuant to a resolution by a shareholders' meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

In accordance with the requirement of Financial Supervisory Commission, a portion of earnings shall be allocated as special earnings reserve during earnings distribution. The special earnings reserve was distributed from the current undistributed earnings, which was income after income tax plus other items, and undistributed earnings of prior period. A portion of undistributed prior-period earnings shall be reclassified as special earnings reserve and does not qualify for earnings distribution to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

The special reserve was $163,182 thousand and $177,226 thousand for the years ended December 31, 2022 and 2021, respectively.

3) Earnings distribution

The amounts of cash dividends on the appropriation of earnings for 2021 had been approved during the board meeting on March 15, 2022, as follow:

Dividends distributed to ordinary shareholders: Cash	2021 Amount per share Total amount $ 3.0 544,420	2020	2020
	Amount per share $ 3.0	Amount per share 3.6	Total amount
			653,305

(Continued)

44

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) OCI accumulated in reserves, net of tax

Exchange differences on translation of foreign financial statements Unrealized (losses) gains from financial assets measured at fair value through other comprehensive income Balance at January 1, 2022 $ (163,182) Exchange differences on foreign operations 19,259 - Balance at December 31, 2022 $ (143,923) - Balance at January 1, 2021 $ (156,823) (20,402) Exchange differences on translation of foreign (6,359) - Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income - 17,184 Disposal of investments in equity instruments designated at fair value through other comprehensive income - 3,218 Balance at December 31, 2021 $ (163,182) -

Total (163,182) 19,259 (143,923) (177,225) (6,359) 17,184 3,218 (163,182)

(s) Earnings (loss) per share

The details on the calculation of basic earnings (loss) per share and diluted earnings per share for years 2022 and 2021 were as follows:

Basic earnings (loss) per share

Net (loss) profit attributable to ordinary shareholders of the Company Weighted-average number of ordinary shares Diluted earnings (loss) per share Net (loss) profit attributable to ordinary shaleholders of the Company Weighted-average number of ordinary shares Effect of employee share bonus Weighted average number of ordinary shares (diluted)	2022 $ (298,921) 181,473 $ (1.65) $ (298,921) 181,473 - 181,473 $ (1.65)	2021
		1,052,892
		181,473
		5.80
		1,052,892
		181,473 1,349
		182,822
		5.76

(Continued)

45

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Revenue from contracts with customers

• (i) Details of revenue

(ii)	Primary geographical markets America Europe Asia Other Major products/services lines Woodworking tools Fitness equipment Other Contract balances Contract liabilities	December 31, 2022		2022 3,928,957 366,938 174,864 78,549 4,549,308 1,371,558 2,954,518 223,232 4,549,308 December 31, 2021 543,155	2021 17,748,698 480,107 133,905 4,113 18,366,823 1,564,139 16,463,705 338,979 18,366,823 January 1, 2021
					27,454

The amount of revenue recognized for the years ended December 31, 2022 and 2021 that was included in the contract liability balance at the beginning of the period were $21,432 thousand and $10,194 thousand, respectively.

Contract liabilities mainly arise from the deferred revenue from sales contract of woodworking tools and fitness equipment. The Group will recognize revenue when the goods are transferred to customers.

The opening balance of contract liabilities on January 1, 2022 was adjusted due to contract modification for 2022, the adjustment was $491,831 thousand, which has been transferred to other current liabilities account. Please refer to note 6 (l) for details .

(u) Remunerations to employees, directors and supervisors

According to the Articles of Association, once the Company has annual profit, it should at least appropriate 5% of the profit to its employees and 5% or less to its directors and supervisors as remuneration. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The pervading target given via cash or shares includes those dependent employees of the Company’s subsidiaries under certain requirements.

For the years ended December 31, 2022 and 2021, the Company estimated its employee remuneration amounting to $0 and $69,327 thousand, and directors' and supervisors' remuneration amounting to $0 and $7,000 thousand, respectively. 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. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2022 and 2021.

(Continued)

46

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(v) Non-operating income and expenses

(i) Interest income

The details of interest income for years 2022 and 2021 were as follows:

Interest income－bank deposits	2022 $ 5,858	2021
		2,030

(ii) Other income

The details of other income for years 2022 and 2021 were as follows:

Rent income Dividend income Other	2022 $ 5,589 - 14,305 $ 19,894	2021
		3,535 13 36,244
		39,792

(iii) Other income and losses

The details of other income and losses for years 2022 and 2021 were as follows:

Net foreign exchange gains (losses) Net losses on disposal of properey, plant and equipment Gain financial assets measured at fair value through profit Impairment loss on property, plant and equipment Other Net other income and losses	2022 $ 50,388 (4,132) - (15,971) (4,780) $ 25,505	2021
		(88,579) (4,987) 5,908 (52,723) (230)
		(140,611)

(iv) Finance expenses

The details of finance expenses for years 2022 and 2021 were as follows:

Interest expenses Less: capitalization of interest	2022 $ (26,089) 3,650 $ (22,439)	2021 (9,227) 1,400
		(7,827)

(Continued)

47

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(w) Financial Instruments

• (i) Credit risk

• 1) Credit risk exposure

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

2) Concentration of credit risk

Major clients of the Group are concentrated in automatic facilities and fitness machines market. Sales to the major clients in 2022 and 2021 are accounted for 47% and 88% of consolidated revenue, respectively. To minimize credit risk, the Group periodically evaluates their financial positions and requests collateral if deemed necessary. As of December 31, 2022 and 2021, three customers accounted for 82% and 80% respectively of notes receivable and accounts receivable, which resulted in significant concentration of credit risk.

3) Receivables

For credit risk exposure of notes and accounts receivable, please refer to note 6(c). Other financial assets at amortized cost inlcudes other receivables. For the details and loss allowance, please refer to note 6(d).

(ii) Liquidity risk

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

Carrying amount December 31, 2022 Non-derivative financial liabilities Secured bank loans $ 1,119,751 Unsecured loans 732,253 Leased liabilities (current and non-current) 35,192 Other payable 1,639,700 $ 3,526,896 December 31, 2021 Non-derivative financial liabilities Secured bank loans $ 762,025 Unsecured loans 726,597 Lease liabilities (current and non-current) 68,553 Other payable 5,659,611 $ 7,216,786	Contractual cash flows 1,137,492 742,453 36,289 1,639,700 3,555,934 770,243 728,219 70,100 5,659,611 7,228,173	1-12months 654,277 618,844 10,808 1,639,700 2,923,629 174,332 728,219 34,778 5,659,611 6,596,940	1-2 years 401,103 51,686 6,146 - 458,935 241,770 - 12,241 - 254,011	2-5 years 82,112 71,923 9,780 - 163,815 354,141 - 10,586 - 364,727	more than 5 years
					- - 9,555 -
					9,555
					- - 12,495 -
					12,495

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

(Continued)

48

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Currency risk

• 1) Exposure to foreign currency risk

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

F inancial Assets Monetary items USD EUR JPY GBP F inancial Liabilities M onetary items USD EUR JPY	December 31, 2022 Foreign Currency Exchange Rates TWD $ 79,128 30.71 2,430,021 31 32.72 1,014 209,838 0.2324 48,766 5 37.30 187 8,491 30.71 260,759 230 32.72 7,526 - - -	December 31, 2022 Foreign Currency Exchange Rates TWD $ 79,128 30.71 2,430,021 31 32.72 1,014 209,838 0.2324 48,766 5 37.30 187 8,491 30.71 260,759 230 32.72 7,526 - - -	December 31, 2021	December 31, 2021
	Foreign Currency $ 79,128 31 209,838 5 8,491 230 -	Exchange Rates 30.71 32.72 0.2324 37.30 30.71 32.72 -	Foreign Currency 96,986 13 196,874 5 13,042 783 579	Exchange Rates TWD 27.68 2,684,572 31.32 407 0.2405 47,348 37.30 187 27.68 361,003 31.32 24,524 0.2405 139

• 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, accounts and other receivables, borrowings, and accounts and other payables that are denominated in foreign currency. A strengthening (weakening) of 1% of the TWD against the USD, EUR, JPY, and GBP as of December 31, 2022 and 2021 would have increased (decreased) the net profit after tax by $17,694 thousand and $19,021 thousand, respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases.

The analysis is performed on the same basis for perior year.

• 3) Foreign exchange gain and loss on monetary items

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 years 2022 and 2021, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $50,388 thousand and $(88,579) thousand, respectively.

(iv) 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 derivative and non-derivative financial instruments on the reporting date.

Regarding liabilities with variable interest rates, the analysis is based on the assumption that the amount of liabilities at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate which increases or decreases by 1% when reporting to management internally, which also represents the Group management's assessment of the reasonably possible interest rate change.

(Continued)

49

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

If the interest rate had increased/decreased by 1%, with all other variable factors remaining constant, the Group’ s net income would have increasd/decreased by $14,816 thousand and $11,909 thousand for the years ended December 31, 2022 and 2021, respectively. This is mainly due to the Group’s borrowings in variable rates.

• (v) Fair value of financial instruments

• 1) Categories and fair value of financial instruments

The fair value of financial assets at fair value through profit or loss and financial assets measured at fair value through other comprehensive income is measured on a recurring basis. 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, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required:

Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss Financial assets measured at amortized cost Cash and cash equivalents Notes receivable, trade receivable, and other receivable (including related parties) Guarantee deposits paid Financial liabilities at amortized cost Short-term borrowings Notes payable, accounts payable, and other payable (including related parties) Long-term borrowings, due in 1 year Loan-term borrowings Leases liabilities		December 31, 2022	December 31, 2022	December 31, 2022
	Carrying amount $ 96 1,970,759 778,794 1,926 $ 2,751,575 $ 801,417 1,639,700 413,033 637,554 35,192 $ 3,526,896		Fair Value
		Level 1 - - - - - - - - - - -	Level 2 - - - - - - - - - - -	Level 3 96 - - - 96 - - - - - -	Total
					96 - - -
					96
					- - - - -
					-

(Continued)

50

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss Financial assets measured at amortized cost Cash and cash equivalents Notes receivable, trade receivable, and other receivable (including related parties) Guarantee deposits paid Financial liabilities at amortized cost Short-term borrowings Notes payable, accounts payable, and other payable(including related parties) Long-term borrowings, due in 1 year Loan-term borrowings Lease liabilities		December 31, 2021	December 31, 2021	December 31, 2021
	Carrying amount $ 96 4,574,719 1,758,150 9,053 $ 6,342,018 $ 802,025 5,659,611 93,264 593,333 68,553 $ 7,216,786		Fair Value
		Level 1 - - - - - - - - - - -	Level 2 - - - - - - - - - - -	Level 3 96 - - - 96 - - - - - -	Total
					96 - - -
					96
					- - - - -
					-

• 2) Valuation techniques for financial instruments not measured at fair value

The Group’ s valuation techniques and assumption used for financial instruments not measured at fair value are as follows:

For financial liabilities measured at amortized cost, if there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

• 3) Valuation techniques for financial instruments measured at fair value

The fair value of financial instruments is quoted prices if quoted prices are from an active market. Published prices from the main exchange and central government bonds regarded as usually-traded securities are both basis of fair values of listed equity instruments and debt instruments with quoted prices from an active market.

(Continued)

51

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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. Whether transactions are taking place ‘regularly’ is a matter of judgment and depends on the facts and circumstances of the market for the instrument.

The Group holds the financial instruments with the active market, the categories and characteristics of fair value are listed as follow: Fair values of listed stocks are based on market quoted prices.

• 4) Transfer between Level 1 and Level 2

There were no transfers from one level to another in 2022 and 2021.

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

The Group’s financial instruments that use Level 3 inputs to measure fair value include “financial assets measured at fair value through profit or loss – equity investments”.

Most of the Group’s fair values are Level 3 “only with single significant unobservable inputs” , and only equity instruments without active market have plural significant unobservable inputs. Since significant unobservable inputs of equity instruments without an active market are independent, they are not correlated.

(x) Financial risk management

• (i) Overview

The Group has exposures to the following risks from its financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management. For detailed information, please refer to the related notes of each risk.

(Continued)

52

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Structure of risk management

The Group’ s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Group minimizes the risk exposure through derivative financial instruments. The board of directors regulated the use of derivative financial instruments in accordance with the Group’s policy on risks arising from financial instruments such as credit risk, currency risk, and interest rate risk, the use of derivative and non-derivative financial instruments, and the investments of excess liquidity. The internal auditors of the Group continue to review the amount of the risk exposure in accordance with the Group's policies and the risk management's policies and procedures. The Group has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

(iii) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

1) Accounts receivable and other receivables

The Group established a credit policy to obtain the necessary collateral to mitigate risks arising from financial loss due to default risk. The Group will transact with corporations having credit ratings equivalent to investment grade, and such ratings are provided by independent rating agencies. Where it is not possible to obtain such information, the Group will assess the ratings based on other publicly available financial information and records of transactions with its major customers. The Group continuously monitors the exposure to credit risk and counterparty credit ratings, and establish sales limits based on credit rating for each of its approved customer. The credit limits for each counterparty are approved and reviewed annually by the Risk Management Committee.

The Group did not have any collateral or other credit enhancement to avoid credit risk of the financial assets.

2) Investments

The exposure to credit risk for the bank deposits and other financial instruments is measured and monitored by the Group’s finance department. The Group only deals with banks, other external parties, corporate organizations, government agencies and financial institutions with good credit rating. The Group does not expect any counterparty above fails to meet its obligations hence there is no significant credit risk arising from these counterparties.

3) Guarantees

The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. As of December 31, 2022 and 2021, the Group provided financial guarantee to its subsidiaries amounted to $61,420 thousand and $138,400 thousand, respectively.

(Continued)

53

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Liquidity risk

The Group manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group’ s management supervises the banking facilities to ensure they are in compliance with the terms of the loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Group. The Group has unused long-term and short-term credit line of $3,559,004 thousand and $3,856,903 thousand as of December 31, 2022 and 2021, respectively.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices that will affect the Group’ s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

1) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollar (NTD). The currencies used in these transactions are the NTD,RMB, EUR, USD, GBP and JPY.

2) Interest rate risk

The Group maintains an appropriate proportion of the fixed and variable interest rate instruments and using interest rate swap contracts to mitigate the floating interest rate risk. The Group will assess the hedging activities for consistent interest rates within its risk preferences and use the most cost-effective hedging strategy on a regular basis.

(y) Capital management

The Group meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, and issue new shares or sell assets to settle any liabiltiies.

The Group and other entities in the simialr industry use the debt-to-equity ratio to manage capital. This ratio uses the total net debt divided by the total capital. The net debt from the balance sheet is derived from the total liabilities, less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity, and non-controlling interest, plus, net debt.

(Continued)

54

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

As of December 31, 2022, the Group’s capital management strategy is consistent with the prior year as of December 31, 2021. The Group’s debt to equity ratio as of December 31, 2022 and 2021, were as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Adjusted equity Debt-to-equity ratio		December 31, 2022 4,244,630 (1,970,759) 2,273,871 3,509,327 5,783,198 39%	December 31, 2021 8,271,030 (4,574,719) 3,696,311 4,250,403 7,946,714 47%
	$ $

The debt-to equity ratio was reduced on December 31,2022, due to the substantial decrease in revenue during the current period, hence, the relative decrease in purchases from suppliers has led to an decrease in the amount of account payable.

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

Reconciliation of liabilities arising from financing activities were as follows:

January 1,2022 Long-term borrowings (Including due within 1year) $ 686,597 Short-term borrowings 802,025 Lease liabilities 68,553 Total liabilities from financing$ 1,557,175 January 1,2021 Long-term borrowings (Including due within 1year) $ 380,739 Short-term borrowings 336,960 Lease liabilities 23,619 Total liabilities from financing$ 741,318	Cash flows 364,433 - (30,257) 334,176 Cash flows 304,231 460,513 (29,043) 735,701	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - (443) - - (608) 4,228 (7,332) - 4,228 (7,332) (1,051) Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - 1,627 - - 4,552 73,977 - - 73,977 - 6,179	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - (443) - - (608) 4,228 (7,332) - 4,228 (7,332) (1,051) Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - 1,627 - - 4,552 73,977 - - 73,977 - 6,179	December 31,2022
				1,050,587 801,417 35,192
				1,887,196
				December 31,2021
		Acquistion - - 73,977 73,977	Changes in lease payments - - - -
				686,597 802,025 68,553
				1,557,175

(7) Related-party transactions:

(a) Names and relationship with the Group

The following is the entity that have had transactions with the Group during the periods covered in the consolidated financial statements.

Name of related parey

Relationship with the Group

Fine Clear Co., Ltd

An associate

(Continued)

55

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) Significant transactions with related parties

(i) Sale of goods to related parties

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

Associates－Fine Clear Co., Ltd	2022 $ 76,674	2021 56,115

The price changed to related party is incomparable to normal price because there were no similar items sold to both related and non-related parties. The credit term was 150 days, while the credit term for routine sales transaction was ranged from 30 days to 120 days. Amounts receivable from related parties were uncollateraliged, and no expected credit loss were required after the assussment by the management.

• ii) Receivables from related-parties

Account Related-party type Notes receivable Associates－Fine Clear Co., Ltd Accounts receivable Associates－Fine Clear Co., Ltd	December 31, 2022 $ 31,722 $ 8,794	December 31, 2021
		27,543
		11,078

iii) Payables to related-parties

The payables to related parties were as follows:

Account	Related-party type	December 31, 2022 $ 94 $ 6	December 31, 2021
Notes payable Other payables	Associates－Fine Clear Co., Ltd Associates－Fine Clear Co., Ltd		3,799
			17

(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	2022 $ 31,407 1,358 - - - $ 32,765	2021
		54,540 1,384 - - -
		55,924

(Continued)

56

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(8) Pledged assets

The carrying values of pledged assets were as follows:

Pledged assets and Buildings	Object Guarantee for bank loans Guarantee for bank loans	December 31, 2022 $ 296,916 844,913 $ 1,141,829	December 31, 2021
			296,916 853,440
			1,150,356

(9) Significant commitments and contingencies

i) The Group’s unrecognized contractual commitments were as follows:

Acquisition of property, plant and equipment	December 31, 2022 $ 293,285	December 31, 2021
		265,343

ii)The Group received civil complaint of trade price and notice trial which Yi-Zong Hardware Co., Ltd. claim that the Group should pay $37,154 thousands for purchase. The complaint is on trial in Taiwan Taichung District Court, therefore, the Group has not estimated relevant provisions and does not expect material impact in the Group's operation and business.

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

(12) Other

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

By function By item	2022	2022	2022	2021	2021	2021
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits
Salary	359,763	258,386	618,149	741,723	340,663	1,082,386
Labor and health insurance	46,460	26,807	73,267	82,370	23,491	105,861
Pension	20,006	10,599	30,605	33,338	8,919	42,257
Others	7,181	5,404	12,585	19,336	2,515	21,851
Depreciation	255,696	92,032	347,728	228,643	34,849	263,492
Amortization	3,967	14,002	17,969	2,887	11,778	14,665

(Continued)

57

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions

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

• (i) Lending to other parties: None.

• (ii) Guarantees and endorsements for other parties:

								(Amounts in Thousands of New Taiwan Dollar)	(Amounts in Thousands of New Taiwan Dollar)	(Amounts in Thousands of New Taiwan Dollar)	(Amounts in Thousands of New Taiwan Dollar)	(Amounts in Thousands of New Taiwan Dollar)	(Amounts in Thousands of New Taiwan Dollar)
No.	Name of guarantor	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 end orsements	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	REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	2	1,393,463	(USD5,000) 158,750	(USD2,000) 61,420	(USD2,000) 61,420	-	% 1.76	1,393,463	Y	N	Y

Note1：The total amount and the limited amount of the guarantee provided by the company to any individual subsidiary shall not exceed forty percent (40%) of the Company’s net worth.

Note2：No.0 represents the parent company.

Note3：The relationship between guarantee provider and guarantee party were as follows :

• 1) Companies which were in business relationship.

• 2) Subsidiaries which the company directly or indirectly held more than fifty percent (50%).

• 3) Companies with substantial control

• (iii) Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures):

(Amounts in Thousands of New Taiwan Dollars)

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Highest Shares/Units (thousands)	Highest Percentage of ownership (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
REXON INDUSTRIAL CORP., LTD.	Stock-Hwa Chung Venture Capital Corp.		Financial assets at fair value through profit or loss-current	10	96	-	96	10	-

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

• (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None

• (vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None

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

(Amounts in Thousands of New Taiwan Dollars)

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)
REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	The subsidiary	Purchase	980,602	% 37	90~150Days	Note 1	Note 2	(214,202)	(19)%

Note1：The price charged to related party is incomparable to normal price because there were no similar iterms purchased from both related and non-related parties.

• Note2：The payment term for the related party is 90-150 days. Apart from according to the established payment policy, the related working capital, industry characteristics, and industrial prosperity are also considered.

(Continued)

58

REXON INDUSTRIAL CORP., 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 capital stock:

Name of company	Name of Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequent period	Allowance for bad debts
					Amount	Action taken
Tongxiang Rexon	REXON INDUSTRIAL CORP., LTD.	Parent company	Account receivable 214,202	6.62%	-	-	The recovery amount as of January30,2023 : 63,274	-

(ix) Trading in derivative instruments: None.

(x) Business relationships and significant intercompany transactions:

No.	Name of company	Name of counter-party	Nature of relationship	Intercompany transactions	Intercompany transactions	Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 I	REXON NDUSTRIAL CORP., LTD.	Tongxiang Rexon	1	Purchases	980,602	The prices were agreed upon by the two parties to the transaction.	21.55%
0 I	REXON NDUSTRIAL CORP., LTD.	Tongxiang Rexon	1	Account payable	214,202	The payment terms were agreed upon by the two parties to the transaction.	2.76%
0 I	REXON NDUSTRIAL CORP., LTD.	Rexon Technology Corp., Ltd.	1	Purchases	45,383	The prices were agreed upon by the two parties to the transaction.	1.00%
0 I	REXON NDUSTRIAL CORP., LTD.	Rexon Technology Corp., Ltd.	1	Account payable and notes payable	33,426	The payment terms were agreed upon by the two parties to the transaction.	0.43%
0 I	REXON NDUSTRIAL CORP., LTD.	P.T.S.	1	Service fee	44,836	The prices were agreed upon by the two parties to the transaction.	0.99%
0 I	REXON NDUSTRIAL CORP., LTD.	P.T.S.	1	Other payable	101,110	The payment terms were agreed upon by the two parties to the transaction.	1.30%
0 I	REXON NDUSTRIAL CORP., LTD.	P.T.S.	1	Sales	7,157	The prices were agreed upon by the two parties to the transaction.	0.16%

Note1：Representations of No. were as follows:

• 1) No.0 represents the parent company.

• 2) Subsidiaries were numbered in sequence from No.1.

Note2：Type of intra-group transactions were as follows:

• 1) represents the transactions form parent company to subsidiary.

• 2) represents the transactions from subsidiary to parent company.

• 3) represents the transactions between subsidiaries.

(b) Information on investees:

The following is the information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China):

(Amounts in Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2022	Balance as of December 31, 2022	Balance as of December 31, 2022	Net income (losses) of investee	Share of profits/losses of investee	Highest Shars/Units (thousands)	Highest Percentage of ownership(%)	Note
				December 31, 2022	December 31, 2021	Shares (thousands)	Percentage of wnership	Carrying value
REXON INDUSTRI AL CORP., LTD.	Fine Clear Co.,Ltd	R.O.C	Buying and selling accessories	14,197	14,197	1,600	% 16	16,420	1,177	188	1,600	% 16	Investment Using Equity Method
REXON INDUSTRI AL CORP., LTD.	Rexon Technology Corp., Ltd. (Rexon Tech)	R.O.C	Manufacture and sale of electric components	293,741	293,741	7,851	% 82.87	97,871	309	256	7,851	% 82.87	Direct subsidiaries of the Company
REXON INDUSTRI AL CORP., LTD.	Power Tool Specialists Inc.	U.S.A	Merchandise trading	196,465	196,465	0.1	% 96	154,890	(6,289)	(6,046)	0.1	% 96	Direct subsidiaries of the Company
REXON INDUSTRI AL CORP., LTD.	Gold Item Group Ltd.	British Virgin Islands	Investing and holding	747,858	747,858	US$ 25,000 (Note 1)	% 100	702,524	(3,919)	(3,919)	US$ 25,000 (Note 1)	% 100	Direct subsidiaries of the Company
Gold Item	Gold Tech GroupLtd.	Hong Kong	Investing and holding	US$ 25,000	US$ 25,000	US$ 25,000 (Note 1)	% 100	682,012	(3,924)	(3,924)	US$ 25,000 (Note 1)	% 100	Direct subsidiaries of Gold Item

Note1：Company Limited without issuing Shares. The amount of capital invested is disclosed.

(Continued)

59

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Information on investment in mainland China:

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

							(Amounts in Thousands	(Amounts in Thousands	(Amounts in Thousands	(Amounts in Thousands	of New Taiwan Dollar)	of New Taiwan Dollar)	of New Taiwan Dollar)
Investee company	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2022	Investment flows		Accumulated outflow of investment from Taiwan as of December 31, 2022	Net income (losses) of the investee	Percentage of ownership	Highest Percentage of ownership	Net income (losses) recognized	Carrying value as of December 31, 2022	Accumulated remittance of earnings as of December 31, 2022
					Outflow	Inflow
Tongxiang Rexon	Manufacture of drills, woodworking tools and fitness equipment	RMB 154,465 USD25,000	Note 1	USD 25,000 (NTD745,565)	-	-	USD 25,000 (NTD745,565)	(3,924)	100%	100%	(3,924)	682,012	-

(Amounts in Thousands of New Taiwan Dollars)

Note 1：The Group invested companies in Mainland China through investees in Third Region, and investees in Third Region invested companies in Mainland China through their investees in Hong Kong.

(ii) Limitation on investment in Mainland China:

itation on investment in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2022	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
US$25,000 (NT$745,565)	US$25,000 (NT$745,565)	2,090,194

(iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

(d) Major shareholders:

reholders:
Shareholding Shareholder’s Name	Shares	Percentage
Kun-Ju Co., Ltd.	18,735,302	% 10.32
Trust Account entrusted by Shu-Qi Chen in Li-Tai Investing Corp., Ltd.	12,275,599	% 6.76

• Note:(l) The information of major shareholders in this table is calculated by Taiwan Depository & Clearing Corporation based on the last business day at the end of each quarter, disclosing shareholders with more than 5% of the Company's ordinary shares and preferred shares that have been delivered without physical registration (including treasury shares). As for the share capital reported in the Company's financial statements and the Company's actual number of shares delivered without physical registration, there may be differences due to different calculation bases.

• (2) In a situation where a shareholder entrusted the holdings, the individual account of the settlor opened by the trustee was disclosed. As for the shareholder's declaration of insider's equity holding more than 10% of the shares in accordance with the Securities and Exchange Act, his shareholding includes his own shareholding plus the shares delivered to the trust and the right to use the trust property, etc. For information on insider equity declaration, please refer to Market Observation Post System.

(Continued)

60

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(14) Segment information

(a) General information

The Group has only one reportable segment which is automatic facilities and fitness equipment segment. The automatic facilities and fitness equipment segment engages mainly in the manufacturing and selling of drills, woodworking tools, automatic facilities, and fitness equipment. The Group’s operating segment revenue, the profit and loss of reportable segment and the assets of the reportable segment are in consistent with consolidated financial statements. Please refer to consolidated balance sheet and consolidated income statement.

(b) Product information

Product Automatic facilities Fitness equipment Other	2022 $ 1,371,558 2,954,518 223,232 $ 4,549,308	2021
		1,564,139 16,463,705 338,979
		18,366,823

(c) Geographical information

In presenting the information on the basis of geography, segment revenue is based on the geographical location of the customers and the segment non-current assets are based on the geographical location of the assets.

Revenue from the external customers of the Group was as follows:

Region America Europe Asia Other	2022 $ 3,928,957 366,938 174,864 78,549 $ 4,549,308	2021
		17,748,698 480,107 133,905 4,113
		18,366,823

Non-current assets:

Region Taiwan Other	December 31, 2022 $ 3,188,997 733,379 $ 3,922,376	December 31, 2021
		3,030,047 772,781
		3,802,828

Non-current assets include property, plant and equipment, right-of-use assets, intangible assets, and other assets, not including financial instruments, deferred tax assets and defined benefit assets.

• (d) Major customers’ information

Sale revenues from individual customers representing over 10% of the total revenue were summarized as follows:

Customer D Company A Company B Company D Company		2022	2022
			Percentage
			47 14 14
			75