Loop Telecommunication International : Financial Statement

Stock Code: 3025

Loop Telecommunication International, Inc. and its subsidiaries

Consolidated Financial Statements for the

Years Ended December 31, 2023 and 2022 and

Independent Auditors' Report

Address: 7F, No.8, Xin'an Road, Hsinchu Science Park

Tel: [phone]

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§Table of Contents§

						Notes to the
		Item		Pages	Financial Statements
I.	Cover	1	-
II.	Table of Contents	2	-
III. Declaration of Consolidated Financial	3	-
	Statements of Affiliated Enterprises
IV. Independent Auditors' Report Translated	4～7	-
	from Chinese
V.	Consolidated Balance Sheet	8	-
VI.	Consolidated Statement of Comprehensive	9～10	-
	Income
VII.	Consolidated Statement of Changes in	11	-
	Equity
VIII. Consolidated Statement of Cash Flows	12～13	-
IX.	Notes to Consolidated Financial Statements
	(I)	Company History	14	1
	(II)	Approval date and procedures of the	14	2
		financial statements
	(III)	New standards, amendments and	14～15	3
		interpretations adopted:
	(IV)	Summary of significant accounting	15～25	4
		policies
	(V)	Significant accounting judgments and	25～26	5
		key source of uncertainties for
		estimations and assumptions
	(VI)	Explanation of significant accounting	26～51		6 to 26
		items
	(VII)	Related party transactions	51	27
	(VIII) Pledged assets	51	28
	(IX)	Significant contingent liabilities and	-	-
		unrecognized contractual commitments
	(X)	Losses due to severe disasters	-	-
	(XI)	Significant subsequent events	-	-
	(XII)	Assets and liabilities in foreign	52	29
		currencies of material effects
	(XIII) Disclosures notes
		1. Information on
		significant transactions	53、56、60	30
		2. Information on investees	53、57	30
		3. Information on investments	53～54
		in Mainland China	58～59	30
		4. Information on major shareholders	54、61	30
	(XIV) Segment information	54～55	31

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Declaration of Consolidated Financial Statements of Affiliated Enterprises

The entities that are required to be included in the consolidated financial statements of the Company for 2023 (from January 1, 2023 to December 31, 2023) under the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10, "Consolidated Financial Statements" endorsed by the Financial Supervisory Commission. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, the Company and its subsidiaries will not prepare a separate set of combined financial statements.

Very truly yours

Loop Telecommunication International, Inc.

Chairman: Yeh Maw-Lin

March 12, 2024

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Independent Auditors' Report Translated from Chinese

Shareholders and the Board of Directors of Loop Telecommunication International, Inc.,

Opinion

We have audited the accompanying consolidated balance sheet of Loop Telecommunication International, Inc. and its subsidiaries (the "Company") as of December 31, 2023 and 2022, and the consolidated statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements (including a summary of significant accounting policies).

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of the most significance in our audit of the consolidated financial statements of the Company for the year ended December 31, 2023. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not

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provide a separate opinion on these matters.

Key audit matters for the Company's consolidated financial statements for the year ended December 31, 2023 is stated as follows:

Revenue recognition

1. The major revenue sources of the Company includes the production and sales of user remote line disconnectors, high-speed network access equipment, smart network resource management selectors, and other relevant products. As revenue has material effects on the 2023 consolidated financial statements of Loop Telecommunication International, Inc., revenue recognition involves manual control operations, and there are risks related to sales counterparties and the authenticity of transactions due to the significant growth in the revenue from partial customers, we have identified the revenue recognition as a key audit matter. For the accounting policies of revenue recognition, please refer to Note 4.(12) to the consolidated financial statements.

2. In response to the abovementioned risks, we have performed the following audit procedures:

1. Understand and test the internal control systems and procedures related to the cycle of sales transactions to identify and evaluate the effectiveness of the internal control procedures involved in making sales transactions.
2. Sample whether internal orders are approved by the responsible supervisor.
3. Sample whether external orders and transportation documents have been obtained for revenue recognition and whether the amount and the invoiced amount are consistent.
4. Sample whether the amount of collection after the period for relevant sales income transactions, remittance certificates, and counterparties is consistent with the amount of revenue recognition and counterparties.

Other matters

We have also audited the parent company only financial statements of Loop Telecommunication International, Inc. as of and for the years ended December 31, 2023 and 2022 on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect

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by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including members of the Audit Committee, are responsible for overseeing the Company's financial reporting process.

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

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

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

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

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

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

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

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

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

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

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

From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2023 and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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Deloitte & Touche Taiwan
Accountant Huang Yu-Feng	Accountant Tseng Jian-Ming

Approval No. of the Securities and Futures	Approval No. of the Financial Supervision
Bureau	Commission
Tai-Cai-Zheng-Liu-Zi No.0920123784	Jin-Guan-Shen-Zheng-Zi No.1100356048

March 12, 2024

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with 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 applied in the Republic of China.

For the convenience of readers, the independent auditors' review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors' review report and consolidated financial statements shall prevail.

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Loop Telecommunication International, Inc. and its subsidiaries

Consolidated Balance Sheet

December 31, 2023 and 2022

										(In Thousands of New Taiwan Dollars)
				December 31, 2023						December 31, 2022
Assets				Amount			％					Amount			％
Current assets
Cash and cash equivalents (Notes 4 and 6)	$	269,074					21	$	361,283				34
Financial assets at fair value through profit or loss - current (Notes 4 and 7)			10,541					1					33,546				3
Financial assets at amortized cost - current (Notes 4 and 8)			103,169					8					15,773				1
Contract assets - current (Notes 4 and 21)			233					-					32,776				3
Net accounts receivable (Notes 4, 5, 9, and 21)			230,989					18					41,771				4
Other receivables (Notes 4 and 9)			1,419					-					1,150				-
Inventories (Notes 4, 5, and 10)			374,974					29					312,977				29
Other current assets (Note 16)			7,953					1					2,934				-
Total current assets			998,352					78					802,210				74
Non-current assets
Financial assets at amortized cost - non-current (Notes 4, 8, and 28)			12,056					1					12,026				1
Property, plant and equipment (Notes 4, 12, and 28)			153,385					12					146,206				14
Right-of-use assets (Notes 4 and 13)			45,576					4					42,591				4
Investment property (Notes 4, 14, and 28)			30,719					2					31,858				3
Intangible assets (Notes 4 and 15)			4,560					-					8,638				1
Deferred income tax assets (Notes 4 and 23)			6,439					-					5,713				-
Refundable deposits (Note 28)			32,911					3					30,212				3
Net defined benefit assets (Notes 4 and 19)			1,427					-					-					-
Total non-current assets			287,073					22					277,244				26
Total assets		$	1,285,425					100		$	1,079,454				100
Financial liabilities and equity
Current liabilities
Short-term borrowings (Notes 4, 17, and 28)	$	192,000					15	$	-					-
Contract liabilities - current (Notes 4 and 21)			4,561					-					3,002				-
Accounts payable			35,455					3					29,638				3
Other payables (Note 18)			82,768					6					59,150				5
Income tax payable (Notes 4 and 23)			48,424					4					9,235				1
Lease liabilities - current (Notes 4 and 13)			2,256					-					1,159				-
Long-term liabilities - current portion (Notes 4, 17, and 28)			-					-					1,936				-
Other current liabilities (Note 18)			9,758					1					30,462				3
Total current liabilities			375,222					29					134,582				12
Non-current liabilities
Deferred income tax liabilities (Notes 4 and 23)			945					-					3,455				-
Lease liabilities - non-current (Notes 4 and 13)			50,329					4					48,109				5
Net defined benefit liabilities - non-current (Notes 4 and 19)			-					-					16,731				2
Guarantee deposits			1,493					-					1,190				-
Non-current liabilities (Note 18)			14,242					1					23,304				2
Total non-current liabilities			67,009					5					92,789				9
Total liabilities			442,231					34					227,371				21
Equity (Note 20)
Common stock			567,365					44					709,206				66
Capital surplus			43,953					4					48,208				4
Retained earnings
Legal reserve			26,563					2					19,174				2
Special reserve			2,786					-					3,088				-
Unappropriated earnings			205,278					16					75,193				7
Total retained earnings			234,627					18					97,455				9
Other equity	(		2,751 )				-	(		2,786 )				-
Total equity			843,194					66					852,083				79
Total Liabilities and Equity		$	1,285,425					100		$	1,079,454				100

The accompanying notes are an integral part of the consolidated financial statements.

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Loop Telecommunication International, Inc. and its subsidiaries

Consolidated Statement of Comprehensive Income

For the years ended December 31, 2023 and 2022

(In Thousands of New Taiwan Dollars,

Except Earnings Per Share)

			2023								2022
			Amount			％				Amount			％
Net revenue (Notes 4 and 21)	$	649,097		100		$	438,242	100
Cost of revenue (Notes 4, 10, and 22)			203,043			31					197,678	45
Gross profit			446,054			69					240,564	55
Operating expenses (Note 22)
Sales and marketing expenses			52,732		8					44,881	10
General and administrative
expenses			47,828		7					46,459	11
Research and development
expenses			152,224			24					134,715	31
Subtotal			252,784			39					226,055	52
Income from operations			193,270			30					14,509	3
Non-revenue and expenses (Note 22)
Interest income			15,525		2					4,029	1
Other income			36,495		6					36,119	8
Other gains and losses			3,297		-				29,994	7
Finance costs	(		1,822 )	-	(		1,248 )	-
Total non- operating income
and expenses			53,495			8					68,894	16
Income before income tax			246,765			38					83,403	19
Income tax expenses (Notes 4 and 23)			47,106			7					16,000	4
Net income			199,659			31					67,403	15
(Cont'd)

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