Twinhead — Audit Report / Information 2023

Dec 11, 2023

1

Stock Code:2364

TWINHEAD INTERNATIONAL CORP.

Parent Company Only Financial Statements

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

Address: 9F., No.550, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.) Telephone: (02)5589-9999

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

2

Table of contents

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

Page

1 2 3 4 5 6 7 8 8 8～9 9～21 21～22 22～48 48～50 50 50 50 50 51 52～53 53 53～54 54 54 55～68

3

==> picture [76 x 31] intentionally omitted <==

==> picture [169 x 19] intentionally omitted <==

KPMG

台北市110615信義路5段7號68樓(台北101大樓) 電 話 Tel + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, 傳 真 Fax + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) 網 址 Web kpmg.com/tw

Independent Auditors’ Report

To the Board of Directors of Twinhead International Corp.:

Opinion

We have audited the parent company only financial statements of Twinhead International Corp.(“ the Company” ), which comprise the balance sheets as of December 31, 2023 and 2022, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of material accounting policies.

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

Basis for Opinion

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

Key Audit Matters

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

Inventory measurement

Please refer to note 4(g), note 5, and note 6(c) of the parent company only financial statements for details on the information about inventory measurement.

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.

3-1

Description of key audit matter:

The inventory of the Company includes inventory for production and repair. Since the technology in the computer industry changes rapidly, market demand may change in the meantime. Because of the market change and aging situation, the carrying value of inventories may exceed its net realized value. As the subsequent measurement of inventory depends on the evaluation of the management based on several evidence. Therefore, we consider it as a key audit matter.

How the matter was addressed in our audit:

The key audit procedures performed are to understand management’ s accounting policy of inventory measurement and determine whether if it is reasonable and is being implement. The procedures include reviewing the inventory aging documents and analyzing its changes; obtaining the documents of inventory measurement and evaluating whether if the basis used for net realizable value is reasonable; selecting samples and verifying them with the vouchers to test the accuracy of the amount; and reviewing whether the disclosure of inventory measurement made by the management is appropriate.

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

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

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 parent company only financial statements.

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

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

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

3-2

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

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

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

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

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

The engagement partners on the audit resulting in this independent auditors’ report are Huang, Po-Shu and Wu, Chung-Shun.

KPMG

Taipei, Taiwan (Republic of China) March 13, 2024

Notes to Readers

The accompanying parent company only financial statements are intended only to present the 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 parent company only financial statements are those generally accepted and applied in the Republic of China.

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

4

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

TWINHEAD INTERNATIONAL CORP.

Balance Sheets

December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollar)

Assets Current assets: 1100 Cash and cash equivalents (note 6(a)) 1170 Accounts receivable, net (notes 6(b) and 6(q)) 1180 Accounts receivable－related parties, net (notes 6(b), 6(q) and 7) 130x Inventories (note 6(c)) 1410 Prepayments 1470 Other current assets Total current assets Non-current assets: 1520 Financial assets measured at fair value through other comprehensive income-non- current (note 6(d)) 1600 Property, plant and equipment (notes 6(f), 6(j) and 8) 1755 Right-of-use assets (note 6(g)) 1760 Investment property, net (notes 6(h), 6(l) and 8) 1840 Deferred income tax assets (note 6(n)) 1920 Refundable deposits 1942 Long-term accounts receivable- related parties (notes 6(b), 6(q) and 7) 1995 Other non-current assets Total non-current assets Total assets	December 31, 2023 Amount % $ 332,304 25 44,514 3 71,794 6 241,260 18 6,490 1 1,566 - 697,928 53 53 - 264,009 20 79,314 6 139,957 10 32,874 2 7,660 1 75,702 6 22,381 2 621,950 47 $ 1,319,878 100	December 31,	2022 % 17 7 6 21 - - 51 - 23 1 12 3 1 7 2 49 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (notes 6(i) and 8) 2130 Current contract liabilities (note 6(q)) 2150 Notes payable 2170 Accounts payable 2200 Other payables (notes 6(m) and 6(r)) 2220 Other payables-related parties (note 7) 2250 Provisions－current (note 6(j)) 2280 Current lease liabilities (note 6(k)) 2300 Other current liabilities Total current liabilities Non-Current liabilities: 2550 Provisions－non-current (note 6(j)) 2580 Non-current lease liabilities (note 6(k)) 2670 Other non-current liabilities (notes 6(e) and 7) Total non-current liabilities Total liabilities Equity (notes 6(d) and 6(o)): Share capital: 3110 Ordinary shares 3120 Preference shares 3200 Capital surplus Retained earnings: 3310 Legal reserve 3350 Retained earnings Other equities: 3410 Exchange differences on translation of foreign financial statements 3420 Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Total equity Total liabilities and equity	December 31, 2023 Amount % $ 552,000 42 17,208 1 61 - 97,953 8 78,033 6 1,384 - 9,759 1 16,638 1 13,625 1 786,661 60 6,831 1 62,808 4 10,339 1 79,978 6 866,639 66 309,991 23 11 - 310,002 23 35 - 10,778 1 114,006 9 124,784 10 31,970 2 (13,552) (1) 18,418 1 453,239 34 $ 1,319,878 100	December 31,	2022 % 50 - - 9 6 - 1 1 2 69 - - 1 1 70 21 - 21 - - 7 7 3 (1) 2 30 100
	Amount $ 332,304 44,514 71,794 241,260 6,490 1,566 697,928 53 264,009 79,314 139,957 32,874 7,660 75,702 22,381 621,950 $ 1,319,878	Amount 193,170 82,589 64,491 239,197 6,356 441 586,244 679 271,122 14,748 141,360 32,874 5,810 80,292 23,126 570,011 1,156,255			Amount 579,000 5,310 221 108,352 63,877 437 7,843 15,069 14,915 795,024 6,908 230 8,690 15,828 810,852 247,993 11 248,004 35 2,818 79,758 82,576 32,903 (18,115) 14,788 345,403 1,156,255

See accompanying notes to parent company only financial statements.

5

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

TWINHEAD INTERNATIONAL CORP.

Statements of Comprehensive Income

For the years ended December 31, 2023 and 2022

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

4000 Operating revenues (notes 6(q) and 7) 5000 Operating costs (notes 6(c), 6(f), 6(j), 6(k), 6(m) and 7) Gross profit from operations 5910 Less: Unrealized profit on affiliated transactions (note7) 5900 Gross profit 6000 Operating expenses (notes 6(f), 6(g), 6(k), 6(l), 6(m), 6(r) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses 6900 Net operating income 7000 Non-operating income and expenses (notes 6(d), 6(f), 6(h), 6(k), 6(l) and 6(s)): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Finance costs 7375 Share of loss of subsidiaries accounted for under equity method Total non-operating income and expenses Income from continuing operations before tax 7950 Less: Income tax expense (note 6(n)) Net income 8300 Other comprehensive income (loss) (note 6(o)): 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income (loss) that will be reclassified to profit or loss 8300 Other comprehensive income (loss), net Total comprehensive income (loss) 9750 Basic earnings per share (in New Taiwan dollar) (note 6(p)) 9850 Diluted earnings per share (in New Taiwan dollar) (note 6(p))	2023 Amount % $ 1,045,747 100 678,605 65 367,142 35 627 - 366,515 35 53,746 5 112,026 11 103,433 10 269,205 26 97,310 9 6,647 - 16,793 2 13,244 1 (12,433) (1) (12,357) (1) 11,894 1 109,204 10 388 - 108,816 10 (45) - - - (45) - (933) - - - (933) - (978) - $ 107,838 10 $ 3.51 $ 3.50	2022 Amount % 892,509 100 625,445 70 267,064 30 1,126 - 265,938 30 40,832 5 96,631 11 89,825 10 227,288 26 38,650 4 1,242 - 14,982 2 52,149 6 (11,266) (1) (16,159) (2) 40,948 5 79,598 9 - - 79,598 9 (1,124) - - - (1,124) - (9,298) (1) - - (9,298) (1) (10,422) (1) 69,176 8 2.57 2.56

See accompanying notes to parent company only financial statements.

6

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

TWINHEAD INTERNATIONAL CORP.

Statements of Changes in Equity

For the years ended December 31, 2023 and 2022 (Expressed in Thousands of New Taiwan Dollar)

Balance at January 1, 2022 Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Cash dividends of preference share Due to donated assets received Net income Other comprehensive loss Total comprehensive income (loss) Balance at December 31, 2022 Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of preference share Stock dividends of ordinary share Net income Other comprehensive loss Total comprehensive income (loss) Disposal of equity investments at fair value through other comprehensive income Balance at December 31, 2023		Share capital	Total share capital 248,004 - - - - - - - 248,004 - - 61,998 - - - - 310,002	Capital surplus - - - - 35 - - - 35 - - - - - - - 35	Retained earnings	Retained earnings	Total retained earnings 28,182 - (24,799) (405) - 79,598 - 79,598 82,576 - (2) (61,998) 108,816 - 108,816 (4,608) 124,784	Total other equity interest Exchange differences on translation of Unrealized gains (losses) from financial assets measured at fair value through other foreign financial statements comprehensive income Total other equity interest 42,201 (16,991) 25,210 - - - - - - - - - - - - - - - (9,298) (1,124) (10,422) (9,298) (1,124) (10,422) 32,903 (18,115) 14,788 - - - - - - - - - - - - (933) (45) (978) (933) (45) (978) - 4,608 4,608 31,970 (13,552) 18,418	Total other equity interest Exchange differences on translation of Unrealized gains (losses) from financial assets measured at fair value through other foreign financial statements comprehensive income Total other equity interest 42,201 (16,991) 25,210 - - - - - - - - - - - - - - - (9,298) (1,124) (10,422) (9,298) (1,124) (10,422) 32,903 (18,115) 14,788 - - - - - - - - - - - - (933) (45) (978) (933) (45) (978) - 4,608 4,608 31,970 (13,552) 18,418	Total equity 301,396 - (24,799) (405) 35 79,598 (10,422) 69,176 345,403 - (2) - 108,816 (978) 107,838 - 453,239
								Exchange differences on translation of foreign financial statements 42,201 - - - - - (9,298) (9,298) 32,903 - - - - (933) (933) - 31,970	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income (16,991) - - - - - (1,124) (1,124) (18,115) - - - - (45) (45) 4,608 (13,552)
	Ordinary shares $ 247,993 - - - - - - - 247,993 - - 61,998 - - - - $ 309,991	Preference share 11 - - - - - - - 11 - - - - - - - 11			Legal reserve - 2,818 - - - - - - 2,818 7,960 - - - - - - 10,778	Retained earnings 28,182 (2,818) (24,799) (405) - 79,598 - 79,598 79,758 (7,960) (2) (61,998) 108,816 - 108,816 (4,608) 114,006

See accompanying notes to parent company only financial statements.

7

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

TWINHEAD INTERNATIONAL CORP.

Statements of Cash Flows

For the years ended December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollar)

Cash flows from (used in) operating activities: Net income before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation Amortization Interest expense Interest income Dividend income Share of loss of subsidiaries accounted for using equity method Loss on disposal of property, plant and equipment Gain on disposal of non-current assets held for sale Unrealized profit on affiliated transactions Total adjustments to reconcile profit Changes in operating assets and liabilities: Net changes in operating assets: Notes receivable Accounts receivable Accounts receivable－related parties Inventories Prepayments Other current assets Total changes in operating assets, net Net changes in operating liabilities: Contract liabilities Notes payable Accounts payable Other payables Other payable－related parties Provisions Other current liabilities Total changes in operating liabilities, net Total changes in operating assets and liabilities, net Total adjustments Cash inflow generated from operating activities Interest received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities: Proceeds from disposal of financial assets at fair value through other comprehensive income Proceeds from disposal of non-current assets held for sale Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Increase in other non-current assets Dividends received Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Payment of lease liabilities Cash dividends paid Interest paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2023 $ 109,204 26,453 13,012 12,433 (6,647) - 12,357 (66) (17,141) 627 41,028 - 38,075 (14,981) (2,063) (134) (506) 20,391 11,898 (160) (10,399) 14,060 947 1,839 (1,290) 16,895 37,286 78,314 187,518 6,247 (11,883) (607) 181,275 581 20,001 (3,446) 66 (1,850) (12,267) - 3,085 120,000 (147,000) (17,770) (2) (454) (45,226) 139,134 193,170 $ 332,304	2022 79,598 23,386 12,194 11,266 (1,242) (480) 16,159 - - 1,126 62,409 116 (23,137) (26,894) (41,414) 3,182 2,041 (86,106) (1,719) 44 35,673 10,512 (377) 2,867 4,728 51,728 (34,378) 28,031 107,629 1,132 (10,505) (99) 98,157 - - (2,367) - (4) (11,079) 480 (12,970) 80,000 (121,000) (14,782) (25,204) (448) (81,434) 3,753 189,417 193,170

See accompanying notes to parent company only financial statements.

8

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

TWINHEAD INTERNATIONAL CORP.

Notes to the Financial Statements

For the years ended December 31, 2023 and 2022

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

(1) Company history

TWINHEAD INTERNATIONAL CORP. (the Company) was incorporated on February 27, 1984, as a company limited by shares under the laws of the Republic of China (ROC). The Company is mainly engaged in the design, manufacture, sale and development of computers, computer components, peripherals, software, ASIC chips and workstations, and operation of telecommunication-related business.

(2) Approval date and procedures of the financial statements

The parent company only financial statements were approved by the Board of Directors and issued on March 13, 2024.

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

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

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

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

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

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

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

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

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

• ●Amendments to IAS 1 “Non-current Liabilities with Covenants”

• ●Amendments to IAS 7 and IFRS 7 “Supplier Finance Arrangements”

• ●Amendments to IFRS 16 “Lease Liability in a Sale and Leaseback”

(Continued)

9

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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

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

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

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

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

• ●Amendments to IAS21 “Lack of Exchangeability”

(4) Summary of material policies

The significant accounting policies presented in the parent company only financial statements are summarized as follows. The following accounting policies have been applied consistently throughout the presented periods in the parent company only financial statements.

(a) Statement of compliance

The parent company only 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").

• (b) Basis of preparation

• (i) Basis of measurement

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

• (ii) Functional and presentation currency

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

(c) Foreign currencies

Transactions in foreign currencies are translated into the respective functional currencies of Company entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

(Continued)

10

TWINHEAD INTERNATIONAL CORP. Notes to the 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:

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

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

• qualifying cash flow hedges to the extent that the hedges are effective.

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.

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

• (i) An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.

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

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

  • 3) It is expected to be realized within twelve months after the reporting period; or

  • 4) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

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

  • 1) It is expected to be settled in the normal operating cycle;

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

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

  • 4) The Company 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.

(Continued)

11

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(e) 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.

Bank overdrafts that are repayable on demand and form an integral part of the Company’ s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(f) 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 Company 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 other comprehensive income (FVOCI) equity investment and FVTPL.

The Company shall reclassify all affected financial assets on the first day of the first reporting period only when it changes its business model for managing its financial assets.

• 1) Financial assets measured at amortized cost

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

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

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

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.

(Continued)

12

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

• 2) Fair value through other comprehensive income (FVOCI )

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established.

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

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company 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.

• 4) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, notes and trade receivables(including related parties) and guarantee deposit paid).

The Company 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.

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

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

(Continued)

13

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company 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 Company’ s historical experience and informed credit assessment as well as forwardlooking information.

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

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

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

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company 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 Company 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 Company’s procedures for recovery of amounts due.

5) Derecognition of financial assets

The Company 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 Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

• (ii) Financial liabilities and equity instruments

1) Classification of debt or equity

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

(Continued)

14

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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.

Preferred share capital is classified as equity if it is non-redeemable, or redeemable only at the Company's option, and any dividends are discretionary. Discretionary dividends thereon are recognized as distributions within equity upon approval by the Company's shareholders.

Preferred share capital is classified as a financial liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary.

The Company classifies preferred share capital with the characteristics of a financial liability issued before January 1, 2006, as equity in accordance with Rule No. 10000322083 issued by the FSC.

Compound financial instruments issued by the Company comprise convertible bonds that can be converted into ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest, gains, or losses related to financial liabilities are recognized in profit or loss and recorded under non-operating income and expenses.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

3) Financial liabilities

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

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

(Continued)

15

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

4) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. The Company 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.

5) 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 Company 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.

(g) Inventories

The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition. The costs of finished goods and work in progress adopt the standard cost method. The difference between standard and actual costing is fully classified as operating cost and allocated to the ending balance of inventories.

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

(h) Investment in subsidiaries

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

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

(Continued)

16

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

• (i) 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.

• (ii) Reclassification to investment property

Property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property.

• (iii) Subsequent expenditure

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

• (iv) 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 has an unlimited useful life and therefore is not depreciated.

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

1)	Buildings	4~62 years
2)	Machinery	2~12 years
3)	Other equipment	4~9 years

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

(Continued)

17

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(j) Leases

At inception of a contract, the Company 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 lessee

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

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by 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 Company’s incremental borrowing rate. Generally, the Company 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 Company’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 assets; or

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

• － there is any lease modifications

(Continued)

18

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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 Company 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 Company 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.

The Company has elected not to recognize the right-of-use assets and lease liabilities for the leases of its low-value assets, including its office and dormitory. The Company 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 Company 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 Company 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 Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

(k) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, or for use in the production or supply of goods or services, or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently measured under the cost model, and depreciation expense is calculated using the depreciable amount. The depreciation method, useful life, and residual amount are the same as those adopted for property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property and any other cost.

When the use of an investment property changes such that it is reclassified as property, plant and equipment, its carrying amount at the date of reclassification becomes its cost for subsequent accounting.

(l) Impairment of non-financial assets

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

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 CGUs.

(Continued)

19

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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 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.

(m) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive 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. The provision is based on historical warranty data and a weighing of all possible outcomes against their associated probabilities.

(n) Revenue

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

(i) Sale of goods

The Company is mainly engaged in the manufacture, sale and development of computers, computer components, and peripherals, and operation of telecommunication-related business. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

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

(Continued)

20

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

• (ii) Financing components

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

• (o) Employee benefits

• (i) Defined contribution plans

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

• (ii) 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 Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

• (p) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes 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. 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 (i) affects neither accounting nor taxable profits (losses) at the time of the transaction and (ii) does not give rise to equal taxable and deductible temporary differences;

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company 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 taxes are measured at tax rates that are applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

(Continued)

21

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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

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

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

• 1) the same taxable entity; or

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

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

(q) Earnings per share

The Company discloses the Company's basic and diluted earnings per share attributable to ordinary equity holders 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. An increase in ordinary shares which is from appropriation of retained earnings or capital surplus, or a decrease in ordinary shares which is to offset accumulated deficit, is added to or deducted from the shares outstanding retroactively. The shares outstanding are also adjusted retroactively if the recording date of the appropriation or share-based payment transaction is within the subsequent period. 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 dilutive potential ordinary shares. The potentially diluted ordinary shares of the Company are convertible preference shares.

(r) Segment information

The Company has disclosed information about operating segments in its consolidated financial statements. Hence no further information is disclosed in the parent company only financial statements.

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

The preparation of the parent company only financial statements requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The 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.

(Continued)

22

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

Inventory measurement

Since inventories are measured at the lower of cost or net realizable value, the Company 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(c) for further description of the valuation of inventories.

(6) Explanation of significant accounts

• (a) Cash and cash equivalents

Petty cash Checking and demand deposits Time deposits Cash and cash equivalents per statements of cash flows	December 31, 2023 $ 198 113,933 218,173 $ 332,304	December 31, 2022
		140 131,610 61,420
		193,170

The Company's exposure to interest rate risk and the sensitivity analysis for the financial instruments held by the Company are disclosed in note 6(t).

• (b) Accounts receivable and long-term receivable (including related parties)

Accounts receivable Accounts receivable－related parties Long-term accounts receivable－related parties	December 31, 2023 $ 44,514 71,794 75,702 $ 192,010	December 31, 2022
		82,589 64,491 80,292
		227,372

The Company applies the simplified approach to estimat expected credit losses for all accounts receivables and long-term accounts receivable (including related parties) .

To measure the expected credit losses, accounts receivables (including related parties) and longterm accounts receivable (including related parties) are grouped based on shared credit risk characteristics represent the customer's ability to pay all amounts due under the terms of the contract, and forwardlooking information has been included.

(Continued)

23

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

The Company's accounts receivable from related parties and long-term receivables from related parties have no history of credit losses, with no indications of deteriorating credit quality since the original credit approval date. Therefore, the Company assesses that these receivables will not result in credit losses, and they are not included in the calculation of expected credit losses analysis.

The loss allowance provision for accounts receivable from non-related parties was determined as follows:

Current 1 to 30 days past due Current 1 to 30 days past due 181 to 365 days past due	December 31, 2023	December 31, 2023
	Gross carrying amount Weighted- average loss rate $ 38,211 - 6,303 - $ 44,514 December 31, 2022		Loss allowance provision
			- -
			-
		Weighted- average loss rate - - -	Loss allowance provision
			- - -
			-

The Company did not hold any collateral for the collectible amounts.

(c) Inventories

The components of the Company's inventories were as follows:

Finished goods Work in progress Raw materials and supplies Goods in transit Total	December 31, 2023 $ 66,082 8,185 162,687 4,306 $ 241,260	December 31, 2022
		63,131 13,351 160,262 2,453
		239,197

As of December 31, 2023 and 2022, the Company's inventories were not provided as pledged assets.

Except for operating costs arising from the ordinary sale of inventories, other losses directly recorded under operating costs were as follows:

recorded under operating costs were as follows:
Loss on decline in market value of inventory	2023 $ 5,991	2022
		11,331

(Continued)

24

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(d) Non-current financial assets at fair value through other comprehensive income

Equity investments at fair value through other comprehensive income: Unlisted stocks (domestic) Unlisted stocks (overseas) Total	December 31, 2023 $ - 53 $ 53	December 31, 2022
		622 57
		679

• (i) Equity investments at fair value through other comprehensive income

The Company designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Company intends to hold for long-term for strategic purposes.

In addition, EUROC Venture Capital Corp. was dissolved on May 10, 2022, by a resolution of the shareholders' meeting, with the base date set on May 31, 2022, and as of December 21, 2023, the liquidation process was completed. The Company received liquidation proceeds amounting to $581 thousand, and transferred $4,608 thousand of the cumulative loss from other equity to retained earnings. The dividend income from the investee amounted to $480 thousand for the year ended December 31, 2022.

No strategic investments were disposed for the year ended December 31, 2022, and there were no transfers of any cumulative gain or loss related to these investments within equity.

• (ii) For credit risk and market risk, please refer to note 6(t).

(iii) The Company did not provide the financial assets as collateral.

• (e) Credit balance of investments accounted for under the equity method

The details of the credit balance of investments accounted for under the equity method (recognized under other non-current liabilities) at the reporting date were as follows:

Subsidiary (i) Subsidiary	December 31, 2023 $ 7,132	December 31, 2022
		5,483

Please refer to the consolidated financial statements for the year ended December 31, 2023.

(ii) Collateral

As of December 31, 2023 and 2022, the Company did not pledge any collateral on its investments accounted for under the equity method.

(Continued)

25

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(f) Property, plant and equipment

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

Cost or deemed cost: Balance at January 1, 2023 Additions Disposal Reclassification Balance at December 31, 2023 Balance at January 1, 2022 Additions Disposal Balance at December 31, 2022 Depreciation and impairment loss: Balance at January 1, 2023 Depreciation Disposal Reclassification Balance at December 31, 2023 Balance at January 1, 2022 Depreciation Disposal Balance at December 31, 2022 Carrying value: December 31, 2023 December 31, 2022 January 1, 2022	Land $ 118,425 - - (2,752) $ 115,673 $ 118,425 - - $ 118,425 $ 10,593 - - - $ 10,593 $ 10,593 - - $ 10,593 $ 105,080 $ 107,832 $ 107,832	Buildings 430,842 743 - (3,615) 427,970 430,730 112 - 430,842 274,228 4,614 - (3,507) 275,335 269,594 4,634 - 274,228 152,635 156,614 161,136	Machinery 179,376 851 (996) - 179,231 178,467 1,060 (151) 179,376 175,709 849 (996) - 175,562 175,064 796 (151) 175,709 3,669 3,667 3,403	Other equipment 106,069 1,852 (50,867) - 57,054 104,948 1,195 (74) 106,069 103,060 2,236 (50,867) - 54,429 101,092 2,042 (74) 103,060 2,625 3,009 3,856	Total 834,712 3,446 (51,863) (6,367) 779,928 832,570 2,367 (225) 834,712 563,590 7,699 (51,863) (3,507) 515,919 556,343 7,472 (225) 563,590 264,009 271,122 276,227

(i) Impairment loss and subsequent reversal

As of December 31, 2023 and 2022, the accumulated property impairment amounted to $10,593 thousand. The above accumulated asset impairment was recognized based on the carrying value of the factory land at Da Fa Industrial exceeding its estimated recoverable amount. After assessment, no additional impairment loss should be recognized for the years ended December 31, 2023 and 2022.

(ii) Collateral

As of December 31, 2023 and 2022, the Company's property, plant and equipment were provided as pledged assets; please refer to note 8.

(Continued)

26

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(iii) Sales

The land and factory located in Linyuan were reclassified to non-current assets held for sales in March 2023 and was subsequently sold in May 2023 for a net price of $20,001 thousand. As the result, gains on disposal of $17,141 thousand were recognized and recorded under other gains and losses.

(g) Right-of-use assets

The Company leases assets including, buildings and transportation equipment. Information about leases, for which the Company is the lessee, is presented below:

Cost: Balance at January 1, 2023 Additions Disposal Balance at December 31, 2023 Balance at December 31, 2022 (Balance at January 1, 2022) Accumulated depreciation: Balance at January 1, 2023 Depreciation Disposal Balance at December 31, 2023 Balance at January 1, 2022 Depreciation Balance at December 31, 2022 Carrying value: December 31, 2023 December 31, 2022 January 1, 2022 (h) Investment property Cost or deemed cost: Balance at December 31, 2023 (Balance at January 1, 2023) Balance at December 31, 2022 (Balance as at January 1, 2022)	Building $ 69,914 76,975 (69,914) $ 76,975 $ 69,914 $ 55,932 16,548 (69,914) $ 2,566 $ 41,949 13,983 $ 55,932 $ 74,409 $ 13,982 $ 27,965 Land and improvements $ 95,830 $ 95,830	Transportation equipment 2,641 4,942 - 7,583 2,641 1,875 803 - 2,678 1,347 528 1,875 4,905 766 1,294 Buildings 87,010 87,010	Total 72,555 81,917 (69,914) 84,558 72,555 57,807 17,351 (69,914) 5,244 43,296 14,511 57,807 79,314 14,748 29,259 Total 182,840 182,840

(Continued)

27

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

Land and

	Land and
Depreciation and impairment loss: Balance at January 1, 2023 Depreciation Balance at December 31, 2023 Balance at January 1, 2022 Depreciation Balance at December 31, 2022 Carrying value: Balance at December 31, 2023 Balance at December 31, 2022 Balance at January 1, 2022 Fair value: Balance at December 31, 2023 Balance at December 31, 2022 Balance at January 1, 2022	improvements $ - - $ - $ - - $ - $ 95,830 $ 95,830 $ 95,830	Buildings Total 41,480 41,480 1,403 1,403 42,883 42,883 40,077 40,077 1,403 1,403 41,480 41,480 44,127 139,957 45,530 141,360 46,933 142,763 $ 479,520 $ 419,218 $ 419,218	Total
			41,480 1,403
			42,883
			40,077 1,403
			41,480
			139,957
			141,360
			142,763

Investment property is commercial properties that are leased to third parties. Each of the leases contains an initial non-cancellable period of 1~3 years. Subsequent renewals are negotiable with the lessee, and no contingent rents are charged. Please refer to note 6(l) for further information.

The fair value of investment property is based on a valuation by an independent appraiser who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being valued. The valuation is based on market price. The parameters used by the fair value valuation technique belong to the third hierarchy.

The investment properties of the Company are located at Xindian Dist., New Taipei City, Taiwan. The range of yields applied to the net annual rentals to determine the fair value of the property for which the current prices in an active market are unavailable was 1.04% and 1.58% for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, the Company's investment properties were provided as pledged assets; please refer to note 8.

• (i) Short-term borrowings

The details of the Company's short-term borrowings were as follows:

Unsecured loans Secured bank loans Total		December 31, 2023	December 31, 2023
	Currency	Range of interest rates (%)	Year of maturity Amount 2024 $ 90,000 2024 462,000 $ 552,000
	TWD TWD	2.12~2.13 2.13

(Continued)

28

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

Unsecured loans Secured bank loans Total		December 31, 2022	December 31, 2022
	Currency	Range of interest rates (%)	Year of maturity Amount 2023 $ 70,000 2023 509,000 $ 579,000
	TWD TWD	2.05 1.92~2.16

As of December 31, 2023 and 2022, the unused credit facilities amounted to $524,240 thousand and $394,240 thousand, respectively.

Please refer to note 6(t) for the Company's risk exposures relating to interest rate, currency, and liquidity risk.

The Company has pledged certain assets against the loans; please refers to note 8 for additional information.

(j) Provisions

Balance at January 1, 2023 Provisions made during the year Provisions used during the year Provisions reversed during the year Balance at December 31, 2023 Current Non-current Balance at January 1, 2022 Provisions made during the year Provisions used during the year Provisions reversed during the year Balance at December 31, 2022 Current Non-current	Decommissioning liabilities $ 3,729 - - - $ 3,729 $ - 3,729 $ 3,729 $ 3,729 - - - $ 3,729 $ - 3,729 $ 3,729	Other 11,022 5,826 (2,630) (1,357) 12,861 9,759 3,102 12,861 8,155 4,971 (1,917) (187) 11,022 7,843 3,179 11,022	Total 14,751 5,826 (2,630) (1,357) 16,590 9,759 6,831 16,590 11,884 4,971 (1,917) (187) 14,751 7,843 6,908 14,751

(i) Decommissioning liabilities

The provision was the estimation for removing, moving and restoring the lease assets according to the lease contract, which were recognized as long-term liabilities. The future cost shall result in an uncertainty of provision due to the long-term lease of the office. Related costs are expected to occur after the lease term reaches its maturity.

(Continued)

29

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(ii) Other provisions

Provisions were estimated based on the historical data on warranties on merchandise and services, which are mainly associated with the Company's business products. The Company expects to settle the majority of the liability over the next one to three years.

(k) Lease liabilities

The Company's lease liabilities were as follow:

The Company's lease liabilities were as follow:
Current Non-current	December 31, 2023 $ 16,638 $ 62,808	December 31, 2022
		15,069
		230

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

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	2023 $ 454 $ 541	2022
		448
		490

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

Total cash outflow for leases	2023 $ 18,765	2022
		15,720

(i) Real estate leases

The Company leases buildings for its office space. The leases of its office space typically run for a period of 5 years.

(ii) Other leases

The Company leases vehicles, with lease terms of three years. The Company has options to purchase the assets at the end of the contract term.

The Company also leases office and dormitory with contract terms of 1 to 2 years. These leases are leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(l) Operating leases

The Company leases out its investment property. The Company has classified these leases as operating leases, because it does not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Please refer to note 6(h) for the information of investment property.

(Continued)

30

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

A maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date is as follows:

the reporting date is as follows:
Less than one year One to two years Total undiscounted lease payments	December 31, 2023 $ 9,196 - $ 9,196	December 31, 2022
		10,032 9,196
		19,228

Rental income from investment properties was $10,032 thousand for the years ended December 31, 2023 and 2022, respectively. The direct expenses from investment properties were $578 thousand and $606 thousand for the years ended December 31, 2023 and 2022, respectively.

(m) Employee benefits

• (i) Defined contribution plans

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

The Company's pension costs under the defined contribution plan were $7,152 thousand and $6,655 thousand for the years ended December 31, 2023 and 2022, respectively. Payments were made to the Bureau of Labor Insurance.

• (ii) Short-term employee benefit liabilities

Short-term employee benefit liabilities
Compensated absence liabilities	December 31, 2023 $ 8,271	December 31, 2022
		7,998

(n) Income taxes

• (i) Income tax expenses

The amount of the Company's income tax for the years ended December 31, 2023 and 2022, was as follows:

Current income tax expense Deferred tax expense Income tax expense from continuing operations	2023 $ 388 - $ 388	2022 - - -

(Continued)

31

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

Reconciliations of the Company's income tax expenses and the income before tax for the years ended December 31, 2023 and 2022 were as follows:

Income before tax Income tax using the Company's domestic tax rate Adjustment under tax laws Change in unrecognized deductible temporary differences Surtax on unappropriated earnings Loss from equity investments under the equity method Overestimate of previous deferred tax assets Recognition of previously unrecognized tax losses Unrecognized deferred tax assets resulting from tax loss Income tax expense	2023 $ 109,204 $ 21,841 (2,611) (30,991) 388 2,471 538 - 8,752 $ 388	2022 79,598 15,920 (5,865) 2,134 - 3,232 1,544 (16,965) - -

• (ii) Deferred income tax assets and liabilities

• 1) Unrecognized deferred tax assets

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

Deductible temporary differences The carryforward of unused tax losses	December 31, 2023 $ - 1,280,252 $ 1,280,252	December 31, 2022
		154,955 1,236,489
		1,391,444

Tax losses of a company can be carried forward to offset its future taxable income for a period of ten years in accordance with the Income Tax Act of the ROC. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.

(Continued)

32

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

As of December 31, 2023, the information of the Company's unutilized business losses for which no deferred tax assets were recognized is as follows:

Year of tax loss occurred 2014 2015 2016 2017 2019 2020 2023	Amount Year of expiration $ 34,816 2024 95,026 2025 298,592 2026 71,323 2027 25,418 2029 679,502 2030 75,575 2033 $ 1,280,252

• 2) Recognized deferred tax assets

Changes in the amount of deferred tax assets for 2023 and 2022 were as follows:

Balance at January 1, 2023 Recognized in profit or loss Balance at December 31, 2023 Balance at January 1, 2022 Recognized in profit or loss Balance at December 31, 2022	Allowance for inventory valuation $ 18,067 (6,317) $ 11,750 $ 18,866 (799) $ 18,067	Impairment loss 11,200 - 11,200 11,200 - 11,200	Loss carryforwards - 5,824 5,824 - - -	Others 3,607 493 4,100 2,808 799 3,607	Total 32,874 -
					32,874
					32,874 -
					32,874

• (iii) Income tax assessment

The ROC income tax authorities have examined the Company's income tax returns for all years through 2021.

(o) Capital and other equity

As of December 31, 2023 and 2022, the total value of authorized ordinary shares amounted to $7,000,000 thousand, with par value of $10 per share, divided into 700,000 thousand shares. The number of authorized shares included ordinary shares and preference shares, of which 30,999 thousand and 24,799 thousand ordinary shares were issued. In addition, 1 thousand preference shares were issued. All issued capital was fully paid in. The preference shares were classified under equity.

(Continued)

33

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

For the years ended December 31, 2023 and 2022, the reconciliation of outstanding shares of the Company was as follows:

Company was as follows:
Beginning balance on January 1 Issuance of stock dividends Balance at December 31		(Express in thousand shares) Ordinary shares Preference shares 2023 2022 2023 2022 24,799 24,799 1 1 6,200 - - - 30,999 24,799 1 1
		2023		2022		2023		2022
		24,799 6,200		24,799 -		1 -		1 -
		30,999		24,799		1		1

• (i) Capital stock

In the shareholders' meeting of the Company held on June 13, 2023, the Company resolved to increase capital from the unappropriated retained earnings amounting to $61,998 thousand, with par value of $10 per share, by issuing 6,200 thousand shares. The record date of the aforementioned capital increase was October 22, 2023. The related statutory registration procedure was completed.

According to the Company's articles of incorporation, the rights and obligations of the 20% cumulative convertible preference shareholders are as follows:

• 1) Annual earnings, after making up accumulated deficits and appropriating legal reserve, are distributed, at 20% of par value, as dividends and bonus to the cumulative convertible preference shareholders.

• 2) Dividends and bonus are paid annually after being approved and declared in the annual ordinary shareholders' meeting. Dividends are calculated based on the prior year's days outstanding; however, upon conversion of their preference shares into ordinary shares, the cumulative convertible preference shareholders waive their rights to the current year's profit distribution.

• 3) Dividends and bonus in arrears must be made up in a later year before profits are distributed to ordinary shareholders. Upon conversion of preference shares into ordinary shares, dividends and bonus in arrears should be paid in full, and a cumulative convertible preference shareholders is precluded from sharing in the prior years' profit distribution with the ordinary shareholders. Except for the differences in dividend distribution, a 20% cumulative convertible preference shareholder shares the same rights or obligations as the ordinary stockholders.

• 4) One year after issuance, the cumulative convertible preference shareholders may, at their option, in June of every year, exchange their convertible preference shares for ordinary shares at a 1:1 ratio.

• 5) A cumulative convertible preference shareholder has a higher claim than the ordinary shareholders to the remaining assets in the event of the Company's liquidation, and is limited to the issuance amount of the cumulative convertible preference shares. Unless otherwise stipulated in the Articles of Incorporation, a cumulative preference shareholder has no other rights or obligations.

(Continued)

34

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(ii) Capital surplus

The Company's capital surplus were as follows:

The Company's capital surplus were as follows:
Donation from shareholders	December 31, 2023 $ 35	December 31, 2022
		35

• －

• (iii) Retained earnings Distribution of retained earnings

1) Legal reserve

The ROC Company Act stipulates that companies must retain 10% of their annual net earnings, as defined in the Act, until such retention equals the amount of issued share capital. When a company incurs no loss, it may, pursuant to a resolution to be adopted by the shareholders' meeting as required, distribute its legal reserve by issuing new shares or distributing cash. Only the portion of legal reserve which exceeds 25% of the issued share capital may be distributed.

2) Special earnings reserve

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

3) Distribution of retained earnings

In accordance with the Articles of Incorporation, the Company's net earnings should first be used to pay taxes, and then to offset prior years' deficits. Of the remaining balance, 10% is to be appropriated as legal reserve, unless the accumulated legal reserve has reached the Company's paid-in capital, and priority is given to the payment of unpaid dividends to preference shares. In addition, depending on the Company's operational needs and laws and regulations, a special reserve may be set aside. If there are any unappropriated earnings at the beginning of the period, the Board of Directors will prepare a distribution plan and submit it to the shareholders' meeting for approval. The aforementioned distribution by cash shall be authorized by a majority vote of the Board of Directors with at least two-thirds of the directors present, and shall be reported to the stockholder’s meeting.

(Continued)

35

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

The distributable earnings can be distributed as dividends in consideration of the characteristics of the industrial growth, the Company's financial structure, and the investors' best interests, but at least 50% of the distributable earnings should be distributed to shareholders , except that the cumulative distributable earnings may not be distributed if the cumulative distributable earnings are less than 1% of the paid-in capital. Such distributions, considering the capital surplus, retained earnings, future capital requirements, long-term financial planning, and maintenance of the dividend distribution level, shall be no more than 40% of the total stockholders' bonus, and the rest shall be distributed as stock dividends.

In accordance with the articles of incorporation amended on June 13, 2023, cash dividends shall be no more than 80% of the total stockholders' bonus, and the remainder shall be distributed as stock dividends.

On June 13, 2023 and June 10, 2022, the shareholders' meeting resolved to distribute the 2022 earnings and the 2021 earnings, respectively. These earnings were appropriated as follows:

Dividends distributed to ordinary shareholders: Cash Stock Total Dividends distributed to preference shareholders: Cash	2022 Amount per share (NT dollars) Amount $ - - 2.50 61,998 $ 61,998 $ 2.00 2	2021	2021
		Amount per share (NT dollars) 1.00 - 2.00	Amount
			24,799 -
			24,799
			405

The Company's accumulated undistributed dividends for preference shares amounted to $2 thousand as of December 31, 2023 and 2022, respectively. The dividends to preference shares in 2021 were accumulated from 2008 to 2021.

On March 13, 2024, the Company's Board of Directors resolved to appropriate the 2023 earnings as follows:

Dividends distributed to ordinary shareholders: Stock Dividends distributed to preference shareholders: Cash	2023	2023
	Amount per share (NT dollars) $ 3.00 $ 2.00	Amount
		92,998
		2

(Continued)

36

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(iv) Other equities (net of tax)

Balance at January 1, 2023 Foreign exchange differences arising from foreign operation Unrealized losses from financial assets measured at fair value through other comprehensive income Disposal of finanical assets at fair value through other comprehensive income Balance at December 31, 2023 Balance at January 1, 2022 Foreign exchange differences arising from foreign operation Unrealized losses from financial assets measured at fair value through other comprehensive income Balance at December 31, 2022	Exchange differences on translation of foreign financial statements $ 32,903 (933) - - $ 31,970 $ 42,201 (9,298) - $ 32,903	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income (18,115) - (45) 4,608 (13,552) (16,991) - (1,124) (18,115)	Total 14,788 (933) (45) 4,608 18,418 25,210 (9,298) (1,124) 14,788

(p) Earnings per share

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

(i) Basic earnings per share

Net income of the Company Dividends on non-redeemable preference shares Net income attributable to ordinary shareholders of the Company Weighted average number of ordinary shares Basic earnings per share (in NTD)	2023 $ 108,816 (2) $ 108,814 30,999 $ 3.51	2022 79,598 (2) 79,596 30,999 2.57

(Continued)

37

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(ii) Diluted earnings per share

Net income attributable to ordinary shareholders of the Company (basic) Dividends on non-redeemable preference shares Net income attributable to ordinary shareholders of the Company (diluted) Weighted average number of ordinary shares outstanding (basic) Effect of dilutive potential ordinary shares Effect of remuneration to employees Effect of convertible preference shares Weighted average number of ordinary shares outstanding (diluted) Diluted earnings per share (in NTD) (q) Revenue from contracts with customers (i) Disaggregation of revenue Primary geographical markets: Taiwan United States France Germany Hong Kong Others Major products/services lines: Laptop Mainboard Sales of materials and others	2023 $ 108,814 2 $ 108,816 30,999 101 1 31,101 $ 3.50 2023 $ 91,209 255,239 98,315 134,478 135,642 330,864 $ 1,045,747 $ 871,094 99,031 75,622 $ 1,045,747	2022
		79,596 2
		79,598
		30,999 108 1
		31,108
		2.56
		2022
		107,728 273,620 65,162 130,722 22,612 292,665
		892,509
		716,461 74,176 101,872
		892,509

(Continued)

38

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(ii) Contract Balance

Notes receivable Accounts receivable Accounts receivable－related parties Long-term accounts receivable－ related parties Total Contract liabilities	December 31, 2023 $ - 44,514 71,794 75,702 $ 192,010 $ 17,208	December 31, 2022 - 82,589 64,491 80,292 227,372 5,310	January 1, 2022
			116 59,452 56,860 82,129
			198,557
			7,029

Please refer to the note 6(b) for the details on notes receivable, accounts receivables, long-term accounts receivable (including related parties) and allowance for impairment.

The contract liabilities are mainly due to advance receipts, wherein the Company will recognize revenue when the product is delivered to the customer.

The amount of revenue recognized for the years ended December 31, 2023 and 2022 that were included in the contract liabilities at the beginning of the period were $5,308 thousand and $7,023 thousand, respectively.

(r) Remunerations to employees and directors

In accordance with the articles of incorporation, the Company should contribute no less than 10% of the profit as employee remuneration and less than 2% as directors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration of each director and of remuneration for employees entitled to receive the abovementioned employee remuneration is approved by the Board of Directors. The recipients of shares and cash may include the employees of the Company's controlling or affiliated companies who meet certain conditions.

In accordance with the articles of incorporation amended on June 10, 2022 the Company should contribute no less than 5% of the profit as employee remuneration and less than 4% as directors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration of each director and of remuneration for employees entitled to receive the abovementioned employee remuneration is approved by the Board of Directors. The recipients of shares and cash may include the employees of the Company's controlling or affiliated companies who meet certain conditions.

(Continued)

39

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

For the years ended December 31, 2023 and 2022, the estimated employee remuneration amounted to $9,816 thousand and $7,155 thousand, respectively, and the estimated directors' remuneration amounted $3,681 thousand and $2,683 thousand, respectively. The estimated amounts mentioned above were calculated based on the net profit before tax, excluding the remuneration to employees and directors, multiplied by the percentage of remuneration to employees and directors as specified in the Company's articles, and expensed under operating expenses, the related information would be available at the Market Observation Post System Website. If there are any subsequent adjustments to the actual remuneration amount, the adjustments will be regarded as changes in accounting estimate and will be recognized in profit or loss in the following year. The amounts, as stated in the parent company only financial statements, were identical to those of the actual distributions for 2023 and 2022.

(s) Non-operating income and expenses

(i) Interest income

Interest income from bank deposits (ii) Other income Rental income Dividend income Other income－other Total other income (iii) Other gains and losses Gains on disposal of property, plant and equipment Gains on disposal of non-current assets classified as held for sale Foreign exchange gain (loss), net Others Other gains and losses, net (iv) Finance costs Interest expense	2023 $ 6,647 2023 $ 13,533 - 3,260 $ 16,793 2023 $ 66 17,141 (2,560) (1,403) $ 13,244 2023 $ 12,433	2022 1,242 2022 13,512 480 990 14,982 2022 - - 56,241 (4,092) 52,149 2022 11,266

(Continued)

40

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(t) Financial instruments

• (i) Credit risk

• 1) Credit risk exposure

The maximum credit risk exposure of the Company's financial assets is equal to their carrying amount.

• 2) Concentration of credit risk

As of December 31, 2023 and 2022, 57% and 41%, respectively, of the accounts receivable were from the sales to one customer. In addition, for the years ended December 31, 2023 and 2022, 64% and 73%, respectively, of the sales of the Company were concentrated in the Americas and Europe.

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments but excluding the impact of netting agreements.

December 31, 2023 Non-derivative financial liabilities Short-term borrowings Notes payable Accounts payable Other payables (including related parties) Lease liabilities Guarantee deposits received Preference shares (including preference shares dividends) December 31, 2022 Non-derivative financial liabilities Short-term borrowings Notes payable Accounts payable Other payables (including related parties) Lease liabilities Guarantee deposits received Preference shares (including preference shares dividends)	Carrying amount $ 552,000 61 97,953 79,417 79,446 3,207 11 $ 812,095 $ 579,000 221 108,352 64,314 15,299 3,207 11 $ 770,404	Contractual cash flows 554,752 61 97,953 79,417 83,622 3,207 13 819,025 583,185 221 108,352 64,314 15,461 3,207 13 774,753	Less than 1 year 554,752 61 97,953 79,417 18,189 3,107 13 753,492 583,185 221 108,352 64,314 15,230 - 13 771,315	1-2 years - - - - 17,958 100 - 18,058 - - - - 231 3,107 - 3,338	2-5 years - - - - 47,475 - - 47,475 - - - - - 100 - 100	More than 5 years
						- - - - - - -
						-
						- - - - - - -
						-

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

(Continued)

41

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(iii) Currency risk

• 1) Exposure to foreign currency risk

The Company's financial assets and financial liabilities exposed to significant currency risk were as follows:

December 31, 2023 Financial assets: Monetary assets: USD Financial liabilities: Monetary liabilities: USD December 31, 2022 Financial assets: Monetary assets: USD Financial liabilities: Monetary liabilities: USD	Foreign currency $ 23,665 $ 1,605 $ 19,547 $ 1,814	Exchange rate TWD 30.71 726,752 30.71 49,290 30.71 600,288 30.71 55,708

• 2) Sensitivity analysis

The Company's exposure to foreign currency risk arose from cash and cash equivalents, accounts receivable, accounts payable and other payables that were denominated in foreign currencies. 1% appreciation (depreciation) of the TWD against the USD as of December 31, 2023 and 2022, with all other variable factors remaining constant, would have (decreased) increased the net income before tax for the years ended December 31, 2023 and 2022 by $6,775 thousand and $5,446 thousand, respectively. The analysis was performed on the same basis for both periods with all other variable factors remaining constant.

• 3) Foreign exchange gain and loss on monetary item

Due to the numerous types of functional currency, the Company aggregately discloses its exchange gains and losses on monetary items. The Company's exchange gains (losses), including realized and unrealized, were $(2,560) thousand and $56,241 thousand for the years ended December 31, 2023 and 2022, respectively.

(Continued)

42

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

• (iv) Interest rate risk analysis

Please refer to the notes on liquidity risk management for the interest rate exposure of the Company's financial assets and liabilities.

The following sensitivity analysis is based on the risk exposure to interest rates of the derivative and non-derivative financial instruments on the reporting date. For floating-rate instruments, the sensitivity analysis assumes the liabilities with a floating rate as of the reporting date are outstanding for the whole year.

If the interest rate had increased/decreased by 1%, the Company's net income before tax would have decreased/increased by $5,520 thousand and $5,790 thousand for the years ended December 31, 2023 and 2022, respectively, with all other variable factors remaining constant. This is mainly due to the Company's borrowings at floating rates.

• (v) Fair value

• 1) Categories and fair value of financial instruments

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

Financial assets at fair value through other comprehensive income Unlisted stocks (overseas) Financial assets at fair value through other comprehensive income Unlisted stocks (domestic) Unlisted stocks (overseas) Total		December 31, 2023	December 31, 2023	December 31, 2023
	Carrying amount $ 53		Fair value
		Level 1 Level 2 Level 3 - - 53 December 31, 2022			Total
					53
			Fair value
		Level 1 - - -	Level 2 - - -	Level 3 622 57 679	Total
					622 57
					679

• －

• 2) Valuation techniques for financial instruments measured at fair value Non-derivative financial instruments

If there are quoted prices in active markets for financial instruments, the fair value of those prices may be based on the quoted market prices. The market prices announced by Securities Exchange and Over the Counter are the benchmarks used for the fair value of equity instruments and liability instruments traded in active markets.

(Continued)

43

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

If the quoted prices from stock exchanges, brokers, underwriters, industry associations, pricing agencies or authorities are timely and frequently, and that the price fairly presents the market transaction, the financial instrument is regarded to have a quoted price in an active market. If the aforementioned conditions are not fulfilled, the market is regarded as inactive. Generally, large or significantly widen bid-ask spread, or significantly low trading volume are indications of an inactive market.

If the financial instrument held by the Company is an equity investment without an active market, its fair value will have to be derived using the market approach. The fair value can be estimated based on the valuation of the comparable company and the quoted price provided by third parties, as well as the equity value of the comparable company and its operating performances. Whereas the liquidity discount is a significant unobservable input in valuing equity investment, its potential changes will not cause material impact on financial figures, and therefore, its quantitative information need not be disclosed.

• 3) Reconciliation of Level 3 fair values

Balance at January 1, 2023 Total loss recognized: In other comprehensive income Disposal Balance at December 31, 2023 Balance at January 1, 2022 Total loss recognized: In other comprehensive income Balance at December 31, 2022	Fair value through other comprehensive income Unquoted equity instruments $ 679 (45) (581) $ 53 $ 1,803 (1,124) $ 679

The aforementioned total loss was included in unrealized gains and losses from financial assets at fair value through other comprehensive income.

(Continued)

44

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

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

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through other comprehensive income－equity investments without an active market	Valuation technique Comparative listed company	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement ‧ Multiplier of price-to- book ratio (As of December 31, 2023 and 2022 were 0.08 and 0.08~1.00) ‧ Market illiquidity discount rate (As of December 31, 2023 and 2022 were 20%) The estimated fair value would increase (decrease) if ‧ the multiplier were higher (lower) ‧ the market illiquidity discount were lower (higher)

• －

• 5) Fair value measurements in Level 3 sensitivity analysis of reasonably possible alternative assumptions.

The Company's measurement of the fair value of financial instruments is reasonable, but the use of different evaluation models or parameters may result in different results. For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

December 31, 2023 Financial assets at fair value through other comprehensive income Equity investments without an active market December 31, 2022 Financial assets at fair value through other comprehensive income Equity investments without an active market	Input Market liquidity discount at 20% Market liquidity discount at 20%	Assumptions	Other comprehensive income Favorable Unfavorable $ 3 (3) 42 (42)
		5% 5%

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

(Continued)

45

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(u) Financial risk management

• (i) Overview

The Company is exposed to the following risks arising from financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

This note discloses information about the Company's exposure to the aforementioned risks, and its goals, policies, and procedures regarding the measurement and management of these risks. For additional quantitative disclosures of these risks, please refer to the notes regarding each risk disclosed throughout the financial report.

• (ii) Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board is also responsible for developing and monitoring the Company's risk management policies.

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

• (iii) Credit risk

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

• 1) Accounts receivable

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

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes the history of transactions with the counter-party, its financial position, and geographic considerations. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval; these limits are reviewed on a periodic basis. Customers that fail to meet the Company's benchmark creditworthiness may transact with the Company only on a prepayment basis.

(Continued)

46

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

The Company has established an allowance of doubtful accounts to reflect actual and estimated potential losses resulting from uncollectible account and trade receivables. The allowance of doubtful accounts consists primarily of specific losses regarding individual customers and estimates of potential losses based on statistics from payment histories of similar customer groups.

2) Investments

The credit risk exposure in the bank deposits and other financial instruments is measured and monitored by the Company's finance department. Since those who transact with the Company are banks and other external parties with good credit standing, there is no significant credit risk.

3) Guarantees

The Company's policy allows it to provide financial guarantees to companies which it has business relationship with, as well as those companies who hold more than 50% of the voting rights of the company, either directly or indirectly. As of December 31, 2023 and 2022, the Company did not provide any financial guarantees to its subsidiaries.

(iv) Liquidity risk

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

(v) Market risk

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

1) Currency risk

The Company is exposed to currency risk on sales, purchases, and borrowings that are denominated in currencies other than the respective functional currencies of the Company. The currencies used in these transactions are the USD.

The Company relies on foreign exchange transactions at spot rate to ensure the net exposure to foreign exchange risk is maintained within prescribed limits in order to manage market risk.

The Company's foreign currency assets and liabilities are influenced by foreign exchange rates. However, the amount is not significant after offsetting the assets against the liabilities. Therefore, market risk is maintained within prescribed limits.

The Company does not hedge against investments in subsidiaries.

(Continued)

47

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

2) Interest rate risk

The interest rates of the Company's short-term borrowings are floating. Hence, changes in market conditions will cause fluctuations in the effective interest rate and the future cash flow of the aforementioned loans. Because of the stable financial environment in which the Company operates and the stable fluctuating range of the market interest rate, it should not cause significant risks due to the changes in interest rate.

(v) Capital management

The Company's objectives for managing capital are to safeguard the capacity to continue to operate, to provide a return to shareholders and benefits to other related parties, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividend payment capital reduction, issuance of new shares or disposal of assets to settle liabilities.

The Company uses the debt ratio to manage capital. This ratio is debt divided by total assets. Debt is derived from the total liabilities on the balance sheet. Total assets include share capital, capital surplus, retained earnings, other equity, and non-controlling interests plus debt.

The Company's debt ratio at the reporting date was as follows:

Total liabilities Total assets Debt ratio	December 31, 2023 $ 866,639 $ 1,319,878 % 66	December 31, 2022
		810,852
		1,156,255
		% 70

• (w) Investing and financing activities not affecting current cash flow

The Company's non-cash investing and financing activities in 2023 consisted of the acquisition of right-of-use assets under lease. The Company did not have any noncash investing and financing activities in 2022.

For the years ended December 31, 2023 and 2022, the reconciliation of liabilities arising from financing activities was as follows:

Short-term borrowings Lease liabilities Total liabilities from financing activities	January 1, 2023 $ 579,000 15,299 $ 594,299	Cash flows (27,000) (17,770) (44,770)	Non-cash changes Acquisition right-of-use assets - 81,917 81,917	December 31, 2023 552,000 79,446
				631,446

(Continued)

48

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

Short-term borrowings Lease liabilities Total liabilities from financing activities	January 1, 2022 $ 620,000 30,081 $ 650,081	Cash flows (41,000) (14,782) (55,782)	Non-cash changes Other - - -	December 31, 2022 579,000 15,299
				594,299

(7) Related-party transactions

• (a) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Company and the Company's subsidiaries.

• (b) Name and relationship with related party

The following are entities that have had transactions with the Company during the periods covered in the parent company only financial statements:

Name of related party	Relationship with the Company
Durabook Americas Inc.	Subsidiary
Twinhead (Asia) Pte Ltd.	Subsidiary
Twinhead Enterprises (BVI) Ltd.	Subsidiary
Twinhead Kunshan Technology Co., Ltd.	Subsidiary
Kunshan Lun Teng System Co., Ltd.	Subsidiary
NCS Technologies, Inc. (NCS)	Other related parties (The president of NCS is the
	director of the Company)

• (c) Significant transactions with related party

• (i) Operating revenue

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

Subsidiaries Durabook Americas Inc. Kunshan Lun Teng System Co., Ltd. Other related parties NCS	2023 $ 91,626 37,626 984 $ 130,236	2022
		91,514 45,023 1,101
		137,638

(Continued)

49

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

The sales price with subsidiaries and other related parties was not significantly different from normal transaction. The payment term granted to the subsidiaries was 60 days after sales or netted against payables from purchases. In addition, before the operation of Durabook Americas Inc. reaches economic of scale and becomes profitable, Durabook Americas Inc. may make payments according to its funding status without abiding the agreed payment term in order for it to maintain the function that the Company allocated to it. The payment terms granted to other related parties were 30 days after sales, which were not significantly different from that of other customers.

(ii) Purchases

The amounts of significant purchase by the Company from its related parties was as follows:

Subsidiaries Durabook Americas Inc.	2023 $ 968	2022
		667

The purchase price is determined by cost plus a certain margin, as the specifications of products purchased from the related parties were different comparing with those purchased from other suppliers, the pricings were not comparable. The payment terms to non-related parties depend on agreed conditions; while the payment terms to the related parties ranges from 30~60 days after purchase or offsetting the receivables for the sales.

(iii) Accounts receivable-related parties

The details of the Company's accounts receivable from related parties was as follows:

Accounts Accounts receivable－ related parties	Type of related partues Subsidiaries Durabook Americas Inc. Kunshan Lun Teng System Co., Ltd. Other related parties NCS	December 31, 2023 $ 66,673 4,956 165 $ 71,794	December 31, 2022
			60,146 4,345 -
			64,491

As of December 31, 2023 and 2022, the offsetting of long term accounts receivable against the investment of Durabook Americas Inc., accounted for using the equity method amounted to $98,390 thousand and $77,944 thousand, respectively.

(Continued)

50

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(iv) Payables to related parties

The details of the Company's payables to related parties was as follows:

Accounts Other payables－related parties	Type of related partues Subsidiaries Durabook Americas Inc. Kunshan Lun Teng System Co., Ltd.	December 31, 2023 $ 1,225 159 $ 1,384	December 31, 2022
			314 123
			437

(v) Purchase of supplies on behalf

As of December 31, 2023 and 2022, the net amount of accounts receivable derived from the purchase of supplies on behalf of Twinhead Kunshan Technology Co., Ltd. and the accounts payable derived from purchase of goods from Twinhead Kunshan Technology Co., Ltd. in prior years after offsetting against the investment of Twinhead Kunshan Technology Co., Ltd. accounted for using the equity method amounted to $75,702 thousand and $80,292 thousand, respectively (recorded under long-term receivables – related party).

(d) Key management personnel transactions

The compensation of the key management personnel comprised the following:

Short-term employee benefits Post-employment benefits	2023 $ 26,652 216 $ 26,868	2022
		23,809 216
		24,025

(8) Pledged assets

The carrying values of pledged assets were as follows:

Pledged assets Property, plant and equipment Investment property	Object Short-term borrowings Short-term borrowings	December 31, 2023 $ 256,134 139,957 $ 396,091	December 31, 2022
			263,374 141,360
			404,734

(9) Commitments and contingencies: None.

(10) Losses Due to Major Disasters: None.

(11) Subsequent Events: None.

(Continued)

51

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(12) Other

The employee benefit expenses, depreciation, and amortization, categorized by function, were as follows:

By function By nature	Year ended December 31, 2023	Year ended December 31, 2023	Year ended December 31, 2023	Year ended December 31, 2022	Year ended December 31, 2022	Year ended December 31, 2022
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefits
Salary	34,215	135,997	170,212	29,488	121,015	150,503
Labor and health insurance	3,649	9,964	13,613	3,204	9,093	12,297
Pension	1,763	5,389	7,152	1,579	5,076	6,655
Remuneration of directors	-	6,798	6,798	-	5,686	5,686
Others	2,233	3,909	6,142	1,889	3,400	5,289
Depreciation (note)	4,972	20,078	25,050	4,931	17,052	21,983
Amortization	-	13,012	13,012	-	12,194	12,194

Note: Depreciation expenses for investment property recognized under other income and expenses amounted to $1,403 thousand for the years ended December 31, 2023 and 2022, respectively.

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

Number of employees Number of directors who were not employees The average employee benefit The average salaries and wages The adjustments to the average salaries and wages Supervisor remuneration

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

• (a) Director', independent director' and supervisors' remuneration policy

The remuneration of the directors, independent director' and supervisors' of the Company is in accordance with the articles of incorporation. The remuneration of directors is determined by the Board of Directors based on the directors' participation and contribution to the Company's operations, as well as the standards of the industry.

• (b) Managers' and employees' remuneration policy

The salary remuneration policy for managers and employees shall be in accordance with the articles of incorporation and with reference to the usual standards of the industry, and taking into account the reasonableness of their duties, personal performance, the Company's operating performance and future risks, the salaries shall be appointed and adjusted from time to time in accordance with the Company's "Salary Grade Table". The year-end bonuses are based on the annual performance.

(Continued)

52

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

(13) Other disclosures

• (a) Information on significant transactions:

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Company for the years ended December 31, 2023:

• (i) Loans extended to other parties: None.

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

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

(in	(in	(in	(in	Thousands of New Taiwan Dollars / in thousands of sharers)	Thousands of New Taiwan Dollars / in thousands of sharers)	Thousands of New Taiwan Dollars / in thousands of sharers)	Thousands of New Taiwan Dollars / in thousands of sharers)	Thousands of New Taiwan Dollars / in thousands of sharers)
Name of holder	Nature and name of security	Relationship with the security issuer	Account name	Ending balance				Remarks
				Number of shares	Book value	Holding percentage	Market value
The Company	I1, Inc.	-	Non-current financial assets at fair value through profit or loss	400	-	2.125 %	-
The Company	Trigem Computer Inc.	-	Non-current financial assets at fair value through profit or loss	-	-	0.006 %	-
The Company	Ambicion Co., Ltd.	-	Non-current financial assets at fair value through other comprehensive income	1	53	0.691 %	53
The Company	Adolite Inc.	-	Non-current financial assets at fair value through other comprehensive income	400	-	0.535 %	-
The Company	Durabook Federal, Inc	-	Non-current financial assets at fair value through other comprehensive income	19	-	19.000 %	-

• (iv) Accumulated holding amount of a single security in excess of NT$300 million or 20% of the Company's issued share capital: None.

• (v) Acquisition of real estate in excess of NT$300 million or 20% of the Company's issued share capital: None.

• (vi) Disposal of real estate in excess of NT$300 million or 20% of the Company's issued share capital: None.

• (vii) Sales to and purchases from related parties in excess of $100 million or 20% of the Company's issued share capital:

			(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)
Name of company	Counter-party	Relationship	Transaction details				Status and reason for deviation from arm's- length transaction		Accounts / notes receivable (payable)		Remarks
			Purchase / (sale)	Amount	Percentage of total purchases (sales)	Credit period	Unit price	Credit period	Balance	Percentage of total accounts / notes receivable (payable)
The Company	Durabook Americas Inc.	Subsidiary	(Sale)	(91,626)	(9) %	The receivables can be offset with accounts payable from purchase or be O/A 60 days	No significant differences	The receivables can be offset with accounts payable from purchase or be O/A 60 days	66,673 (Note 1)	35 %
Durabook Americas Inc.	The Company	Parent company	Purchase	91,626	96 %	The payables can be offset with accounts receivables from sales or be O/A 60 days	No significant differences	The payables can be offset with accounts receivables from sales or be O/A 60 days	(165,063)	(99) %

Note 1: The Company's accounts receivable was offset against the credit balance of the investments of Durabook Americas Inc., accounted for using the equity method.

• (viii) Receivables from related parties in excess of NT$100 million or 20% of the Company's issued share capital:

					(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)	(in Thousands of New Taiwan Dollars)
Name of related party	Counter-party	Relationship	Balance of receivables from related party (Notes 1 and 5)	Turnover rate	Overdue amount		Amounts received in subsequent period (Note 2)	Allowances for bad debts
					Amount	Action taken
The Company	Twinhead Kunshan Technology Co., Ltd.	Subsidiary	313,042 (Note 3)	-	313,042 (Note 3)	The receivable has been traced and recognized as long-term accounts receivable	-	-
The Company	Durabook Americas Inc.	Subsidiary	165,063 (Note 4)	0.60	98,390 (Note 4)	The receivable has been traced and recognized as long-term accounts receivable	9,194	-

Note 1: Includes the amount recorded under long-term accounts receivables.

Note 2: Until March 13, 2024.

Note 3: It represents the net amount of accounts receivable of the Company derived from the purchase of supplies on behalf of Twinhead Kunshan Technology Co., Ltd. and accounts payable derived from purchase of goods from Twinhead Kunshan Technology Co., Ltd. in prior years. Twinhead Kunshan Technology Co., Ltd. pays the Company with the rental income according to the capital plan.

(Continued)

53

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

Note 4: As of December 31, 2023, the Company's accounts receivable from Durabook Americas Inc. were $165,063 thousand. The overdue receivables of $98,390 thousand were reclassified to long-term receivables.

• (ix) Information regarding trading in derivative financial instruments: None.

(b) Information on investees:

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

Mainland China):	Mainland China):	Mainland China):	Mainland China):
				(in Thousands of New Taiwan Dollars / in Thousands of shares)
Name of investor	Name of investee	Location	Scope of business	Original cost		Ending balance			Net income (loss) of investee	Investment income (losses)	Remarks
				December 31, 2023	December 31, 2022	Shares	Percentage of ownership	Book value
The Company	Durabook Americas Inc.	U.S.A.	The trading of computers and computer peripheral equipment	73,442	73,442	769	% 80.000	(7,132) (Note 2)	(27,145)	(21,716)	Subsidiary
The Company	Twinhead (Asia) Pte Ltd.	Singapore	Investment holding	539,919	539,919	5,872	% 100.000	- (Note 3)	9,359	9,359	Subsidiary
Twinhead (Asia) Pte Ltd.	Twinhead Enterprises (BVI) Ltd.	British Virgin Islands	Investment holding	1,388	1,388	50	% 100.000	1,194	(71)	(71)	Subsidiary

Note 1: The exchange rate as of December 31, 2023 : USD1=TWD30.71.

Note 2: The Compnay’s accounts receivable was offset against the credit balance of the investments of Durabook Americas Inc., accounted for using the equity method.

• Note 3: The Company’s accounts receivable and accounts payable were derived from the purchasing of supplies on behalf of, and the purchasing of goods from, Twinhead Kunshan Technology Co., Ltd. resulting in the net accounts receivable, which was offset against the credit balance of the investment, accounted for using the equity method of Twinhead Kunshan Technology Co., Ltd.

• (c) Information on investment in Mainland China:

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

					(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)	(in Thousands of New Taiwan Dollars / in thousands of USD)
Name of investee in Mainland China	Scope of business	Issued capital	Method of investment (Note 1)	Cumulative investment (amount) from Taiwan as of January 1, 2023	Investment flow during current period		Cumulative investment (amount) from Taiwan as of December 31, 2023	Net income (losses) of investee	Direct / indirect investment holding percentage	Investment income (losses) (Note 2)	Book value as of December 31, 2023	Accumulated remittance of earnings in current period
					Remittance amount	Repatriation amount
Twinhead Kunshan Technology Co., Ltd.	Sales and production of PDAs, calculators and their parts, and computer keyboards	383,875 (USD12,500)	(2)	383,875 (USD12,500)	-	-	383,875 (USD12,500)	10,955	100.00 %	10,955	(255,804)	-
Twinhead Huazhong Technology Limited Corp.	Installation and sales of laptop parts and accessories; sales and production of related software	122,840 (USD4,000)	(2)	61,420 (USD2,000)	-	-	61,420 (USD2,000)	-	- %	-	-	-
Kunshan Lun Teng System Co., Ltd.	Import and export of computers, electronic components, and digital cameras, and technical consultant services	6,449 (USD210)	(2)	6,449 (USD210)	-	-	6,449 (USD210)	(1,039)	100.00 %	(1,039)	19,341	-
Note 1: The method of investment is divided into the following four categories: (1) Remittance from third-region companies to invest in Mainland China. (2) Through transferring the investment to third-region existing companies then investing in Mainland China (Through Twinhead (Asia) Ptd Ltd. invest in Mainland china). (3) Through the establishment of third-region companies then investing in Mainland China. (4) Other methods: EX: delegated investments. Note 2: The investment income (losses) were recognized under the equity method and based on the financial statements audited by the auditor of the Company. Note 3: The exchange rate as of December 31, 2023 : USD1=TWD30.71.

• (ii) Limitation on investment in Mainland China:

Accumulated investment amount in Mainland China as ofDecember 31, 2023 (Note 1)	Investment (amount) approved by Investment Commission, Ministry of Economic Affairs	Maximum investment amount set by Investment Commission, Ministry of Economic Affairs
491,667 (USD16,010)	491,667 (USD16,010)	- (Note 3)

Note 1: Including the amount of USD1,300 thousand wired to Twinhead Beijing Technology Co., Ltd.

Note 2: The exchange rate as of December 31, 2023: USD1=TWD30.71.

(Continued)

54

TWINHEAD INTERNATIONAL CORP. Notes to the Financial Statements

• Note 3: In accordance with the "Regulations on Permission for Investment or Technical Cooperation in Mainland China" and the Principles for Examination of Applications for Investment or Technical Cooperation in Mainland China amended and ratified by the Executive Yuan on August 22, 2008, the Company met the criteria for operational headquarters under the Statute for Industrial Innovation and obtained approval from the Industrial Development Bureau Ministry of Economic Affairs, on June 8, 2023. As it has an operational headquarters status, the Company is not subject to the limitation as to the amount of investment in Mainland China during the period from June 5, 2023 to June 4, 2026.

• (iii) Significant transactions with investees in Mainland China:

As of December 31, 2023, the net amount of accounts receivable derived from the purchase of supplies on behalf of Twinhead Kunshan Technology Co., Ltd. and the accounts payable derived from purchase of goods from Twinhead Kunshan Technology Co., Ltd. in prior years after offsetting against the investment of Twinhead Kunshan Technology Co., Ltd. accounted for using equity method amounted to $75,702 thousand (recognized under long term receivable － related parties). As the net receivables were outstanding for a period exceeding the normal payment term, the Company reclassified them under long term accounts receivable.

• (d) Major shareholders:

Major shareholders:	Major shareholders:	Major shareholders:
Unit: share
Shareholding Shareholder’s Name	Shares	Percentage
Kaos Enterprise Co., Ltd.	4,966,643	% 16.02
Protegas Futuro Holdings, LLC	4,387,943	% 14.15
OutstandingCorporation	2,055,600	% 6.63
KANG EEL SHIUAN Co., Ltd.	1,739,158	% 5.61

(14) Segment information

Please refer to the consolidated financial statements for the year ended December 31, 2023.

55

Twinhead International Corp.

Statement of cash and cash equivalents

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Petty cash Bank deposits	Description Amount $ 198 Demand deposits 33,442 Checking deposits 1,886 Foreign currency deposits USD2,550thousand,＠30.71 78,305 Other foreign currency deposits 300 Subtotal 113,933 Time deposits (Maturity date:January 3, 2024 to January 29, 2024) USD7,104thousand,＠30.71 218,173 $ 332,304

56

Twinhead International Corp.

Statement of trade receivables (including related parties)

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Customer Related parties: Durabook Americas Inc. Kunshan Lun Teng System Co., Ltd. NCS Technologies, Inc. Non-related parties: A B Others (amount individually less than 5%)	Description Arising from operating activities 〃 〃 Arising from operating activities 〃 〃

57

Twinhead International Corp.

Statement of inventories

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Finished goods Work in progress Raw materials and supplies Goods in transit Total Less: allowance for inventory valuation	Amount Cost Net realizable value Note $ 80,743 70,641 Market value is determined at net realizable value 8,185 8,185 〃 206,776 167,370 〃 4,306 4,306 〃 300,010 250,502 58,750 $ 241,260
	Cost $ 80,743 8,185 206,776 4,306 300,010 58,750 $ 241,260

Statement of prepayments

Item Other prepayments Vat-input tax Prepaid insurance Advance payments	Description	Amount Note $ 2,727 2,300 1,358 105 $ 6,490

58

Twinhead International Corp.

Statement of other current assets

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Temporary payments Prepaid income tax Other receivable	Description	Amount Note $ 738 318 510 $ 1,566

59

Twinhead International Corp.

Statement of financial assets measured at fair value through other

comprehensive income - non-current

For the year ended December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Company EUROC Venture Capital Corp. Ambicion Co., Ltd. Adolite Inc. Durabook Federal, Inc.	Balance Beginning of period Shares (in thousands) Fair value 80 $ 622 1 57 400 - 19 - $ 679	Increase Shares (in thousands) Amount - - - - - - - - -	Decrease Shares (in thousands) Amount (Note 1) 80 622 (Note 2) - 4 (Note 1) - - - - 626	Balance End of period Shares (in thousands) Fair value - - 1 53 400 - 19 - 53	Pledged as collateral Note None 〃 〃 〃
	Shares (in thousands)	Shares (in thousands) - - - -	Shares (in thousands) 80 - - -	Shares (in thousands) - 1 400 19
	80 1 400 19

Note 1: The decrease was unrealized losses from investment in equity instruments measured at fair value through other comprehensive income $4 thousand. Note 2: Investee company completed the liquidation process. The decrease represented a cumulative loss of $41 thousand and the liquidation proceed of $581 thousand.

60

Twinhead International Corp.

Statement of changes in investments accounted for using the equity method

For the year ended December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Company Durabook Americas Inc. Twinhead (Asia) Pte Ltd.	Balance Beginning of period Shares (in thousands) Amount 769 $ (5,483) (Note 3) 5,872 - $ (5,483)	Increase Shares (in thousands) Amount (Note 1) - 20,773 - 9,438 30,211	Decrease Shares (in thousands) Amount (Note 2) - 22,422 - 9,438 31,860	Balance End of period Shares (in thousands) Ownership (%) Amount 769 80.000 (7,132) (Note 3) 5,872 100.000 - (7,132)	Balance End of period Shares (in thousands) Ownership (%) Amount 769 80.000 (7,132) (Note 3) 5,872 100.000 - (7,132)	Market value or Book value Unit Price Gross Price - (100,034) - (234,832) (334,866)	Pledged as collateral Note None 〃
		Shares (in thousands) - -	Shares (in thousands) - -	Shares (in thousands) 769 5,872	Ownership (%) 80.000 100.000
	769 5,872

Note 1: The amount is derived from $9,359 thousand of investment gain from subsidiaries, $79 thousand of unrealized gain from sales, $327 thousand of translation effects from foreign operations, $20,446 thousand of the changes in long-term accounts receivable from related parties offsetting with the investments accounted for using the equity method. Note 2: The amount is derived from $21,716 thousand of investment loss from subsidiaries, $706 thousand of unrealized loss from sales $1,260 thousand of translation effects from foreign operations, $8,178 thousand of the changes in long-term accounts receivable from related parties offsetting with the investments accounted for using the equity method. Note 3: Credit balance of investments accounted for under the equity method was recognized under other non-current liabilities.

61

Twinhead International Corp.

Statement of other non-current assets

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Description Unamortized mold

Amount Note $ 22,381

62

Twinhead International Corp.

Statement of short-term borrowings

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Type Secured bank loans 〃 〃 〃 〃 Unsecured loans 〃 〃	Lender First Bank Nanmen Branch Hua Nan Bank Hsin Tien Branch Chang Hwa Bank Pei Hsin Branch Taiwan Cooperative Bank Baociao Branch Land Bank of Taiwan Hsin Tien Branch Mega International Commercial Bank Neihu Branch Bank of Taiwan Yanping Branch The Shanghai Commerical & Savings Bank Hsin Yi Branch	Ending Balance $ 200,000 140,000 70,000 52,000 - 30,000 60,000 - $ 552,000	Term Within one year 〃 〃 〃 〃 Within one year 〃 〃	Interest Rate (%) 2.13 2.13 2.13 2.13 - 2.13 2.12 -	Line of Credit 292,130 200,000 155,710 150,000 100,000 50,000 60,000 70,000	Collateral Note Secured Please refer to note 8 〃 〃 〃 〃 〃 〃 〃 〃 - - - - - -

63

Twinhead International Corp.

Statement of notes payable

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Company Non-related parties: C Company D Company	Description Arising from operating activities 〃	Amount Note $ 39 22 $ 61

Statement of trade payables

Company Non-related parties: E Company F Company G Company H Company I Company Others (amount individually less than 5%)	Description Arising from operating activities 〃 〃 〃 〃 〃	Amount Note $ 9,094 7,558 7,333 6,761 5,767 61,440 $ 97,953

64

Twinhead International Corp.

Statement of other payables (including related parties)

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Company Related parties: Durabook Americas Inc. Kunshan Lun Teng System Co., Ltd. Non-related parties: Accrued year-end bonuses Wages and salaries payable Remuneration to employees Compensated absence liabilities Compensation due to directors and supervisors Others (amount individually less than 5%) Subtotal	Description Amount $ 1,225 159 1,384 26,133 12,640 9,816 8,271 3,681 17,492 78,033 $ 79,417

Statement of provisions

Item Current: Short-term provision for sales returns and allowances Short term provision for warranty Others (amount individually less than 5%) Non-Current: Long-term provision for decommissioning Long-term provision for warranty	Description	Amount Note $ 5,093 4,380 286 $ 9,759 $ 3,729 3,102 $ 6,831

65

Twinhead International Corp.

Statement of other current liabilities

December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Temporary receipts Receipts under custody	Description	Amount Note $ 11,366 2,259 $ 13,625

Statement of operating revenue

For the year ended December 31, 2023

Item Laptop Mainboard Sales of materials and others	Quantity (in unit)	Amount Note $ 871,094 99,031 75,622 $ 1,045,747
	19,662 31,556 -

Note: The amount was net of sales returns and allowances.

66

Twinhead International Corp.

Statement of operating costs

For the year ended December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Cost of goods sold (in-house manufacturing): Direct raw material Beginning raw material inventory (including beginning good in transit $2,453 thousand) Add: Raw material purchased Less: Ending raw material inventory (including ending good in transit $4,306 thousand) Scrapping of raw material Raw materials sold Transferred to manufacturing and operating expenses Others Subtotal Direct labor Manufacturing expenses Manufacturing costs Add: Beginning work-in-process Less: Ending work-in-process Cost of finished goods Add: Beginning finished goods Less: Ending finished goods Transferred to manufacturing and operating expenses Others Total: cost of goods sold (in-house manufacturing) Costs of raw material sold Decline in market value of inventory Operating costs	Amount	Amount
	Subtotal Total $ 389,337 624,830 211,082 192,536 2,998 6,832 594 600,125 11,371 53,263 664,759 13,351 8,185 669,925 81,803 80,743 1,346 23 669,616 2,998 5,991 $ 678,605	Total
		669,616 2,998 5,991

67

Twinhead International Corp.

Statement of selling expenses

For the year ended December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Salaries Advertising expense Depreciation Others	Description	Amount Note $ 24,627 9,854 2,824 16,441 $ 53,746

Statement of administrative expenses

Item Salaries Professional service expenses Depreciation Others	Description	Amount Note $ 63,412 7,112 6,563 34,939 $ 112,026

68

Twinhead International Corp.

Statement of researchand development expenses

For the year ended December 31, 2023

(Expressed in thousands of New Taiwan Dollars)

Item Salaries Testing and inspection fee Mold charge Depreciation Development consumables Others	Description	Amount Note $ 47,958 15,038 13,012 10,691 7,202 9,532 $ 103,433

For statement of changes in property, plant and equipment, please refer to note 6(f).

For statement of changes in accumulated depreciation of property, plant and equipment, please refer to note 6(f). For statement of changes in accumulated impairment of property, plant and equipment, please refer to note 6(f). For statement of changes in right-of-use assets, please refer to note 6(g).

For statement of changes in accumulated depreciation of right-of-use assets, please refer to note 6(g).

For statement of changes in investment property, please refer to note 6(h).

For statement of changes in accumulated depreciation of investment property, please refer to note 6(h).

For statement of other income, please refer to note 6(s).

For statement of other gain and losses, net, please refer to note 6(s).

For statement of finance cost, please refer to note 6(s).