SOI — Interim / Quarterly Report 2021

Nov 4, 2021

Stock Code � 3530

Silicon Optronics, Inc. and Subsidiaries

Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 Independent Auditors’ Report

(Reviewed, Not Audited)

SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

	March 31, 2021	March 31, 2021	December 31,	2020	2020	March 31, 2020	March 31, 2020			March 31,	March 31,	2021	2021	December	December	31,	2020		March 31,	March 31,	2020	2020
	(Reviewed)		(Audited)			(Reviewed)					(Reviewed)				(Audited)					(Reviewed)
	Amount	%	Amount	%		Amount	%	LIABILITIES AND EQUITY		Amount			%	Amount			%		Amount			%
								CURRENT LIABILITIES
	$ 594,445	19	$ 547,597	18		$ 412,361	16	Contract liabilities - current (Note 19)		$	17,065		-	$	15,940		1		$	51,275		2
								Accounts payable			128,217		4		120,321		4			101,715		4
	851,141	28	758,754	25		138,510	6	Accounts payable to related parties (Notes 26)			117,972		4		154,167		5			146,187		6
	9,681	-	32,842	1		3,852	-	Other current liabilities (Notes 16)			83,789		3		100,836		3			44,072		2
	833,383	27	849,523	29		1,056,236	42	Current tax liabilities (Notes 4 and 21)			64,304		2		47,664		2			11,663		-
								Lease liabilities - current (Notes 12)			7,672		-		7,667		-			7,632		-
	61,005	2	61,430	2		100,358	4	Total current liabilities			419,019		13		446,595		15			362,544		14
	2,349,655	76	2,250,146	75		1,711,317	68
								NON-CURRENT LIABILITIES
								Long-term loan (Notes 15)			350,000		12		350,000		12			-		-
								Deferred income tax liabilities (Notes 4 and 21)			616		-		208		-			-		-
	2,500	-	4,048		-	2,548	-	Lease liabilities - non-current (Notes 12)			7,529		-		9,473		-			15,095		1
								Total non-current liabilities
	504,838	16	513,112	17		537,227	21				358,145		12		359,681		12			15,095		1
	15,432	1	17,085		-	22,501	1
	199,228	6	199,228	7		199,228	8	Total liabilities			777,164		25		806,276		27			377,639		15
	8,256	-	7,784		-	12,583	1
								EQUITY ATTRIBUTABLE TO SHAREHOLDERS
	15,525	1	17,454	1		12,904	1	OF THE COMPANY(Notes 18 and 23)
	5,557	-	3,161		-	3,112	-
	751,336	24	761,872	25		790,103	32	Common stock			781,109		25		781,059		26			781,059		31
								Capital surplus			1,131,828		36		1,131,714		37			1,131,714		45
								Retained earnings
								Legal reserve			65,911		2		65,911		2			50,310		2
								Special reserve			2,365		-		2,365		-			-		-
								Unappropriated earnings			443,970		15		325,938		11			259,916		11
								Other equity
								Exchange differences on translating the
								financial
								statements of foreign operations	(		4,361 )		-	(	4,250 )		-	(		2,223 )		-
								Treasury shares	(		96,995)	(	3)	(	96,995)	(	3)	(		96,995)	(	4
								Total equity			2,323,827		75		2,205,742		73			2,123,781		85
	$ 3,100,991	100	$ 3,012,018	100		$ 2,501,420	100	TOTAL		$	3,100,991		100	$	3,012,018		100		$	2,501,420		100

ASSETS CURRENT ASSETS Cash and cash equivalents Notes 6 Financial assets at amortized cost - current Notes 7 and 25 Accounts receivable - net Notes 8 Inventories Notes 9 Prepayments and other current assets Notes 14 and 25 Total current assets NON-CURRENT ASSETS Financial assets at amortized cost - noncurrent(Notes 7, 25 and 27) Property, plant and equipment (Notes 11 and 27) Right-of-use assets (Notes 12) Goodwill Intangible assets (Notes 13) Deferred tax assets (Notes 4 and 21) Other non-current assets (Notes 14 and 17) Total non-current assets		March 31, 2021 (Reviewed) Amount % $ 594,445 19 851,141 28 9,681 - 833,383 27 61,005 2 2,349,655 76 2,500 - 504,838 16 15,432 1 199,228 6 8,256 - 15,525 1 5,557 - 751,336 24	December 31, 2020 (Audited) Amount % $ 547,597 18 758,754 25 32,842 1 849,523 29 61,430 2 2,250,146 75 4,048 - 513,112 17 17,085 - 199,228 7 7,784 - 17,454 1 3,161 - 761,872 25	December 31, 2020 (Audited) Amount % $ 547,597 18 758,754 25 32,842 1 849,523 29 61,430 2 2,250,146 75 4,048 - 513,112 17 17,085 - 199,228 7 7,784 - 17,454 1 3,161 - 761,872 25		March 31, 2020 (Reviewed)
						Amount % $ 412,361 16 138,510 6 3,852 - 1,056,236 42 100,358 4 1,711,317 68 2,548 - 537,227 21 22,501 1 199,228 8 12,583 1 12,904 1 3,112 - 790,103 32
		$ 3,100,991 100		$ 3,012,018 100

TOTAL

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SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

(Reviewed, Not Audited)

(Reviewed, Not Audited)
OPERATING REVENUE (Notes 19) OPERATING COSTS (Notes 9, 20 and 26) GROSS PROFIT OPERATING EXPENSES (Notes 20 and 26) Selling and marketing expenses General and administrative expenses Research and development expenses Other operating costs �Notes 8 � Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES (Note 20) Interest income Other gains and losses Financial costs Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 21) NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations (Notes 18) Total comprehensive income For The Period EARNINGS PER SHARE (Note 22) Basic Diluted		Three Months Ended March 31,
		2021	� 100 74 26 1 1 9 - 11 15 - - - - 15 2) 13 - 13		2020
	( ( (	Amount $ 923,359 687,576 235,783 5,108 14,183 81,893 - 101,184 134,599 1,354 3,047 915) 3,486 138,085 20,053) ( 118,032 111) $ 117,921 $ 1.53 $ 1.52		( (	Amount $ 599,767 474,519 125,248 5,511 11,158 60,299 105 77,073 48,175 1,575 989 59) 2,505 50,680 7,423) ( 43,257 142 $ 43,399 $ 0.56 $ 0.56	� 100 79 21 1 2 10 - 13 8 - - - - 8 1) 7 - 7

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SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

BALANCE, JANUARY 1, 2020 Net income for the three months ended March 31, 2020 Other comprehensive income(loss)for the three months ended March 31, 2020 Total comprehensive income(loss)for the three months ended March 31, 2020 Issuance of ordinary shares under employee share options BALANCE, MARCH 31, 2020 BALANCE, JANUARY 1, 2021 Net income for the three months ended March 31, 2021 Other comprehensive income(loss)for the three months ended March 31, 2021 Total comprehensive income(loss)for the three months ended March 31, 2021 Issuance of ordinary shares under employee share options BALANCE, MARCH 31, 2021	Ordinary Share Capital Number of Shares (In Thousands) Amount Capital Surplus 78,081 $ 780,809 $ 1,131,702 - - - - - - - - - 25 250 12 78,106 $ 781,059 $ 1,131,714 78,106 $ 781,059 $ 1,131,714 - - - - - - - - - 5 50 114 78,111 $ 781,109 $ 1,131,828	Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 50,310 $ - $ 216,659 - - 43,257 - - - - - 43,257 - - - $ 50,310 $ - $ 259,916 $ 65,911 $ 2,365 $ 325,938 - - 118,032 - - - - - 118,032 - - - $ 65,911 $ 2,365 $ 443,970	Other Equity Exchange Difference on Translating the Financial Statements of Foreign Operations Treasury Shares Total Equity ( $ 2,365 ) ( $ 96,995 ) $ 2,080,120 - - 43,257 142 - 142 142 - 43,399 - - 262 ($ 2,223) ($ 96,995) $ 2,123,781 ( $ 4,250 ) ( $ 96,995 ) $ 2,205,742 - - 118,032 ( 111) - ( 111) ( 111) - 117,921 - - 164 ($ 4,361) ($ 96,995) $ 2,323,827
	Number of Shares (In Thousands) 78,081 - - - 25 78,106 78,106 - - - 5 78,111

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SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax Adjustments for: Depreciation expense Amortization expense Impairment loss recognized Finance costs Interest income Write downs of inventories Net loss (gain) on foreign currency exchange Changes in operating assets and liabilities Accounts receivable Inventories Prepayments and other current assets Contract liabilities Accounts payable Accounts payables to related parties Accrued expenses and other current liabilities Refund liability Cash generated from operations Income tax paid Net cash generated from(used in)operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortized cost Proceeds from financial assets at amortized cost Payments of property, plant and equipment Increase in refundable deposits Payments for intangible assets Payments for right-of-use assets Interest received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of the principal portion of lease liabilities Exercise of employee share options Interest paid Net cash used in investing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE(DECREASE) IN CASH CASH AT THE BEGINNING OF PERIOD CASH AT THE END OF PERIOD		Three Months Ended March 31	Three Months Ended March 31
	( ( ( ( ( ( ( ( ( ( ( ( ( ( (	2021 $ 138,085 25,287 1,752 - 915 1,354 ) ( 9,644 ) ( 5,804 ) 23,510 25,784 ( 425 1,095 6,638 ( 38,044 ) 19,229 ) ( 4 149,420 ( 1,076) ( 148,344 ( 91,241 ) ( 1,548 13,014 ) ( 2,400 ) ( 2,215 ) ( 502 ) 1,354 106,470) ( 1,908 ) ( 164 915) ( 2,659) ( 7,633 ( 46,848 ( 547,597 $ 594,445	2020 $ 50,680 15,892 1,896 105 59 1,575 ) 1,056 ) 5,052 7,458 198,660 ) 3,399 41,112 25,862 ) 9,318 14,879 ) - 107,061 ) 668) 107,729) 16 ) - 18,436 ) 158 ) 2,337 ) - 1,575 19,372) 1,901 ) 262 59) 1,698) 546) 129,345 ) 541,706 $ 412,361

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SILICON OPTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

Silicon Optronics, Inc. (the “Company”) was incorporated in the Republic of China (“ROC”) on May 24, 2004 and commenced business on May 27, 2004. The Company’s main business activities include the design, development and sales of complementary metal-oxide semiconductors.

The Company’s shares have been listed on the Taiwan Stock Exchange (TWSE) since July 2018.

The consolidated financial statements of the Company and its subsidiary (collectively referred to as the “Group”) are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on May 06, 2021.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND

INTERPRETATIONS

• a. Initial application of the amendments to the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, the initial application of the IFRSs endorsed and issued into effect by the FSC did not have material impact on the Group’s accounting policies

• b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs �Annual Improvements to IFRS Standards 2018-2020” Amendments to IFRS 3 “Reference to the Conceptual Framework” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” Amendment to IFRS 16 “Covid-19-Related Rent Concessions beyond 30 June 2021” IFRS 17 “Insurance Contracts” Amendments to IFRS 17 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendment to IAS 1 “Disclosure of Accounting Policies” Amendment to IAS 8 “Definition of Accounting Estimates”

Effective Date Announced by IASB(Note 1)

January 1, 2022 (Note 2) January 1, 2022 (Note 3) Undecided April 1, 2021 (Note 8) January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 (Note 6) January 1, 2023 (Note 7)

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Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before January 1, 2022 (Note 4) Intended Use”

Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a Contract” January 1, 2022 (Note 5)

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.

• Note 2: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.

• Note 3: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.

• Note 4: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

• Note 5: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

• Note 6: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.

• Note 7: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.

• Note 8: A lessee should apply the amendment for annual reporting periods beginning on or after April 1, 2021, recognizing the cumulative effect of initial application at the beginning of the annual reporting period.

• 1) Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

The amendments clarify that for a liability to be classified as non-current, the Group shall assess whether it has the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. If such rights are in existence at the end of the reporting period, the liability is classified as non-current regardless of whether the Group will exercise that right. The amendments also clarify that, if the right to defer settlement is subject to compliance with specified conditions, the Group must comply with those conditions at the end of the reporting period even if the lender does not test compliance until a later date.

The amendments stipulate that, for the purpose of liability classification, the aforementioned settlement refers to a transfer of cash, other economic resources or the Group’s own equity instruments to the counterparty that results in the extinguishment of the liability. However, if the terms of a liability that could, at the option of the counterparty, result in its settlement by a transfer of the Group’s own equity instruments, and if such option is recognized separately as equity in accordance with IAS 32 “Financial Instruments: Presentation”, the aforementioned terms would not affect the classification of the liability.

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• 2) Amendments to IAS 16 “Property, Plant and Equipment: Proceeds before Intended Use”

The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The cost of those items is measured in accordance with IAS 2 “Inventories”. Any proceeds from selling those items and the cost of those items are recognized in profit or loss in accordance with applicable standards.

The amendments are applicable only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021. The Group will restate its comparative information when it initially applies the aforementioned amendments.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

• The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

b. Basis of preparation

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

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

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

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

• 3) Level 3 inputs are unobservable inputs for an asset or liability. c. Basis of consolidation

• The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (its subsidiaries).Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Refer to Notes 10 and 29 for detailed information on subsidiaries (including

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the percentages of ownership and main businesses).

d. Other significant accounting policies Except for the following, please refer to the consolidated financial statements for the year ended December 31, 2020.

• 1)Retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events

2) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period's pre-tax income the tax rate that would be applicable to expected total annual earnings.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Except for the following, refer to the statements of critical accounting judgments and key sources of estimation uncertainty to the consolidated financial statements for the year ended December 31, 2020.

6. CASH AND CASH EQUIVALENTS

Cash on hand Bank deposits Cash equivalents (investments with original maturities of 3 months or less) Time deposits in banks	March 31, 2021 $ 351 473,276 120,818 $ 594,445	December 31, 2020 $ 263 547,334 - $ 547,597	March 31, 2020 $ 338 54,345 357,678
			$ 412,361

The market interest rate intervals of the time deposits held in banks at the end of the reporting period were as follows:

March 31, 2021 Time deposits 0.30%~0.41% ANCIAL ASSETS AT AMORTIZED COST March 31, 2021 Current Time deposit with original maturities of more than 3 months (a) $ 851,141 Non-current Pledged time deposits (a and c) $ 2,500	December 31, 2020 - December 31, 2020 $ 758,754 $ 4,048	March 31, 2020 0.60%~2.1% March 31, 2020 $ 138,510
		$ 2,548

7. FINANCIAL ASSETS AT AMORTIZED COST

• a. The interest rates rangess of time deposits with original maturities of more than 3 months were 0.08%-2.40% � 0.08%-2.40% and 0.16%-2.80% per annum as of March 31, 2021 � December 31, 2020 and March 31, 2020, respectively.

• b. Refer to Note 25 for information relating to their credit risk management and impairment of financial assets at amortized cost.

• c. Refer to Note 27 for information relating to investments in financial assets at amortized cost pledged as security.

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8. ACCOUNTS RECEIVABLE

Accounts receivable-unrelated parties At amortized cost Gross carrying amount Less: Allowance for impairment loss	March 31, 2021 $ 9,681 - $ 9,681	December 31, 2020 $ 32,842 - ( $ 32,842	March 31, 2020 $ 3,957 105) $ 3,852

The average credit period of sales of goods was 30 days. No interest was charged on trade receivables.

In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group measures the loss allowance for trade receivables at an amount equal to lifetime ECLs. The expected credit losses on trade receivables are estimated using a provision matrix by reference to the past default records of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation, whichever occurs earlier. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

March 31,2021

Not Past Due Past Due Up to 60 Days Past Due 61 ~90 Days Past Due 91 ~120 Days Past Due 121~150 Days Past Due 151~180 Days Past Due Over 181 Days Gross carrying amount $ 702 $ 8,979 $ - $ - $ - $ - $ - Loss allowance (Lifetime ECL) - - - - - - - Amortized cost $ 702 $ 8,979 $ - $ - $ - $ - $ - December 31,2020 Not Past Due Past Due Up to 60 Days Past Due 61 ~90 Days Past Due 91 ~120 Days Past Due 121~150 Days Past Due 151~180 Days Past Due Over 181 Days Gross carrying amount $ 16,224 $ 16,618 $ - $ - $ - $ - $ - Loss allowance (Lifetime ECL) - - - - - - - Amortized cost $ 16,224 $ 16,618 $ - $ - $ - $ - $ - March 31,2020 Not Past Due Past Due Up to 60 Days Past Due 61 ~90 Days Past Due 91 ~120 Days Past Due 121~150 Days Past Due 151~180 Days Past Due Over 181 Days Gross carrying amount $ 2,905 $ - $ 1,052 $ - $ - $ - $ - Loss allowance - - ( 105) - - - - (	Total $ 9,681 - $ 9,681 Total $ 32,842 - $ 32,842 Total $ 3,957 105)	Total $ 9,681 -
		$ 9,681
Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost March 31,2020
Gross carrying amount Loss allowance

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(Lifetime ECL) Amortized cost $ 2,905 $ - $ 947 $ - $ - $ - $ - $ 3,852

The movements in the loss allowance of trade receivables were as follows:

Balance at January 1 Add: Net remeasurement of loss allowance Balance at March 31 ENTORIES Finished goods Work in progress Raw materials Balance at March 31	Three Months Ended March 31 2021 2020 $ - $ - - 105 $ - $ 105 March 31, 2021 December 31, 2020 March 31, 2020 $ 399,997 $ 170,650 $ 347,475 431,147 675,500 708,196 2,239 3,373 565 $ 833,383 $ 849,523 $ 1,056,236		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
			2021 $	- - - December 31, 2020 $ 170,650 675,500 3,373 $ 849,523	2020 $ - 105 $ 105 March 31, 2020 $ 347,475 708,196 565 $ 1,056,236
			$

9. INVENTORIES

The cost of goods sold of March 31, 2021 and 2019, which included inventory write-downs of $9,644 thousand and $1,056 thousand, respectively. � due to the sale of stagnant inventories write-down of inventories to net realizable value.

10. SUBSIDIARIES

Investor Silicon Optronics, Inc. Silicon Optronics (Cayman) Co., Ltd.	Investee	Main Business Research and development and design of high order CMOS Image Sensor products Investment business Design, development and testing of integrated circuits and related electronic products, technical service consultation and transfer of R&D results	Percentage%of Ownership	Percentage%of Ownership	Percentage%of Ownership
			March 31, 2021 100% 100% 100%	December 31, 2020 100% 100% 100%	March 31, 2020
	NUEVA IMAGING, INC. (“NUEVA”) Silicon Optronics (Cayman) Co., Ltd. (“Silicon Cayman”) Silicon Optronics (Shanghai) Co., Ltd.				100% 100% 100%

Except for US NUEVA which fulfills the definition of a major subsidiary per Article 2 of the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants, the remaining entities are non-major subsidiaries Silicon Optronics (Shanghai) Co., Ltd. is an immaterial subsidiary; its financial statements have not been reviewed.

11. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2020 Additions Disposal Effect of exchange rate changes Balance at March 31, 2020 Accumulated depreciation Balance at January 1, 2020 Depreciation expense Disposal Effect of exchange rate changes Balance at March 31, 2020 Accumulated impairment	Testing Equipment $ 1,464 - - ( 4) $ 1,460 $ 980 68 - ( 2) $ 1,046	R&D Equipment $ - - - - $ - $ - - - - $ -	Molding Equipment $ 13,586 751 ( 749 ) - $ 13,588 $ 6,173 957 ( 749 ) - $ 6,381		Computer $ 1,137 - - 11) $ 1,126 $ 639 55 - 7) $ 687	Office Equipment $ 1,672 - - 12 $ 1,684 $ 1,607 16 - 11 $ 1,634	P	hotomasks $ 96,810 19,935 3,965 ) - $ 112,780 $ 46,642 12,775 3,965 ) - $ 55,452	Prepayment for Business Facilities $ 472,972 - - - $ 472,972 $ - - - - $ -		Total
	( (		( (	( (			( (			( ( (	$ 587,641 20,686 4,714 ) 3) $ 603,610 $ 56,041 13,871 4,714 ) 2 $ 65,200

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Balance at January 1, 2020 and March 31, 2020 Balance at January 1,2020 Balance at March 31,2020 Cost Balance at January 1, 2021 Additions Disposal ( Effect of exchange rate changes ( Balance at March 31, 2021 Accumulated depreciation Balance at January 1, 2021 Depreciation expense Disposal ( Effect of exchange rate changes ( Balance at March 31, 2021 Accumulated impairment Balance at January 1, 2021 and March 31, 2021 Balance at January 1,2021 Balance at March 31,2021	$ - $ 484 $ 414 $ 1,584 74 306 ) 2) $ 1,350 $ 1,260 70 306 ) 2) $ 1,022 $ - $ 324 $ 328	$ - $ - $ - $ 473,084 - - ( - $ 473,084 $ 21,026 7,885 - ( - $ 28,911 $ - $ 452,058 $ 444,173	$ 1,183 $ 6,230 $ 6,024 $ 12,665 746 410 ) - ( $ 13,001 $ 4,643 894 410 ) - ( $ 5,127 $ 1,183 $ 6,839 $ 6,691	$ - $ 498 $ 439 $ 1,153 - - ( 8) $ 1,145 $ 846 42 - ( 6) $ 882 $ - $ 307 $ 263	$ - $ 65 $ 50 $ 1,665 - 29 ) ( 2 $ 1,638 $ 1,556 9 29 ) ( 2 $ 1,538 $ - $ 109 $ 100	$ - $ 50,168 $ 57,328 $ 108,800 14,069 12,583 ) - $ 110,286 $ 55,325 14,261 12,583 ) - $ 57,003 $ - $ 53,475 $ 53,283	$ - $ 472,972 $ 472,972 $ - - - ( - ( $ - $ - - - ( - ( $ - $ - $ - $ -	$ 1,183 $ 530,417 $ 537,227 $ 598,951 14,889 13,328 ) 8) $ 600,504 $ 84,656 23,161 13,328 ) 6) $ 94,483 $ 1,183 $ 513,112 $ 504,838

The Group’s property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Testing equipment	2-5 years
R&D equipment	15 years
Molding equipment	3 years
Computers	3 years
Office equipment	5 years
Photomasks	2 years

12. LEASE ARRANGEMENTS

a. Right-of-use assets

Carrying amount Buildings Additions to right-of-use assets Depreciation charge for right-of-use assets Buildings		March 31, 2021 December 31, 2020 March 31, 2020 $ 15,432 $ 17,085 $ 22,501 Three Months Ended March 31 2021 2020 $ 502 $ - $ 2,126 $ 2,021	March 31, 2021 December 31, 2020 March 31, 2020 $ 15,432 $ 17,085 $ 22,501 Three Months Ended March 31 2021 2020 $ 502 $ - $ 2,126 $ 2,021	March 31, 2021 December 31, 2020 March 31, 2020 $ 15,432 $ 17,085 $ 22,501 Three Months Ended March 31 2021 2020 $ 502 $ - $ 2,126 $ 2,021		March 31, 2020
		$
				2021 $ 502 $ 2,126		2020 $ - $ 2,021

Except for the aforementioned addition and recognized depreciation, the Group did not have significant sublease or impairment of right-of-use assets during the years ended March 31, 2021 and 2020.

b. Lease liabilities

Carrying amount Current Non-current		March 31, 2021 $ 7,672 $ 7,529		December 31, 2020 $ 7,667 $ 9,473	March 31, 2020
					$ 7,632 $ 15,095

The discount rate for lease liabilities was as follows:

Buildings	March 31, 2021 1%	December 31, 2020 1%	March 31, 2020
			1%

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c. Material lease activities and terms (the Group is lessee)

The Group did not have significant new lease contracts in March 31, 2021 and 2020. The Group leases buildings for the use of offices with lease terms of 3-4 years. The Group does not have bargain purchase options to acquire the buildings at the expiry of the lease periods. In addition, the Group is prohibited from subleasing or transferring all or any portion of the underlying assets without the lessor’s consent.

d. Other lease information

Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for leases		Three Months Ended March 31	Three Months Ended March 31
	(	2021 $ 126 $ 19 $ 2,093) (	2020 $ 126 $ 15 $ 2,101)

13. INTANGIBLE ASSETS

ANGIBLE ASSETS
Cost Balance at January 1, 2020 Additions Effect of exchange rate changes Balance at March 31, 2020 Accumulated amortization Balance at January 1, 2020 Amortization expense Effect of exchange rate changes Balance at March 31, 2020 Balance at January 1, 2020 Balance at March 31, 2020 Cost Balance at January 1, 2021 Additions Effect of exchange rate changes Balance at March 31, 2021 Accumulated amortization Balance at January 1, 2021 Amortization expense Effect of exchange rate changes Balance at March 31, 2021 Balance at January 1, 2021 Balance at March 31, 2021		Patents $ 14,915 - 122 $ 15,037 $ 6,215 749 53 $ 7,017 $ 8,700 $ 8,020 $ 14,169 - 27 $ 14,196 $ 8,738 705 21 $ 9,464 $ 5,431 $ 4,732		Software $ 23,306 2,337 162 $ 25,805 $ 19,954 1,147 141 $ 21,242 $ 3,352 $ 4,563 $ 25,877 2,215 39 $ 28,131 $ 23,524 1,047 36 $ 24,607 $ 2,353 $ 3,524		Total
						$ 38,221 2,337 284 $ 40,842 $ 26,169 1,896 194 $ 28,259 $ 12,052 $ 12,583 $ 40,046 2,215 66 $ 42,327 $ 32,262 1,752 57 $ 34,071 $ 7,784 $ 8,256

Except for the recognition of amortization expense, there were no significant additions, disposals and impairment of the Group’s other intangible assets for the years ended March 31, 2020 and 2021.

The above items of intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:

s:
Patents		3-7 years
Software		1-3 years
S
	March 31,	December 31,	March 31,
	2021	2020	2020

14. OTHER ASSETS

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Current Prepaid income tax Tax receivables of business tax Prepayments for purchases Tax receivables of business income tax Others Non-current Refundable deposits Net defined benefit assets 15. LONG-TERM LOAN Secured loan (Note 27) Bank loan		$ 38,893 18,880 2,374 - 858 $ 61,005 $ 4,183 1,374 $ 5,557 March 31, 2021 $ 350,000		$ 41,175 18,054 1,187 - 1,014 $ 61,430 $ 1,787 1,374 $ 3,161 December 31, 2020 $ 350,000		$ 58,612 19,850 348 9,972 11,576 $ 100,358 $ 1,792 1,320 $ 3,112 March 31, 2020
						$ -

In the year ended December 31, 2020, the Group acquired new bank loan facilities in the amount of $350,000 thousand, with a floating interest rate of 0.986% per annum. Interest is paid monthly, and the principal is to be repaid in seven equal semiannual installments staring from April 2022. The loan is to be repaid before April 1, 2025.

16. OTHER LIABILITIES

Current Other payables Payables for employees’ compensation Payables for bonuses Payables for purchases of equipment Payables for processing Payables for remuneration of directors Others Other liabilities Receipts under custody Refund liabilities (a)		March 31, 2021 $ 40,660 21,598 7,196 888 1,410 11,882 83,634 151 4 $ 83,789		December 31, 2020 $ 28,570 35,536 5,207 13,787 3,750 13,852 100,702 134 - $ 100,836		March 31, 2020
						$ 18,203 6,337 9,562 - 625 9,210 43,937 135 - $ 44,072

a. Sales revenue is measured at the fair value of the consideration received or receivable, and deducted from estimated customer returns, discounts and other similar discounts. Based on historical experience and considering different contract conditions, the combined company estimates the possible sales discounts and recognizes the refund liabilities accordingly.

17. RETIREMENT BENEFIT PLANS

For the three months ended March 31,2021 and 2020, the pension expenses of defined

benefit plans were $12 thousand and $5 thousand, respectively, and these were calculated based on the pension cost rate determined by the actuarial calculation on December 31, 2020 and 2019, respectively.

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18. EQUITY

a. Common stock

TY Common stock
Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		March 31, 2021 100,000 $ 1,000,000 78,111 $ 781,109		December 31, 2020 100,000 $ 1,000,000 78,106 $ 781,059		March 31, 2020
						100,000 $ 1,000,000 78,106 $ 781,059

A total of 6,000 thousand shares from the authorized share capital was reserved for the

issuance of employee share options. The increase in the Company’s share capital is mainly due to the employees’ exercise of their employee share options.

• b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) Arising from issuance of ordinary shares May be used to offset a deficit only Arising from employee share options exercised price May not be used for any purpose Arising from employee share options		March 31, 2021 $ 1,114,541 12,270 5,017 $ 1,131,828		December 31, 2020 $ 1,114,427 12,269 5,018 $ 1,131,714		March 31, 2020
						$ 1,114,427 12,269 5,018 $ 1,131,714

• 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

Reconciliations of the balance for each class of capital surplus were as follows:

Balance at January 1, 2020 Issuance of ordinary shares under employee share options Balance at March 31, 2020 Balance at January 1, 2021 Issuance of ordinary shares under employee share options Balance at March 31, 2021	Premium on Issue of Shares $ 1,114,415 12 $ 1,114,427 $ 1,114,427 114 $ 1,114,541		Arising from Employee Share Options $ 17,287 - $ 17,287 $ 17,287 - $ 17,287		Total
					$ 1,131,702 12 $ 1,131,714 $ 1,131,714 114 $ 1,131,828

• c. Retained earnings and dividend policy

Under the Company’s articles of incorporation (the “Articles”), where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting accumulated losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and

14

remuneration of directors after the amendment, refer to “Employees’ compensation and remuneration of directors” in Note 20 (g).

Considering that the Company is in a period of operational growth, taking into account the interests of the company's shareholders and long-term capital and business planning, no more than 90% of the accumulated distributable earnings should be distributed as dividends, out of which no less than 10% of the total dividends distributed should be in the form of cash dividends. If the Company has no distributable earnings for the year, or if there are earnings but the amount of earnings is much lower than that distributed in the previous year, or considering the Company’s financial, business and operational factors, the Company may distribute all or part of the earnings in accordance with the law or regulations of the competent authorities.

The appropriations of earnings for 2019 and 2018. which had been approved in the shareholders’ meetings on June 16, 2020 and June 18, 2019, respectively, were as follows:

Legal reserve Special reserve Cash dividends Dividends per share (NT$)		**Appropriation of Earnings **	**Appropriation of Earnings **	**Appropriation of Earnings **
		For the Year Ended December 31
		2019 $ 28,146 $ 1,885 $ 215,897 $ 2.8		2018
				$ 15,601 $ 2,365 $ 154,212 $ 2.0

The appropriations of earnings for 2020 are subject to the resolution of the shareholders’ in their’ meeting to be held on June 16, 2021.

d. Other equity items

Three Months Ended March 31 2021 2020 Balance, beginning of year ( $ 4,250 ) ( $ 2,365 ) Exchange differences on translation of the financial statements of foreign operations ( 111) 142 Balance, end of year ($ 4,361) ($ 2,223) e. Treasury shares March 31, 2021 December 31, 2020 March 31, 2020 Treasury shares (In thousand of shares) 1,000 1,000 1,000		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
							2020
		$				( (	$ 2,365 ) 142 $ 2,223) March 31, 2020
		$
				1,000			1,000

The Company resolved in its board of directors’ meeting held on August 12, 2019 to buy back 1,000 thousand of its ordinary shares listed on the Taiwan Stock Exchange within the period starting August 13, 2019 to October 12, 2019 for transfer to its employees, at a purchase price ranging from NT$53 to NT$115 per share.

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as the rights to dividends and to vote.

19. REVENUE

VENUE	VENUE
Revenue from contracts with custom Revenue from the sale of goods Others a. Contract balances Accounts receivable (Note 8) Contract liabilities - current		ers March 31, 2021			Three Months Ended March 31
					2021		March 31, 2020			2020
				$ 923,232 127 $ 923,359 December 31, 2020 $ 32,842					$	579,766 20,001 599,767 January 1, 2020
									$
		$ 9,681					$ 3,852			$ 11,260

15

$

17,065 $

15,940 $ 51,275 $ 10,090

Sale of goods

Revenue recognized in the current reporting period from the contract liabilities at the beginning of the year is as follows:

From the contract liabilities at the beginning of the year Sale of goods		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 5,754		2020
				$ 5,457

b. Disaggregation of revenue

Primary geographical markets Hong Kong Taiwan (the Group’s operating location) Korean Others Major goods CMOS Others		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 817,398 44,227 31,305 30,429 $ 923,359 $ 918,759 4,600 $ 923,359		2020
				$ 540,107 17,692 7,423 34,545 $ 599,767 $ 577,037 22,730 $ 599,767

20. NET PROFIT FROM CONTINUING OPERATIONS

a. Interest income

Financial assets at amortized cost Bank deposit Others		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 1,162 190 2 $ 1,354		2020
				$ 1,432 141 2 $ 1,575

b. Other gains and losses

Net foreign exchange gain Other losses nance costs Interest on bank loans Interest on lease liabilities		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 2020 $ 3,078 $ 993 31) ( 4) $ 3,047 $ 989 Three Months Ended March 31		2020
	(
		2021 $ 875 40 $ 915		2020
				$ - 59 $ 59

c. Finance costs

d. Depreciation and amortization

Property, plant and equipment Right-of-use assets Intangible assets Total An analysis of depreciation by function Operating costs Operating expenses		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 23,161 2,126 1,752 $ 27,039 $ 4,699 20,588 $ 25,287		2020
				$ 13,871 2,021 1,896 $ 17,788 $ 5,069 10,823 $ 15,892

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Property, plant and equipment An analysis of amortization by function Research and development expenses		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 23,161 $ 1,752		2020
				$ 13,871 $ 1,896

e. Employee benefits expense

Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating expenses		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 791 12 803 64,869 $ 65,672 $ 65,672		2020
				$ 791 5 796 49,853 $ 50,649 $ 50,649

f. Employees’ compensation and remuneration of directors

According to the Company’s Articles, the Company accrued employees’ compensation at a rate of no less than 0.005% and no higher than 25%, and remuneration of directors and supervisors at rate of no higher than 3%. The employees’ compensation and remuneration of directors for the three months ended March 31, 2020 and 2019, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount Employees’ compensation Remuneration of directors and supervisors		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 2020 8% 8% 1% 2% Three Months Ended March 31	2020
		2021 $ 12,090 $ 1,410		2020
				$ 4,415 $ 625

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate. The appropriations of employees’ compensation and remuneration of directors and supervisors for 2020 and 2019 that were resolved by the board of directors on March 10, 2021 and March 17, 2020, respectively, are as shown below:

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2020 $ 28,570 3,750	2019
		$ 16,030 2,500

There is no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2019 and 2018.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

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21. INCOME TAXES

a. Income tax recognized in profit or loss

The major components of tax expense (income) were as follows:

Current tax In respect of the current year Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 17,320 396 2,337 $ 20,053		2020
			(	$ 7,712 - 289) $ 7,423

b. Income tax assessments

The Company’s tax returns through 2018 have been assessed by the tax authorities.

22. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share		Unit: NT$ Per Share Three Months Ended March 31	Unit: NT$ Per Share Three Months Ended March 31	Unit: NT$ Per Share Three Months Ended March 31
		2021 $ 1.53 $ 1.52		2020
				$ 0.56 $ 0.56

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Bonuses issued to employees Earnings used in the computation of diluted earnings per share		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 118,032 - - $ 118,032		2020
				$ 43,257 - - $ 43,257

Number of shares

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Bonuses issued to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share		Unit: In Thousands of Shares Three Months Ended March 31	Unit: In Thousands of Shares Three Months Ended March 31	Unit: In Thousands of Shares Three Months Ended March 31
		2021 77,106 3 298 77,407		2020
				77,102 3 226 77,331

Since the Group can offer to settle the bonuses to employees in cash or shares, the Company assumes the entire amount of the bonus would be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

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23. SHARE-BASED PAYMENT ARRANGEMENTS

• a. Employee share option plan

Qualified employees of the Company were granted 2,000 options on July 29, 2013 and 3,200 options on May 16, 2012, each option entitles the holder to subscribe for one thousand ordinary shares of the Company, and the total number of new ordinary shares required to be issued for the exercise of the employee share option is 2,000 shares and 3,200 shares, respectively. The options granted are valid for 10 years and exercisable at certain percentages after the second year from the grant date.

Information on employee share options is as follows:

For the Three Months Ended March 31,2021 Balance at January 1 Options exercised Option expired Balance at March 31 For the Three Months Ended March 31,2020 Balance at January 1 Options exercised Option expired Balance at March 31		2013 Employee S	hare Option Plan Weighted- average Exercise Price (NT$) $ 33.00 32.21 32.21 $ 33.00 - 33.00		2012 Employee S	hare Option Plan
		Number of Options (In Thousands) 100 5) 95 95 100 - 100 100			Number of Options (In Thousands) 605 - 605 605 630 25) 605 605	Weighted- average Exercise Price (NT$)
	(					$ 17.17 - 17.17
				(		$ 17.31 10.50 17.60

Information on outstanding options as follows:

	March 31,2021			December 31,2020			March 31,2020
Share Option Plan	Range of Exercise Price(NT$)	Weighted- average Remaining Contractual Life (In Years)	Share Option Plan	Range of Exercise Price(NT$)	Weighted- average Remaining Contractual Life (In Years)	Share Option Plan	Range of Exercise Price(NT$)	Weighted- average Remaining Contractual Life (In Years)
2013 Employee share option plan 2012 Employee share option plan	$ 32.21 10.25~19.03	2.37 1.57	2013 Employee share option plan 2012 Employee share option plan	$ 32.21~33.00 10.25~19.03	2.62 1.82	2013 Employee share option plan 2012 Employee share option plan	$ 33.00~46.00 10.50~19.50	3.37 2.57

The resolution for the granting of the 2013 employee share options was passed in the board of directors’ meeting on June 10, 2014, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$)	$13.55
Exercise price (NT$)	$46.00
Expected volatility	33.73%-37.88%
Expected life	2.5-4.5 years
Expected dividend yield	-
Risk-free interest rate	0.68%-1.12%
Fair value of stock options	0.05-0.55

The resolution for the granting of the 2013 employee share options was passed in the board of directors’ meeting on August 13, 2013, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$) $11.18 Exercise price (NT$) $33.0 Expected volatility 37.6%-41.65% Expected life 2.5-4.5 years Expected dividend yield Risk-free interest rate 0.82%-1.07% Fair value of stock options 0.18-0.93

The resolution for the granting of the 2012 employee share options was passed in the board of directors’ meeting on November 13, 2012, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$)	$12.29
Exercise price (NT$)	$19.5
Expected volatility	44.34%-54.56%
Expected life	2.5-4.5 years
Expected dividend yield	-

19

Risk-free interest rate 0.75%-0.85% Fair value of stock options 1.67-3.94

The resolution for the granting of the 2012 employee share options was passed in the board of directors’ meeting on May 25, 2012, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$) $10.10 Exercise price (NT$) $10.50 Expected volatility 46.76%-47.19% Expected life 6-7 years Expected dividend yield Risk-free interest rate 1.09%-1.15% Fair value of stock options 4.45-4.81

24. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

Key management personnel of the Group review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the number of new shares issued, and/or the amount of new debt issued or existing debt redeemed.

The Group is not subject to any externally imposed capital requirements.

25. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities not carried at fair value approximate their fair values.

• b. Categories of financial instruments

Financial assets Financial assets at amortized cost (Note 1) Financial liabilities Amortized cost (Note 2)	March 31, 2021 $ 1,461,950 604,273	December 31, 2020 $ 1,345,028 643,482	March 31, 2020
			$ 559,063 257,464

Note 1: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, refundable deposits and pledged time deposits.

• Note 2: The balances include financial liabilities measured at amortized cost, which comprise accounts payable (including related parties), other payables (including related parties), and long-term debt.

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c. Financial risk management objectives and policies

The Group’s major financial instruments included accounts receivable, accounts payable and long-term borrowings. The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports that analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

There had been no change in the Group’s exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Group has foreign currency sales and purchases, which exposes the Group to foreign currency risk. Approximately 95% of the Group’s sales is denominated in currencies other than the functional currency of the entity making the sale, whilst almost 96% of costs is denominated in the entity’s functional currency. Exchange rate exposures are managed within approved policy parameters.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities are set out in Note 28.

Sensitivity analysis

The Group is mainly exposed to the exchange rate fluctuations in the USD.

The sensitivity analysis regarding foreign currency risk is mainly calculated for USD denominated monetary items on the balance sheet date.

When the NTD appreciates/depreciates by 1% against the USD, the Group’s net profit before tax for the three months ended March 31, 2021 and 2020 would decrease/increase by $1,400 thousand and $(1,573) thousand, respectively. b) Interest rate risk

The Group is exposed to interest rate risk arising from financial assets and financial liabilities at both fixed and floating interest rates.

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting periods were as follows.

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	March 31, 2021 $ 974,459 473,266 350,000	December 31, 2020 $ 762,802 547,324 350,000	March 31, 2020
			$ 498,736 54,335 -

The sensitivity analysis regarding interest rate risk is calculated based on the changes in the cash flow of floating-rate liabilities on the balance sheet date. If interest rates had

21

been 0.5% higher/lower, pre-tax profit for the three months ended March 31, 2021 and 2020 would have increased/decreased by $154 thousand and $68 thousand, respectively. 2) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations and resulting in a financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation mainly arise from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

The Group transacts with a large number of unrelated customers, thus, no concentration of credit risk was observed.

• 3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank facilities andensures compliance with loan covenants.

Bank borrowings are significant sources of liquidity for the Group. For the Group’s unutilized financing facilities, please refer to (2) Financing facilities below.

a) Liquidity and interest rate risk tables for non-derivative financial liabilities

The following tables detail the Group’s remaining contractual maturities for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.

Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

March 31, 2021

Non-derivative financial liabilities Leas liabilities Accounts payable Accounts payable - related parties Payables for processing Payables for purchases of equipment Long-term borrowings December 31, 2020 Non-derivative financial liabilities Leas liabilities Accounts payable Accounts payable - related parties Payables for processing	On Demand or Less than 1 Month $ 649 104,157 95,295 - 3,403 288 $ 203,792 On Demand or Less than 1 Month $ 650 95,205 132,384 -		1-3 Months $ 1,297 24,060 22,677 888 3,793 575 $ 53,290 1-3 Months $ 1,300 25,116 21,783 13,787		3 Months to 1 Year $ 5,839 - - - - 2,588 $ 8,427 3 Months to 1 Year $ 5,849 - - -		1 Year to 5 Years
							$ 7,136 - - - - 355,464 $ 362,600 1 Year to 5 Years
							$ 9,098 - - -

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ayables for purchases of equipment ong-term borrowings	2,771 288 $ 231,298	2,436 576 $ 64,998	- 2,591 $ 8,440	- 356,333
				$ 365,431

March 31, 2020

Non-derivative financial liabilities eas liabilities Accounts payable Accounts payable - related parties ayables for purchases of equipment	On Demand or Less than 1 Month $ 652 73,697 138,312 6,690 $ 219,351		1-3 Months $ 1,304 28,018 7,875 2,872 $ 40,069		3 Months to 1 Year $ 5,866 - - - $ 5,866		1 Year to 5 Years
							$ 14,991 - - - $ 14,991

b) Financing facilities

Unsecured bank overdraft facilities, reviewed annually and payable on demand: Amount used Amount unused Secured bank overdraft facilities: Amount used Amount unused		March 31, 2021 $ - 200,000 $ 200,000 $ 350,000 250,000 $ 600,000		December 31, 2020 $ - 200,000 $ 200,000 $ 350,000 250,000 $ 600,000		March 31, 2020
						$ - 300,000 $ 300,000 $ - 600,000 $ 600,000

26. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Besides information disclosed elsewhere in the other notes, details of transactions between the Group and other related parties are disclosed below.

a. Related party name and category

elated parties are disclosed below. Related party name and category
Related Party Name			Related Party Category
Powerchip Semiconductor Manufacturing Corp. Purchases Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp.			Substantive related parties Three Months Ended March 31
		2021 $ 364,865			2020
					$ 419,855

b. Purchases

The purchase prices and payment terms were based on negotiations and thus not comparable with those in the market.

• c. Research and development expenses

esearch and development expenses
			Three Months Ended March 31
Related Party Category		2021			2020
Substantive related parties
Powerchip Semiconductor Manufacturing
Corp.	$		-	$	2,359

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d. Accounts payable to related parties

Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp.		March 31, 2021 $ 117,972		December 31, 2020 $ 154,167		March 31, 2020
						$ 146,187

e. Other transactions with related parties

The Group signed a joint development contract with Powerchip Semiconductor Manufacturing Co., Ltd. According to the contract, the Group will provide some machinery and equipment for the purpose of research and development.

• f. Remuneration of key management personnel

Short-term employee benefits		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2021 $ 9,203		2020
				$ 7,454

The remuneration of directors and other key management personnel is determined by the remuneration committee based on with individual performance and market trends.

27. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets of the Company were provided as collateral for long-term bank borrowings and as guarantee for the tariff on imported raw materials:

Property, plant and equipment - R&D equipment Pledged time deposits (classified as financial assets a amortized cost-noncurrent)		March 31, 2021 $ 444,173 2,500 $ 446,673		December 31, 2020 $ 452,058 4,048 $ 456,106		March 31, 2020
						$ - 2,548 $ 2,548

28. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group’s significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than the functional currencies and the related exchange rates between the foreign currencies and the respective functional currencies were as follows:

March 31, 2021

Financial assets Monetary items USD CNY Financial liabilities Monetary items USD Decmeber 31, 2020 Financial assets Monetary items USD CNY Financial liabilities Monetary items USD	Foreign Currency $ 13,608 2,249 8,663 Foreign Currency $ 11,060 2,237 10,019	Exchange Rate 28.535(USD:NTD) 4.344(RMB:NTD) 28.535(USD:NTD) Exchange Rate 28.48(USD:NTD) 4.377(RMB:NTD) 28.48(USD:NTD)		Carrying Amount
				$ 387,167 9,771 $ 396,938 $ 247,206 Carrying Amount
				$ 314,965 9,792 $ 324,757 $ 285,331

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March 31, 2020

March 31, 2020
Financial assets Monetary items USD CNY Financial liabilities Monetary items USD	Foreign Currency $ 4,413 2,198 9,617	Exchange Rate 30.225(USD:NTD) 4.255(RMB:NTD) 30.225 (USD:NTD)		Carrying Amount
				$ 133,379 9,351 $ 142,730 $ 290,671

The Group is mainly exposed to the USD and CNY. The following information was aggregated by the functional currencies of the entities in the Group, and the exchange rates between the presentation currency and the respective functional currencies were disclosed. The significant unrealized foreign exchange gains (losses) were as follows:

Foreign Currency NTD CNY USD		Three Months Ended March 31	Three Months Ended March 31
	2021	Net Foreign Exchange Gains (Losses) $ 2,473 ( 61 ) 666 $ 3,078	2020
	Exchange Rate 1 (NTD:NTD) 4.344 (CNY:NTD) 28.535 (USD:NTD)		Exchange Rate	Net Foreign Exchange Gains (Losses) $ 602 391 - $ 993
		(	1 (NTD:NTD) 4.255 (CNY:NTD) 30.225 (USD:NTD)		$ 602 391 - $ 993

29. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others: None;

• 2) Endorsements/guarantees provided: None;

• 3) Marketable securities held (excluding investments in subsidiaries): None;

• 4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None;

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None;

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital:None;

• 7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: See Table 1;

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None;

• 9) Information about the derivative instruments transaction: None;

• 10) Intercompany relationships and significant intercompany transactions: See Table 2;

• b. Names, locations, and related information of investees over which the Company exercises

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significant influence (excluding information on investment in Mainland China): Please see Table 3;

• c. Information on investments in mainland China: See Table 4.

• d. Information on major shareholders: the name, amount and proportion of shareholders with a shareholding ratio of 5% or more: See Table 5

30. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided.

The segment revenues and operating results for the three months ended March 31, 2021 and 2020 are shown in the consolidated income statements for the three months ended March 31, 2021 and 2020. The segment assets as of March 31, 2021, December 31, 2020 and March 31, 2020 are shown in the consolidated balance sheets as of March 31, 2021, December 31, 2020 and March 31, 2020.

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TABLE 1

SILICON OPTRONICS, INC. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE THREE MONTHS ENDED March 31, 2021

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts (Payable) Receivable	Notes/Accounts (Payable) Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Silicon Optronics, Inc.	Powerchip Semiconductor Manufacturing Corp.	Substantive related parties	Purchase	$ 364,865	55	Note	-	-	$ (117,972)	48	-

Note: Mainly paid on the 30th days after the month of the invoice date.

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TABLE 2

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE THREE MONTHS ENDED March 31, 2021

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Counterparty	Nature of Relationship (Note 3)	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
			Financial Statement Item	2021		Terms
				Amount	Percentage of Consolidated Total Gross Sales or Total Assets
Silicon Optronics, Inc.	NUEVA IMAGING INC. NUEVA IMAGING INC. Silicon Optronics (Shanghai) Co., Ltd. Silicon Optronics (Shanghai) Co., Ltd.	1 1 1 1	Technical service expense Other payable from related parties Technical service expense Other payable from related parties	$ 8,688 2,474 20,612 1,974	1% - 2% -	- - - -

Note 1: Represents the transactions from parent company to subsidiary.

Note 2: The intercompany transactions, prices and terms are determined in accordance with mutual agreements.

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TABLE 3

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION ON INVESTEES March 31, 2021

(In Thousands of New Taiwan Dollars)

Investor Company	Investee Accounted for using the Equity Method	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of March 31, 2021	Balance as of March 31, 2021	Balance as of March 31, 2021	Net Income of Investee Accounted for using the Equity Method	Investment Income	Note
				March 31, 2021	December 31, 2020	Number of Shares (In Thousands)	Percentage of Ownership (%)	Carrying Amount
Silicon Optronics, Inc.	NUEVA IMAGING INC. Silicon Optronics (Cayman) Co., Ltd.	USA Cayman Islands	Product development & design of high-end CMOS Image Sensor Investment holding company	$ 358,500 5,237	$ 358,500 5,237	6,000 170	100 100	$ 244,408 26,253	$ 947 1,594	$ 947 1,594	Subsidiary Subsidiary

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TABLE 4

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE THREE MONTHS ENDED March 31, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital (US$ in Thousands)	Paid-in Capital (US$ in Thousands)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2021 (US$ in Thousands)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of March 31, 2021 (US$ in Thousands)	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Amount as of March 31, 2021	Accumulated Repatriation of Investment Income as of March 31, 2021	Note
							Outward	Inward
Silicon Optronics (Shanghai) Co., Ltd.	Design, test and research and development of IC and related electronic products with consultation on technology services and technology transfer		US$ 175 thousand		Note 1	$ 4,994 (US$ 175 thousand )	$ -	$ -	$ 4,994 (US$ 175 thousand )	$ 1,594	100	$ 1,594	$ 26,253	$ -
Accumulated Outward Remittance Investment in Mainland China as March 31, 2021 (US$ in Thousands)	for of	Investment Amount Authorized by Investment Commission, MOEA (US$ in Thousands)		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA (US$ in Thousands)
$ 4,994 (US$ 175 thousand )		Note 1		$ 1,394,296

Note 1: Through Silicon Optronics (Cayman) Co., Ltd.’s investment in Silicon Optronics (Shanghai) Co., Ltd., the investment was approved by the Investment Commission, MOEA with the approved amount of US$ 175 thousand.

Note 2: Amount was recognized on the basis of the audited financial statements.

Note 3: Based on the exchange rate as of March 31, 2021.

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TABLE 5

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS FOR THE THREE MONTHS ENDED MARCH 31, 2021

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
Samoa Shangzhao Lake Co., Ltd. Samoa Full Guest Investment Limited Xiao Dong Luo	18,676,413 4,875,458 4,583,587	23.91 6.24 5.86

• Note 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preferred shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Company as of the last business day for the current quarter. The share capital in the consolidated financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.

• Note 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, please refer to Market Obsrvation Post System.

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