Weikeng — Interim / Quarterly Report 2020

Dec 14, 2020

1

Stock Code:3033

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors’ Review Report For the Nine Months Ended September 30, 2020 and 2019

Address: 11F., No.308, Sec.1, Neihu Rd., Neihu Dist., Taipei City Telephone: (02)2659-0202

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

2

Table of contents

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

Page

1 2 3 4 5 6 7 8 8 8～9 9～10 11 11～37 37～38 38 38 39 39 39～40 40～42 43 43～44 44 44

3

==> 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) Telephone 電話 + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Fax 傳真 + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) Internet 網址 home.kpmg/tw

Independent Auditors’ Review Report

To the Board of Directors of Weikeng Industrial Co., Ltd.:

Introduction

We have reviewed the accompanying consolidated balance sheets of Weikeng Industrial Co., Ltd. and its subsidiaries as of September 30, 2020 and 2019, and the related consolidated statements of comprehensive income for the three months and nine months ended September 30, 2020 and 2019, as well as the changes in equity and cash flows for the nine months ended September 30, 2020 and 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

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

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of Weikeng Industrial Co., Ltd. and its subsidiaries as of September 30, 2020 and 2019, and of its consolidated financial performance for the three months and nine months ended September 30, 2020 and 2019, as well as its consolidated cash flows for the nine months ended September 30, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “ Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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

The engagement partners on the review resulting in this independent auditors’ review report are Jui-Lan Lo and Yiu-Kwan Au.

KPMG

Taipei, Taiwan (Republic of China) November 11, 2020

Notes to Readers

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

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

4

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards as of September 30, 2020 and 2019

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2020, December 31, and September 30, 2019

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note (6)(a)) 1110 Financial assets at fair value through profit or loss - current (note (6)(b)) 1170 Notes and accounts receivable, net (note (6)(d)) 1200 Other receivables (notes (6)(d), (6)(e) and (7)) 1300 Inventories, net (note (6)(f)) 1470 Prepaid expenses and other current assets Non-current assets: 1517 Financial assets at fair value through other comprehensive income－non-current (note (6)(c)) 1600 Property, plant and equipment (note (6)(g)) 1780 Intangible assets 1755 Right-of-use assets (note (6)(h)) 1840 Deferred tax assets 1900 Other non-current assets Total assets	September 30, 2020 Amount % $ 2,235,555 10 636 - 10,267,903 45 950,517 4 8,186,668 36 324,663 2 21,965,942 97 44,326 - 137,072 1 53,292 - 203,337 1 239,233 1 74,773 - 752,033 3 $ 22,717,975 100	December 31, 2019 Amount % 2,336,361 10 522 - 8,223,453 35 1,243,839 6 10,479,000 45 276,752 1 22,559,927 97 45,162 - 149,291 1 57,519 - 279,613 1 216,156 1 75,782 - 823,523 3 23,383,450 100	September 30, 2019 Amount % 2,278,024 10 581 - 8,226,135 37 358,784 2 10,440,384 46 340,815 1 21,644,723 96 50,127 - 151,645 1 64,950 - 316,365 2 146,990 1 77,535 - 807,612 4 22,452,335 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note (6)(i)) 2120 Financial liabilities at fair value through profit or loss - current (note (6)(b)) 2170 Notes and accounts payable 2200 Other payables (notes (6)(j) and (7)) 2230 Current tax liabilities 2130 Contract liabilities -current (note (6)(r)) 2280 Current lease liabilities (note (6)(l)) 2300 Other current liabilities Non-current liabilities: 2570 Deferred tax liabilities 2580 Non-current lease liabilities (note (6)(l)) 2640 Non-current net defined benefit liabilities (note (6)(n)) 2670 Other non-current liabilities Total liabilities Equity (note (6)(p)): 3100 Ordinary share 3200 Capital surplus 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest: 3410 Exchange differences on translation of foreign financial statements 3420 Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total equity Total liabilities and equity	September 30, 2020		December 31, 2019		September 30, 2019
								Amount % 11,327,173 51 3,087 - 3,765,004 17 467,063 2 93,911 - 85,345 - 135,033 1 191,783 1 16,068,399 72 335,359 1 181,893 1 128,006 - 211 - 645,469 2 16,713,868 74 3,677,513 16 884,335 4 864,760 4 138,615 1 302,720 1 (49,289) - (80,187) - (129,476) - 5,738,467 26 22,452,335 100

See accompanying notes to consolidated financial statements.

5

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months and nine months ended September 30, 2020 and 2019

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

4100 Net sales revenue (note (6)(r) and note (7)) 5000 Cost of sales (note (6)(f)) Gross profit Operating expenses (notes (6)(l), (6)(m), (6)(n), note (7) and (12)): 6100 Selling expenses 6200 Administrative expenses 6450 Expected credit losses (gains) (note (6)(d)) Net operating income Non-operating income and expenses: 7100 Interest income 7010 Other income (note (7)) 7235 Gains (losses) on financial assets (liabilities) at fair value through profit or loss (note (6)(t)) 7230 Foreign currency exchange gains (losses), net 7050 Financial costs (note (6)(l)) 7590 Miscellaneous disbursements 7900 Profit before tax 7950 Income tax expenses (note (6)(o)) 8200 Profit Other comprehensive income: 8310 Items 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 relating to components of other comprehensive income that will not be reclassified to profit or loss 8360 Items that may be reclassified subsequently to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Less: income tax relating to components of other comprehensive income that may be reclassified to profit or loss (note (6)(o)) Other comprehensive income, net 8500 Comprehensive income Earnings per share: (note (6)(q)) 9750 Basic earnings per share 9850 Diluted earnings per share	For the three months ended September 30 2020 2019 Amount % Amount % $ 17,265,545 100 13,080,286 100 16,411,670 95 12,343,802 94 853,875 5 736,484 6 436,506 2 399,147 3 123,604 1 103,900 1 18,904 - 10,800 - 579,014 3 513,847 4 274,861 2 222,637 2 753 - 891 - 10,575 - 1,834 - (99) - 2,989 - 73,189 - (24,798) - (51,380) - (105,975) (1) (173) - - - 32,865 - (125,059) (1) 307,726 2 97,578 1 73,162 1 26,144 - 234,564 1 71,434 1 (489) - (17) - - - - - (489) - (17) - (47,808) - (20,840) - (9,561) - (4,168) - (38,247) - (16,672) - (38,736) - (16,689) - $ 195,828 1 54,745 1 $ 0.64 0.19 $ 0.63 0.19	For the nine months ended September 30 2020 2019 Amount % Amount % 42,824,338 100 35,163,817 100 40,540,230 95 32,995,269 94 2,284,108 5 2,168,548 6 1,161,595 3 1,182,787 3 332,506 1 324,540 1 34,688 - 5,310 - 1,528,789 4 1,512,637 4 755,319 1 655,911 2 3,630 - 4,145 - 39,908 - 17,786 - 1,815 - 1,771 - 94,015 - (33,667) - (205,100) - (331,568) (1) (442) - (23) - (66,174) - (341,556) (1) 689,145 1 314,355 1 159,895 - 82,137 - 529,250 1 232,218 1 1,143 - (12,956) - - - - - 1,143 - (12,956) - (114,822) - 27,620 - (22,964) - 5,524 - (91,858) - 22,096 - (90,715) - 9,140 - 438,535 1 241,358 1 1.44 0.63 1.42 0.63
	2020 Amount % $ 17,265,545 100 16,411,670 95 853,875 5 436,506 2 123,604 1 18,904 - 579,014 3 274,861 2 753 - 10,575 - (99) - 73,189 - (51,380) - (173) - 32,865 - 307,726 2 73,162 1 234,564 1 (489) - - - (489) - (47,808) - (9,561) - (38,247) - (38,736) - $ 195,828 1 $ 0.64 $ 0.63	2020 Amount % 42,824,338 100 40,540,230 95 2,284,108 5 1,161,595 3 332,506 1 34,688 - 1,528,789 4 755,319 1 3,630 - 39,908 - 1,815 - 94,015 - (205,100) - (442) - (66,174) - 689,145 1 159,895 - 529,250 1 1,143 - - - 1,143 - (114,822) - (22,964) - (91,858) - (90,715) - 438,535 1 1.44 1.42

See accompanying notes to consolidated financial statements.

6

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

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2019 Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve reversed Cash dividends Stock dividends Consolidated net income for the nine months ended September 30, 2019 Other comprehensive income for the nine months ended September 30, 2019 Total comprehensive income for the nine months ended September 30, 2019 Conversion of convertible bonds Balance at September 30, 2019 Balance at January 1,2020 Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends Consolidated net income for the nine months ended September 30, 2020 Other comprehensive income for the nine months ended September 30, 2020 Total comprehensive income for the nine months ended September 30, 2020 Balance at September 30, 2020	Ordinary shares $ 3,448,980 - - - 207,484 207,484 - - - 21,049 $ 3,677,513 $ 3,677,513 - - - - - - - $ 3,677,513	Capital surplus 872,702 - - - - - - - - 11,633 884,335 884,335 - - - - - - - 884,335	Retained earnings Legal reserve Special reserve Unappropriated retained earnings 802,354 143,162 690,010 62,406 - (62,406) - (4,547) 4,547 - - (354,165) - - (207,484) 62,406 (4,547) (619,508) - - 232,218 - - - - - 232,218 - - - 864,760 138,615 302,720 864,760 138,615 329,162 25,866 - (25,866) - 90,844 (90,844) - - (212,452) 25,866 90,844 (329,162) - - 529,250 - - - - - 529,250 890,626 229,459 529,250	Retained earnings Legal reserve Special reserve Unappropriated retained earnings 802,354 143,162 690,010 62,406 - (62,406) - (4,547) 4,547 - - (354,165) - - (207,484) 62,406 (4,547) (619,508) - - 232,218 - - - - - 232,218 - - - 864,760 138,615 302,720 864,760 138,615 329,162 25,866 - (25,866) - 90,844 (90,844) - - (212,452) 25,866 90,844 (329,162) - - 529,250 - - - - - 529,250 890,626 229,459 529,250	Other equity interest Exchange differences on Unrealized gains (losses) from financial assets measured at fair value translation of foreign financial statements through other comprehensive income (71,385) (67,231) - - - - - - - - - - - - 22,096 (12,956) 22,096 (12,956) - - (49,289) (80,187) (144,308) (85,152) - - - - - - - - - - (91,858) 1,143 (91,858) 1,143 (236,166) (84,009)	Total equity
					Exchange differences on translation of foreign financial statements (71,385) - - - - - - 22,096 22,096 - (49,289) (144,308) - - - - - (91,858) (91,858) (236,166)
			Legal reserve 802,354 62,406 - - - 62,406 - - - - 864,760 864,760 25,866 - - 25,866 - - - 890,626	Special reserve 143,162 - (4,547) - - (4,547) - - - - 138,615 138,615 - 90,844 - 90,844 - - - 229,459
						5,818,592 - - (354,165) - (354,165) 232,218 9,140 241,358 32,682 5,738,467 5,664,925 - - (212,452) (212,452) 529,250 (90,715) 438,535 5,891,008

See accompanying notes to consolidated financial statements.

7

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

Reviewed only, not audited in accordance with generally accepted auditing standards

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit (gains) losses Net (gains) losses on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Others Changes in operating assets and liabilities: Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in notes and accounts receivable Decrease in inventories Decrease in other receivables Increase in prepaid expenses and other current assets Decrease in notes and accounts payable Decrease in other payable Increase (decrease) in contract liabilities and other current liabilities Others Total changes in operating assets and liabilities Total adjustments Cash flow from (used in) operations Interest received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Acquisition of property, plant and equipment Decrease (increase) in refundable deposits Acquisition of intangible assets Others Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term loans Decrease in guarantee deposits received Payment of lease liabilities Cash dividends paid Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the nine months ended September 30, 2020 2019 $ 689,145 314,355 114,814 115,416 17,201 4,085 34,688 5,310 (1,815) (1,771) 205,100 331,568 (3,630) (4,145) 14 6 366,372 450,469 (2,339) 5,397 (2,079,138) 192,420 2,292,332 2,964,438 293,322 858,018 (47,853) (43,837) 456,324 3,976,436 (1,696,973) (1,867,820) (224,147) (1,051,506) 142,421 (12,174) (4,430) (3,544) (1,783,129) (2,935,044) (1,326,805) 1,041,392 (960,433) 1,491,861 (271,288) 1,806,216 3,630 4,145 (222,975) (348,938) (138,400) (135,249) (629,033) 1,326,174 (1,483) (8,489) 1,008 (572) (29,330) (3,296) 1,979 175 (27,826) (12,182) 983,498 (410,302) (30) (33) (101,253) (102,025) (212,452) (354,165) 669,763 (866,525) (113,710) 27,656 (100,806) 475,123 2,336,361 1,802,901 $ 2,235,555 2,278,024

2020 $ 689,145 114,814 17,201 34,688 (1,815) 205,100 (3,630) 14 366,372 (2,339) (2,079,138) 2,292,332 293,322 (47,853) 456,324 (1,696,973) (224,147) 142,421 (4,430) (1,783,129) (1,326,805) (960,433) (271,288) 3,630 (222,975) (138,400) (629,033) (1,483) 1,008 (29,330) 1,979 (27,826) 983,498 (30) (101,253) (212,452) 669,763 (113,710) (100,806) 2,336,361 $ 2,235,555

See accompanying notes to consolidated financial statements.

8

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

Reviewed only, not audited in accordance with generally accepted auditing standards as of September 30, 2020 and 2019 WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

September 30, 2020 and 2019

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

(1) Company history

Weikeng Industrial Co., Ltd. (the Company) was incorporated in Taiwan as a company limited by shares in January 1977 and registered under the Ministry of Economic Affairs, R.O.C. The address of the Company’ s registered office is 11F, No.308 Sec. 1, Neihu Rd., Neihu Dist., Taipei City. The major activities of the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) are the purchase and sale of electronic components and computer peripherals, technical service, and the import-export trade business. Please refer to note (4)(b) for related information. The Company’s common shares were listed on the Taiwan Stock Exchange (TSE).

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

These consolidated financial statements were reported to the board of directors and issued on November 11, 2020.

(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. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020.

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020
Amendments to IFRS 16 “Covid-19-Related Rent Concessions”	June 1, 2020

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2021:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying	January 1, 2021
IFRS 9”

(Continued)

9

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group assesses that the adoption of the abovementioned amendments would not have any material impact on its consolidated financial statements.

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

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an	Effective date to
Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2023
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	January 1, 2023
Amendments to IAS 16 “Property, Plant and Equipment－Proceeds before	January 1, 2022
Intended Use”
Amendments to IAS 37 “Onerous Contracts－Cost of Fulfilling a Contract”	January 1, 2022
Annual Improvements to IFRS Standards 2018-2020	January 1, 2022
Amendments to IFRS 3 “Reference to the Conceptual Framework”	January 1, 2022
Amendments to IFRS 17 “Insurance Contracts”	January 1, 2023
Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate	January 1, 2021
Benchmark Reform－Phase 2”

The above new, revised on amended standards and interpretations which issued by IASB but not yet endorsed by the FSC may not be relevant to the Group.

(4) Summary of significant accounting policies

• (a) Statement of compliance

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

Except the following accounting policies mentioned below, the significant accounting policies adopted in the consolidated financial statement are the same as those in the consolidated financial statement for the year ended December 31, 2019. For the related information, please refer to note (4) of the consolidated financial statement for the year ended December 31, 2019.

(Continued)

10

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) Basis of Consolidation

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

Name of Investor	Name of Subsidiary	Nature of operation	Shareholding	Shareholding
			September 30, 2020	December 31, 2019 September 30, 2019 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100
The Company 〃 〃 WKI 〃 WKS	Weikeng International Co., Ltd. (WKI) Weikeng Technology Co., Ltd. (WTC) Weikeng Technology Pte. Ltd. (WTP) Weikeng International (Shanghai) Co., Ltd. (WKS) Weitech International Co., Ltd. (Weitech) Weikeng Electronic Technology (Shanghai) Co., Ltd. (WKE)	Electronic components computer peripherals products distribution and technical support Electronic components and technical support 〃 Electronic components computer peripherals products distribution and technical support Import and export trade of electronic components Electronic technology development and technical advisory	% 100 % 100 % 100 % 100 % 100 % 100

(c) Income Taxes

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

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

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

• (d) Employee benefits

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

(Continued)

11

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The preparation of the consolidated financial statements in conformity with the Regulations and IFRSs (in accordance with IAS 34 "Interim Financial Reporting" and endorsed by the FSC) requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The preparation of the consolidated financial statements, estimates and underlying assumptions are reviewed on an ongoing basis which are in conformity with the consolidated financial statements for the year ended December 31, 2019. For the related information, please refer to note (5) of the consolidated financial statements for the year ended December 31, 2019.

(6) Explanation of significant accounts

Except for the following disclosures, there is no significant difference as compared with those disclosed in the consolidated financial statements for the year ended December 31, 2019. Please refer to note (6) of the 2019 annual consolidated financial statements.

• (a) Cash and cash equivalents

September 30, 2020 Cash on hand $ 488 Checking accounts and demand deposits 2,235,067 $ 2,235,555	December 31, 2019 488 2,335,873 2,336,361	September 30, 2019
		499 2,277,525
		2,278,024

Please refer to Note (t) for the sensitivity analysis, exchange rate and interest rate risk of the financial assets of the Group.

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

September 30, 2020 Financial assets mandatorily measured at fair value through profit or loss－current: Derivative instruments not used for hedging Forward exchange contracts $ - Financial assets measured at fair value through profit or loss－current: Non-derivative financial assets Stock listed on domestic markets 636 $ 636	December 31, 2019 - 522 522	September 30, 2019 83 498 581

(Continued)

12

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial liabilities mandatorily measured at fair value through profit or loss－current: Derivative instruments not used for hedging Forward exchange contracts	$	September 30, 2020 -	December 31, 2019 4,040	September 30, 2019
				3,087

The Group holds derivative instruments to hedge certain foreign currency and interest risk the Group is exposed to arising from its operating, financing and investing activities. The following derivative instruments, without the application of hedge accounting, were classified as mandatorily measured at fair value through profit or loss were as follows:

(in thousands of foreign currency)

Financial assets Forward exchange purchased Financial liabilities Forward exchange purchased	September 30, 2020	September 30, 2020	September 30, 2020	December 31, 2019 Amount Currency Maturity date - - - USD4,000 USD/TWD 2020.02	December 31, 2019 Amount Currency Maturity date - - - USD4,000 USD/TWD 2020.02	September 30, 2019 Amount Currency Maturity date USD1,000 USD/TWD 2020.02 USD15,000 USD/TWD 2019.10 ~ 2020.02
	Amount - -	Currency - -	Maturity date	Amount	Currency
			- -	- USD4,000	- USD/TWD

As of September 30, 2020, December 31 and September 30, 2019, the Group did not provide any financial assets and liabilities at fair value through profit or loss as collateral for its loans.

• (c) Financial assets at fair value through other comprehensive income – non-current

September 30, 2020 Equity investments at fair value through other comprehensive income: Domestic emerging market stock $ 3,851 Domestic unlisted stock 17,866 Foreign unlisted stock 22,609 $ 44,326	December 31, 2019 2,709 17,866 24,587 45,162	September 30, 2019
		2,444 23,096 24,587
		50,127

There were no disposals of strategic investments and transfers of any cumulative gain or loss within equity relating to these investments as of September 30, 2020 and 2019.

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

• (ii) As of September 30, 2020, December 31 and September 30, 2019, the Group did not provide any financial assets at fair value through other comprehensive income as collateral for its loans.

(Continued)

13

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(d) Notes and accounts receivable

September 30, 2020 Notes receivable $ 188,080 Accounts receivable-measured as amortized cost 8,536,143 Accounts receivable-fair value through other comprehensive income 1,713,518 10,437,741 Less: Loss allowance (169,838) $ 10,267,903	December 31, 2019 220,659 7,183,364 990,167 8,394,190 (170,737) 8,223,453	September 30, 2019 168,012 7,192,680 1,055,390 8,416,082 (189,947) 8,226,135

The Group has assessed a portion of its accounts receivable that was held within a business model whose objective is achieved by selling financial assets; therefore, such accounts receivable was measured at fair value through other comprehensive income.

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics of the customer's ability to pay all due amounts in accordance with contract terms, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision was determined as follows:

(i) The Company

Credit rating Listed company (assessed by group) Level A Level B Unlisted company		September 30, 2020	September 30, 2020
	Carrying amount $ 2,415,403 1,707,407 609,678 $ 4,732,488	Expected credit loss rate 0.54% 1.35% 2.52%	Loss allowance provision Credit impaired 13,042 No 23,060 No 15,366 No 51,468

(Continued)

14

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Credit rating Listed company (assessed by group) Level A Level B Unlisted company Credit rating Listed company (assessed by group) Level A Level B Unlisted company		December	31, 2019
	Carrying amount $ 1,897,369 1,177,580 706,642 $ 3,781,591	Expected credit loss rate Loss allowance provision Credit impaired 0.54% 10,305 No 1.26% 14,833 No 1.30% 9,216 No 34,354 September 30, 2019
	Carrying amount $ 1,771,820 833,492 1,118,757 $ 3,724,069	Expected credit loss rate 0.58% 1.69% 1.18%	Loss allowance provision Credit impaired 10,335 No 14,099 No 13,225 No 37,659

The aging analysis of notes and accounts receivable was determined as follows:

September 30, 2020 Not past due $ 4,617,000 Overdue less than 90 days 113,579 Overdue 91 to 180 days 1,095 Overdue more than 181 days 814 $ 4,732,488	December 31, 2019 3,551,395 224,660 4,985 551 3,781,591	September 30, 2019
		3,434,048 271,941 3,442 14,638
		3,724,069

(ii) Subsidiaries

Not past due Overdue less than 90 days Overdue 91 to 180 days Overdue more than 181 days	September 30, 2020	September 30, 2020
	Carrying amount $ 5,322,454 343,780 4,510 34,509 $ 5,705,253	Expected credit loss rate 0.49% 12.36% 99.96% 100.00%	Loss allowance provision
			25,886 42,483 4,508 34,509
			107,386

(Continued)

15

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Not past due Overdue less than 90 days Overdue 91 to 180 days Overdue more than 181 days Not past due Overdue less than 90 days Overdue 91 to 180 days Overdue more than 181 days	December 31, 2019	December 31, 2019
	Carrying amount Expected credit loss rate $ 3,998,016 0.01% 506,448 7.11% 15,680 37.70% 92,455 100.00% $ 4,612,599 September 30, 2019		Loss allowance provision
			464 36,032 5,912 92,455
			134,863
	Carrying amount $ 4,003,571 543,552 46,445 98,445 $ 4,692,013	Expected credit loss rate 0.01% 6.48% 34.16% 100.00%	Loss allowance provision
			341 35,196 15,864 98,445
			149,846

For the nine months ended September 30, 2020 and 2019, the movements in the allowance for notes and accounts receivable were as follows:

Balance at January 1 Impairment loss recognized (reversed) Amounts written off Reclassifications Effect of changes in foreign exchange rates Balance at September 30	For the nine months ended September 30, 2020 2019 $ 170,737 185,733 34,688 5,310 (32,700) (245) (79) (1,203) (2,808) 352 $ 169,838 189,947
	2020 $ 170,737 34,688 (32,700) (79) (2,808) $ 169,838

The Group has entered into accounts receivable factoring agreements with banks. According to the factoring agreement, the Group does not bear the loss if the account debtor does not have the ability to make payments upon the transfer of the accounts receivable factoring. The Group has not provided other guarantees except for the promissory notes, which have the same amount with the factoring, used as the guarantee for the sales return and discount. The Group received the proceeds from the discounted accounts receivable on the selling date. Interest is calculated and paid based on the duration and interest rate of the agreement, and the remaining amounts are received when the accounts receivable are paid by the customers. In addition, the Group has to pay a service charge based on a certain rate.

(Continued)

16

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group derecognized the above trade receivables because it has transferred substantially all of the risks and rewards of their ownership, and it does not have any continuing involvement by them. The amounts receivable from the financial institutions were recognized as “other receivables” upon the derecognition of those trade receivables.

As of September 30, 2020, December 31 and September 30, 2019, the Group sold its trade receivable without recourse as follows:

		September 30, 2020	September 30, 2020
Purchaser	Amount Derecognized $ 3,539,846	Amount Paid Advanced Unpaid 3,202,635 - December 31, 2019		Amount Recognized in Other Receivables 337,211	Range of Interest Rate Significant Transferring Terms 0.68%~1.38% None
Financial institutions
Purchaser	Amount Derecognized $ 3,556,406	Amount Paid Advanced Unpaid 3,276,346 - September 30, 2019		Amount Recognized in Other Receivables 280,060	Range of Interest Rate Significant Transferring Terms 1.07%~3.2% None
Financial institutions
Purchaser	Amount Derecognized $ 3,972,640	Amount Paid 3,636,582	Advanced Unpaid -	Amount Recognized in Other Receivables 336,058	Range of Interest Rate Significant Transferring Terms 1.07%~3.44% None
Financial institutions

As of September 30, 2020, December 31 and September 30, 2019, the Group did not provide any receivables as collaterals for its loans.

Please refer to note (6)(t) for further credit risk information.

(e) Other receivables

September 30, 2020 Other receivables－the receivables of the Group as an agent (note (6)(r)) $ 578,315 Other receivables－accounts receivable factored 337,211 Tax refund 33,518 Overdue receivable 23,246 Others 1,473 973,763 Less: Loss allowance (23,246) $ 950,517	December 31, 2019 938,929 280,060 22,769 23,313 2,081 1,267,152 (23,313) 1,243,839	September 30, 2019 - 336,058 21,872 23,352 854 382,136 (23,352) 358,784

(Continued)

17

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For the nine months ended September 30, 2020 and 2019, the movements in the allowance for other receivables were as follows:

Balance at January 1 Amounts written off Reclassifications Effect of changes in foreign exchange rates Balance at September 30	For the nine months ended September 30, 2020 2019 $ 23,313 27,643 (109) (5,494) 79 1,203 (37) - $ 23,246 23,352	For the nine months ended September 30, 2020 2019 $ 23,313 27,643 (109) (5,494) 79 1,203 (37) - $ 23,246 23,352
	2020 $ 23,313 (109) 79 (37) $ 23,246
		23,352

As of September 30, 2020, December 31 and September 30, 2019, the Group did not provide any other receivables as collaterals for its loans.

For further credit risk information, please refer to note (6)(t).

• (f) Inventories

September 30, 2020 Merchandise inventories $ 7,491,138 Goods in transit 695,530 $ 8,186,668	December 31, 2019 9,522,408 956,592 10,479,000	September 30, 2019 9,533,793 906,591 10,440,384

The details of inventory-related losses and expenses were as follows:

Inventory valuation loss and obsolescence (Gain from price recovery of inventory) Loss on scrapping of inventory and others	For the three months ended September 30, 2020 2019 $ (99,336) - - 3 $ (99,336) 3	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ (99,336) - $ (99,336)	2020 (137,419) - (137,419)	2019
			157,581 988
			158,569

For the nine months ended September 30, 2019, the write-down of inventories to net realizable value amounted to $157,581. For the three months and nine months ended September 30, 2020 the reversal of inventory valuation losses amounted to $99,336 and $137,419, respectively, resulting from the slow-moving inventories sold by the Group.

As of September 30, 2020, December 31 and September 30, 2019, the Group did not provide any inventories as collaterals for its loans.

(Continued)

18

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(g) Property, plant and equipment

Carrying amounts: Balance on January 1, 2020 Balance on September 30, 2020 Balance on January 31, 2019 Balance on September 30, 2019	Land $ 77,377 $ 77,377 $ 77,377 $ 77,377	Buildings and construction 30,927 30,282 31,790 31,143	Transportation equipment 5,436 4,203 5,912 4,691	Machinery equipment 4,578 4,198 5,999 4,963	Office and other facilities equipment 30,973 21,012 35,737 33,471	Total 149,291
						137,072
						156,815
						151,645

The Group’s property, plant and equipment have no significant additions, disposals, impairments or reversals during for the nine months ended September 30, 2020 and 2019. Information on depreciation for the period is disclosed in note (12)(a). For other related information, please refer to note (6)(g) of the 2019 annual consolidated financial statements.

(h) Right-of-use assets

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

Buildings Cost: Balance on January 1, 2020 $ 389,090 Additions 28,970 Reductions (22,556) Effect of changes in exchange rates (4,816) Balance on September 30, 2020 $ 390,688 Balance on January 1, 2019 $ 394,091 Additions 71,893 Reductions (71,907) Effect of changes in exchange rates 229 Balance on September 30, 2019 $ 394,306 Accumulated depreciation: Balance on January 1, 2020 $ 114,037 Depreciation 99,716 Reductions (21,806) Effect of changes in exchange rates (2,013) Balance on September 30, 2020 $ 189,934	Transportation equipment 7,548 - - - 7,548 7,548 - - - 7,548 2,988 1,977 - - 4,965	Total 396,638 28,970 (22,556) (4,816)
		398,236
		401,639 71,893 (71,907) 229
		401,854
		117,025 101,693 (21,806) (2,013)
		194,899

(Continued)

19

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Buildings Transportation equipment Balance on January 1, 2019 $ - - Depreciation 99,353 2,241 Reductions (15,227) - Effect of changes in exchange rates (878) - Balance on September 30, 2019 $ 83,248 2,241 Carrying amount: Balance on January 1, 2020 $ 275,053 4,560 Balance on September 30, 2020 $ 200,754 2,583 Balance on September 30, 2019 $ 311,058 5,307 Short-term borrowings September 30, 2020 December 31, 2019 Unsecured loans $ 10,159,553 9,175,602 Short-term notes and bills payable, net 668,798 669,251 $ 10,828,351 9,844,853 Unused short-term credit lines $ 2,675,881 4,909,723 Range of interest rates 0.52%~4.57% 1.02%~4.35%

Total - 101,594 (15,227) (878) 85,489 279,613 203,337 316,365 September 30, 2019 10,657,960 669,213 11,327,173 4,282,938 1.00%~4.35%

(i) Short-term borrowings

(i) Issuance and repayment of borrowings

The Group’s additional amounts in loans for the nine months ended September 30, 2020 and 2019 were $29,348,885 and $24,498,787, respectively, with maturities from October, 2020 to September, 2021 and from October, 2019, to September, 2020, respectively; and the repayments were $28,365,387 and $24,909,089, respectively.

• (ii) For information on the Group’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(t).

(j) Other payables

September 30, 2020 Other payable — the payables of the Group’s as an agent (note(6)(r)) $ 613,563 Accrued expenses 281,574 Bonus payable 159,795 Remuneration to employees and directors 81,348 Interest payable 18,510 $ 1,154,790	December 31, 2019 936,542 235,370 154,821 48,720 36,154 1,411,607	September 30, 2019
		- 274,701 104,218 45,046 43,098
		467,063

(Continued)

20

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The accrued expenses include import and export fees, processing expense, professional services fees, pension, insurance, and payable for unused vacation time, etc.

(k) Convertible bonds payable

• (i) Non-guaranteed convertible bonds:

December 31, 2019 Aggregate principal amount $ 200,000 Cumulative converted amount (200,000) - Less: Convertible bonds payable – could be repaid within one year - Bonds payable at end of period $ - Embedded derivative – call and put options $ - Equity component – conversion options (included in capital surplus – conversion options) $ -	September 30, 2019 200,000 (200,000) - - - - -

The effective interest rates of the fourth convertible bonds were 2.47%. The annual interest expenses on convertible bonds payable for the nine months ended September 30, 2019 was $290. The above convertible bonds had expired on August 22, 2019, and all of them had been transferred into the ordinary shares before the expiration date.

There were no significant issues, repurchases and repayments of bonds payable for the nine months ended September 30, 2020 and 2019. Please refer to note (6)(k) of the 2019 annual consolidated financial statements for the related information.

(l) Lease liabilities

Current $ Non-current $	September 30, 2020 116,999 86,723	December 31, 2019 127,571 152,221	September 30, 2019
			135,033
			181,893

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

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expenses relating to short-term leases		For the three months ended September 30, 2020 2019 1,479 2,426 1,314 1,857	For the nine months ended September 30,	For the nine months ended September 30,
		2020 1,479 1,314	2020 4,937 4,096	2019
	$ $			7,465 5,570

(Continued)

21

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Total cash outflow for leases		For the nine months ended September 30,	For the nine months ended September 30,
		2020 110,286	2019
	$		115,060

• (i) Real estate leases

The Group leases buildings for its office space, warehouses and dormitories. The leases of office space typically run for a period of 1 to 5 years, of warehouses for 1 to 4 years, and of dormitories for 2 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

Some leases of office buildings contain extension or cancellation options exercisable by the Group before the end of the non-cancellable contract period. These leases are negotiated and monitored by local management, and accordingly, contain a wide range of different terms and conditions. The extension options held are exercisable only by the Group and not by the lessors. In which lease is not reasonably certain to use an optional extended lease term, payments associated with the optional period are not included within lease liabilities.

(ii) Other leases

The Group leases transportation equipment and parking space with lease terms of one year. These leases are short-term. The Group has elected not to recognize right-of-use assets and lease liabilities for these leases.

(m) Operating lease —as lessor

There were no significant leases contracts for the nine months ended September 30, 2019. Please refer to note (6)(m) of the 2019 annual consolidated financial statements for other related information.

(n) Employee benefits

(i) Defined benefit plans

Management believes that there was no material volatility of the market, no material reimbursement and settlement or other material onetime events since prior fiscal year. As a result, the pension cost in the accompanying interim period was measured and disclosed according to the actuarial report as of December 31, 2019 and 2018.

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

(Continued)

22

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The expenses recognized in profit or loss for the Group were as follows:

Operating expense		For the three months ended September 30, 2020 2019 $ 429 722	For the nine months ended September 30,	For the nine months ended September 30,
		2020 $ 429	2020 1,287	2019
				2,164

• (ii) Defined contribution plans

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

The Company and WTC recognized the pension costs under the defined contribution method amounting to $5,497, $5,432, $16,535 and $16,492 for the three months and nine months ended September 30, 2020 and 2019, respectively. Payment was made to the Bureau of Labor Insurance.

Other subsidiaries recognized the pension expense, basic endowment insurance expense, and social welfare expenses amounting to $4,857, $15,028, $17,390 and $46,697 for the three months and nine months ended September 30, 2020 and 2019, respectively.

(o) Income taxes

(i) Income tax expenses

The amounts of income tax for the three months and nine months ended September 30, 2020 and 2019 were as follows:

Current tax expense		For the three months ended September 30, 2020 2019 73,162 26,144	For the nine months ended September 30,	For the nine months ended September 30,
		2020 73,162	2020 159,895	2019
	$			82,137

The amounts of income tax recognized in other comprehensive income for the three months and nine months ended September 30, 2020 and 2019 were as follows:

Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign financial statements		For the three months ended September 30, 2020 2019 (9,561) (4,168)	For the nine months ended September 30,	For the nine months ended September 30,
		2020 (9,561)	2020 (22,964)	2019
	$			5,524

(Continued)

23

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (ii) The income tax return of the Company was authorized through 2018 except for 2017. The income tax return of WTC was authorized through 2018.

(p) Capital and other equities

As of September 30, 2020, December 31 and September 30, 2019, the total value of nominal ordinary shares amounted to $4,500,000, each having a par value of $10 per share, totaling 450,000 thousand ordinary shares, of which 367,751 thousand shares were issued. All issued shares were paid up upon issuance.

(i) Common stock

For the nine months ended September 30, 2019, 2,105 thousand new common shares, with a par value of $10, amounting to $21,049, were issued due to the conversion of convertible bonds. As of reporting date, the related registration procedures were completed.

(ii) Capital surplus

Balances on capital surplus of the Group were as follows:

Balances on capital surplus of the Group were as follows:
September 30, 2020 Additional paid in capital $ 845,753 Treasury share transactions 37,617 Donation from shareholders 712 Convertible bonds– conversion options - Other 253 $ 884,335	December 31, 2019 845,753 37,617 712 - 253 884,335	September 30, 2019
		845,753 37,617 712 - 253
		884,335

For the nine months ended September 30, 2019, the capital surplus deriving from those convertible bonds, which was converted to common stock, amounted to $11,633. (including the capital surplus-conversion options transferred to the capital surplus-additional paid-in capital of $1,335).

In accordance with the Company Act, realized capital reserves can only be utilized for issuing new shares or being distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be utilized for issuing new shares shall not exceed 10 percent of paid-in capital. Capital reserve increased by transferring paid-in capital in excess of par value may not be capitalized until the fiscal year after the competent authority for company registrations approves registration of the capital increase.

(iii) Retained earnings

The Company's Article of Incorporation stipulates that Company's earnings should first be used to pay any taxes, offset the prior years' deficits, be set aside as legal reserve, and then set aside or reverse special reserve, any remaining profit, together with any undistributed retained

(Continued)

24

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

earnings at the beginning, be distributed according to the distribution plan proposed by the Board of Directors to be submitted during the stockholders’ meeting for approval. Before the distribution of dividends, the Board of Directors shall first take into consideration its profitability, plan of capital expenditure, business expansion and capital, requirements for cash flow, regulations, and degree of dilution of earnings per share in determining the proportion of stock and cash dividends to be paid. After the above appropriations, current and prior-period earnings that remain undistributed will be proposed for distribution by the Board of Directors, and a meeting of shareholders will be held to adopt this resolution. The total distribution shall not be less than 50% of the current earnings, and the cash dividends shall not be less than 20% of the total dividends.

The Company authorize dividends, bonus and the legal reserve and capital surplus in whole or in part be paid in cash based on the resolution of the Board of Directors with two-thirds directors present and approved by one-half of the present directors, then shall be reported to shareholders meeting.

1) Earnings distribution

The amount for cash dividends of Company’s earnings distribution for 2019 was decided by the Board of directors held on March 27, 2020, and the Company’ s earnings distribution for 2018 was decided via a general meeting of the shareholders held on June 20, 2019.

Dividends distributed to ordinary shareholders: Cash dividends Stock dividends	2019 Amount per share Total amount $ 0.57770670 212,452	2018 Amount per share Total amount 1.02063987 354,165 0.59793133 207,484 $ 561,649	2018 Amount per share Total amount 1.02063987 354,165 0.59793133 207,484 $ 561,649
	Amount per share $ 0.57770670		Total amount
			354,165 207,484
			561,649

(q) Earnings per share

The basic earnings per share and diluted earnings per share are calculated as follows:

• (i) Basic earnings per share

• 1) Profit attributable to ordinary shareholders of the Company

Profit attributable to ordinary shareholders of the Company		For the three months ended September 30, 2020 2019 234,564 71,434	For the nine months ended September 30,	For the nine months ended September 30,
		2020 234,564	2020 529,250	2019
	$			232,218

(Continued)

25

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 2) Weighted-average number of ordinary shares (thousands)

Weighted-average number of ordinary shares		For the three months ended September 30, 2020 2019 367,751 367,583	For the nine months ended September 30,	For the nine months ended September 30,
		2020 367,751	2020 367,751	2019
				366,732

(ii) Diluted earnings per share

• 1) Profit attributable to ordinary shareholders of the Company (diluted)

For the three months ended September 30, 2020 2019 Profit attributable shareholders of the Company (basic) $ 234,564 71,434 Convertible bonds payable - 16 Profit attributable to ordinary shareholders of the Company (diluted) $ 234,564 71,450	For the nine months ended September 30,	For the nine months ended September 30,
	2020 529,250 - 529,250	2019
		232,218 290
		232,508

• 2) Weighted-average number of ordinary shares (thousands, diluted)

Weighted-average number of ordinary shares (basic) Effect of convertible bonds Effect of employee stock remuneration Weighted-average number of ordinary shares (diluted) on September 30	For the three months ended September 30, 2020 2019 367,751 367,583 - 168 3,407 1,454 371,158 369,205	For the three months ended September 30, 2020 2019 367,751 367,583 - 168 3,407 1,454 371,158 369,205	For the nine months ended September 30,	For the nine months ended September 30,
		2020 367,751 - 3,407 371,158	2020 367,751 - 4,113 371,864	2019
				366,732 1,020 2,603
				370,355

(Continued)

26

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (r) Revenue from contracts with customers

(i) Disaggregation of revenue

For the three months ended September 30, 2020 2019 Primary geographical markets: Taiwan $ 1,686,557 1,186,884 China 14,617,199 11,031,667 Others 961,789 861,735 $ 17,265,545 13,080,286 Major products/services lines Chipset/memory components $ 7,550,342 5,561,458 Assorted and other components 9,655,039 7,515,737 Others 60,164 3,091 $ 17,265,545 13,080,286	For the nine months ended September 30,	For the nine months ended September 30,
	2020 4,279,602 36,137,095 2,407,641 42,824,338 18,530,665 24,233,435 60,238 42,824,338	2019
		2,998,547 29,687,803 2,477,467
		35,163,817
		14,622,661 20,525,838 15,318
		35,163,817

The Group was determined in some specific transactions as an agent that the other party sold some merchandises to end-customer by delivering them to the Group. In these cases, the Group did not obtain the control of the merchandises, therefore, the Group recognized the remaining sales amounts which have been offset against the payment to the other party from the transactions; or recognized the commission signed with the other party, as revenue.

Due to the above transactions, the other receivables amounted to $578,315 and $0 as of September 30, 2020 and 2019, respectively; and the other payables amounted to $613,563 and $0 as of the nine months ended September 30, 2020 and 2019, respectively. Please refer to note (6)(e) and (6)(j).

(ii) Contract balance

Notes and accounts receivable (included related parties) Less: allowance for impairment Contract liabilities	September 30, 2020 $ 10,437,741 (169,838) $ 10,267,903 $ 180,026	December 31, 2019 8,394,190 (170,737) 8,223,453 91,026	September 30, 2019 8,416,082 (189,947) 8,226,135 85,345

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

(Continued)

27

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The amounts of revenue recognized for the nine months ended September 30, 2020 and 2019 that were included in the contract liability balance at the beginning of the period were $62,835 and $132,905, respectively.

The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received.

(s) Remuneration to employees and directors

The Audit committee, established by the independent directors, has replaced the supervisors’ authority after the re-election of the new directors at the shareholders’ meeting held on June 13, 2018, and amended the relevant provisions in the Company's articles of incorporation.

The Company’s Articles of Incorporation require that earning shall first be offset against any deficit, then, 6% to 10% of profit before tax (before deducting remuneration to employees and directors) will be distributed as employee remuneration and a maximum of 2.5% will be allocated as directors’ remuneration. Employees who are entitled to receive the above-mentioned employee remuneration, in share or cash, include the employees of the subsidiaries of the Company who meet certain specific requirements. Actual distribution should be determined in the Board of Directors’ meeting, with no less than two-thirds of directors present, and approved by more than half of the directors attending the meeting, then shall be report to the meeting of shareholders.

For the three months and nine months ended September 30, 2020 and 2019, the accrued remuneration of the Company’s employees were $26,091, $8,025, $58,941 and $26,471; as well as directors were $6,522, $2,006, $14,735 and $6,618, respectively. These amounts were calculated by using the Company’ s profit before tax for the period before deducting the amount of the remuneration to employees and directors, multiplied by the distribution ratio of remuneration to employees and directors under the Company’s articles of Incorporation, and expensed under operating expenses. If the Board of Directors resolved to distribute employees’ remuneration in the form of shares, the numbers of shares to be distributed were calculated based on the closing price of the Company’s ordinary shares one day before the date of the meeting of the board of directors.

The accrued remuneration of the Company’ s employees was $29,690 and $73,349 as well as remuneration of directors was $7,422 and $18,337 for the years ended December 31, 2019 and 2018, respectively. There were no differences between the distributed amounts and the accrued amounts in the consolidated financial statements. Related information would be available at the Market Observation Post System website.

(t) Financial Instruments

Except for those mentioned below, there were no significant changes in the fair value of the Group's financial instruments and degree of exposure to credit risk. Please refer to the note (6)(t) of the consolidated financial statement for the year ended December 31, 2019.

(Continued)

28

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) Credit risk

For credit risk exposure of notes and trade receivables, please refer to note (6)(d).

The amount of other financial assets at amortized cost include other receivables which had been impaired. For the loss allowance provision, please refer to the note (6)(e).

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, excluding estimated interest payments.

September 30, 2020 Non-derivative financial liabilities Unsecured loans Short-term notes and bill payable, net Lease liabilities Notes and accounts payable Other payables December 31, 2019 Non-derivative financial liabilities Unsecured loans Short-term notes and bills payable, net Lease liabilities Notes and accounts payable Other payables Derivative financial liabilities Forward exchange contracts: Outflow Inflow September 30, 2019 Non-derivative financial liabilities Unsecured loans Short-term notes and bill payable, net Lease liabilities Notes and accounts payable Other payables Derivative financial liabilities Forward exchange contracts: Outflow Inflow	Carrying Amount $ 10,159,553 668,798 203,722 3,619,245 841,007 $ 15,492,325 $ 9,175,602 669,251 279,792 5,316,218 1,174,242 4,040 - - $ 16,619,145 $ 10,657,960 669,213 316,926 3,765,004 282,435 3,087 - - $ 15,694,625	Contractual cash flows (10,159,553) (670,000) (209,520) (3,619,245) (841,007) (15,499,325) (9,175,602) (670,000) (289,857) (5,316,218) (1,174,242) (123,699) 119,659 (16,629,959) (10,657,960) (670,000) (328,405) (3,765,004) (282,435) (467,311) 464,224 (15,706,891)	Within a year (10,159,553) (670,000) (120,980) (3,619,245) (841,007) (15,410,785) (9,175,602) (670,000) (133,384) (5,316,218) (1,174,242) (123,699) 119,659 (16,473,486) (10,657,960) (670,000) (141,447) (3,765,004) (282,435) (467,311) 464,224 (15,519,933)	Over 1 year - - (88,540) - - (88,540) - - (156,473) - - - - (156,473) - - (186,958) - - - - (186,958)

(Continued)

29

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

(iii) Market risk

1) Currency risk

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

September 30, 2020 Foreign currency Exchange rate TWD Financial assets Monetary items USD $ 240,728 USD/TWD 29.12 7,009,998 USD 2,630 USD/CNY 6.8261 76,592 Non-monetary items USD 745 USD/TWD 29.12 21,694 Financial liabilities Monetary items USD 200,180 USD/TWD 29.12 5,829,228 USD 20,818 USD/CNY 6.8261 606,219	September 30, 2020	September 30, 2020	September 30, 2020	December 31, Foreign currency Exchange rate 226,081 USD/TWD 30.020 1,877 USD/CNY 6.9830 745 USD/TWD 30.020 179,097 USD/TWD 30.020 39,178 USD/CNY 6.9830	December 31,	December 31,	2019	September 30, 2019 Foreign currency Exchange rate TWD 204,049 USD/TWD 31.020 6,329,593 1,836 USD/CNY 7.1212 56,938 745 USD/TWD 31.020 23,110 161,791 USD/TWD 31.020 5,018,755 36,729 USD/CNY 7.1212 1,139,329	September 30, 2019 Foreign currency Exchange rate TWD 204,049 USD/TWD 31.020 6,329,593 1,836 USD/CNY 7.1212 56,938 745 USD/TWD 31.020 23,110 161,791 USD/TWD 31.020 5,018,755 36,729 USD/CNY 7.1212 1,139,329
	Foreign currency	Exchange rate	TWD			Exchange rate	TWD		Exchange rate TWD USD/TWD 31.020 6,329,593 USD/CNY 7.1212 56,938 USD/TWD 31.020 23,110 USD/TWD 31.020 5,018,755 USD/CNY 7.1212 1,139,329
		USD/TWD 29.12 USD/CNY 6.8261 USD/TWD 29.12 USD/TWD 29.12 USD/CNY 6.8261	7,009,998 76,592 21,694 5,829,228 606,219	226,081 1,877 745 179,097 39,178		USD/TWD 30.020 USD/CNY 6.9830 USD/TWD 30.020 USD/TWD 30.020 USD/CNY 6.9830	6,786,937 56,349 22,365 5,376,480 1,176,111	204,049 1,836 745 161,791 36,729

• 2) Currency risk sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, account receivables, other receivables, financial assets at fair value through other comprehensive income, loans and borrowings, accounts payables and other payables that are denominated in foreign currency. A change of 5% in the exchange rate of TWD or CNY against foreign currency for the nine months ended September 30, 2020 and 2019 would have increase (decreased) the other comprehensive income (before tax) $1,085 and $1,156, respectively. For the nine months ended September 30, 2020 and 2019 would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods.

USD (against the TWD) Strengthening 5% Weakening 5%	For the nine months ended September 30, 2020 2019 $ 59,039 65,542 (59,039) (65,542) (Continued)

30

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

USD (against the CNY) Strengthening 5% Weakening 5%	For the nine months ended September 30, 2020 2019 (26,481) (54,120) 26,481 54,120

• 3) Exchange gains and losses of monetary items

As the Group deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the three months and nine months ended September 30, 2020 and 2019, the foreign exchange gain (loss), including both realized and unrealized, amounted to a gain of $73,189, a loss of $24,798, a gain of $94,015 and a loss of $33,667, respectively.

4) Interest rate analysis

The details of financial assets and liabilities exposed to interest rate risk were as follows:

Variable rate instruments: Financial assets Financial liabilities	Carrying amount September 30, 2020 September 30, 2019 $ 1,702,465 1,830,799 (10,159,553) (10,657,960)

The following sensitivity analysis is based on the risk exposure to interest rate on the derivative and non-derivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25% when reporting to management internally, which also represents the Group’s management's assessment of the reasonably possible interest rate change.

If the interest rate had increased or decreased by 0.25%, the Group's net profit before tax would have decreased or increased by $15,857 and $16,551 for the nine months ended September 30, 2020 and 2019, respectively, which would be mainly resulting from demand deposits, and unsecured loans with variable interest rates.

(Continued)

31

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Fair value

• 1) Categories and the fair value of financial instruments

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

Financial assets mandatorily measured at fair value through profit or loss Stocks listed on domestic markets Financial assets at fair value through other comprehensive income Notes and accounts receivable, net Emerging market stock Stocks unlisted on domestic markets and foreign market Subtotal Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Other receivables Guarantee deposits paid Subtotal Financial liabilities measured at amortized cost Bank loans Notes and accounts payable Other payables Bonds payable		September 30, 2020	September 30, 2020	September 30, 2020
	Carrying amount $ 636 1,713,518 3,851 40,475 1,757,844 2,235,555 8,554,385 916,999 70,541 11,777,480 $ 13,535,960 $ 10,828,351 203,722 3,619,245 841,007 $ 15,492,325		Fair Value
		Level 1 636 - 3,851 - - - - - - - - -	Level 2 - - - - - - - - - - - -	Level 3 Total - 636 - - - 3,851 40,475 40,475 - - - - - - - - - - - - - - - -

(Continued)

32

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets mandatorily measured at fair value through profit or loss Stocks listed on domestic markets Financial assets at fair value through other comprehensive income Notes and accounts receivable, net Emerging market stock Stocks unlisted on domestic markets and foreign market Subtotal Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Other receivables Guarantee deposits paid Subtotal Financial liabilities mandatorily measured at fair value through profit or loss Derivative instruments not used for hedging Forward exchange contracts Financial liabilities measured at amortized cost Bank loans Lease liabilities Notes and accounts payable Other payables Subtotal		December 31, 2019	December 31, 2019	December 31, 2019
	Carrying amount $ 522 990,167 2,709 42,453 1,035,329 2,336,361 7,233,286 1,221,070 71,549 10,862,266 $ 11,898,117 $ 4,040 9,844,853 279,792 5,316,218 1,174,242 16,615,105 $ 16,619,145		Fair Value
		Level 1 522 - 2,709 - - - - - - - - - -	Level 2 - - - - - - - - 4,040 - - - -	Level 3 Total - 522 - - - 2,709 42,453 42,453 - - - - - - - - - 4,040 - - - - - - - -

(Continued)

33

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets mandatorily measured at fair value through profit or loss Derivative instruments not used for hedging Forward exchange contracts Stocks listed on domestic markets Subtotal Financial assets at fair value through other comprehensive income Notes and accounts receivable, net Emerging market stock Stocks unlisted on domestic markets and foreign market Subtotal Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Other receivables Guarantee deposits paid Subtotal Financial liabilities mandatorily measured at fair value through profit or loss Derivative instruments not used for hedging Forward exchange contracts Financial liabilities measured at amortized cost Bank loans Lease liabilities Notes and accounts payable Other payables Subtotal		September 30, 2019	September 30, 2019	September 30, 2019
	Carrying amount $ 83 498 581 1,055,390 2,444 47,683 1,105,517 2,278,024 7,170,745 336,912 73,303 9,858,984 $ 10,965,082 $ 3,087 11,327,173 316,926 3,765,004 282,435 15,691,538 $ 15,694,625		Fair Value
		Level 1 - 498 - 2,444 - - - - - - - - - -	Level 2 83 - - - - - - - - 3,087 - - - -	Level 3 Total - 83 - 498 - - - 2,444 47,683 47,683 - - - - - - - - - 3,087 - - - - - - - -

(Continued)

34

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

There were no transfers of financial instruments between any levels for the nine months ended September 30, 2020 and 2019.

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

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

• a) Financial assets measured at amortized cost

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

• 3) Valuation technique of financial instruments measured at fair value

• a) Non-derivative financial instruments

If the financial instrument has a public quoted price in an active market, the public quoted price will be determined as the fair value. The measurements on fair value of the financial instruments without an active market are determined using the valuation technique or the quoted market price of its competitors. Fair value measured using the valuation technique can be extrapolated from similar financial instruments, discounted cash flow method, or other valuation techniques which include the model used in calculating the observable market data at the consolidated balance sheet date.

The Group holds the unquoted equity investments of financial instruments without an active market. The measurement of fair value of the equity instruments is based on the Guideline Public Company method, which mainly assumes the evaluation by the price to book value ratio of similar public company and by the discount for lack of marketability. The estimation has been adjusted by the effect resulting from the discount for lack of marketability of the securities.

• b) Derivative financial instruments

Measurement of fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate.

(Continued)

35

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

4) Reconciliation of Level 3 fair values

Reconciliation of Level 3 fair values
		Fair value through
		other
		comprehensive
		income
		Unquoted equity
		instruments
Opening balance, January 1, 2020	$	42,453
Total gains and losses recognized:
In other comprehensive income		(1,978)
Ending Balance, September 30, 2020	$	40,475
Opening balance, January 1, 2019	$	60,883
Total gains and losses recognized:
In other comprehensive income		(13,200)
Ending Balance, September 30, 2019	$	47,683

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

The Group’s financial instruments that use Level 3 inputs to measure fair value include “ financial assets measured at fair value through other comprehensive income - equity investments”.

Quantified information of significant unobservable inputs was as follows:

Inter-relationships between significant unobservable inputs Valuation Significant and fair value Item technique unobservable inputs measurement Financial assets at fair Guideline Public ‧Price-Sales ratio The estimated fair value value through other Company method (0.85, 0.7 and 0.73 at would increase comprehensive income September 30, 2020, (decrease) if: December 31 and ‧The Price-Sales ratio September 30, 2019, were higher (lower); respectively) ‧Price-Book ratio (0.77, ‧the Price-Book ratio 0.9 and 0.80 at were higher (lower); September 30, 2020, or December 31 and September 30, 2019, respectively) ‧Lack-of-Marketability ‧the Lack-ofdiscount rate Marketability discount (12.93%, 12.93% and rate were lower 17.02% on September (higher) 30, 2020, December 31 and September 30, 2019, respectively)

(Continued)

36

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Item Financial assets at fair value through profit or loss	Valuation technique Net Asset Value Method	Significant unobservable inputs Inter-relationships between significant unobservable inputs and fair value measurement ‧Net asset value ‧Not applicable

(u) Financial risk management

There was no significant changes in the Group’s financial risk management and policies as disclosed in the note (6)(u) of the consolidated financial statements for the year ended December 31, 2019.

(v) Capital management

The Group’ s objectives, policies and processes of capital management are consistent with those disclosed in the consolidated financial statements for the year ended December 31, 2019. In addition, there were no significant differences between the summary quantitative data of the items of capital management in the consolidated financial statements and those disclosed in the consolidated financial statements for the year ended December 31, 2019. Please refer to note (6)(v) of the consolidated financial statements for the year ended December 31, 2019 for further details.

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

The Group’s investing and financing activities which did not affect the current cash flow for the nine months ended September 30, 2020 and 2019, were as follows:

• (i) For the acquisition of right-of-use assets from leases, please refer to note (6)(h).

Reconciliation of liabilities arising from financing activities was as follows:

Non-cash changes

Short-term loans Lease liabilities Total liabilities from financing activities	January 1, 2020 $ 9,844,853 279,792 $ 10,124,645	Cash flows 983,498 (101,253) 882,245	Acquisition - 28,970 28,970	Reduction - (767) (767)	Foreign exchange movement - (3,020) (3,020)	September 30, 2020
						10,828,351 203,722
						11,032,073

(Continued)

37

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Short-term loans Lease liabilities Total liabilities from financing activities	January 1, 2019 $ 11,737,475 401,639 $ 12,139,114	Cash flows (410,302) (102,025) (512,327)	Non-cash changes Acquisition Reduction Foreign exchange movement - - - 71,893 (56,680) 2,099 71,893 (56,680) 2,099	September 30, 2019
				11,327,173 316,926
				11,644,099

(7) Related-party transactions

• (a) Name and relationship with related parties

The following are entities that have had transactions with the Group during the period covered in the consolidated financial report:

consolidated financial report:
Related-party	Relationship
Weiji Investment Co., Ltd.	The same chairman
Yang Sheng Education Foundation	The same chairman
Genlog Industrial Co., Ltd.	Substantive related-party

• (b) Other related party transactions

• (i) Sale of goods to related parties

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

Other related parties		For the three months ended September 30, 2020 2019 - 20	For the nine months ended September 30,	For the nine months ended September 30,
		2020 -	2020 2	2019
	$			18

There were no significant differences in terms of collection and pricing on sales to related parties and other customers. The collection period was approximately 30 days after the sales date.

• (ii) Processing fee and consultancy fees from related Parties

Other related parties were commissioned to provide processing services and consulting services to the Group. The amounts of transactions between the Group and related parties were as follows:

follows:
Other related parties		For the three months ended September 30, 2020 2019 2,524 2,698	For the nine months ended September 30,
		2020 2,524	2020 7,241	2019
	$			7,797

(Continued)

38

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Lease

The Group leased a portion of its building to its related parties for office use purpose. The rentals collected monthly were as follows:

Other related parties		For the three months ended September 30, 2020 2019 298 326	For the nine months ended September 30,	For the nine months ended September 30,
		2020 298	2020 894	2019
	$			979

• (iv) Receivables from related parties

The receivables from related parties were as follows:

Account Relationship Notes and accounts receivables Other related parties $ Payable to related parties Account Related party categories Other payables Other related parties	September 30, 2020 - September 30, 2020 $ 770	December 31, 2019 - December 31, 2019 963	September 30, 2019
			10
			September 30, 2019
			825

(v) Payable to related parties

• (c) Key management personnel compensation

Key management personnel compensation comprised:

Short-term employee benefits Post-employment benefits	For the three months ended September 30, 2020 2019 $ 38,408 32,675 200 220 $ 38,608 32,895	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ 38,408 200 $ 38,608	2020 101,776 600 102,376	2019
			99,671 660
			100,331

(8) Pledged assets: None.

(9) Commitments and contingencies:

As of September 30, 2020, December 31 and September 30, 2019 the balances of L/Cs for customs and value added tax and the purchase of merchandise were as follows:

llows:
September 30, 2020 $ 166,600	December 31, 2019 171,100	September 30, 2019
		326,200

(Continued)

39

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(10) Losses Due to Major Disasters: None

(11) Subsequent Events:

In order to repay bank loans, the Board of Directors approved a resolution on September 10, 2020, to issue the fifth domestic unsecured convertible bonds. The denomination of the bond was $100, and the total value was $1,000,000 with a 0% interest rate, issued at par. The units for this offering were 10,000. The bond had been effectively registered via Rule No.1090359482 issued by the Financial Supervisory Commission on October 13, 2020, and would be traded on the over-the-counter market on November 3, 2020.

(12) Other:

• (a) A summary of current-period employee benefits, depreciation and amortization by function, is as follows:

follows:
	For the three months ended September 30,
By function By item	2020	2019
	Operating expense	Operating expense
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	$ 321,033 22,581 10,783 10,219 11,381 37,799 6,071	253,465 25,166 21,182 1,103 11,075 39,061 1,229
	For the nine months ended September 30,
By function By item	2020	2019
	Operating expense	Operating expense
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	$ 848,546 63,161 35,212 22,500 34,440 114,816 17,201	777,623 72,836 65,353 8,116 35,760 115,416 4,085

(Continued)

40

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (b) Seasonality of operations:

The Group’s operation were not affected by seasonality or cyclically factors.

(13) Other disclosures:

• (a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group for the nine months ended September 30, 2020:

• (i) Loans to other parties: None

• (ii) Guarantees and endorsements for other parties:

								(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)
No.	Name of guarantor	Counter-party of guarantee and endorsement		Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period e	Balance of guarantees and ndorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements t	Parent company endorsements/ guarantees to hird parties on behalf of subsidiary (note 2)	Subsidiary endorsements/ guarantees to third parties on behalf of parent company (note 2)	Endorsements/ guarantees to third parties on behalf of companies in Mainland China (note 2)
		Name	Relationship with the Company
0 〃 〃	The Company 〃 〃	WKI WTP WKS	100％owned subsidiary 100％owned subsidiary 100％owned subsidiary	8,836,512 8,836,512 8,836,512	6,628,688 570,380 1,545,918	5,085,832 465,920 797,740	4,534,596 356,164 422,720	- - -	% 86.3 % 7.9 % 13.5	17,673,024 17,673,024 17,673,024	Y Y Y	- - -	- - Y

Note 1：The total amount of the guarantee provided by the Company shall not exceed three hundred percent (300%) of the higher amount between the Company’s capital amount and net worth. However, for any individual entity whose voting shares are 50% owned, directly or indirectly, by the Company shall not exceed fifty percent (50%) of the maximum amount for guarantee on recent audited or reviewed financial statements.

Note 2：For those entities as the guarantor to the subsidiary, subsidiary as the guarantor to the company, or the guarantor that located in China, please fill in “Y”.

• (iii) Securities held as of September 30, 2020 (excluding investment in subsidiaries, associates and joint ventures):

joint ventures):	joint ventures):	joint ventures):	joint ventures):
				(Shares/units (thousands))
Name of holder	Category and name of security	Relationship with company	Account title	Ending balance				Note
				Shares/Units (thousands)	Carrying amount	Percentage of ownership (%)	Fairvalue
The Company The Company 〃 The Company 〃 〃 〃 〃	Securities of listed companies EBM Technologies Inc. Feature Integration Technology Inc. Clientron Corp. Paradigm I Venture Capital Company (Paradigm I) Paradigm Venture Capital Corporation (PVC Corp.) InnoBridge Venture Fund ILP. (InnoBridge) Shin Kong Global Venture Capital Corp. Vision Wide Technology Co., Ltd. (VTEC)	- - - - - - - -	Financial assets mandatorily measured at fair value through profit or loss-current Financial assets at fair value through other comprehensive income-noncurrent 〃 Financial assets at fair value through other comprehensive income-noncurrent 〃 〃 〃 〃	34 158 15 750 271 - 3,000 800	$ 636 $ 3,571 280 $ 3,851 $ 7,459 3,226 15,150 4,800 9,840 $ 40,475	- 0.53 0.02 6.79 10.49 9.90 12.00 1.70	$ 636 $ 3,571 280 $ 3,851 $ 7,459 3,226 15,150 4,800 9,840 $ 40,475

(Continued)

41

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

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

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

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transaction different f	s with terms rom others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchases/ (Sales)	Amount	Percentage of total purchases/ (sales)	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company 〃 WKI 〃 〃 WKS	WKI 〃 The Company 〃 WKS WKI	100%owned subsidiary 〃 Parent company 〃 Subsidiary Parent company	(Sales) Purchases Purchases (Sales) (Sales) Purchases	(332,409) (USD(11,141)) 381,458 (USD12,826) 332,409 (USD11,141) (381,458) (USD(12,826)) (2,603,264) (USD(87,297)) 2,603,264 (USD87,297)	(2) % 2 % 2 % (2) % (14) % 68 %	OA30 〃 〃 〃 OA60 〃	No significant difference with other customer 〃 〃 〃 〃 〃	- - - - - -	Accounts Receivable 116,006 (USD3,984) - Accounts Payable (116,006) (USD(3,984)) - Accounts Receivable 593,627 (USD20,386) Accounts Payable (593,627) (USD(20,386))	2 % - % (8) % - % 14 % (66) %

Note: The transactions have been eliminated in the consolidated financial statement.

• (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

of the capital stock:	of the capital stock:	of the capital stock:	of the capital stock:	of the capital stock:
					(in thousands of foreign currency)
Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue		Amounts received in subsequent period (Note)	Allowance for bad debts	Note
					Amount	Action taken
The Company WKI	WKI WKS	100% owned Subsidiary Subsidiary	116,006 (USD3,984) 593,627 (USD20,386)	7.20 3.93	- -	- -	USD 1,600 USD 12,683	- -	The transactions have been eliminated in the consolidated financial statement 〃

Note: Information as of Sep. 30, 2020.

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

(Continued)

42

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(x) Business relationships and significant intercompany transactions:

No. (Note 1)	Name of company	Name of counter-party	Nature of relationship (Note 2)		Intercompany transactions	Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 〃 〃 〃 〃 〃 〃 〃 1 〃 〃 2 〃	The Company 〃 〃 〃 〃 〃 〃 〃 WKI 〃 〃 WKS 〃	WKI 〃 〃 〃 WKS WTP 〃 〃 The Company WKS 〃 WKI 〃	1 〃 〃 〃 〃 〃 〃 〃 2 3 〃 〃 〃	Sales Revenue Accounts Receivable Management and Credit Service Revenue Other Receivables Sales Revenue Sales Revenue Accounts Receivable Other Receivables Sales Revenue Sales Revenue Accounts Receivable Service Revenue Accounts Receivable	332,409 116,006 190,562 95,881 1,158 16,012 9,783 2,401 381,458 2,603,264 593,627 227,747 70,488	The price is marked up based on operating cost, and the receivables depend on OA30 after offsetting the accounts payable. 〃 The price is set by percentage of the contract and is received quarterly. 〃 The price is marked up based on operating cost, OA60. The price is marked up based on operating cost, and the receivables depend on OA30 after offsetting the accounts payable. 〃 〃 The price is marked up based on operating cost, and the receivables depend on OA30 after offsetting the accounts payable. The price is marked up based on operating cost, and the receivables depend on funding demand and OA60. 〃 The price is set by percentage of the contract, OA30. 〃	0.78% 0.51% 0.44% 0.42% -% 0.04% 0.04% 0.01% 0.89% 6.08% 2.61% 0.53% 0.31%

Note 1: The numbers filled in as follows:

1. 0 represents the Company.

2. Subsidiaries are sorted in a numerical order starting from 1.

Note 2: Relationship with the transactions labeled as follows:

• 1 represents the transactions from the parent company to its subsidiaries.

• 2 represents the transactions from the subsidiaries to the parent company.

• 3 represents the transactions between subsidiaries.

(Continued)

43

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Information on investees:

The following is the information on investees for the nine months ended September 30, 2020 (excluding information on investees in Mainland China):

information on investees in Mainland China):	information on investees in Mainland China):	information on investees in Mainland China):	information on investees in Mainland China):
								(in tho		usands of foreign currency)
Name of investor	Name of investee	Location	Main businesses and products	Original invest	ment amount	Highest			Net income (losses) of investee	Investment income (losses) of investor	Note
				September 30, 2020	December 31, 2019	Shares (In Thousands)	Percentage of Ownership	Carrying amount
The Company 〃 〃 WKI	WKI WTC WTP Total Weitech	Hong Kong Taipei Singapore Hong Kong	Electronic components computer peripherals products distribution and technical support Electronic components and technical support 〃 Import and export trade of electronic components	$ 1,044,995 12,983 293,327 $ 1,351,305 0.41 (HKD0.1)	774,275 12,983 293,327	396,250 1,589 12,413 -	100% 100% 100% 100%	$ 3,715,818 26,333 327,012 $ 4,069,163 2,025 (USD70)	224,683 (260) 2,241 228 (USD8)	$ 224,683 (260) 2,241 $ 226,664 228 (USD8)	Subsidiary 〃 〃 Subsidiary's subsidiary
					1,080,585
					0.41 (HKD0.1)

• (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 f	oreign currency)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2020	Inves flo	tment ws	Accumulated outflow of investment from Taiwan as of September 30, 2020	Net income (losses) of the investee	Percentage of ownership	Investment income (losses) of investor (Note 2)	Book value	Accumulated remittance of earnings in current period
					Outflow (Note 3)	Inflow
WKS WKE	Electronic components computer peripherals products distribution and technical support Electronic technology development and technical advisory	786,647 (USD25,000) 5,067 (RMB1,000)	Note 1、4 Note 1、5	304,594 (USD9,800) -	- -	- -	304,594 (USD9,800) -	100,123 (USD3,357) (Note 2) (493) (USD(17))	100% 100%	100,123 (USD3,357) (Note 2) (493) (USD(17))	659,168 (USD22,636) 4,853 (USD167)	- -

• (ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of September 30, 2020 I	nvestment Amounts Authorized by Investment Commission, MOEA (note 3)	Upper Limit on Investment
304,594 (USD9,800)	728,000 (USD25,000)	3,534,605

Note 1: Investment in Mainland China was through a company in the third area.

• Note 2: The investment gains and losses of the current period are recognized according to the financial statements, which have been reviewed by the Company’ s independent auditors, and were translated into New Taiwan Dollars at the average exchange rates for the nine months ended September 30, 2020.

• Note 3: The currency was translated into New Taiwan Dollars at the exchange rates at the end of reporting period.

• Note 4: The difference was due to Weikeng International Co. Ltd.'s investment of US15,200 thousand dollars on Weikeng International (Shanghai) Co. Ltd. using its own funds.

• Note 5: The difference was due to Weikeng International (Shanghai) Co. Ltd.'s investment of RMB1,000 thousand dollars on Weikeng Electronic Technology (Shanghai) Co. Ltd. using its own funds.

(Continued)

44

WEIKENG INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• (iii) Significant transactions:

Please refer to Information on significant transactions for the information on significant direct or indirect transactions, which were eliminated in the preparation of consolidated financial statements, between the Group and the investee companies in Mainland China in 2020.

• (d) Major shareholders:

Major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Weiji Investment Co., Ltd.	31,426,876	% 8.55

• Note (i): The information of major shareholders is based on the last business day of the end of each quarter set by Taiwan Depository & Clearing Corporation, wherein the shareholders hold more than 5% of the Company's ordinary shares, which have been completely registered non-physically (including treasury shares). There may be differences between the share capital recorded in the Company's financial statements and the actual number of the delivered shares, which have been completely registered non-physically due to the different methods used in their calculation.

• Note (ii): In the case of the above information, if the shareholder delivers the shares to the trust, the shares will be disclosed as a personal account under the trust account of the principal opened by the trustee. As for the shareholders’ declaration of more than 10% of the insider’ s shareholdings under the Securities and Exchange Act, the shareholders’ stocks should be include in their own shareholdings, plus, the shares delivered to the trust, wherein the shareholders have the right of decision on using the trust property. For information on insider’s equity declaration, please refer to market observation post system.

(14) Segment information:

The Group has only one operating segment, which is the electronic components segment, of which, the major activities are the purchase and sales of electronic components and computer peripherals, technical service, as well as the import/export trade business. The Group’s details and reconciliations of operating segment are consistent with the consolidated financial statements. Please refer to the consolidated statements of comprehensive income and the consolidated balance sheet for the segment profit and assets, respectively.