{"url_path":"/sec/brqsf/10-k/2026/item-19","section_key":"item-19","section_title":"Item 19 EXHIBITS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1650575/0001213900-26-057706-index.html","accession_number":"0001213900-26-057706","cik":"0001650575","ticker":"BRQSF","issuer_name":"Borqs Technologies, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1650575/0001213900-26-057706-index.html","primary_entity_key":"0001650575","primary_entity_name":"Borqs Technologies, Inc."},"word_count":28809,"has_tables":true,"body_markdown":"**ITEM 19. EXHIBITS**\n\n \n\n \n \n**Incorporated by Reference**\n\n**Exhibit\nNumber**\n \n**Exhibit Title**\n \n**Form**\n \n**File No.**\n \n**Exhibit**\n \n**Filing\nDate**\n \n**Filed\nHerewith**\n \n**Furnished\nHerewith**\n\n1.1\n \n[Amended and Restated Memorandum and Articles of Association](http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex3-1_borqstech.htm)\n \n8-K\n \n001-37593\n \n3.1 \n \n8/24/17\n \n \n \n \n\n2.1\n \n[Borqs Technologies, Inc. 2017 Equity Incentive Plan, as amended](http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex10-10_borqs.htm)\n \n8-K\n \n001-37593\n \n10.10\n \n8/24/17\n \n \n \n \n\n2.2\n \n[Form of Warrant, dated August 18, 2017, by and between the Company and each of Warrant Holders](http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex10-11_borqstech.htm)\n \n8-K\n \n001-37593\n \n10.11\n \n8/24/17\n \n \n \n \n\n2.3\n \n[Form of Warrant issued to Partners For Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018017642/f8k1218ex10-4_borqstech.htm)\n \n8-K\n \n001-37593\n \n10.4\n \n12/20/18\n \n \n \n \n\n2.4\n \n[Description of Securities](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex2-4_borqstechno.htm)\n \n20-F\n \n001-37593\n \n2.4\n \n2/4/2020\n \n \n \n \n\n4.1\n \n[Loan and Security Agreement, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-20_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.20\n \n7/2/18\n \n \n \n \n\n4.2\n \n[Subordination Agreement, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited, Borqs International Holding Corp., Spd Silicon Valley Bank Co., Ltd. and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-21_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.21\n \n7/2/18\n \n \n \n \n\n4.3\n \n[Deed Of Guarantee and Indemnity, Effective as of April 30, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-22_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.22\n \n7/2/18\n \n \n \n \n\n4.4\n \n[Debenture, Effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-23_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.23\n \n7/2/18\n \n \n \n \n\n4.5\n \n[Deed and Charge Of Shares, Effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-24_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.24\n \n7/2/18\n \n \n \n \n\n4.6\n \n[Deed Of Guarantee and Indemnity, Effective as of April 30, 2018, by and Between Borqs Hong Kong Limited and Partners for Growth V., L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-25_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.25\n \n7/2/18\n \n \n \n \n\n4.7\n \n[Debenture, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-26_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.26\n \n7/2/18\n \n \n \n \n\n4.8\n \n[Intellectual Property Security Agreement, Effective as of April 30, 2018, By and between Borqs Hong Kong and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-27_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.27\n \n7/2/18\n \n \n \n \n\n4.9\n \n[Intellectual Property Security Agreement, Effective as of April 30, 2018, By and between Borqs Hong Kong and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-28_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.28\n \n7/2/18\n \n \n \n \n\n4.10\n \n[Equitable Mortgage, Effective as of April 30, 2018, by and between Borqs Technologies, Inc. and Partners For Growth V, L.P](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-29_borqstechno.htm).\n \nS-1/A\n \n333-223034\n \n10.29\n \n7/2/18\n \n \n \n \n\n \n\n75 \n\n \n\n \n\n4.11\n \n[Waiver and Modification No. 2 To Loan and Security Agreement, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth V, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-30_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.30\n \n7/2/18\n \n \n \n \n\n4.12\n \n[Amended and Restated Registration Rights Agreement, dated August 18, 2017, by and among Pacific and certain shareholders of Pacific](http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex10-13_borqstech.htm)\n \n8-K\n \n001-37593\n \n 10.13 \n \n8/24/17\n \n \n \n \n\n4.13\n \n[Share Purchase Agreement, dated January 18, 2018, by and among with Borqs Technologies, Inc. and Colmei Technology International Limited, Shenzhen Crave Communication Company, Limited, and their respective shareholders.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018000745/f8k011818ex99-1_borqstech.htm)\n \n8-K\n \n001-37593\n \n99.1\n \n1/22/18\n \n \n \n \n\n4.14\n \n[Form of Indemnification Agreement, dated August 18, 2017, by and Borqs Technologies, Inc. and each of its directors and executive officers](http://www.sec.gov/Archives/edgar/data/1650575/000121390018003858/f10k2017ex10-19_borqstech.htm)\n \n10-K\n \n001-37593\n \n10.19\n \n4/2/18\n \n \n \n \n\n4.15\n \n[Share Pledge Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and Beijing Big Cloud Century](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-37_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.37\n \n8/6/18\n \n \n \n \n\n4.16\n \n[Share Pledge Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and Beijing Big Cloud Century Network Technology Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-38_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.38\n \n8/6/18\n \n \n \n \n\n4.17\n \n[Amendment Agreement, Effective August 31, 2018, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-42_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.42\n \n9/14/18\n \n \n \n \n\n4.18\n \n[Amendment Agreement, Effective August 31, 2018, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-43_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.43\n \n9/14/18\n \n \n \n \n\n4.19\n \n[Guarantee Agreement for Corporate Guarantor for Borqs Hong Kong Limited, Effective as of August 31, 2018, by and between Borqs Technologies, Inc. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-44_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.44\n \n9/14/18\n \n \n \n \n\n4.20\n \n[Guarantee Agreement for Corporate Guarantor for Borqs Beijing Ltd. Effective as of August 31, 2018, by and between Borqs Technologies, Inc. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-45_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.45\n \n9/14/18\n \n \n \n \n\n4.21\n \n[Guarantee Agreement for Corporate Guarantor for Borqs Hong Kong Limited, Effective as of August 31, 2018, by and between Borqs International Holding Corp. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-46_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.46\n \n9/14/18\n \n \n \n \n\n4.22\n \n[Guarantee Agreement for Corporate Guarantor for Borqs Beijing Ltd., Effective as of August 31, 2018, by and between Borqs International Holding Corp. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-47_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.47\n \n9/14/18\n \n \n \n \n\n4.23\n \n[Loan and Security Agreement, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-48_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.48\n \n9/14/18\n \n \n \n \n\n4.24\n \n[Deed Of Guarantee and Indemnity, Effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-49_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.49\n \n9/14/18\n \n \n \n \n\n4.25\n \n[Debenture, Effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-50_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.50\n \n9/14/18\n \n \n \n \n\n \n\n76 \n\n \n\n \n\n4.26\n \n[Intellectual Property Security Agreement, Effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-51_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.51\n \n9/14/18\n \n \n \n \n\n4.27\n \n[Deed Of Guarantee and Indemnity, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth IV, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-52_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n 10.52\n \n9/14/18\n \n \n \n \n\n4.28\n \n[Debenture, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-53_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.53\n \n9/14/18\n \n \n \n \n\n4.29\n \n[Intellectual Property Security Agreement, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-54_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.54\n \n9/14/18\n \n \n \n \n\n4.30\n \n[Subordination Agreement, Effective as of August 15, 2016, by and between Spd Silicon Valley Bank Co., Ltd. and Partners for Growth Iv, L.P.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-55_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.55\n \n9/14/18\n \n \n \n \n\n4.31\n \n[Facility Agreement for Working Capital Loans, Effective as of August 31, 2015, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-56_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.56\n \n9/14/18\n \n \n \n \n\n4.32\n \n[Guarantee Agreement for Corporate Guarantor, Effective as of August 31, 2015, Byand Between Borqs International Holding Corp. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-57_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.57\n \n9/14/18\n \n \n \n \n\n4.33\n \n[Amendment Agreement, Effective July 20, 2016, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-58_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.58\n \n9/14/18\n \n \n \n \n\n4.34\n \n[Amendment Agreement, Effective August 31, 2017, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-59_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.59\n \n9/14/18\n \n \n \n \n\n4.35\n \n[Facility Agreement for Working Capital Loan, Effective as of July 20, 2016, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-60_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.60\n \n9/14/18\n \n \n \n \n\n4.36\n \n[Pledge Agreement Of Accounts Receivable, Effective as of July 20, 2016, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-61_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.61  \n \n9/14/18\n \n \n \n \n\n4.37\n \n[Amendment Agreement, Effective July 20, 2017, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-62_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.62\n \n9/14/18\n \n \n \n \n\n4.38\n \n[Amendment Agreement, Effective August 31, 2017, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-63_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.63\n \n9/14/18\n \n \n \n \n\n4.39\n \n[Share Purchase Agreement, dated as of December 15, 2018, by and among Borqs Technologies, Inc., Borqs Beijing, Ltd., Borqs Hong Kong Limited, Shanghai KADI Technologies Co., Ltd., KADI Technologies Limited and the selling shareholders named therein.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018017642/f8k1218ex10-1_borqstech.htm)\n \n8-K\n \n001-37593\n \n10.1  \n \n12/20/18\n \n \n \n \n\n4.40\n \n[Waiver and Modification No. 1 to Loan and Security Agreement, dated as of December 17, 2018, by and among Partners for Growth V, L.P., Borqs Hong Kong Limited, BORQS International Holding Corp. and Borqs Technologies, Inc.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018017642/f8k1218ex10-2_borqstech.htm)\n \n8-K\n \n001-37593\n \n10.2 \n \n12/20/18\n \n \n \n \n\n4.41\n \n[Promissory Note, dated December 17, 2018](http://www.sec.gov/Archives/edgar/data/1650575/000121390018017642/f8k1218ex10-3_borqstech.htm)\n \n8-K\n \n001-37593\n \n 10.3 \n \n12/20/18\n \n \n \n \n\n4.42\n \n[Amended and Restated Loan and Security Agreement, dated March 8, 2019, by and among the Company, PFG5, BORQS HK, BORQS Tech HK and BORQS International](http://www.sec.gov/Archives/edgar/data/1650575/000121390019004148/f6k031419ex10-1_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.1\n \n03/14/19\n \n \n \n \n\n \n\n77 \n\n \n\n \n\n4.43\n \n[Reaffirmations of Intellectual Property Security Agreement and Joinder, dated March 8, 2019, by and among PFG5, BORQS HK, BORQS Tech HK and BORQS International](http://www.sec.gov/Archives/edgar/data/1650575/000121390019004148/f6k031419ex10-4_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.4 \n \n03/14/19\n \n \n \n \n\n4.44\n \n[Share Pledge Agreement, dated March 8, 2019, by and among PFG5, BORQS HK and BORQS Tech HK](http://www.sec.gov/Archives/edgar/data/1650575/000121390019004148/f6k031419ex10-5_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.5 \n \n03/14/19\n \n \n \n \n\n4.45\n \n[Equity Mortgage, dated March 8, 2019, by and among PFG5, BORQS International and the Company](http://www.sec.gov/Archives/edgar/data/1650575/000121390019004148/f6k031419ex10-6_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.6 \n \n03/14/19\n \n \n \n \n\n4.46\n \n[Share Pledge Agreement, dated March 8, 2019, by and among PFG5, BORQS International, BORQS HK and BORQS Software Solutions Private Limited](http://www.sec.gov/Archives/edgar/data/1650575/000121390019004148/f6k031419ex10-7_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.7 \n \n03/14/19\n \n \n \n \n\n4.47\n \n[Custody and Control Agreement, dated March 8, 2019, by and among PFG5, BORQS International, BORQS HK and Borqs Software Solutions Private Limited](http://www.sec.gov/Archives/edgar/data/1650575/000121390019004148/f6k031419ex10-8_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.8 \n \n03/14/19\n \n \n \n \n\n4.48\n \n[Securities Purchase Agreement, dated April 29, 2019, by and between the Company and Chongqing City Youtong Equity Investment Fund, Limited Liability Partnership](http://www.sec.gov/Archives/edgar/data/1650575/000121390019009413/f6k052219ex10-1_borqstech.htm)\n \n6-K\n \n001-37593\n \n10.1\n \n05/22/19\n \n \n \n \n\n4.49\n \n[Partial Assignment and Amendment of Backstop and Subscription Agreement, dated August 18, 2017, by and between Zhengqi, EarlyBirdCapital, Pacific and Borqs International](http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex10-12_borqstech.htm)\n \n8-K\n \n001-37593\n \n10.12\n \n8/24/17\n \n \n \n \n\n4.50\n \n[Letter of Intent, dated January 8, 2018, by and between Borqs Technologies, Inc. and Shanghai KADI Technologies Co., Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018003858/f10k2017ex10-14_borqstech.htm)\n \n10-K\n \n001-37593\n \n10.14\n \n4/2/18\n \n \n \n \n\n4.51\n \n[Vendor Master Services Agreement, dated July 5, 2013, by and between Borqs Software Solutions Pvt. Ltd. and Qualcomm India Private Limited](http://www.sec.gov/Archives/edgar/data/1650575/000121390018006130/fs12018a1ex10-18_borqs.htm)\n \nS-1/A\n \n333-223034\n \n10.18\n \n5/14/18\n \n \n \n \n\n4.52\n \n[Vendor Master Services Agreement, dated July 5, 2013, by and Between Borqs Software Solutions Pvt. Ltd. and Qualcomm India Private Limited](http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-18_borqstechno.htm)\n \nS-1/A\n \n333-223034\n \n10.18\n \n7/2/18\n \n \n \n \n\n4.53\n \n[Colmei Technology International Limited Master Manufacturing Agreement and Form of Purchase Order, dated March 6, 2017.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018003858/f10k2017ex10-17_borqstech.htm)\n \n10-K\n \n001-37593\n \n10.17\n \n4/2/18\n \n \n \n \n\n4.54\n \n[Reliance Retail Limited Form of Purchase Order, dated November 23, 2015](http://www.sec.gov/Archives/edgar/data/1650575/000121390018003858/f10k2017ex10-18_borqstech.htm)\n \n10-K\n \n001-37593\n \n10.18\n \n4/2/18\n \n \n \n \n\n4.55\n \n[Exclusive Business Cooperation Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd. and Beijing Big Cloud ](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-32_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n 10.32  \n \n8/6/18\n \n \n \n \n\n4.56\n \n[Loan Contract, Effective October 18, 2016, by and between Borqs Beijing Ltd. and Between Borqs Beijing Ltd. and Wang Lei](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-33_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.33  \n \n8/6/18\n \n \n \n \n\n4.57\n \n[Loan Contract, Effective October 18, 2016, by and between Borqs Beijing Ltd. and Wang Tun](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-34_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.34 \n \n8/6/18\n \n \n \n \n\n4.58\n \n[Exclusive Option Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Lei, and Beijing Big Cloud Century Network Technology Ltd.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-35_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.35 \n \n8/6/18\n \n \n \n \n\n4.59\n \n[Exclusive Option Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and Beijing Big Cloud Century](http://www.sec.gov/Archives/edgar/data/1650575/000121390018010211/fs12018a4ex10-36_borqstech.htm)\n \nS-1/A\n \n333-223034\n \n10.36\n \n8/6/18\n \n \n \n \n\n \n\n78 \n\n \n\n \n\n4.61\n \n[Master Services Agreement for Software Development, dated February 8, 2018, by and between Cloudminds (Hong Kong) Ltd. and Borqs Hong Kong Limited.](http://www.sec.gov/Archives/edgar/data/1650575/000121390018016230/f10q0918ex10-1_borqs.htm)\n \n10-Q\n \n001-37593\n \n10.1  \n \n11/19/18\n \n \n \n \n\n4.63\n \n[Formal Commercial Cooperation Agreement for Mobile Communication Resale Business, dated June 5, 2018, by and between Yuantel (Beijing) Investment Management Co., Ltd. and China Unicom](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-63_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.63\n \n2/4/2020\n \n \n \n \n\n4.64\n \n[Memorandum of Understanding of Equity Transfer and Incentive, dated November 8, 2018, between Beijing Big Cloud Century Network Technology Co., Ltd. and Jinan Yuantel Communication Technology LLP](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-64_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.64\n \n2/4/2020\n \n \n \n \n\n4.65\n \n[Ownership Transfer Agreement, dated February 14, 2019, between Beijing Big Cloud Century Network Technology Co., Ltd. and Jinggangshan Leiyi Venture Capital LLP](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-65_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.65\n \n2/4/2020\n \n \n \n \n\n4.66\n \n[10% Equity Transfer Agreement, dated February 28, 2019, by and between Beijing Big Cloud Network Techonology Co., Ltd. And Jinan Yuantel Communications Technology Partnership](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-66_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.66\n \n2/4/2020\n \n \n \n \n\n4.67\n \n[Mobile Communication Resale Business Cooperation Agreement, dated January 10, 2018, by and between Yuantel (Beijing) Investment Management Co., Ltd. and China Unicom](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-67_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.67\n \n2/4/2020\n \n \n \n \n\n4.69\n \n[Waiver, Consent and Modification to Loan and Security Agreement, dated June 28, 2019, by and among PFG4, Borqs HK, Borqs International, and the Company.](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-69_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.69\n \n2/4/2020\n \n \n \n \n\n4.70\n \n[Waiver, Consent and Modification No. 1 to Amended and Restated Loan and Security Agreement, dated June 28, 2019, by and among PFG5, Borqs HK, Borqs International, and the Company.](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-70_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.70\n \n2/4/2020\n \n \n \n \n\n4.71\n \n[Supplementary Agreement 1 of the “Mobile Communication Resale Business Cooperation Agreement,” dated January 16, 2019, by and between Yuantel (Beijing) Investment Management Co., Ltd. and China Unicom](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-71_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.71\n \n2/4/2020\n \n \n \n \n\n4.72\n \n[20% Equity Transfer Agreement, dated February 28, 2019, by and between Beijing Big Cloud Network Techonology Co., Ltd. And Jinan Yuantel Communications Technology Partnership](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-72_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.72\n \n2/4/2020\n \n \n \n \n\n4.73\n \n[Engagement Letter, dated December 6, 2019, by and between the Company and American West Pacific International Investment Corp.](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-73_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.73\n \n2/4/2020\n \n \n \n \n\n4.74\n \n[Amended Engagement Letter, dated January 17, 2020, by and between the Company and American West Pacific International Investment Corp.](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-74_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.74\n \n2/4/2020\n \n \n \n \n\n4.75\n \n[Strategic Cooperation Agreement, dated January 2020, by and between China National Technical & Export Corp, Genertec America Inc., and the Company](http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex4-75_borqstechno.htm)\n \n20-F\n \n001-37593\n \n4.75\n \n2/4/2020\n \n \n \n \n\n4.76\n \n[Loan Agreement of November 27, 2020 with Run He](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-76_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.76\n \n4/26/2021\n \n \n \n \n\n4.77\n \n[Settlement Agreement with LMFA Financing, LLC, Of December 14, 2020](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-77_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.77\n \n4/26/2021\n \n \n \n \n\n \n\n79 \n\n \n\n \n\n4.78\n \n[Loan Agreement of December 30, 2020 with American West Pacific International Investment Corporation](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-78_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.78\n \n4/26/2021\n \n \n \n \n\n4.79\n \n[Settlement Agreement with Growth V, L.P. of February 11, 2021](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-79_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.79\n \n4/26/2021\n \n \n \n \n\n4.80\n \n[Form of Securities Purchase Agreement.](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-80_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.80\n \n4/26/2021 \n \n \n \n \n\n4.81\n \n[Form of Convertible Note.](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-81_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.81\n \n4/26/2021\n \n \n \n \n\n4.82\n \n[Form of Warrant.](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-82_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.82\n \n4/26/2021\n \n \n \n \n\n4.83\n \n[Form of Registration Rights Agreement.](http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-83_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.83\n \n4/26/2021\n \n \n \n \n\n4.84\n \n[YT Ownership Transfer Agreement, dated September 1, 2020, by and among Fengbin Tian, Beijing Big Cloud Century Network Technology Company, Limited, and Jinggangshan Leiyi Venture Capital Partnership Enterprise, Limited](http://www.sec.gov/Archives/edgar/data/1650575/000121390020029193/f20f2019ex4-77_borqstech.htm)\n \n20-F\n \n001-37593\n \n4.77\n \n9/30/2020\n \n \n \n \n\n4.85\n \n[Membership Interest Purchase Agreement](http://www.sec.gov/Archives/edgar/data/1650575/000121390021056794/ea149964ex10-32_borqstech.htm)\n \nF-1\n \n333-259856\n \n10.32\n \n11/04/2021\n \n \n \n \n\n4.86\n \n[Limited Liability Company Agreement](http://www.sec.gov/Archives/edgar/data/1650575/000121390021056794/ea149964ex10-33_borqstech.htm)\n \nF-1\n \n333-259856\n \n10.33\n \n11/04/2021\n \n \n \n \n\n4.87††\n \n[National Security Agreement, dated March 16, 2023, by and among Borqs Technologies, Inc., Holu Hou Energy, LLC and the U.S. Government](https://www.sec.gov/Archives/edgar/data/1650575/000121390024042975/ea020560401ex4-87_borqstech.htm) \n \n20-F\n \n001-37593\n \n4.87\n \n05/14/2024\n \n \n \n \n\n4.88††\n \n[Share Purchase Agreement, dated April 8, 2025](http://www.sec.gov/Archives/edgar/data/1650575/000121390025031332/ea023762001ex99-2_borqs.htm)\n \n6-K\n \n001-37593\n \n99.2\n \n04/14/2025\n \n \n \n \n\n8.1\n \n[List of Subsidiaries](https://www.sec.gov/Archives/edgar/data/1650575/000121390024042975/ea020560401ex8-1_borqstech.htm) \n \n20-F\n \n001-37593\n \n8.1\n \n05/14/2024\n \n \n \n \n\n11.1\n \n[Insider trading policy of the Company](https://www.sec.gov/Archives/edgar/data/1650575/000121390023039729/f20f2022ex11-1_borqstech.htm)\n \n20-F\n \n 001-37593\n \n11.1\n \n05/15/2023\n \n \n \n \n\n12.1\n \n[Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted by Section 302 of the of the Sarbanes-Oxley Act of 2002.](ea029016301ex12-1.htm)\n \n20-F\n \n \n \n \n \n \n \nX\n \n \n\n12.2\n \n[Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted by Section 302 of the of the Sarbanes-Oxley Act of 2002.](ea029016301ex12-2.htm)\n \n20-F\n \n \n \n \n \n \n \nX\n \n \n\n13.1\n \n[Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.](ea029016301ex13-1.htm)\n \n20-F\n \n \n \n \n \n \n \n \n \nX\n\n15.1\n \n[Consent of Independent Auditor](ea029016301ex15-1.htm)\n \n \n \n \n \n \n \n \n \nX\n \n \n\n101.INS\n \nInline XBRL Instance Document.\n \n \n \n \n \n \n \n \n \nX\n \n \n\n101.SCH\n \nInline XBRL Taxonomy Extension Schema Document.\n \n \n \n \n \n \n \n \n \nX\n \n \n\n101.CAL\n \nInline XBRL Taxonomy Extension Calculation Linkbase Document.\n \n \n \n \n \n \n \n \n \nX\n \n \n\n101.DEF\n \nInline XBRL Taxonomy Extension Definition Linkbase Document.\n \n \n \n \n \n \n \n \n \nX\n \n \n\n101.LAB\n \nInline XBRL Taxonomy Extension Label Linkbase Document.\n \n \n \n \n \n \n \n \n \nX\n \n \n\n101.PRE\n \nInline XBRL Taxonomy Extension Presentation Linkbase Document.\n \n \n \n \n \n \n \n \n \nX\n \n \n\n104\n \nCover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).\n \n \n \n \n \n \n \n \n \nX\n \n \n\n \n\n†† Certain identified information in the exhibit has been excluded from the exhibit because it is both (i) not material and (ii) is the\ntype that Borqs Technologies, Inc. treats as private or confidential.\n\n \n\n80 \n\n \n\n \n\n**SIGNATURES**\n\n \n\nThe registrant hereby certifies\nthat it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this\nannual report on its behalf.\n\n \n\n \n**BORQS TECHNOLOGIES, INC.**\n\n \n \n\n \nBy:\n/s/ Pat Sek Yuen Chan\n\n \nName:\nPat Sek Yuen Chan\n\n \nTitle:\nChairman & Chief Executive Officer\n\n \n\nDate: May 15, 2026\n\n \n\n81 \n\n \n\n** **\n\n**BORQS TECHNOLOGIES, INC.**\n\n \n\n**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n \n \n**Page**\n\n[Reports of Independent Registered Public Accounting Firms (PCAOB ID # 5910)](#f_001)\n \nF-2 – F-3\n\n[Consolidated Balance Sheets as of December 31, 2024 and 2025](#f_002)\n \nF-4 – F-5\n\n[Consolidated Statements of Operations for the Years Ended December 31, 2023, 2024 and 2025](#f_003)\n \nF-6 – F-7\n\n[Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2024 and 2025](#f_004)\n \nF-8\n\n[Consolidated Statements of Shareholders’ (Deficit) Equity for the Years Ended December 31, 2023, 2024 and 2025](#f_005)\n \nF-9 – F-11\n\n[Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2024 and 2025](#f_006)\n \nF-12 – F-13\n\n[Notes to the Consolidated Financial Statements](#f_007)\n \nF-14 – F-53\n\n \n\nF-1\n\n \n\n \n\n** **\n\n**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**\n\n \n\n \n\nTo the Shareholders and the Board of Directors\nof\n\nBorqs Technologies, Inc.\n\n \n\n**Opinion on the Financial Statements**\n\n** **\n\nWe have audited the accompanying consolidated\nbalance sheets of Borqs Technologies, Inc. (the “Company”) and its subsidiaries (collectively referred to as the “Group”),\nas of December 31, 2025 and 2024, the related consolidated statements of operations, consolidated statements of comprehensive income (loss),\nconsolidated statements of shareholders' (deficit) equity, and consolidated statements of cash flows, for each of the three years ended\nDecember 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion,\nthe consolidated financial statements present fairly, in all material respects, the financial positions of the Group as of December 31,\n2025 and 2024, and the results of its operations and its cash flows, for each of the three years ended December 31, 2025, in conformity\nwith generally accepted accounting principles in the United States of America.\n\n \n\n**Emphasis of Matter – Disposal of Certain\nBusiness**\n\n \n\nAs described in Note 1(b) to the financial statements,\non April 9, 2025, the Group disposed of certain hardware and software services business. This transaction represented a significant disposition\nof the Group’s operations and may affect the Group’s future results of operations and financial position.\n\n \n\n**Basis for Opinion**\n\n \n\nThese consolidated financial statements are the\nresponsibility of the Group's management. Our responsibility is to express an opinion on the Group’s consolidated financial statements\nbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)\nand are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules\nand regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audits in accordance with the\nstandards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated\nfinancial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we\nengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding\nof internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group's internal\ncontrol over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur audits included performing procedures to assess\nthe risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures\nthat respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the\nconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by\nmanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide\na reasonable basis for our opinion.\n\n \n\nF-2\n\n \n\n \n\n**Critical Audit Matters**\n\n** **\n\nThe critical audit matters communicated below\nare the matters, arising from the current audit of the consolidated financial statements, which were communicated or required to be communicated\nto the audit committee, and that (i) related to accounts or disclosures which are material to the consolidated financial statements, and\n(ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter,\nin any way, our opinion on the consolidated financial statements taken as a whole, and we are not, by communicating the critical audit\nmatter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined\nthat there are no critical audit matters. \n\n \n\n/s/ Summit Group CPAs, P.C. (formerly known as “Yu Certified Public Accountant, P.C.”)\n\n(PCAOB ID: 5910)\n\nWe have served as the Company’s auditor since 2019.\n\n \n\nNew\nYork, New York\n\nMay 15, 2026  \n\n \n\nF-3\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED BALANCE SHEETS**\n\n**(Amounts in thousands of US dollar (“$”),\nunless otherwise stated)**\n\n \n\n  \n  \nAs of December 31, \n\n  \nNote \n2024  \n2025 \n\n  \n  \n$  \n$ \n\nASSETS \n  \n   \n  \n\nCurrent assets: \n  \n   \n  \n\nCash and cash equivalents \n  \n 2,032  \n 2,615 \n\nRestricted cash \n  \n 26  \n \n-\n \n\nTime deposits \n  \n 3,377  \n \n-\n \n\nShort term investments \n(5) \n \n-\n  \n 4,888 \n\nAccounts receivable, net (net of allowance of $nil and $56 as of December 31, 2024 and 2025, respectively) \n  \n 116  \n 156 \n\nPrepaid expenses and other current assets, net (net of allowance of $392 and $1,214 as of December 31, 2024 and 2025, respectively) \n(6) \n 6,747  \n 847 \n\nCurrent assets held for sale \n(1) \n 11,057  \n \n-\n \n\n  \n  \n    \n   \n\nTotal current assets \n  \n 23,355  \n 8,506 \n\n  \n  \n    \n   \n\nNon-current assets: \n  \n    \n   \n\nProperty and equipment, net \n(8) \n 7  \n 7 \n\nRight of use asset \n(7) \n 216  \n 41 \n\nNon-current assets held for sale \n(1) \n 1,831  \n \n-\n \n\n  \n  \n    \n   \n\nTotal non-current assets \n  \n 2,054  \n 48 \n\n  \n  \n    \n   \n\nTotal assets \n  \n 25,409  \n 8,554 \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-4\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED BALANCE SHEETS (CONTINUED)**\n\n**(Amounts in thousands of US dollar (“$”),\nunless otherwise stated)**\n\n \n\n  \n  \nAs of December 31, \n\n  \nNote \n2024  \n2025 \n\n  \n  \n$  \n$ \n\nLIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) \n  \n   \n  \n\nCurrent liabilities: \n  \n   \n  \n\nAccounts payable \n  \n 5,388  \n 22 \n\nAccrued expenses and other payables \n(11) \n 15,296  \n 1,538 \n\nContract liabilities \n  \n 1,299  \n \n-\n \n\nLease liabilities – current \n(7) \n 179  \n 12 \n\nShort-term bank and other borrowings \n(10) \n 417  \n \n-\n \n\nIncome tax payable \n  \n \n-\n  \n 6 \n\nCurrent liabilities held for sale \n(1) \n 4,337  \n \n-\n \n\n  \n  \n    \n   \n\nTotal current liabilities \n  \n 26,916  \n 1,578 \n\n  \n  \n    \n   \n\nNon-current liabilities: \n  \n    \n   \n\nLease liabilities – non-current \n  \n \n-\n  \n 30 \n\nNon-current liabilities held for sale \n(1) \n 2,091  \n \n-\n \n\n  \n  \n    \n   \n\nTotal non-current liabilities \n  \n 2,091  \n 30 \n\n  \n  \n    \n   \n\nTotal liabilities \n  \n 29,007  \n 1,608 \n\n  \n  \n    \n   \n\nCommitments and contingencies \n  \n \n \n  \n \n \n \n\n  \n  \n    \n   \n\nShareholders’ (deficit) equity: \n  \n    \n   \n\nOrdinary shares (no par value; unlimited shares authorized; 28,970,077 shares and 45,470,079 shares issued and outstanding as of December 31, 2024 and 2025, respectively*)\n\n \n  \n \n-\n  \n \n-\n \n\nAdditional paid-in capital \n  \n 330,016  \n 332,452 \n\nSubscriptions receivable \n  \n (16,091) \n (16,091)\n\nStatutory reserve \n  \n 1,901  \n 1,901 \n\nAccumulated deficit \n  \n (314,842) \n (309,477)\n\nAccumulated other comprehensive loss \n  \n (4,389) \n (2,055)\n\n  \n  \n    \n   \n\nTotal Borqs Technologies, Inc. shareholders’ (deficit) equity \n  \n (3,405) \n 6,730 \n\n  \n  \n    \n   \n\nNoncontrolling interest \n  \n (193) \n 216 \n\n  \n  \n    \n   \n\nTotal shareholders’ (deficit) equity \n  \n (3,598) \n 6,946 \n\n  \n  \n    \n   \n\nTotal liabilities, noncontrolling interest and shareholders’ equity \n  \n 25,409  \n 8,554 \n\n \n\n*Giving\nretroactive effect to the one-for-sixteen reverse split on June 27, 2022 and one-for-twelve reverse split on October 10, 2023\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-5\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENT OF OPERATIONS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n** **\n\n  \n  \nFor the years ended December 31, \n\n  \nNote \n2023  \n2024  \n2025 \n\n  \n  \n$  \n **$**    \n **$**   \n\nNet Revenues: \n  \n   \n   \n  \n\nSoftware \n  \n 1,516  \n 1,601  \n \n-\n \n\nHardware \n  \n 19,051  \n 26,112  \n 13,602 \n\n  \n  \n    \n    \n   \n\nTotal net revenues \n  \n 20,567  \n 27,713  \n 13,602 \n\n  \n  \n    \n    \n   \n\nSoftware \n  \n (678) \n (379) \n \n-\n \n\nHardware \n  \n (16,019) \n (21,548) \n (13,102)\n\n  \n  \n    \n    \n   \n\nTotal cost of revenues \n  \n (16,697) \n (21,927) \n (13,102)\n\n  \n  \n    \n    \n   \n\nTotal gross profit \n  \n 3,870  \n 5,786  \n 500 \n\n  \n  \n    \n    \n   \n\nOperating expenses: \n  \n    \n    \n   \n\nSales and marketing expenses \n  \n (494) \n (534) \n (204)\n\nGeneral and administrative expenses \n  \n (11,084) \n (6,465) \n (14,164)\n\nResearch and development expenses \n  \n (3,658) \n (2,321) \n (3,526)\n\n  \n  \n    \n    \n   \n\nTotal operating expenses \n  \n (15,236) \n (9,320) \n (17,894)\n\n  \n  \n    \n    \n   \n\nOther operating income \n  \n 22  \n 396  \n \n-\n \n\n  \n  \n    \n    \n   \n\nOperating loss \n  \n (11,344) \n (3,138) \n (17,394)\n\n  \n  \n    \n    \n   \n\nInterest income \n  \n 60  \n 9  \n 9 \n\nInterest expense \n  \n (1,271) \n (1,257) \n (44)\n\nOther income \n  \n 617  \n 4,225  \n 11,994 \n\nOther expense \n  \n (140) \n (210) \n (6,221)\n\nGain on debt settlement \n(17(d)) \n 176  \n \n-\n  \n \n-\n \n\nLoss related to equity financing \n(17(b)) \n (14,156) \n \n-\n  \n \n-\n \n\n(Loss) gain on additional compensation to HHE \n(4(a)) \n (5,400) \n 5,950  \n \n-\n \n\nGain on deconsolidation of subsidiaries \n  \n \n-\n  \n 12,564  \n 21,212 \n\nLoss on repurchase of convertible notes \n  \n \n-\n  \n (600) \n \n-\n \n\nUnrealized loss on trading securities \n  \n \n-\n  \n \n-\n  \n (830)\n\nRealized gain on sale of securities \n  \n \n-\n  \n \n-\n  \n 1,104 \n\nForeign exchange gain (loss) \n  \n 1,163  \n (73) \n (119)\n\n  \n  \n    \n    \n   \n\n(Loss) income from continuing operations, before income taxes \n  \n (30,295) \n 17,470  \n 9,711 \n\n  \n  \n    \n    \n   \n\nIncome tax benefit (expense) \n(15) \n 2,084  \n (8) \n (5)\n\n  \n  \n    \n    \n   \n\nNet (loss) income from continuing operations \n  \n (28,211) \n 17,462  \n 9,706 \n\n** **\n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-6\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n  \n  \nFor the years ended December 31, \n\n  \nNote \n2023  \n2024  \n2025 \n\n  \n  \n$  \n$  \n$ \n\nDiscontinued operations \n  \n   \n   \n  \n\nIncome (loss) from operations of discontinued entities \n  \n 2,368  \n (4) \n (4,999)\n\n  \n  \n    \n    \n   \n\nIncome tax (expense) benefit \n  \n (1,078) \n (135) \n 945 \n\n  \n  \n    \n    \n   \n\nNet income (loss) on discontinued operations \n  \n 1,290  \n (139) \n (4,054)\n\n  \n  \n    \n    \n   \n\nNet (loss) income \n  \n (26,921) \n 17,323  \n 5,652 \n\n  \n  \n    \n    \n   \n\nNet (loss) income attributable to noncontrolling interest – continuing operations \n  \n (454) \n 626  \n 287 \n\nNet (loss) income attributable to noncontrolling interest – discontinued operations \n  \n \n-\n  \n \n-\n  \n \n-\n \n\nLess: net (loss) income attributable to noncontrolling interest \n  \n (454) \n 626  \n 287 \n\n  \n  \n    \n    \n   \n\nNet (loss) income attributable to Borqs Technologies, Inc. \n  \n (26,467) \n 16,697  \n 5,365 \n\n  \n  \n    \n    \n   \n\nNet (loss) income attributable to ordinary shareholders \n  \n (26,467) \n 16,697  \n 5,365 \n\n  \n  \n    \n    \n   \n\nNet (loss) income per share from continuing operations attributable to Borqs Technologies, Inc. \n  \n    \n    \n   \n\n(Loss) income per share—Basic *: \n  \n (2.13) \n 0.55  \n 0.28 \n\n(Loss) income per share—Diluted *: \n  \n (2.13) \n 0.55  \n 0.28 \n\n  \n  \n    \n    \n   \n\nNet (loss) income per share from discontinued operations attributable to Borqs Technologies, Inc. \n  \n    \n    \n   \n\nIncome (loss) per share—Basic *: \n  \n 0.10  \n (0.00) \n (0.12)\n\nIncome (loss) per share—Diluted *: \n  \n 0.10  \n (0.00) \n (0.12)\n\n  \n  \n    \n    \n   \n\nNet (loss) income per share attributable to Borqs Technologies, Inc. \n  \n    \n    \n   \n\n(Loss) income per share—Basic *: \n  \n (2.03) \n 0.55  \n 0.16 \n\n(Loss) income per share—Diluted *: \n  \n (2.03) \n 0.55  \n 0.16 \n\n  \n  \n    \n    \n   \n\nNumber of ordinary shares used in earnings per share computation: \n  \n    \n    \n   \n\nWeighted-average number of ordinary shares used in calculating continuing operations—basic * \n  \n 13,059,041  \n 30,461,758  \n 32,949,585 \n\nWeighted-average number of ordinary shares used in calculating continuing operations—diluted * \n  \n 13,059,041  \n 30,461,758  \n 32,949,585 \n\n  \n  \n    \n    \n   \n\nWeighted-average number of ordinary shares used in calculating discontinued operations—basic * \n  \n 13,059,041  \n 30,461,758  \n 32,949,585 \n\nWeighted-average number of ordinary shares used in calculating discontinued operations—diluted * \n  \n 13,059,041  \n 30,461,758  \n 32,949,585 \n\n \n\n*Giving\nretroactive effect to the one-for-sixteen reverse split on June 27, 2022 and one-for-twelve reverse split on October 10, 2023\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-7\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME\n(LOSS)**\n\n**(Amounts in thousands of $, unless otherwise\nstated)**\n\n \n\n  \n   \nFor the years ended December 31, \n\n  \nNote  \n2023  \n2024  \n2025 \n\n  \n   \n$  \n$  \n$ \n\nNet (loss) income \n                \n (26,921) \n 17,323  \n 5,652 \n\nOther comprehensive income (loss), net of tax of nil: \n    \n    \n    \n   \n\nForeign currency translation adjustments, net of tax of nil \n    \n (262) \n (244) \n 409 \n\nOther comprehensive income (loss), net of tax of nil \n    \n (262) \n (244) \n 409 \n\nComprehensive (loss) income \n    \n (27,183) \n 17,079  \n 6,061 \n\nLess: comprehensive loss attributable to noncontrolling interest \n    \n 18  \n 14  \n 12 \n\nComprehensive (loss) income attributable to Borqs Technologies, Inc. \n    \n (27,201) \n 17,065  \n 6,049 \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-8\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’\n(DEFICIT) EQUITY (CONTINUED)**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n** **\n\n \n \nNumber of\nordinary\nshares\n \n \nOrdinary\nshares\n \n \nAdditional\npaid-in\ncapital\n \n \nSubscription\nreceivable\n \n \nStatutory\nreserves\n \n \n**Accumulated Other comprehensive loss**\n \n \nAccumulated\ndeficit\n \n \nTotal Borqs\nTechnologies, Inc.\nshareholders’\nequity\n \n \nNoncontrolling\ninterest\n \n \nTotal\nshareholders’\n(deficit)\nequity\n \n\nBalance as of January 1, 2023\n \n \n4,765,219\n \n \n \n\n-\n\n \n \n \n310,267\n \n \n \n(14,378\n)\n \n \n1,901\n \n \n \n(3,512\n)\n \n \n(305,072\n)\n \n \n(10,794\n)\n \n \n(358\n)\n \n \n(11,152\n)\n\nConsolidated net loss\n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n(26,467\n)\n \n \n(26,467\n)\n \n \n(454\n)\n \n \n(26,921\n)\n\nForeign exchange difference\n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n \n \n \n \n\n-\n\n \n \n \n(294\n)\n \n \n\n-\n\n \n \n \n(294\n)\n \n \n\n-\n\n \n \n \n(294\n)\n\nDebt equity conversion settlement (Note 17(d))\n \n \n771,605\n \n \n \n-\n \n \n \n1,574\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n1,574\n \n \n \n\n-\n\n \n \n \n1,574\n \n\nIssuance of ordinary shares as collateral (Note17(c))\n \n \n443,294\n \n \n \n\n-\n\n \n \n \n1,321\n \n \n \n(1,321\n)\n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n\nIssuance of ordinary shares for a project (Note17(h))\n \n \n166,667\n \n \n \n-\n \n \n \n392\n \n \n \n(392\n)\n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n\nShares conversion of convertible notes (Note 12)\n \n \n94,003\n \n \n \n-\n \n \n \n500\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n500\n \n \n \n\n-\n\n \n \n \n500\n \n\nWarrants exercised into shares (Note 12)\n \n \n3,127,762\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n\nIssuance of warrants associated with convertible notes (Note 12)\n \n \n-\n \n \n \n-\n \n \n \n629\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n629\n \n \n \n\n-\n\n \n \n \n629\n \n\nShares issued to HHE (Note 4(a))\n \n \n1,916,667\n \n \n \n-\n \n \n \n9,423\n \n \n \n(9,423\n)\n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n\nSettlement of equity financing (Note 17(b))\n \n \n4,668,704\n \n \n \n-\n \n \n \n13,463\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n13,463\n \n \n \n\n-\n\n \n \n \n13,463\n \n\nShare-based compensation (Note 14)\n \n \n12,912,096\n \n \n \n-\n \n \n \n7,769\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n7,769\n \n \n \n\n-\n\n \n \n \n7,769\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nBalance as of December 31, 2023\n \n \n28,866,017\n \n \n \n\n-\n\n \n \n \n345,338\n \n \n \n(25,514\n)\n \n \n1,901\n \n \n \n(3,806\n)\n \n \n(331,539\n)\n \n \n(13,620\n)\n \n \n(812\n)\n \n \n(14,432\n)\n\n** **\n\n*Giving\nretroactive effect to the one-for-sixteen reverse split on June 27, 2022 and one-for-twelve reverse split on October 10, 2023\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-9\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’\n(DEFICIT) EQUITY (CONTINUED)**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n \n \nNumber of\nordinary\nshares *\n \n \nOrdinary\nshares\n \n \nAdditional\npaid-in\ncapital\n \n \nSubscription\nreceivable\n \n \nStatutory\nreserves\n \n \n**Accumulated Other comprehensive loss**\n \n \nAccumulated\ndeficit\n \n \nTotal Borqs\nTechnologies, Inc.\nshareholders’\nequity\n \n \nNoncontrolling\ninterest\n \n \nTotal\nshareholders’\n(deficit)\nequity\n \n\nBalance as of January 1, 2024\n \n \n28,866,017\n \n \n \n\n-\n\n \n \n \n345,338\n \n \n \n(25,514\n)\n \n \n1,901\n \n \n \n(3,806\n)\n \n \n(331,539\n)\n \n \n(13,620\n)\n \n \n(812\n)\n \n \n(14,432\n)\n\nConsolidated net loss\n \n \n-\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n16,697\n \n \n \n16,697\n \n \n \n626\n \n \n \n17,323\n \n\nForeign exchange difference\n \n \n-\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n \n\n \n \n \n\n-\n\n \n \n \n(583\n)\n \n \n\n-\n\n \n \n \n(583\n)\n \n \n\n-\n\n \n \n \n(583\n)\n\nWarrants exercised into shares (Note 12)\n \n \n1,460,493\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n\nDisposal of a subsidiary (Note 4 (b))\n \n \n-\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n(7\n)\n \n \n(7\n)\n\nCancellation of shares issued to HHE (Note 4(a))\n \n \n(2,406,433\n)\n \n \n-\n \n \n \n(15,373\n)\n \n \n9,423\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n(5,950\n)\n \n \n\n-\n\n \n \n \n(5,950\n)\n\nShare-based compensation (Note 14)\n \n \n1,050,000\n \n \n \n-\n \n \n \n51\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n51\n \n \n \n\n-\n\n \n \n \n51\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nBalance as of December 31, 2024\n \n \n28,970,077\n \n \n \n\n-\n\n \n \n \n330,016\n \n \n \n(16,091\n)\n \n \n1,901\n \n \n \n(4,389\n)\n \n \n(314,842\n)\n \n \n(3,405\n)\n \n \n(193\n)\n \n \n(3,598\n)\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-10\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’\n(DEFICIT) EQUITY (CONTINUED)**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n \n \nNumber of\nordinary\nshares *\n \n \nOrdinary\nshares\n \n \nAdditional\npaid-in\ncapital\n \n \nSubscription\nreceivable\n \n \nStatutory\nreserves\n \n \n**Accumulated Other comprehensive loss**\n \n \nAccumulated\ndeficit\n \n \nTotal Borqs\nTechnologies, Inc.\nshareholders’\nequity\n \n \nNoncontrolling\ninterest\n \n \nTotal\nshareholders’\n(deficit)\nequity\n \n\nBalance as of January 1, 2025\n \n \n28,970,077\n \n \n \n\n-\n\n \n \n \n330,016\n \n \n \n(16,091\n)\n \n \n1,901\n \n \n \n(4,389\n)\n \n \n(314,842\n)\n \n \n(3,405\n)\n \n \n(193\n)\n \n \n(3,598\n)\n\nConsolidated net income\n \n \n-\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n5,365\n \n \n \n5,365\n \n \n \n287\n \n \n \n5,652\n \n\nForeign exchange difference\n \n \n-\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n \n \n \n \n\n-\n\n \n \n \n2,334\n \n \n \n\n-\n\n \n \n \n2,334\n \n \n \n\n-\n\n \n \n \n2,334\n \n\nDisposal of subsidiaries (Note 4 (d)(e))\n \n \n-\n \n \n \n-\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n122\n \n \n \n122\n \n\nShare-based compensation (Note 14)\n \n \n16,500,002\n \n \n \n-\n \n \n \n2,436\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n\n-\n\n \n \n \n2,436\n \n \n \n\n-\n\n \n \n \n2,436\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nBalance as of December 31, 2025\n \n \n45,470,079\n \n \n \n\n-\n\n \n \n \n332,452\n \n \n \n(16,091\n)\n \n \n1,901\n \n \n \n(2,055\n)\n \n \n(309,477\n)\n \n \n6,730\n \n \n \n216\n \n \n \n6,946\n \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-11\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENTS OF CASH FLOWS**\n\n**(Amounts in thousands of $, unless otherwise\nstated)**\n\n \n\n  \n  \nFor the years ended December 31, \n\n  \nNote \n2023  \n2024  \n2025 \n\n  \n  \n$  \n$  \n$ \n\nCASH FLOWS FROM OPERATING ACTIVITIES \n  \n    \n    \n   \n\nNet (loss) income \n  \n (26,921) \n 17,323  \n 5,652 \n\nAdjustments to reconcile net (loss) income to net cash used in operating activities: \n  \n    \n    \n   \n\n(Reversal of provision) provision on accounts receivables & other current assets \n  \n (501) \n 15  \n 1,120 \n\nDepreciation of property and equipment \n  \n 424  \n 403  \n 19 \n\nAmortization of right of use asset \n  \n 928  \n 850  \n 104 \n\nLoss on disposal of property and equipment \n  \n 7  \n 70  \n \n-\n \n\nLoss on repurchase of convertible notes \n  \n \n-\n  \n 600  \n \n-\n \n\nDeferred income tax (benefits) expenses \n  \n 783  \n 84  \n (991)\n\nInterest expense related to debt discount \n(12) \n 700  \n 770  \n \n-\n \n\nShare-based compensation expenses \n(14) \n 6,817  \n 4  \n 2,436 \n\nGain on debt settlement \n(17(d)) \n (176) \n \n-\n  \n \n-\n \n\nNon-employee share-based compensation expenses \n(14) \n 952  \n 47  \n \n-\n \n\nLoss on additional compensation to HHE \n(4(a)) \n 5,400  \n \n-\n  \n \n-\n \n\nGain on cancellation of shares compensation to HHE \n  \n \n-\n  \n (5,950) \n \n-\n \n\nGain on disposal of subsidiaries \n  \n \n-\n  \n (12,564) \n (21,212)\n\nGain on debt forgiveness \n  \n \n-\n  \n (4,748) \n \n-\n \n\nGain on reversal of accrued liabilities \n  \n \n-\n  \n \n-\n  \n (10,452)\n\nLoss related to equity financing \n(17(b)) \n 14,156  \n \n-\n  \n \n-\n \n\nUnrealized loss on trading securities \n(5) \n \n-\n  \n \n-\n  \n 830 \n\nRealized gain on sale of securities \n(5) \n \n-\n  \n \n-\n  \n (1,104)\n\nChanges in operating assets and liabilities, net of the effects of an acquisition: \n  \n    \n    \n   \n\nAccounts receivable \n  \n 1,128  \n (3,723) \n 4,710 \n\nInventories \n  \n 679  \n 1,496  \n 29 \n\nPrepaid expenses and other current assets \n  \n 351  \n (656) \n (393)\n\nShort term investments \n(5) \n \n-\n  \n \n-\n  \n (4,617)\n\nAccounts payable \n  \n (218) \n 4,137  \n (4,833)\n\nAccrued expenses and other payables \n  \n (5,501) \n (1,306) \n (290)\n\nAdvances from customers and contract liabilities \n  \n (2,699) \n 1,299  \n 1,201 \n\nAmounts due to related parties \n  \n (3) \n \n-\n  \n 6 \n\nDeferred revenues \n  \n \n-\n  \n (8) \n \n-\n \n\nLong-term payable \n  \n (417) \n \n-\n  \n \n-\n \n\nIncome tax payable \n  \n 208 \n (161) \n (49)\n\nUnrecognized tax benefit \n  \n (1,990) \n \n-\n  \n \n-\n \n\nLease liabilities \n  \n (896) \n (751) \n (65)\n\n  \n  \n    \n    \n   \n\nNet cash used in operating activities \n  \n (6,789) \n (2,769) \n (27,899)\n\n  \n  \n    \n    \n   \n\nCASH FLOWS FROM INVESTING ACTIVITIES \n  \n    \n    \n   \n\nPurchases of property and equipment \n  \n (250) \n (114) \n (37)\n\nReceipt of time deposit from banks \n  \n \n-\n  \n \n-\n  \n 2,686 \n\nInvestment in time deposit \n  \n (2,060) \n (3,377) \n \n-\n \n\nReceipt of time deposit from banks \n  \n \n-\n  \n 3,496  \n \n-\n \n\nProceeds from disposal of subsidiaries \n  \n \n-\n  \n \n-\n  \n 22,490 \n\nProceeds from disposal of HHE \n  \n \n-\n  \n 9,890  \n \n-\n \n\nAdditional compensation payment to a former subsidiary \n(4(a)) \n (2,700) \n \n-\n  \n \n-\n \n\n  \n  \n    \n    \n   \n\nNet cash (used in) generated from investing activities \n  \n (5,010) \n 9,895  \n 25,139 \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-12\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**\n\n**(Amounts in thousands of $, unless otherwise\nstated)**\n\n \n\n  \nNote \n2023  \n2024  \n2025 \n\n  \n  \n$  \n$  \n$ \n\nCASH FLOWS FROM FINANCING ACTIVITIES \n  \n   \n   \n  \n\nProceeds from short-term bank and other borrowings \n  \n 424  \n \n-\n  \n \n-\n \n\nRepayments of short-term bank and other borrowings \n  \n \n-\n  \n \n-\n  \n (411)\n\nProceeds from issuance of convertible notes \n(12) \n 1,418  \n \n-\n  \n \n-\n \n\nRepurchase of convertible notes \n(12) \n \n-\n  \n (4,050) \n \n-\n \n\nNet cash generated from (used in) financing activities \n  \n 1,842  \n (4,050) \n (411)\n\n  \n  \n    \n    \n   \n\nEffect of foreign exchange rate changes on cash and cash equivalents and restricted cash \n  \n (307) \n (591) \n 2,228 \n\n  \n  \n    \n    \n   \n\nNet (decrease) increase in cash and cash equivalents and restricted cash \n  \n (10,264) \n 2,485  \n (943)\n\nCash and cash equivalents and restricted cash at the beginning of year \n  \n 11,337  \n 1,073  \n 3,558 \n\n  \n  \n    \n    \n   \n\nCash and cash equivalents and restricted cash at the end of year \n  \n 1,073  \n 3,558  \n 2,615 \n\nLess: cash and cash equivalents and restricted cash of discontinued operations at the end of year \n  \n 247  \n 1,500  \n \n-\n \n\n  \n  \n    \n    \n   \n\nCash and cash equivalents and restricted cash of continuing operations at the end of year \n  \n 826  \n 2,058  \n 2,615 \n\n  \n  \n    \n    \n   \n\nReconciliation of cash and cash equivalents and restricted cash of the continuing operations \n  \n    \n    \n   \n\nCash and cash equivalents of continuing operations at the end of year \n  \n 800  \n 2,032  \n 2,615 \n\nRestricted cash of continuing operations at the end of year \n  \n 26  \n 26  \n \n-\n \n\nTotal cash and cash equivalents and restricted cash of continuing operations \n  \n 826  \n 2,058  \n 2,615 \n\n  \n  \n    \n    \n   \n\nReconciliation of cash and cash equivalents and restricted cash of the discontinued operations \n  \n    \n    \n   \n\nCash and cash equivalents of discontinued operations at the end of year \n  \n 247  \n 1,500  \n \n-\n \n\nRestricted cash of discontinued operations at the end of year \n  \n \n-\n  \n \n-\n  \n \n-\n \n\nTotal cash and cash equivalents and restricted cash of discontinued operations \n  \n 247  \n 1,500  \n \n-\n \n\n \n\n  \n  \nFor the years ended December 31, \n\n  \nNotes \n2023  \n2024  \n2025 \n\n  \n  \n$  \n$  \n$ \n\nSupplemental disclosures of cash flow information: \n  \n  \n\nInterest paid \n  \n (281) \n (301) \n (44)\n\nInterest received \n  \n 51  \n 9  \n 460 \n\nIncome tax paid \n  \n \n-\n  \n (101) \n \n-\n \n\nCash paid included in the measurement of lease liabilities \n  \n (881) \n (843) \n (304)\n\nSupplemental schedule of non-cash activities: \n  \n    \n    \n   \n\nConversion of convertible notes \n(12) \n 500  \n \n-\n  \n \n-\n \n\nIssuance of shares for increase in subscription receivable \n(4(a)) \n 11,136  \n \n-\n  \n \n-\n \n\nCancellation of shares for decrease in subscription receivable \n(4(b)) \n \n-\n  \n 9,423  \n \n-\n \n\nDebt settlements by issuance of ordinary shares \n(17(d)) \n 1,321  \n \n-\n  \n \n-\n \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-13\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**1.**\n**ORGANIZATION**\n\n \n\nBorqs Technologies, Inc. (formerly\nknown as “Pacific Special Acquisition Corp.”, the “Company” or “Borqs Technologies”) was incorporated\nin the British Virgin Islands on July 1, 2015. The Company was formed for the purpose of acquiring, engaging in a share exchange, share\nreconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging\nin any other similar business combination with one or more businesses or entities.\n\n \n\nOn August 18, 2017, the Company acquired\n100% equity interest of BORQS International Holding Corp. (“Borqs International”) and its subsidiaries, variable interest\nentities (the “VIE”) and the VIE’s subsidiaries (collectively referred to as “Borqs Group” hereinafter)\n(the Company and Borqs Group collectively referred to as the “Group”) in an all-stock transaction (the “Merger”).\nConcurrent with the completion of the acquisition of Borqs International, the Company changed its name from Pacific Special Acquisition\nCorp.” to Borqs Technologies, Inc.\n\n \n\nBorqs Group are principally engaged\nin the provision of commercial grade Android+ platform solutions and hardware product manufactured in the People’s Republic of China\n(the “PRC”) and sold almost entirely outside of the PRC. \n\n \n\n(a) As of the balance sheet date, the\nVIE has been disposed and the details of the Company’s major subsidiaries, are as follows:\n\n \n\nEntity  Date of\nincorporation/ Acquisition  Place of\nincorporation  Percentage of\ndirect or\nindirect\nownership by\nthe Company   Principal\nactivities\n\n         Direct    \n\nSubsidiaries:             \n\n              \n\nBORQS International  July 27, 2007  Cayman   100%  Holding company\n\nBORQS Hong Kong Limited (“Borqs HK”)  July 19, 2007  Hong Kong   100%  Provision of software and service solutions and hardware products sales\n\nBORQS Beijing Ltd. (“Borqs Beijing”)  September 4, 2007  PRC   100%  Provision of software and service solutions and hardware products sales\n\nBORQS Chongqing Ltd. (“Borqs Chongqing”)  August 17, 2010  PRC   100%  Provision of software and service solutions and hardware products sales\n\n \n\nF-14\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**1.**\n**ORGANIZATION (CONTINUED)**\n\n \n\n(b) On November 11, 2024, the Group\nannounced that Sasken Technologies Limited (“Sasken”), a leading global product engineering and digital transformation services\ncompany based in India the intent to acquire the Group’s certain hardware and software services business. The transactions contemplated\nby the Sale were consummated on April 9, 2025. As of December 31, 2024, the Group classified related assets and liabilities as held for\nsale and reported in discontinued operation.\n\n \n\nThe following tables represent the\nfinancial information of the business classified as discontinued operations as of December 31, 2024, and for the years ended December\n31, 2023, 2024 and for the period from January 1 to April 8, 2025 before eliminating the intercompany balances and transactions between\nthe entities held for sale and other entities within the Group:\n\n \n\n  \nAs of December 31,\n2024 \n\nCarrying amounts of major classes of assets included as part of the assets held for sale \n$ \n\nCash and cash equivalents \n 1,500 \n\nAccounts receivable, net \n 5,961 \n\nPrepaid expenses and other current assets, net \n 1,536 \n\nInventories, net \n 2,060 \n\n  \n   \n\nTotal current assets \n 11,057 \n\n  \n   \n\nNon-current assets: \n   \n\nProperty and equipment, net \n 461 \n\nRight of use asset \n 1,273 \n\nDeferred tax assets \n 97 \n\n  \n   \n\nTotal non-current assets \n 1,831 \n\n  \n   \n\nTotal assets \n 12,888 \n\nCarrying amounts of major classes of liabilities included as part of the assets held for sale \n   \n\nCurrent liabilities: \n   \n\nAccounts payable \n 3,386 \n\nAccrued expenses and other payables \n 227 \n\nLease liabilities – current \n 670 \n\nAmount due to related parties \n \n-\n \n\nIncome tax payable \n 54 \n\n  \n   \n\nTotal current liabilities \n 4,337 \n\n  \n   \n\nNon-current liabilities: \n   \n\nDeferred tax liabilities \n 1,449 \n\nLease liabilities – non-current \n 642 \n\nTotal non-current liabilities \n 2,091 \n\n  \n   \n\nTotal liabilities \n 6,428 \n\n \n\nF-15\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**1.****ORGANIZATION\n(CONTINUED)**\n\n \n\n  \nFor the years ended\n\nDecember 31,  \nFor the\n\nperiod\n\nstarting\n\nfrom\n\nJanuary 1 to\n\nApril 8 \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nNet Revenues: \n 11,479  \n 11,098  \n 2,222 \n\nCost of revenues \n (7,256) \n (8,594) \n (2,166)\n\n  \n    \n    \n   \n\nTotal gross profit \n 4,223  \n 2,504  \n 56 \n\n  \n    \n    \n   \n\nOperating expenses: \n    \n    \n   \n\nSales and marketing expenses \n \n-\n  \n \n-\n  \n (39)\n\nGeneral and administrative expenses \n (1,928) \n (2,435) \n (4,316)\n\nResearch and development expenses \n (1,238) \n (1,257) \n (360)\n\n  \n    \n    \n   \n\nTotal operating expenses \n (3,166) \n (3,692) \n (4,715)\n\n  \n    \n    \n   \n\nOperating income (loss) \n 1,057  \n (1,188) \n (4,659)\n\n  \n    \n    \n   \n\nInterest income \n 3  \n 261  \n 63 \n\nInterest expense \n \n-\n  \n \n-\n  \n (1)\n\nOther income (expense) \n 17  \n 884  \n (318)\n\nForeign exchange gain (loss) \n 1,291  \n 39  \n (84)\n\nIncome (loss) from discontinued operation, before income taxes \n 2,368  \n (4) \n (4,999)\n\n  \n    \n    \n   \n\nIncome tax (expense) benefit \n (1,078) \n (135) \n 946 \n\n  \n    \n    \n   \n\nIncome (loss) from discontinued operations \n 1,290  \n (139) \n (4,053)\n\n \n\n  \nFor the years ended\n\nDecember 31,  \nFor the\n\nperiod\n\nstarting\n\nfrom\n\nJanuary 1 to\n\nApril 8 \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nCASH FLOWS FROM OPERATING ACTIVITIES \n   \n   \n  \n\nNet income (loss) \n 1,290  \n (139) \n (4,053)\n\nAdjustments to reconcile net loss to net cash used in operating activities: \n    \n    \n   \n\nDepreciation and amortization \n 229  \n 178  \n 200 \n\nDeferred income tax expenses (benefits) \n 783  \n 84  \n (985)\n\nGain on debt forgiveness by a related party \n \n-\n  \n (737) \n \n-\n \n\nChanges in operating assets and liabilities \n (1,314) \n 2,199  \n 6,102 \n\n  \n    \n    \n   \n\nNet cash generated from operating activities \n 988  \n 1,585  \n 1,264 \n\n  \n    \n    \n   \n\nCASH FLOWS FROM INVESTING ACTIVITIES \n    \n    \n   \n\nPurchases of property and equipment \n (225) \n (108) \n \n-\n \n\nInvestment in time deposit \n (3,496) \n (3,377) \n \n-\n \n\nReceipt of time deposit from banks \n \n-\n  \n 3,496  \n \n-\n \n\n  \n    \n    \n   \n\nNet cash (used in) provided by investing activities \n (3,721) \n 11  \n \n-\n \n\n  \n    \n    \n   \n\nCASH FLOWS FROM FINANCING ACTIVITIES \n    \n    \n   \n\nNet cash generated from financing activities \n \n-\n  \n \n-\n  \n \n-\n \n\n  \n    \n    \n   \n\nEffect of foreign exchange rate changes on cash and cash equivalents and restricted cash \n (49) \n (343) \n (41)\n\nNet increase (decrease) in cash and cash equivalents and restricted cash \n (2,782) \n 1,253  \n 1,223 \n\nCash and cash equivalents and restricted cash at the beginning of year \n 3,029  \n 247  \n 1,500 \n\n  \n    \n    \n   \n\nCash and cash equivalents and restricted cash at the end of year \n 247  \n 1,500  \n 2,723 \n\n \n\nF-16\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**\n\n \n\n**(a) Basis of presentation**\n\n \n\nThe accompanying consolidated financial\nstatements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).\n\n \n\n**(b) Liquidity and going concern**\n\n \n\nThe Group’s consolidated financial\nstatements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during\nthe normal course of operations. As of December 31, 2025, the Group had cash and cash equivalents of $2.6 million and a working capital\nof $6.9 million and has generated a net income from continuing operations of $9.7 million and net decrease in cash of $0.9 million for\nthe year ended December 31, 2025.\n\n \n\nIn April 2025, the Group completed\nthe disposal of a significant portion of its hardware and software services business (see Note 1(b) and Note 4(d)), generating net cash\nproceeds of approximately $22.5 million. Following the disposal, the Group’s ongoing operations consist primarily of holding company\nactivities with minimal recurring cash outflows. However, the Group has no ongoing revenue-generating operations. These conditions raise\nsubstantial doubt about the Group’s ability to continue as a going concern.\n\n \n\nManagement has prepared a cash flow\nforecast for the twelve months from the date of issuance of these financial statements. The forecast assumes no significant capital expenditures\nor debt service obligations, and projects that existing cash and disposal proceeds are sufficient to fund operating expenses. To address\nthe long-term lack of revenue, management is actively evaluating the strategic alternatives, including identifying and negotiating potential\nacquisitions of complementary businesses to re-establish revenue streams, and seeking additional equity or debt financing as needed.\n\n \n\nBased on the cash flow forecast and\nthe plans described above, management believes that the Group has adequate liquidity to meet its obligations for the next twelve months\nfrom the date of issuance of these financial statements. The consolidated financial statements have been prepared on a going concern basis\nand do not include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n**(c) Principles of consolidation**\n\n \n\nThe consolidated financial statements\ninclude the financial statements of the Group, its subsidiaries and Consolidated VIEs, for which, the Group is the primary beneficiary.\nAll significant inter-company transactions and balances between the Group, its subsidiaries and the Consolidated VIEs are eliminated upon\nconsolidation. Results of its subsidiaries and its Consolidated VIEs are consolidated from the date on which control is transferred to\nthe Company.\n\n \n\nF-17\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(d) Discontinued operations**\n\n \n\nA component of a reporting entity or\na group of components of a reporting entity that are disposed or meet the criteria to be classified as held for sale, such as the management,\nhaving the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued operations\nif the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.\nDiscontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished,\noperationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed\nof, if the component either (1) represents a strategic shift or (2) have a major impact on an entity’s financial results and operations.\nIn the consolidated statement of operations, result from discontinued operations is reported separately from the income and expenses from\ncontinuing operations and prior periods are presented on a comparative basis. Cash flows for discontinued operations are presented separately\nin Note 1(b).\n\n \n\nAssets and liabilities of the discontinued\noperations are classified as held for sale when the carrying amounts will be recovered principally through a sale transaction.\n\n \n\n**(e) Use of estimates**\n\n \n\nThe preparation of the consolidated\nfinancial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts\nof assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and\nthe reported amounts of revenues and expenses during the year. Areas where management uses subjective judgment include, but are not limited\nto, estimating the useful lives of long-lived assets and intangible assets and the subsequent impairment assessment of long-lived assets,\nintangible assets and goodwill, determining the provisions for accounts receivable, prepaid expenses and other current assets and inventories,\ndetermining the valuation allowance for deferred tax assets and accounting for deferred income taxes, uncertain tax benefits, determining\nthe valuation for share-based compensation arrangements, convertible notes and warrants associated with convertible notes, fair value\nof identifiable intangible assets, contingent consideration liabilities and goodwill in a business combination,. Changes in facts and\ncircumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material\nto the consolidated financial statements.\n\n \n\n**(f) Foreign currency**\n\n \n\nThe functional currency of the Group\nand its non-PRC subsidiaries, excluding Borqs India, is the United States dollar (“$”). The functional currency of Borqs India\nis Rupee (“INR”), whereas the functional currency of the Group’s PRC subsidiaries and its Consolidated VIEs is the Chinese\nRenminbi (“RMB”) as determined based on the criteria of ASC Topic 830, *Foreign Currency Matters*, (“ASC 830”).\nThe Group uses the $ as its reporting currency. Transactions denominated in foreign currencies are re-measured into the functional currency\nat the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured\nat the balance sheet date exchange rate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated\nstatements of operations.\n\n \n\nAssets and liabilities of the Group’s\nPRC subsidiaries are translated into $ at fiscal year-end exchange rates. Equity amounts are translated at historical exchange rates.\nIncome and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments arising from\ntranslation of foreign currency financial statements are reported as cumulative translation adjustments and are shown as a separate component\nof other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).\n\n \n\n**(g) Cash and cash equivalents**\n\n \n\nCash and cash equivalents consist of\ncash on hand and demand bank deposits which are unrestricted as to withdrawal and use have original maturities less than three months.\nAll highly liquid investments with a stated maturity of 90 days or less from the date of purchase are classified as cash equivalents.\n\n \n\nF-18\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(h) Restricted cash and time\ndeposits**\n\n \n\nCash that are restricted as to withdrawal\nor use for current operations are classified as restricted cash. Time deposits consist of bank deposits with an original maturity of greater\nthan three months.\n\n \n\nRestricted cash as of December 31,\n2024 mainly represents the cash frozen by a bank as credit card deposit.\n\n** **\n\n**(i) Short-term investments**\n\n \n\nThe Group classifies its short-term\ninvestments in accordance with ASC 321, Investments—Equity Securities, and ASC 825, Financial Instruments. Short-term investments\nconsist of money market funds and equity securities.\n\n \n\nMoney market funds — The Group\ninvests in money market funds as part of its short-term investment portfolio. These funds are measured at fair value, which approximates\ncost due to their stable net asset value. Interest and dividend income from money market funds is recognized as earned and included in\ninterest and dividend income in the statement of operations.\n\n \n\nEquity securities — The Group’s\nequity securities consist of publicly traded common stocks listed on major U.S. exchanges. These securities are measured at fair value\nunder ASC 321, with changes in fair value recognized in the statement of operations. Fair value is determined using quoted market prices\nin active markets (Level 1 inputs). Realized gains and losses are recognized in earnings in the period of sale using the specific identification\nmethod.\n\n \n\nAll short-term investments are included\nin current assets on the balance sheet. Interest, dividends, and realized and unrealized gains and losses are included in other income\n(expense), net in the statement of operations.\n\n \n\n**(j) Accounts Receivable**\n \n\n \n\nAccounts receivable are carried at\nnet realizable value. An allowance of doubtful accounts is recorded in the period when the collection of full amount is no longer probable.\nThe Group reviews the accounts receivable for expected credit loss on a periodic basis and makes specific allowances when there is doubt\nas to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Group considers\nmany factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic\ntrends. The Group adopt Accounting Standard Update (ASU) 2016-13, Financial Instruments-Credit Losses (codified as Accounting Standard\nCodification Topic 326) on January 1, 2020, which requires measurement and recognition of current expected credit losses for financial\ninstruments held at amortized cost. See Note 2 (p) below for current expected credit loss.\n\n \n\n**(k) Inventories**\n\n \n\nInventories are stated at the lower\nof cost or market. Cost is determined using the first-in, first-out method. Adjustments to reduce the cost of inventories to its net market\nvalue are made, if required, for decreases in sales prices, obsolescence or similar reductions in the estimated net realizable value.\n\n \n\n**(l) Property and equipment**\n\n \n\nProperty and equipment are stated at\ncost and are depreciated using the straight-line method over the estimated useful lives of the assets, as follows:\n\n \n\nCategory  Estimated useful life\n\nComputer and network equipment  3-5 years\n\nOffice equipment  5 years\n\nMotor vehicles  5 years\n\nLeasehold improvements  Over the shorter of lease term or the estimated useful lives of the assets\n\n \n\nRepair and maintenance costs are charged\nto expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment are capitalized as additions\nto the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any\nresulting gain or loss reflected in the consolidated statements of operations.\n\n \n\nF-19\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(m) Intangible assets**\n\n \n\nIntangible assets are carried at cost\nless accumulated amortization and any recorded impairment. Intangible assets acquired in a business combination are recognized initially\nat fair value at the date of acquisition. Intangible assets with finite useful lives are amortized using the straight-line method. These\namortization methods reflect the estimated pattern in which the economic benefits of the respective intangible assets are to be consumed.\n\n \n\nDevelopment costs of software to be\nsold, leased, or otherwise marketed are subject to capitalization beginning when technological feasibility is reached and ending when\nthe software is available for general release to customers, in accordance with ASC 350-20, *Costs of Software to be Sold, Leased, or\nMarketed*, (“ASC 350-20”).\n\n \n\nIntangible assets have weighted average\nuseful lives from the date of purchase as follows:\n\n \n\nPurchased software  4.5 years\n\nCapitalized software development costs  3 years\n\nInternal-use software  5 years\n\nDeveloped technology  10 years\n\n \n\n**(n) Business combination and\nGoodwill **\n\n \n\nBusiness combinations are accounted\nfor using the acquisition method. The Group recognizes separately from goodwill the assets acquired, the liabilities assumed and the noncontrolling\ninterest at their acquisition date fair values. Goodwill represents the excess of the purchase price over the amounts assigned to the\nfair value of the assets acquired and the liabilities assumed of an acquired business. In accordance with ASC Topic 350, *Goodwill and\nOther Intangible Assets*, (“ASC 350”), recorded goodwill amounts are not amortized, but rather are tested for impairment\nannually or more frequently if there are indicators of impairment present.\n\n \n\nIn addition, the share purchase agreements\nentered into may contain contingent consideration provisions obligating the Group to pay additional purchase consideration, upon the acquired\nbusiness’s achievement of certain agreed upon operating performance-based milestones. Under ASC 805, these contingent consideration\narrangements are required to be recognized and measured at fair value at the acquisition date as either a liability or as an equity instrument,\nwith liability instruments being required to be remeasured at each reporting period through the Company’s statements of comprehensive\nincome (loss) until such time as to when the contingency is resolved.\n\n \n\nThe fair value of the contingent consideration\nis valued by external valuers. The valuations are presented to the Group’s management.  The fair value of the earn-out payments\nwas measured using a Monte Carlo simulation analysis.\n\n \n\nIn accordance with ASC 350, the Group\nassigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below\nthe operating segment. The Group has determined that it has two operating segments as its reporting units, namely Solar Energy Business\nand Connected Solution. Goodwill is recorded at the Solar Energy reporting unit. The Group performed impairment analysis on goodwill as\nof December 31 every year beginning with a qualitative assessment, or starting with the quantitative assessment instead. The quantitative\ngoodwill impairment test compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit\nconstitutes a business for which discrete profit and loss financial information is available. The fair value of each reporting unit is\nestablished using a combination of expected present value of future cash flows and income approach valuation methodologies. If the\nfair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a\nreporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total\namount of goodwill allocated to that reporting unit.\n\n \n\nDetermining when to test for impairment,\nthe Group’s reporting units, the fair value of a reporting unit and the fair value of assets and liabilities within a reporting\nunit, requires judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue\ngrowth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market\nconditions and determination of appropriate market comparable. The Group bases fair value estimates on assumptions it believes to be reasonable\nbut that are unpredictable and inherently uncertain.\n\n \n\nF-20\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\nSignificant changes in the economic\ncharacteristics of components or reorganization of an entity’s reporting structure can sometimes result in a re-assessment of the\naffected operating segment and its components to determine whether reporting units need to be redefined where the components are no longer\neconomically similar.\n\n \n\nFuture changes in the judgments and\nestimates underlying the Group’s analysis of goodwill for possible impairment, including expected future cash flows and discount\nrate, could result in a significantly different estimate of the fair value of the reporting units and could result in additional impairment\nof goodwill.\n\n \n\n**(o) Long-term investments**\n\n \n\nThe Group’s long-term investments\nconsist of equity investments without readily determinable fair value. The Group makes a qualitative assessment of whether the investment\nis impaired at each reporting date, applying judgment in considering various factors and events including a) adverse performance of investees;\nb) adverse industry developments affecting investees; and c) adverse regulatory social, economic or other developments affecting investees.\nIf a qualitative assessment indicates that the investment is impaired, the Group estimates the investment’s fair value in accordance\nwith the principles of ASC 820. If the fair value is less than the investment’s carrying value, the Group recognizes an impairment\nloss of investments equal to the difference between the carrying value and fair value.\n\n \n\n**(p) Current expected credit loss**\n\n \n\nIn 2016, the FASB issued ASU No. 2016-13,\n“Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC\nTopic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment\nmodel that is based on expected losses rather than incurred losses. The Group no longer qualified as an emerging growth company in the\nyear 2020 and adopted this ASC Topic 326 on January 1, 2020.\n\n \n\nThe Group has identified the relevant\nrisk characteristics of its customers and the related receivables, and other receivables which include type of the products the Group\nprovides, nature of the customers or a combination of these characteristics. Receivables with similar risk characteristics have been grouped\ninto pools. For each pool, the Group considers the historical credit loss experience, current economic conditions, reasonable and supportable forecasts\nof future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the\nexpected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers, and\nindustry-specific factors that could impact the Group’s receivables. Additionally, external data and macroeconomic factors are also\nconsidered.\n\n \n\nMovement of the allowance for doubtful\naccounts for accounts receivable and contract assets is as follows:\n\n \n\n  \nYear\n\nended December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nBalance as of January 1 \n 12,796  \n \n-\n \n\nProvisions for doubtful accounts \n \n-\n  \n 56 \n\nWrite offs \n (12,752) \n \n-\n \n\nChanges due to foreign exchange \n (44) \n \n-\n \n\nBalance as of December 31 \n \n-\n  \n 56 \n\n \n\nMovement of the allowance for other\nreceivables in prepaid expenses and other current assets (See Note 6), is as follows:\n\n \n\n  \nYear\nended December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nBalance as of January 1 \n 405  \n 392 \n\nProvisions for doubtful accounts \n 4  \n 1,048 \n\nWrite offs \n (28) \n (230)\n\nChanges due to foreign exchange \n 11  \n 4 \n\nBalance as of December 31 \n 392  \n 1,214 \n\n \n\nF-21\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(q) Impairment of long-lived\nassets**\n\n \n\nThe Group evaluates its long-lived\nassets or asset group, including intangible assets with indefinite and finite lives, for impairment. Intangible assets with indefinite\nlives that are not subject to amortization are tested for impairment at least annually or more frequently if events or changes in circumstances\nindicate that the assets might be impaired in accordance with ASC 350. Such impairment test compares the fair values of assets with their\ncarrying values with an impairment loss recognized when the carrying values exceed fair values.\n\n \n\nFor long-lived assets and intangible\nassets with finite lives that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances\n(such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount\nof an asset or a Group of long-lived assets may not be recoverable. When these events occur, the Group evaluates impairment by comparing\nthe carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual\ndisposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize\nan impairment loss based on the excess of the carrying amount of the asset group over its fair value.\n\n \n\nThe impairment loss of long-lived assets\nwas $nil, $nil and $nil for the years ended December 31, 2023, 2024 and 2025, respectively, based on the impairment tests performed.\n\n \n\n**(r) Convertible Promissory Notes**\n\n \n\nIn August 2020, the FASB issued ASU\nNo. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s\nOwn Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities\nand equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made\ncertain disclosure amendments to improve the information provided to users. For public business entities that meet the definition of an\nSEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years\nbeginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than\nfiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Group has elected to adopt the\namendments in these ASUs on January 1, 2021. \n\n \n\nThe Group determines the appropriate\naccounting treatment of its convertible notes in accordance with the terms in relation to the conversion feature, call and put options,\nand any other embedded features. After considering the impact of such features, the Group may account for such instrument as a liability\nin its entirety, or separate the instrument into debt and equity components following the respective guidance described under ASC 815\n“Derivatives and Hedging” and ASC 470 “Debt”. The debt discount, if any, together with the related issuance cost\nare subsequently amortized as interest expense, using the effective interest method, from the issuance date to the earliest maturity date.\nInterest expenses are recognized in the consolidated statements of operations in the period in which they are incurred. \n\n \n\n**(s) Debt Issuance Costs and Debt\nDiscounts**\n\n \n\nThe Group may record debt issuance\ncosts and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash,\nor equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying\ndebt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.\n\n \n\n**(t) Derivative financial instruments **\n\n \n\nThe Group evaluates all of its equity-linked\nfinancial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features\nthat qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative instruments, including whether\nsuch instruments should be recorded as liabilities or as equity and whether embedded derivative shall be bifurcated from the host instrument\nand separately accounted for as a derivative, is reassessed at the end of each reporting period. Derivative assets and liabilities are\nrecorded at fair value at inception and re-valued at each reporting date, with changes in the fair value reported in the consolidated\nstatements of operations.\n\n \n\n**(u) Fair value of financial instruments**\n\n \n\nThe Group applies ASC Topic 820, *Fair\nValue Measurements and Disclosures*, (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair\nvalue and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.\n\n \n\nF-22\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\nASC 820 establishes a three-tier fair\nvalue hierarchy, which prioritizes the inputs used in measuring fair value as follows:\n\n \n\nLevel 1 — Observable inputs that\nreflect quoted prices (unadjusted) for identical assets or liabilities in active markets.\n\n \n\nLevel 2 — Other inputs that are\ndirectly or indirectly observable in the marketplace.\n\n \n\nLevel 3 — Unobservable inputs\nwhich are supported by little or no market activity.\n\n \n\nASC 820 describes three main approaches\nto measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach\nuses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.\nThe income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on\nthe value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently\nbe required to replace an asset.\n\n \n\nThe Group’s financial instruments\ninclude cash and cash equivalents, restricted cash, short term investments, accounts receivable and payable, accounts receivable from\nrelated parties, short-term bank and other borrowings and long-term bank borrowings. Other than the long-term bank borrowings, the carrying\nvalues of these financial instruments approximate their fair values due to their short-term maturities. The carrying amounts of long-term\nbank borrowings approximated their fair values since they bear interest rates which approximate market interest rates.\n\n \n\nThe Group’s investments measured\nat fair value consist of money market funds and equity securities. Money market funds are measured at fair value using the net asset value\n(“NAV”) per share. Equity securities are classified as trading securities and are measured at fair value on a recurring basis\nusing quoted prices in active markets (Level 1 inputs). Unrealized gains and losses on these investments are recognized in the statement\nof operations.\n\n \n\n**(v) Revenue recognition**\n\n \n\nThe Group is mainly engaged in the\nbusiness of providing 1) Android+ platform solutions and services, 2) hardware product sales and 3) Solar. The Group adopted the new revenue\nrecognition standards, or ASC 606, effective January 1, 2019 using the modified retrospective method for contracts which were not completed\nat the date of initial adoption. In accordance with ASC Topic 606, revenues are recognized when control of the promised goods or services\nis transferred to the Group’s customers, in an amount that reflects the consideration the Group expects to be entitled to in exchange\nfor those goods or services. In determining when and how much revenue is recognized from contracts with customers, the Group performs\nthe following five-step analysis: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract;\n(3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; (5) recognize\nrevenue when (or as) the entity satisfies a performance obligation.\n\n \n\nWhen either party to a contract has\nperformed, the Group presents the contract in the consolidated balance sheet as a contract asset or a contract liability, depending on\nthe relationship between the entity’s performance and the customer’s payment.\n\n \n\nA contract asset is the Group’s\nright to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when\nthe Group has an unconditional right to consideration, and it is probable that substantially all of the consideration will be collected.\n\n \n\nIf a customer pays consideration or\nthe Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer,\nthe Group presents the contract liability when the payment is made or a receivable is recorded (whichever is earlier). A contract liability\nis the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount\nof consideration is due) from the customer.\n\n \n\nThe Group’s contract with customers\ndo not include significant financing component and material variable consideration.\n\n \n\nGenerally, the Group recognizes revenue\nunder ASC Topic 606 for each type of its major revenue streams as follows:\n\n \n\n1. Android+ platform solutions and\nservices\n\n \n\nAndroid+ platform solutions\n\n \n\nThe Group provides customized Android+\nsoftware platform solutions that are developed to maximize the commercial grade quality or performance of open source Android+ software\nfor integration with particular chipsets. The Group also provides customized Android+ service platform solutions that are end-to-end software\ndeveloped for mobile operators to allow data synchronization between their platform and mobile devices. The Group charges its customers,\nmainly including mobile device manufacturers and mobile operators, fixed fees for project-based software contracts, as well as per chip\nor per mobile device royalty fees.\n\n \n\nThere are executed contracts and purchase\norders between the Group and each customer, and each party’s rights regarding the service to be rendered are written on the contracts.\nFor this type of customers, the Group enters contract with them, which has the commercial substance to identify each party’s rights\nand obligations.\n\n \n\nF-23\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\nThere are two major performance obligations\nin the contracts with this type of customers: the delivery of the software product and the completion of the post-contract-service (“PCS”).\nThe allocation of the transaction price between the two major performance obligations is based on the estimated standalone selling prices.\nThe selling price for the performance obligation of PCS is estimated as the reasonable cost budget plus a margin or industrial standard.\nThe rest of the transaction price other than the reasonable cost budget plus a margin for PCS will be allocated to the performance obligation\nof the delivery of the software product.\n\n \n\nFor the sales derived from software\ndevelopment project in which the customer’s contract specifies the technical requirements of the software product, the Group recognizes\nrevenue in accordance with the satisfaction of each performance obligation. For the performance obligation of the delivery of the software\nproduct, the Group recognizes the revenue at the point of time, upon the customers sign off the acceptance. For the performance obligation\nof the completion of PCS Period, the Group recognizes the revenue over the period of the PCS Period.\n\n \n\nService contracts\n\n \n\nThe Group provides research and development\nservices to certain customers for their mobile-computing related development projects where fees are charged on a time and material basis\nand the Group is not responsible for the outcome of such development projects. The revenue is recognized proportionately over the time.\nThe Group elects right to invoice expedient as the measure of progress.\n\n \n\nThe revenue arising from contracts\nrelated to Android+ platform solutions and services is included as “Software Revenues” on the Group’s consolidated statement\nof operations.\n\n \n\n2. Hardware product sales\n\n \n\nThe Group provides total solutions\non original design manufacturer (“ODM”) basis to customers of mobile devices. The Group recognizes revenue at the point of\ntime, upon the delivery of products to customers, which is when the goods delivered to the designated address and it is probable that\nsubstantially all of the consideration will be collected. Warranty is provided to all customers, which is not considered an additional\nservice; rather, an integral part of the product sales. ASC Topic 450, Contingencies, specifically addresses the accounting for standard\nwarranties. The Group believes that accounting for its standard warranty pursuant to ASC 450 does not impact revenue recognition because\nthe cost of honoring the warranty can be reliably estimated. The Group has determined the likelihood of claims arising from warranties\nto be remote based on strong quality control procedures in the production process and historical experience with regard to claims being\nmade by customers. The basis for the warranty accrual will be reviewed periodically based on actual experience. The Group does not sell\nextended warranty coverage.\n\n \n\nThe revenue arising from contracts\nrelated to hardware product sales is included as “Hardware Revenues” on the Group’s consolidated statement of operations.\n\n \n\n3. Solar\n\n \n\nSolar, Holu Hou Energy LLC (“HHE”)\nprovides services under three business models, which are residential projects, commercial projects and wholesale equipment sales. For\nresidential projects and commercial projects, HHE complete solar + battery systems to residential homeowners and commercial customers.\nThere are several milestones in both projects. The Group recognizes the revenue at the point of time, upon the satisfaction of the performance\nobligation (upon all of the contract milestones complete). For wholesale equipment sale, customers either purchases equipment from HHE\ninventory, or purchase a large order of equipment from HHE with payment terms. Revenue is recognized upon the satisfaction of the performance\nobligation (upon equipment delivery).\n\n \n\nF-24\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\nPractical expedients and exemptions\n\n \n\nBesides the right to invoice expedients,\nthe Group generally expenses sales commissions if any incurred because the amortization period would have been one year or less.\n\n \n\n**(w) Contract assets**\n\n \n\nContract assets represent the right\nto consideration in exchange for services that the Group have transferred to the customer before payment is due. \n\n \n\n**(x) Deferred cost of revenue**\n\n \n\nThe Group’s deferred cost of\nrevenues primarily consists of (i) materials and equipment costs, (ii) compensation and related overhead expenses for personnel involved\nin the customization of its products, delivery, installation and maintenance (“compensation and overhead costs”), and (iii)\ncontractor costs. The deferred cost of revenue will be charged to the cost of revenue when revenue is recognized.\n\n \n\n**(y) Contract Costs**\n\n \n\nCosts of fulfilling a contract are\nrecognized as an asset if those costs meet all the following criteria: (1) the costs relate directly to a contract that the Group can\nspecifically identify; (2) the costs generate or enhance resources of the Group that will be used in satisfying performance obligations\nin the future; (b) the costs are expected to be recovered. The Group chooses to use consistent method to amortize such contract costs,\nwith the timing of the transfer of goods and services to customers. Over time, the carrying amount of the contract costs may become impaired.\n\n \n\n**(z) Contract Liabilities**\n\n \n\nContract liabilities primarily relate\nto multiple element arrangements for which billing has occurred but transfer of control of all elements to the customer has either partially\nor not occurred at the balance sheet date. This includes cash received from customers for services or products in advance of the transfer\nof control. For the year ended December 31, 2025, the Group recognized revenue of $1,086 that was included in the advances from customers\nand deferred revenue at January 1, 2025. For the year ended December 31, 2024, the Group recognized revenue of $3,093 that was included\nin the advances from customers and deferred revenue at January 1, 2024.\n\n \n\n**(aa) Cost of revenues**\n\n \n\nCost of revenues consists primarily\nof telecommunication costs, depreciation of long-lived assets, amortization of acquired intangible asset, payroll and other related costs\nof operations.\n\n \n\n**(bb) Advertising expenditures**\n\n \n\nAdvertising expenditures are expensed\nas incurred and are included in sales and marketing expenses, which amounted to nil, nil and nil for the years ended December 31, 2023,\n2024 and 2025, respectively for the Group’s continuing operation.\n\n \n\n**(cc) Research and development\nexpenses**\n\n \n\nResearch and development expenses include\npayroll, employee benefits, and other headcount-related expenses associated with research and platform development. Research and development\nexpenses also include rent, depreciation and other related expenses. Research and development expenses are expensed as incurred.\n\n \n\nF-25\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(dd) Government grants**\n\n \n\nGovernment grants are provided by the\nrelevant PRC municipal government authorities to subsidize the cost of certain technology development projects. The amount of such government\ngrants are determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will continue\nto receive these government grants in the future. Government grants are recognized when it is probable that the Group will comply with\nthe conditions attached to them, and the grants are received. When the grant relates to an expense item, it is recognized in the consolidated\nstatement of operations over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate,\nas a reduction of the related operating expense. When the grant relates to an asset, it is recognized as deferred government grants and\nreleased to the consolidated statement of operations in equal amounts over the expected useful life of the related asset, when operational,\nas a reduction of the related depreciation expense.\n\n \n\n**(ee) Leases**\n\n \n\nOn January 1, 2019, the Group adopted\nASU No. 2016-02, Leases (Topic 842), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires\nlessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide\nenhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.\n\n \n\nThe Group elected to apply practical\nexpedients permitted under the transition method that allow the Group to use the beginning of the period of adoption as the date of initial\napplication, to not recognize lease assets and lease liabilities for leases with a term of twelve months or less, to not separate non-lease\ncomponents from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing\nor expired contract contains a lease. The Group used modified retrospective method and did not adjust the prior comparative periods. Under\nthe new lease standard, the Group determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities\nare recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. The Group considers\nonly payments that are fixed and determinable at the time of lease commencement.\n\n \n\nASC 842 requires a lessee to discount\nits unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental\nborrowing rate. As most of the Group’s leases do not provide an implicit rate, the Group uses its incremental borrowing rate as\nthe discount rate for the lease. The Group’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized\nbasis with similar terms and payments. The right-of-use asset is initially measured at cost, which comprises the initial amount of the\nlease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less\nany lease incentives received. The Group’s lease terms may include options to extend or terminate the lease. Renewal options are\nconsidered within the right-of-use assets and lease liability when it is reasonably certain that the Group will exercise that option.\n\n \n\nLease expense for lease payments is\nrecognized on a straight-line basis over the lease term.\n\n \n\n**(ff) Income taxes**\n\n \n\nThe Group accounts for income taxes\nusing the liability method. Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Under this\nmethod, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets\nand liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group\nrecords a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that\nsome portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized\nin income in the period that includes the enactment date.\n\n \n\nThe Group applies ASC Topic 740, *Accounting\nfor Income Taxes*, (“ASC 740”), to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold\na tax position is required to meet before being recognized in the financial statements. The Group has elected to classify interest related\nto unrecognized tax benefits, if and when required, as part of “income tax expense” in the consolidated statements of operations\nand to classify all deferred income tax assets and liabilities as non-current on the consolidated balance sheets.\n\n \n\nF-26\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(gg) Reverse stock split**\n\n \n\nThe Board of Directors of the Group\napproved a reverse stock split of the Group’s issued and outstanding shares at a ratio of 1-for-16 (the “2022 Reverse Stock\nSplit”) on June 08, 2022. The 2022 Reverse Stock Split became effective on June 27, 2022. As a result, the Group’s issued\nand outstanding shares was decreased in inverse proportion to the ratio.\n\n \n\nThe Board of Directors of the Group\napproved a reverse stock split of the Group’s issued and outstanding shares at a ratio of 1-for-12 (the “2023 Reverse Stock\nSplit”) on May 26, 2023. The 2023 Reverse Stock Split became effective on October 10, 2023. As a result, the Group’s issued\nand outstanding shares was decreased.\n\n \n\nWhen the 2022 Reverse Stock Split became\neffective, each sixteen shares of issued and outstanding shares were converted into one newly issued and outstanding share. When the 2023\nReverse Stock Split became effective, each twelve shares of issued and outstanding shares were converted into one newly issued and outstanding\nshare. No fractional shares were issued in connection with the 2022 Reverse Stock Split and 2023 Reverse Stock Split. Any fractional shares\nof common stock that would have otherwise resulted from the 2022 Reverse Stock Split and 2023 Reverse Stock Split were rounded up to the\nnearest full share. No cash or other consideration was paid in connection with any fractional shares that would otherwise have resulted\nfrom the 2022 Reverse Stock Split and 2023 Reverse Stock Split.\n\n \n\nAs a result of the 2022 Reverse Stock\nSplit, 298,406,545 shares of common stock that were issued and outstanding at June 27, 2022 was reduced to 18,681,481 shares of common\nstock. As a result of the 2023 Reverse Stock Split, 190,168,698 shares of common stock that were issued and outstanding at October 10,\n2023 was reduced to 15,895,015 shares of common stock (taking into account the rounding of fractional shares).\n\n \n\nExcept where otherwise specified, all\nnumber of shares, share prices and per share data in the consolidated financial statements and the notes to the consolidated financial\nstatements have been retroactively restated as if the Reverse Stock Splits occurred at the beginning of the periods presented.\n\n \n\n**(hh) Subscriptions receivable**\n\n \n\nAs of December 31, 2025 and 2024, subscriptions\nreceivable included investment amounts in the form of (i) ownership of KADI that has been contemplated to be sold to the Group in exchange\nfor shares of the Group of $5,217. (ii) escrow shares to Samsung in the year 2019, 2022 and 2023 as security for arbitration compensation\nof $10,482, and (iii) shares issued for a project to an advisor of $392. Since the shares in all these cases have already been issued,\nthese items were recorded as subscriptions receivable on the equity section of the Group’s consolidated balance sheets as of December\n31, 2025 and 2024, respectively.\n\n \n\nThe Group retains the legal right to\nenforce the subscriptions receivable. As of December 31, 2025, the amounts remain outstanding due to pending administrative or procedural\nmatters, not due to collectability concerns. No impairment is considered necessary. Subsequent to the year ended December 31, 2025, the\nGroup cancelled all the 538,437 shares issued to Samsung and held in Escrow in February 2026.\n\n \n\n**(ii) Share-based compensation**\n\n \n\nThe Group accounts for share-based\ncompensation in accordance with ASC Topic 718, *Compensation-Stock Compensation: Overall*, (“ASC 718”).\n\n \n\nIn accordance with ASC 718, the Group\ndetermines whether an award should be classified and accounted for as a liability award or equity award. All grants of share-based awards\nto employees classified as equity awards are measured based on their grant date fair values and recognized as compensation expense over\nthe requisite service period and/or performance period in the consolidated statements of operations.\n\n \n\nThe Group recognizes compensation expense\nusing the accelerated method for share-based awards granted with service and performance conditions. According to ASC 718, the amount\nof compensation cost recognized (or attributed) when achievement of a performance condition is probable depends on the relative satisfaction\nof the performance condition based on performance to date. According to ASC 718, probable means the future event or events are likely\nto occur and the Group interprets “probable” to be generally in excess of a 70% likelihood of occurrence. The Group elected\nto account for forfeitures as they occur.\n\n \n\nF-27\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(jj) Comprehensive income (loss)**\n\n \n\nComprehensive income (loss) is defined\nas the increase (decrease) in equity of the Group during a period from transactions and other events and circumstances excluding transactions\nresulting from investments by owners and distributions to owners. Accumulated other comprehensive loss of the Group includes foreign currency\ntranslation adjustments related to the Group and its PRC subsidiaries, whose functional currency is RMB.\n\n \n\n**(kk) Segment reporting**\n\n \n\nIn November 2023, the FASB issued Accounting\nStandards Update, or ASU 2023-07 – Improvements to Reportable Segment Disclosures, which enhances the disclosures required for reportable\nsegments in annual and interim consolidated financial statements, including additional, more detailed information about a reportable segment’s\nexpenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning\nafter December 15, 2024. The Group adopted ASU 2023-07 for the year ended December 31, 2024, retrospectively to all periods presented\nin the consolidated financial statement. The adoption of this ASU had no material impact on reportable segments identified and had no\neffect on the Group’s consolidated financial position, results of operations, or cash flows. In accordance with ASC 280, Segment\nReporting, an operating segment is identified as a component of an enterprise that engages in business activities about which separate\ndiscrete financial information and operating results is the Group’s chief operating decision maker (“CODM”) has been\nidentified as the Chief Executive Officer (“CEO”).\n\n \n\nThe Group historically had two operating\nsegments, namely Connected Solution and Solar Power Solutions, which related to HHE’s business as the Group’s chief executive\nofficer, who has been identified as the Group’s chief operating decision maker (“CODM”) reviews the operating results\nof the two difference service lines in order to allocate resources and assess performance for the Group. As of December 31, 2025 and 2024,\nthe Group operates in one reportable segment, which is the Connected Solutions. The CODM makes decisions on resource allocation, evaluates\noperating performance, and monitors budget versus actual results using net income (loss). There is no reconciling items or adjustments\nbetween segment income (loss) and net income (loss) as presented in our statements of operations. The CODM does not review assets in evaluating\nthe segment results and therefore such information is not presented.\n\n \n\n**(ll) Employee benefits**\n\n \n\nThe full-time employees of the Group’s\nPRC subsidiaries are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance,\nwhich are governmental mandated defined contribution plans. These entities are required to accrue for these benefits based on certain\npercentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations,\nand make cash contributions to the state-sponsored plans out of the amounts accrued.\n\n \n\n**(mm) (Loss) income per share**\n\n \n\n(Loss) income per share is computed\nby dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period\nusing the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities\nbased on their participating rights. As the participating securities do not share the losses of the Group, the computation of basic earnings\nper share using two-class method is not applicable when the Group is at a net loss position. Diluted (loss) earnings per share is calculated\nby dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent\nshares outstanding during the period. Ordinary equivalent shares consist of shares issuable upon the exercise of share options using the\ntreasury stock method and shares issuable upon the exercise of the Group’s warrant using the if-converted method. Ordinary equivalent\nshares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.\n\n \n\nF-28\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**2.**\n**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**\n\n \n\n**(nn) Recent accounting pronouncements**\n\n \n\n*Recently issued accounting pronouncements\nnot yet adopted*\n\n \n\nIn October 2023, the FASB issued ASU\nNo. 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification\nInitiative”. This standard was issued in response to the SEC’s disclosure update and simplification initiative, which affects\na variety of topics within the Accounting Standards Codification. The amendments apply to all reporting entities within the scope of the\naffected topics unless otherwise indicated. This ASU will become effective for each amendment on the date on which the SEC removes the\nrelated disclosure from its regulations. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations,\nthe amendments will be removed from the Codification and not become effective for any entity. The Group is currently evaluating the impact\nof adopting this ASU.\n\n \n\nIn November 2024, the FASB issued ASU\nNo. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation\nof Income Statement Expenses, which requires an entity to disclose disaggregated information about certain income statement expense line\nitems. The standard is effective for us beginning January 1, 2027, with early adoption permitted. The Group is currently evaluating the\nimpact the adoption will have on the disclosures.\n\n \n\nIn September 2025, the FASB issued\nASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting\nfor Internal-Use Software, which aims to modernize the accounting for internal-use software costs to better align with current software\ndevelopment practices by removing references to prescriptive software development stages and establishing a new principle for when to\nbegin capitalizing such costs. The standard is effective for us beginning January 1, 2028. The Group is currently evaluating the impact\nthe adoption will have on the consolidated financial statements.\n\n \n\n*Recently adopted accounting pronouncements*\n\n \n\nOn November 27, 2023, the FASB issued\nASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. In November 2023, the FASB issued ASU No.\n2023 - 07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by\nrequiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”)\nand included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position\nof the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or\nloss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after\nDecember 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December\n31, 2024. The adoption did not have a material impact on the Group’s consolidated financial statements.\n\n \n\nIn December 2023, the FASB issued Accounting\nStandards Update No. 2023-09, Income Taxes (Topic 740) (“ASU 2023-09”). The amendments in ASU 2023-09 are intended to improve\nincome tax disclosures, primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 became effective for\nour fiscal year beginning after December 15, 2024. We adopted these amendments on January 1, 2025 and applied the amendments on a prospective\nbasis. The adoption of ASU 2023-09 did not have a material impact on our consolidated financial statements.\n\n \n\nThe Group does not believe other recently\nissued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated\nfinancial position, statements of operations, cash flows, and disclosures.\n\n \n\nF-29\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**3.**\n**CONCENTRATION OF RISKS**\n\n \n\n**(a) Credit risk**\n\n \n\nFinancial instruments that potentially\nsubject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, time deposits,\naccounts receivable and accounts receivable from related parties. As of December 31, 2024 and 2025, the aggregate amount of cash and cash\nequivalents and restricted cash from continuing operations were $2,058 and $2,615, respectively. As of December 31, 2024 and 2025, the\naggregate amount of cash and cash equivalents and restricted cash of $425 and $1,406 respectively, were held at major financial institutions\nlocated in the PRC, and $1,633 and $1,209, respectively, were deposited with major financial institutions located outside the PRC. Management\nbelieves that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial\ninstitutions. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors’ interests. However,\nChina promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly\nstating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law.\nUnder the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China’s concession to the World Trade Organization,\nforeign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects,\nespecially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese\nbanks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds the Group’s deposits,\nthe Group is unlikely to claim its deposits back in full since the bank is unlikely to be classified as a secured creditor based on PRC\nlaws.\n\n \n\nAccounts receivable, and accounts receivable\nfrom related parties are both typically unsecured and are derived from revenues earned from customers. The risk is mitigated by credit\nevaluations the Group performs on its ongoing credit evaluations of its customers’ financial conditions and ongoing monitoring process\nof outstanding balances.\n\n \n\n**(b) Business supplier, customer,\nand economic risk**\n\n \n\nThe Group participates in a dynamic\nand competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect\non the Group’s future financial position, results of operations or cash flows: changes in the overall demand for services; competitive\npressures due to new entrants; advances and new trends in new technology; control of telecommunication infrastructures by local regulators\nand industry standards; strategic relationships or customer relationships; regulatory considerations; and risks associated with the Group’s\nability to attract and retain employees necessary to support its growth.\n\n \n\n(i) Customer concentration risk –\nthe Group’s main operations are dependent upon a few customers, with one particularly large customer representing 53.88% of the\nGroup’s net revenues during the year ended December 31, 2025. It is always considered at least reasonably possible that any customer\ncan be lost in the near time. There is no guarantee that the large customer will continue to place orders with the Group or award similar\nvolume of business to the Group. The Group’s top five customers accounted for 98.4%, 91.6% and 100.0% of our net revenues in the\nyears ended December 31, 2023, 2024 and 2025, respectively.\n\n \n\nThe accounts receivable from the largest\nsingle customer accounted for 95% and 90% of the Group’s total accounts receivable for the years ended December 31, 2024 and 2025,\nrespectively.\n\n \n\n(ii) Product concentration and geography\nconcentration risks – For the fiscal year of 2023, approximately 91.3% of the Group’s net revenues was focused on the handset\nmobile device. For the fiscal year of 2024, approximately 93.4% of the Group’s net revenues was focused on the handset mobile device.\nFor the fiscal year of 2025, approximately 86.0% of the Group’s net revenues was focused on the handset mobile device. There is\nno guarantee that this product type will continue to have demand in the fast-changing telecom industry or that the Group can continue\nto feasibly compete as a designer and manufacturer of such products.\n\n \n\nF-30\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**3.**\n**CONCENTRATION OF RISKS (CONTINUED)**\n\n \n\n(iii) Business supplier risk\n\n \n\nFor the Group’s continuous operations,\nthe Group’s top five suppliers accounted for 43.8% and 35.1% of our cost of goods sold in the years ended December 31, 2024\nand 2025, respectively.\n\n \n\n(iv) Economic risk – the Group’s\noperations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government\nhas been pursuing economic reform policies for more than 40 years, no assurance can be given that the PRC government will continue to\npursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social\nor political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee\nthat the PRC government’s pursuit of economic reforms will be consistent or effective.\n\n \n\n**(c) Foreign currency exchange\nrate risk**\n\n \n\nFor financial reporting purposes, the\nfinancial statements of the Group’s PRC operating subsidiaries and VIE, which are prepared using the functional currency of the\nPRC, Renminbi (“RMB”), are translated into the Company’s reporting currency, the United States Dollar (“U.S. dollar”).\nAssets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average\nrates prevailing during each reporting period, and shareholders’ equity is translated at historical exchange rates. Adjustments\nresulting from the translation are recorded as a separate component of accumulated other comprehensive income in shareholders’ equity.\n \n\n \n\nThe exchange rates used to translate\namounts in RMB into US$ for the purposes of preparing the consolidated financial statements are as follows:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\nBalance sheet items, except for equity accounts \n 7.1884  \n 7.0288 \n\n \n\n  \nYears ended\nDecember 31, \n\n  \n2024  \n2025 \n\nItems in the statements of operations and comprehensive loss \n 7.1217  \n 7.1429 \n\n \n\n**(d) Interest rate risk**\n\n \n\nThe Group is exposed to interest rate\nrisk on its interest-bearing liabilities. As part of its liability risk management, the Group reviews and takes appropriate steps to manage\nits interest rate exposures on its interest-bearing liabilities. The Group has not been exposed to material risks due to changes in market\ninterest rates, and not used any derivative financial instruments to manage the interest risk exposure during the years presented.\n\n \n\nF-31\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**4.**\n**BUSINESS ACQUISITIONS AND DISPOSAL**\n\n \n\n \n**(a)**\n**Acquisition of HHE**\n\n \n\nOn October 19, 2021, the Group signed\ndefinitive agreements to acquire 51% equity interests in Holu Hou Energy LLC (“HHE”). The total consideration for the acquisition\nof HHE amounted to $10.0 million in cash as capital contribution, and 73,099 of the Group’s ordinary shares. Of this consideration,\n$3.25 million cash and 18,275 shares were released at the closing date and the remaining $6.75 million of cash and 54,824 shares will\nbe held in escrow and released as earn-out payments.\n\n \n\nThe earn-out payment is based on the\nperformance of the acquiree to achieve certain earn-out requirements from July 2022 to January 2024. The fair value of the earn-out payments\nwas measured using a Monte Carlo simulation analysis. As of the acquisition date, the total contingent consideration recognized with the\namount of $1,669. The Group and HHE entered into agreement to postpone the original earn-out to be measured in July 2022 to July 2023.\n\n \n\nHHE is an innovative solar energy and\nstorage provider for the residential, multi-family residential and commercial building markets. With operations in California, Hawaii,\nWisconsin and Shanghai, HHE engineers proprietary storage system and software and control platform solutions. The HHE team is made up\nof renewable energy industry veterans, engineering and deploying energy storage systems that enable greater energy independence.\n\n \n\nAfter the completion of the acquisition,\nHHE became a subsidiary of the Group.\n\n \n\nDuring the year ended December 31,\n2022, the Group issued additional 416,666 shares to HHE as an additional acquisition cost to compensate the short fall in value of shares\nand recorded a loss on additional compensation to HHE of $5,950.\n\n \n\nDuring the year ended December 31,\n2023, the Group issued additional 1,916,667 shares to HHE to compensate the short fall in value of shares issued to HHE. The fair value\nof the issued shares of $9,423 was recorded in subscription receivable with a corresponding charge to additional paid in capital during\nthe year ended December 31, 2023.\n\n \n\nDuring the year ended December 31,\n2023, the Group recorded $5,400 loss of additional compensation to HHE as the Company signed amendment agreement with HHE and agreed to\npay total of $5,400 cash compensation to the former subsidiary. As of December 31, 2023, $2,700 has been paid and the remaining $2,700\nwas included in other payables.\n\n \n\nIn March 2024, the Group completed\nthe divestment of all of its interest in Holu Hou Energy LLC (Note 4(b)), adhering to the requirements from the Commission on Foreign\nInvestment in the United States. Further, the Group has agreed with HHE to cancel all the shares issued to HHE included 73,099, 416,666\nand 1,916,667 shares issued during the year ended December 31, 2022, 2023 and 2024, respectively.\n\n \n\nF-32\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**4.**\n**BUSINESS ACQUISITIONS AND DISPOSAL (CONTINUED)**\n\n \n\nThis transaction was considered a business\nacquisition and therefore was recorded using the acquisition method of accounting. The acquired assets and liabilities were recorded at\ntheir fair values at the date of acquisition. The purchase price for the acquisition was allocated as follows:\n\n \n\n  \nAmount\n(’000) \n\n  \n$ \n\nNet liabilities acquired \n$(2,265)\n\nAmortizable intangible assets \n \n \n \n\nDeveloped Technology \n 4,492 \n\nGoodwill \n 12,208 \n\nDeferred tax liabilities \n (1,143)\n\nNoncontrolling interests \n (6,513)\n\nTotal \n$6,779 \n\n  \n   \n\nTotal purchase price consisted of: \n   \n\n- cash consideration (paid in fiscal 2021) \n 3,250 \n\n- share-based consideration (18,275 of the Group’s ordinary shares) \n 1,860 \n\n- contingent considerations \n 1,669 \n\nTotal \n$6,779 \n\n \n\nThe goodwill is attributable to intangible\nassets that cannot be recognized separately as identifiable assets under U.S. GAAP, and comprise of (a) the assembled work force and (b)\nthe expected but unidentifiable business growth as a result of the economy of scale, increase in cross-selling opportunities as well as\nsynergy resulting from the acquisition.\n\n \n\nThe amortizable intangible assets represent\nthe developed technology acquired as of the acquisition date with the amount of $4,492, it was valued using the multi-period excess earnings\napproach.\n\n \n\nThe non-controlling interest with the\namount of $6,513 as of the acquisition date was valued using the discounted cashflow method.\n\n \n\nThe key input and assumptions included\ninternal rate of return of 11.2%, weighted average cost of capital of 12.0% and weighted average return of assets of 12.0%.\n\n \n\n*Transaction Expenses*\n\n \n\nTransaction costs directly related\nto the acquisition of $538 for the year ended December 31, 2021, recorded in share-based compensation expense for the ordinary shares\nissued to the financial advisors and general and administrative expenses for other related fees.\n\n \n\nF-33\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**4.**\n**BUSINESS ACQUISITIONS AND DISPOSAL (CONTINUED)**\n\n \n\n \n**(b)**\n**Deconsolidation of HHE during the year ended December 31, 2022**\n\n** **\n\nIn December 2022, the Group received\na letter (the “CFIUS Letter”) from the Department of the Treasury on behalf of the Committee on Foreign Investment in the\nUnited States (“CFIUS”) stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests\nand rights in HHE due to HHE’s solar energy storage system and EnergyShare technology for Multi-Dwelling Residential Units being\ndeemed a potential national security risk.\n\n \n\nOn December 31, 2022, the Group resolved\nthat in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Group must adhere to, including:\n(i) Entering into a National Security Agreement with various departments of the US government with a plan that is effective, monitorable\nand verifiable to divest Borqs’ investment interests and rights in HHE; (ii) Selection of a trustee and entering into a Divestment\nTrust Agreement, and assigning the Group’s interest in HHE to the trustee; and, (iii) Selection of a nationally recognized investment\nbank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of December 31, 2022, terminate its control\nof HHE by (i) removal of all of the Group’s representatives from HHE’s Board of Directors, (ii) relinquishment of Class A\nMembership Unit voting rights, and (iii) reduction of the Group’s ownership of HHE from 51% down to 49% by allowing HHE to increase\nthe total number of Class B membership units for employees of HHE such that the Group’s ownership is proportionally reduced. And\nthe Group resolved to comply fully with the requirements of the CFIUS Letter and terminate its control of HHE on December 31, 2022. By\ntaking above actions, the Group no longer has a controlling interest in HHE and result in deconsolidation of HHE as of December 31, 2022.\n\n \n\nOn March 16, 2023, the Group and HHE\nentered into a National Security Agreement (“NSA”) with the Department of Defense and Department of Treasury. The NSA provides\nthat the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill provisions\nwhich provide that the Group shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any changes to\nthe rights held by the Group, except as necessary to effect its obligations under the NSA, or acquire or take possession of any assets\nof HHE. Further, upon the completion of the Divestment, the Group shall terminate or irrevocably waive any information, consent, board\nappointment, board observer, or other governance rights held by the Group, except for any and all rights that are determined by the U.S.\nGovernment to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the Divestment:\nengaging a nationally recognized investment bank with experience in administering competitive sales and auction processes; assigning and\nhiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs’ administrative\nand technical influence over HHE; and creating a plan to divest all of Borqs’ investment interests and rights in HHE. Pursuant to\nthe requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment Trust Agreement\n(“DTA”) dated March 20, 2023 entered into between Borqs, HHE and a trustee. According to the DTA, when Borqs’ interests\nin HHE are being placed in a Voting Trust Agreement as a security measure designed to insulate HHE from any foreign control or influence\nthat may arise from Borqs’ ownership of the investment interest. Also, it shall not accept direction from the Group on any matter\nbefore the trustee or the Board of Manager of HHE and not to permit the Group to exercise any control or influence over the business or\nmanagement of HHE\n\n \n\nAs above, HHE, which identified the\ninnovative clean energy business, a separate segment was deconsolidated on December 31, 2022, and reclassified as held for sale as of\nDecember 31, 2021, for the carrying amounts will be recovered principally through a sale and revenues and expenses related to HHE have\nbeen reclassified in the accompanying consolidated financial statements as discontinued operations for 2022.\n\n \n\nThe loss on the deconsolidation of\nHHE was calculated as below for the year ended December 31, 2022:\n\n \n\n  \nAmount \n\n  \n$’000 \n\nThe fair value of the consideration received \n$\n-\n \n\nCarrying value of non-controlling interest prior to the deconsolidation \n 1,926 \n\nLess: Net assets of HHE derecognized on deconsolidation \n 7,317 \n\nLoss from deconsolidation \n (5,391)\n\nDerecognition of contingent liabilities recognized during the acquisition \n 1,781 \n\nNet loss on deconsolidation \n$(3,610)\n\n \n\nF-34\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**4.**\n**BUSINESS ACQUISITIONS AND DISPOSAL (CONTINUED)**\n\n \n\nAfter the deconsolidation of HHE on\nDecember 31, 2022, the Group recorded the investment as equity investments without readily determinable fair value. Based on the valuation\nof the retained interest in HHE, the fair value of the investment is zero and the Group recognized the impairment loss equal to the difference\nbetween the carrying value and fair value. The loss related to the remeasurement of remaining investment in HHE is $5,391.\n\n \n\nThe fair value of HHE was valued using\nthe market approach and income approach.\n\n \n\nThe key input and assumptions included\nlong-term growth rate of 2.4%, weighted average cost of capital of 14.0% and risk-free rate of 4.1%.\n\n \n\nSubsequent to the year ended December\n31, 2023, the Group completed the divestment of all of its interest in HHE as of March 6, 2024, adhering to the requirements from the\nCommission on Foreign Investment in the United States. On March 01, 2024, the Group cancelled 489,766 shares issued to HHE and 1,916,667\nshares issued to HHE held in escrow.\n\n \n\n \n**(c)**\n**Disposal of Borqs KK (“BKK”) during the year ended December 31, 2024**\n\n \n\nIn November 2024, the Group ceased\noperation in Borqs KK (“BKK”) a 60% majority owned subsidiary. Since the date of loss of control BKK was deconsolidated from\nthe Group’s financial statements. A gain of $4 was recognized during the year ended December 31, 2024.\n\n \n\n \n**(d)**\n**Disposal of Targeted Business during the year ended December 31, 2025**\n\n \n\nOn November 11, 2024, the Company announced\nthat Sasken Technologies Limited (“Sasken”), a leading global product engineering and digital transformation services company\nbased in India, signed a Letter of Intent with the Group to acquire the Group’s certain hardware and software services business.\nOn April 8, 2025, the Group signed a Share Purchase Agreement (“SPA”) with Sasken Design Solutions Pte. Ltd, a wholly owned\nsubsidiary of Sasken. The SPA provided for Sasken’s acquisition of the Group’s core business through the purchase of BORQS\nInternational Holding Corp, the Group’s wholly owned subsidiary. The business including Borqs International Holding Corp (the Cayman\nIslands), Borqs Technologies (HK) Limited, Borqs Technologies India Private Limited, New Borqs Technologies (Beijing) Company, Ltd., (all\nreferred as the “Targeted Business”). The transactions contemplated by the SPA (the “Sale”) were consummated on\nApril 9, 2025. Included in the Sale are all of the Group’s embedded software design and customized hardware manufacturing of products\nfor the Internet of Things (IoT) activities, customer contracts, technology licenses, intellectual property, employment agreements with\nkey personnel and assets required for the Group’s operations. Sasken agreed to pay the Group an aggregate purchase price of $40\nmillion, subject to adjustments for working capital and certain earnout payments linked to performance in 2025.\n\n \n\nThe gain on the deconsolidation of\nTargeted Business was calculated as below for the year ended December 31, 2025:\n\n \n\n  \nAmount \n\n  \n$’000 \n\nThe fair value of the consideration received \n$26,451 \n\nLess: Net assets of Targeted Business on disposal \n 5,168 \n\nNet gain on disposal \n$21,283 \n\n \n\n \n**(e)**\n**Disposal of BOZZ during the year ended December 31, 2025**\n\n \n\nIn November 2024, the Group ceased\noperation in BOZZ, a 55% majority owned subsidiary. Since the date of loss of control BOZZ was deconsolidated from the Group’s financial\nstatements. A loss of $71 was recognized during the year ended December 31, 2025:\n\n \n\nF-35\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**5.**\n**SHORT TERM INVESTMENTS**\n\n \n\nShort-term investments consist of the\nfollowing:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nMoney market funds \n \n-\n  \n 1,080 \n\nEquity securities \n \n-\n  \n 3,808 \n\n  \n \n-\n  \n 4,888 \n\n \n\nThe Group invests in money market funds\nas part of the short-term investment portfolio. These funds are measured at fair value. As of December 31, 2025, the Group held $1,080\nin money market funds. The Group’s equity securities consist of publicly traded common stocks listed on major U.S. exchanges. Fair value\nis determined using quoted market prices in active markets. As of December 31, 2025, the Group held $3,808 in equity securities.\n\n \n\nThe following table presents the Company’s\nshort-term investments for the year ended December 31, 2025:\n\n \n\n  \nShort term investments \n\n  \n$ \n\nBalance at beginning of year \n \n-\n \n\nNet purchase of short term investments \n 4,617 \n\nNet unrealized loss recognized in earnings \n (830)\n\nRealized gain recognized in earnings \n 1,104 \n\nForeign currency translation \n (3)\n\nBalance at end of year \n 4,888 \n\n \n\n**6.**\n**PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET**\n\n \n\nPrepaid expenses and other current\nassets consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nStaff advances \n 67  \n 38 \n\nPrepayment for products \n 525  \n 69 \n\nAdvance to OEMs \n 3,945  \n 747 \n\nRental and other deposits \n 27  \n \n-\n \n\nVAT recoverable \n 899  \n 624 \n\nInvestment of convertible bond \n 438  \n 438 \n\nCash loan \n 100  \n \n-\n \n\nPrepayment for debt settlement \n 1,000  \n \n-\n \n\nOthers \n 138  \n 145 \n\n  \n 7,139  \n 2,061 \n\nLess: provision \n (392) \n (1,214)\n\n  \n    \n   \n\n  \n 6,747  \n 847 \n\n \n\nProvisions were $392 and $1,214 as\nof December 31, 2024 and 2025, respectively. The Group reviews staff advances, rental and other deposits, receivable from an agent and\nother for expected credit loss. The Group determined the allowance based on known troubled accounts, historical experience, and other\ncurrently available evidence.\n\n \n\n**7.**\n**LEASE**\n\n \n\nThe Group leases office space under\nnon-cancelable operating lease agreement, which expire through 2028. As of December 31, 2024 and 2025, the Group’s operating leases\nhad a weighted average discount rate of 4.75% and 4.75%, respectively. The Group uses its incremental borrowing rate as the discount rate\nfor leases. The incremental borrowing rate is based on the Group’s actual borrowing rates, adjusted for collateral and term. Weighted-average\nremaining lease term for the year ended December 31, 2024 and 2025 were 1.0 years and 3.0 years, respectively.\n\n \n\nF-36\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**7.**\n**LEASE (CONTINUED)**\n\n \n\nOperating lease cost for the year ended\nDecember 31, 2025 was $41, which excluded cost of short-term contracts. Short-term lease cost for the year ended December 31, 2025 was\n$12. Operating lease cost for the year ended December 31, 2024 was $234, which excluded cost of short-term contracts. Short-term lease\ncost for the year ended December 31, 2024 was $85. Operating lease cost for the year ended December 31, 2023 was $483, which excluded\ncost of short-term contracts. Short-term lease cost for the year ended December 31, 2023 was $27.\n\n \n\nCash paid for amounts included in the\nmeasurement of operating lease liabilities was $484, $150 and $70 for the year ended December 31, 2023, 2024 and 2025, respectively.\n\n \n\n  \nOperating Leases\n(’000) \n\n  \n$ \n\nYear ended December 31, \n  \n\n-2026 \n 13 \n\n-2027 \n 17 \n\n-2028 \n 15 \n\nTotal undiscounted lease payments \n 45 \n\nLess: imputed interest \n (3)\n\nTotal \n$42 \n\n  \n   \n\nIncluding: \n   \n\n- Operating lease liabilities - current \n 12 \n\n- Operating lease liabilities – non current \n 30 \n\nTotal \n$42 \n\n \n\n**8.**\n**PROPERTY AND EQUIPMENT, NET**\n\n \n\nProperty and equipment consisted of\nthe following:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nAt cost: \n   \n  \n\nComputer and network equipment \n 43  \n 44 \n\nOffice equipment \n 78  \n 79 \n\nMotor vehicles \n 61  \n 61 \n\nProduction equipment \n 216  \n 217 \n\n  \n 398  \n 401 \n\nLess: accumulated depreciation \n (391) \n (394)\n\n  \n    \n   \n\n  \n 7  \n 7 \n\n \n\nDepreciation expense from continuing\noperations was $184, $208 and $3 for the years ended December 31, 2023, 2024 and 2025, respectively. Certain fully depreciated computer\nequipment, motor vehicles and office equipment were disposed in the year 2023.\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nCost of revenues \n 85  \n 79  \n \n-\n \n\nGeneral and administrative expenses \n 99  \n 129  \n 2 \n\nResearch and development expenses \n \n-\n  \n \n-\n  \n 1 \n\n  \n    \n    \n   \n\n  \n 184  \n 208  \n 3 \n\n \n\nF-37\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**9.**\n**LONG-TERM INVESTMENTS**\n\n \n\nOn January 18, 2018, the Company entered\ninto an agreement with Colmei Technology International Ltd (“Colmei”) and its affiliate Shenzhen Crave Communication Co.,\nLtd (“Crave”), along with the shareholders of Crave and Colmei (the “Selling Shareholders”), pursuant to which\nthe Selling Shareholders sold to the Company 13.8% of the outstanding shares of Crave and 13.8% of the outstanding shares of Colmei. Under\nthe agreement, the Company paid purchase consideration consisting of the Company’s 2,467 ordinary shares at the fair value of $3,000\nand cash in the amount of $10,000 to be paid to the Selling Shareholders by the end of 36 months from the date of agreement, which the\nCompany has not yet paid as of the filing of this annual report. Subject to board approval, the Company agreed to issue 955 additional\nshares to the Selling Shareholders if the aggregate value of the ordinary shares initially issued at the closing to the Selling Shareholders\nwas less than $3,000 in fair value as of August 18, 2018. The board of directors approved and 955 shares that were issued on January 10,\n2019.\n\n \n\nThe Company does not have significant\ninfluence over the investees and therefore the investment was accounted for under the cost method. Cost of the long-term investments originally\nconsisted of the fair value of the ordinary shares on the dates of issuance and the present value of the cash consideration determined\nbased on management’s estimated payment schedule.\n\n \n\nDue to significant numbers of claims\nagainst Crave and Colmei in the year 2019, the Company recorded $13,000 of impairment loss as of December 31, 2018. In June 2020, Crave\nand Colmei filed for bankruptcy, the Company cancelled any further investment into these entities.\n\n \n\n**10.**\n**BANK AND OTHER BORROWINGS**\n\n \n\nBank and other borrowings were as follows\nas of the respective balance sheet dates:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nShort-term bank and other borrowings \n 417  \n \n-\n \n\nTotal borrowings \n 417  \n \n-\n \n\n \n\nThe outstanding balances as of December 31, 2024\nrepresented a loan borrowed by one of the Group’s subsidiaries. A subsidiary has entered into a short-term loan with 5.0% interest\nrate with the financial institution. The loan was fully paid during the year ended December 31, 2025.\n\n \n\n**11.**\n**ACCRUED EXPENSES AND OTHER PAYABLES**\n\n \n\nThe components of accrued expenses\nand other payables were as follows:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nPayroll and welfare payable \n 1,490  \n 641 \n\nVAT, and other taxes payable \n 180  \n \n-\n \n\nPayables for office supply and utilities \n 58  \n \n-\n \n\nPayables for purchase of property and equipment \n 47  \n \n-\n \n\nProfessional service fees \n 250  \n 11 \n\nPayables for share purchase consideration (Note 9) \n 10,000  \n \n-\n \n\nAdvance from customers \n 2,327  \n 250 \n\nInterest payable related to an equity financing (Note 17(b)) \n 693  \n \n-\n \n\nPayable for consideration adjustment \n \n-\n  \n 636 \n\nOthers \n 251  \n \n-\n \n\n  \n 15,296  \n 1,538 \n\n \n\nFor the $10,000 balance of payables for share\npurchase consideration, following the bankruptcy of Crave, the Company determined that there was no longer any viable commercial reason\nto proceed with the investment. Accordingly, during the year ended December 31, 2025, the Company reversed the entire balance and recognized\nas other income.\n\n \n\nFor the $636 of payable for consideration\nadjustment, the Company has completely paid off the amount subsequent to the year end 2025 and prior to the filing of this Annual\nReport.\n\n \n\nF-38\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**12.**\n**CONVERTIBLE NOTES**\n\n \n\n**Prior Private Placement Notes and\nWarrants**\n\n** **\n\nOn February 25, 2021 and April 14,\n2021 the Group entered into securities purchase agreements with institutional and individual investors, pursuant to which the Group sold\napproximately $6.67 million of notes (the “February 25 Notes”) and 60,877 warrants at an exercise price of $426.62 per share\n(the “February 25 Warrants), $1 million of notes (the “April 14 Notes”) and 13,130 warrants at an exercise price of\n$295.68 per share (the “April 14 Warrants” and, together with the February 25 Warrants, the “Prior Private Placement\nWarrants”) and $15.3 million of notes (the “May 5 Notes” and, together with the February 25 Notes and the April 14 Notes,\nthe “Prior Private Placement Notes.”) The Prior Private Placement Notes have a two-year term with a conversion price of $186.62\nper share. The Prior Private Placement Notes have certain anti-dilution protections in the event of a lower priced issuance. Interest\nshall accrue on the notes at 8% annually, payable on a quarterly basis, in either cash or, in the event the registration statement registering\nsuch shares has been declared effective, ordinary shares. The Prior Private Placement Notes held by a particular holder will not be convertible\nto the extent such conversion would result in such holder owning more than 9.9% of the number of ordinary shares outstanding after giving\neffect to the issuance of ordinary shares issuable upon conversion of such note calculated in accordance with Section 13(d) of the Exchange\nAct. On May 5, 2021, the Company issued additional $15.3 million Prior Private Placement Notes to investors in the February and April\ntransactions.\n\n \n\nThe Prior Private Placement Warrants\nare exercisable immediately for a period of five years for cash, at an exercise price of $426.62 per ordinary share for the February 25\nWarrants and $295.68 per ordinary share for the April 14 Warrants, subject to adjustment in the event of stock dividends and splits, or\nsales or grants of ordinary shares or ordinary share equivalents in certain transactions at less than the then current exercise price,\nor where the exercise price is higher than the then-current market price of the ordinary shares, on a cashless exercise basis, using the\nBlack Scholes Value. The Prior Private Placement Warrants held by a particular holder will not be exercisable to the extent such conversion\nwould result in such holder owning more than 9.9% of the number of ordinary shares outstanding after giving effect to the issuance of\nordinary shares issuable upon exercise of such warrants calculated in accordance with Section 13(d) of the Exchange Act.\n\n \n\nDuring the year ended December 31,\n2021, all of the February 25 Notes, April 14 Notes and May 5 Notes (except for $1.57 million), have been converted into 124,689 ordinary\nshares, and all of 74,007 Prior Private Placement Warrants exercised to 147,570 ordinary shares. During the year ended December 31, 2022,\nall of the February 25 Notes, April 14 Notes, May 5 Notes and the remaining Prior Private Placement Warrants have been converted into\n35,112 ordinary shares.\n\n \n\n**September 2021 Private Placement\nNotes and Warrants**\n\n \n\nOn September 14, 2021 the Group entered\ninto securities purchase agreements with institutional and individual investors, pursuant to which the Group sold $13,575,000 of notes\n(the “September 2021 Notes”) and 194,774 Warrants (the “September 14 Warrants”). The September 2021 Notes have\na two year term and are convertible into ordinary shares at the lower of (i) $125.45 per share, (ii) 90% of the closing price of the ordinary\nshares on the date that the registration statement registering the underlying shares is declared effective, or (iii) in the event that\nthe registration statement registering the underlying shares is not declared effective by the date that the shares underlying the September\n2021 Notes are eligible to be sold, assigned or transferred under Rule 144, 90% of the closing price of the ordinary shares on such date.\nThe September 2021 Notes have certain anti-dilution protections in the event of a lower priced issuance. Interest shall accrue on the\nnotes at 8% annually, payable on a quarterly basis, in either cash or, in the event the registration statement registering the underlying\nshares has been declared effective, ordinary shares. The September 2021 Notes held by a particular holder will not be convertible to the\nextent such conversion would result in such holder owning more than 9.9% of the number of ordinary shares outstanding after giving effect\nto the issuance of ordinary shares issuable upon conversion of such note calculated in accordance with Section 13(d) of the Exchange Act.\nAn additional $13,575,000 of notes with the same terms will be issued upon the satisfaction of certain conditions, including the effectiveness\nof the registration statement. As of December 31, 2023, the Group has not issued the notes.\n\n \n\nF-39\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**12.**\n**CONVERTIBLE NOTES (CONTINUED)**\n\n \n\nThe Warrants are exercisable immediately\nfor a period of five years for cash, at an exercise price of $166.69 per ordinary share, subject to adjustment in the event of stock dividends\nand splits, or sales or grants of ordinary shares or ordinary share equivalents in certain transactions at less than the then current\nexercise price, or where the exercise price is higher than the then-current market price of the ordinary shares, on a cashless exercise\nbasis, using the Black Scholes Value. The Warrants held by a particular holder will not be exercisable to the extent such conversion would\nresult in such holder owning more than 9.9% of the number of ordinary shares outstanding after giving effect to the issuance of ordinary\nshares issuable upon exercise of such warrants calculated in accordance with Section 13(d) of the Exchange Act.\n\n \n\nDuring the year ended December 31,\n2021, 7,353 warrants were exercised into 10,702 ordinary shares on a cashless basis.\n\n \n\nDuring the year ended December 31,\n2022, all of the September 2021 Notes have been converted into 299,026 ordinary shares, and 90,034 warrants of the September 14 Warrants\nhave been exercised to 231,872 ordinary shares. As of December 31, 2022 and 2023, 97,387 warrants of the September 14 Warrants remained\noutstanding.\n\n \n\n**May 2022 Private Placement Notes\nand Warrants**\n\n \n\nOn May 25, 2022, the Group signed agreements\nwith institutional and individual investors, for the sale of $16,000,000 in secured convertible notes. The notes are due in two years,\nhave an annual interest rate of 10% and are convertible into ordinary shares at 90% of the closing bid price on the day of closing, or\n90% of the closing bid price of the ordinary shares on the date that such shares are first eligible to be sold, assigned or transferred\nunder Rule 144 or Regulation S, as applicable, whichever is lower but in no event at less than $0.41 per ordinary share, which was $17.71\nper shares. The Group also issued an aggregate of 504,134 warrants to purchase ordinary shares at an exercise price of $40.08 per share,\nsubject to adjustment in certain conditions. The Group issued the notes and warrants on May 25, 2022.\n\n \n\nDuring the year ended December 31,\n2022, $13.55 million of May 2022 Notes have been converted into 1,276,249 ordinary shares. 319,092 warrants were exercised into 1,214,848\nordinary shares on a cashless basis.\n\n \n\nDuring the year ended December 31,\n2023, $0.50 million of May 2022 Notes have been converted into 94,003 ordinary shares. The remaining 185,042 warrants were exercised into\n1,191,486 ordinary shares on a cashless basis.\n\n \n\nAs of December 31, 2023, $1.95 million\nof May 2022 Notes remained outstanding, and all the warrants have been fully exercised into 2,406,334 ordinary shares.\n\n \n\nIn May 2024, $1.95 million of May 2022\nNotes expired and the Group fully repaid to the investors.\n\n \n\n**August 2023 Private Placement Notes\nand Warrants**\n\n \n\nOn August 24, 2023, the Group signed\nagreements with an institutional investor, for the sale of $1,500,000 in secured convertible notes. The notes are due in two years, have\nan annual interest rate of 10% and are convertible into ordinary shares at 90% of the closing bid price on the day of closing, or 90%\nof the closing bid price of the ordinary shares on the date that such shares are first eligible to be sold, assigned or transferred under\nRule 144 or Regulation S, as applicable, whichever is lower but in no event at less than $0.72 per ordinary share, and in the case of\na reverse stock split the minimum Conversion Price will be adjusted to 25% of the closing bid price. The Group also issued warrants to\npurchase an aggregate of 905,141 ordinary shares at an exercise price of $2.1384 per share, subject to adjustment in certain conditions.\nThe Group issued the notes and warrants on August 24, 2023.\n\n \n\nDuring the year ended December 31,\n2023, none of August 2023 Notes have been converted into ordinary shares. 235,467 warrants were exercised into 1,936,276 ordinary shares\non a cashless basis.\n\n \n\nDuring the year ended December 31,\n2024, none of August 2023 Notes have been converted into ordinary shares. 175,565 warrants were exercised into 1,460,493 ordinary shares\non a cashless basis.\n\n \n\nOn March 9, 2024, the Group repurchased\nthe $1.5 million August 2023 Notes and unexercised warrants from the investor in an amount of $2.2 million.\n\n \n\nF-40\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**12.**\n**CONVERTIBLE NOTES (CONTINUED)**\n\n \n\nThe detachable Warrants issued to the\nabove holder are considered to be indexed to the Company’s own stock and classified in stockholders’ equity and therefore\nthey meet the scope exception prescribed in ASC 815-10-15.\n\n \n\nThe Group early adopted ASU 2020-06\non January 1, 2021. As a result, the Notes above were accounted for as a liability in its entirety, equal to the proceeds received, net\nof debt issuance discounts and debt issuance costs if any. At the time of issuance, the Group allocated the proceeds to the Convertible\nNotes and the Warrants based on their relative fair values. During the year ended December 31, 2021, in connection with the issuance of\nthe Convertible Notes and the Warrants, the Group recorded debt discount of $15,097 that will be amortized over the term of the Convertible\nNotes. During the year ended December 31, 2022, in connection with the issuance of the Convertible Notes and the Warrants, the Group recorded\ndebt discount of $6,994 that will be amortized over the term of the Convertible Notes. During the year ended December 31, 2023, in connection\nwith the issuance of the Convertible Notes and the Warrants, the Group recorded debt discount of $629 that will be amortized over the\nterm of the Convertible Notes.\n\n \n\nThe fair value of the Warrants was\ncomputed using the Black-Scholes option-pricing model. Variables used in the option-pricing model include the following:\n\n \n\n  \nValue\nper share  \nRisk-free\ninterest\nrate  \nExpected\nwarrant\nlife \nExpected\nvolatility \n\n  \n   \n   \n  \n  \n\nFebruary 25, 2021 Warrants \n 1.76  \n 0.60% \n5 years \n 170%\n\nApril 14, 2021 Warrants \n 1.25  \n 0.86% \n5 years \n 168%\n\nSeptember 14, 2021 Warrants \n 0.72  \n 0.78% \n5 years \n 160%\n\nMay 25, 2022 Warrants \n 0.17  \n 2.73% \n5 years \n 152%\n\nAugust 24, 2023 Warrants \n 0.16  \n 4.60% \n3.75 years \n 146%\n\n \n\nThe fair values of the convertible\nnotes are determined by the optimized value derived from valuation of straight debt and valuation of convertible debt. The assumptions\ninclude the following:\n\n \n\n  \nCoupon\nrate  \nRisk-free\ninterest\nrate  \nVolatility  \nBond\nyield \n\n  \n   \n   \n   \n  \n\nFebruary 25, 2021 Notes ($6.67 million) \n 8% \n 0.13% \n 196% \n 28%\n\nApril 14, 2021 Notes ($1 million) \n 8% \n 0.16% \n 196% \n 29%\n\nMay 5, 2021 Notes ($13.33 million) \n 8% \n 0.16% \n 194% \n 28%\n\nMay 5, 2021 Notes ($2 million) \n 8% \n 0.16% \n 193% \n 28%\n\nSeptember 14, 2021 Notes ($13.575 million) \n 8% \n 0.21% \n 200% \n 30%\n\nMay 25, 2022 Notes ($16.0 million) \n 10% \n 2.50% \n 153% \n 33%\n\nAugust 24, 2023 Notes ($1.50 million) \n 10% \n 5.02% \n 103% \n 36%\n\n \n\nDuring the year ended December 31, 2023, 2024\nand 2025, the holders of the convertible notes have converted into total of 94,003, nil and nil the Group’s ordinary shares, respectively.\nInterest expense related to the amortization of the debt discount of $700, $770 and nil recorded for the year ended December 31, 2023,\n2024 and 2025, respectively.\n\n \n\nF-41\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**13.**\n**MAINLAND CHINA EMPLOYEE CONTRIBUTION PLAN**\n\n \n\nAs stipulated by the regulations of\nthe PRC, full-time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan organized\nby municipal and provincial governments. Under the plan, certain pension benefits, medical care, unemployment insurance, employee housing\nfund and other welfare benefits are provided to employees. The Group is required to make contributions to the plan based on certain percentages\nof employees’ salaries. The total expenses for the plan from continuing operations were $749, $737 and $265 and from discontinued\noperations were nil, nil and nil for the years ended December 31, 2023, 2024 and 2025, respectively.\n\n \n\n**14.**\n**SHARE BASED COMPENSATION**\n\n \n\n*(a) Options issued in 2020*\n\n \n\nThe Group granted 11,719 shares of\noptions to three non-employees to purchase ordinary shares with the exercise price of $240.0 per share on March 19, 2020. The expiration\ndate of these options is March 19, 2023.\n\n \n\nThe Group granted 521 shares of warrants\nto an advisory company to purchase ordinary shares with the exercise price of $230.4 per share on May 18, 2020. The expiration date of\nthese warrants is May 18, 2027. The recipients received such warrants for bringing to the Company a merger possibility and have the ability\nto exercise the warrants into ordinary shares of the Company at the time of their own choosing by the expiration date or by the closing\nof a merger brought forth by them, whichever occurs earlier.\n\n \n\n   Number of\noptions   Weighted\naverage\nexercise\nprice   Weighted\naverage\nremaining\ncontractual\nterm   Aggregate\nintrinsic\nvalue \n\n       ($)   (Years)   ($) \n\nOutstanding, January 1, 2023   12,240    230.40    4.38    \n-\n \n\nGranted   \n-\n    \n-\n    -    \n-\n \n\nForfeited   (11,719)   \n-\n    -    \n-\n \n\nOutstanding, December 31, 2023   521    230.40    3.38    \n-\n \n\n                     \n\nOutstanding, January 1, 2024   521    230.40    3.38    \n-\n \n\nGranted   \n-\n    \n-\n    -    \n-\n \n\nForfeited   \n-\n    \n-\n    -    \n-\n \n\nOutstanding, December 31, 2024   521    230.40    2.38    \n-\n \n\n                     \n\nOutstanding, January 1, 2025   521    230.40    2.38    \n-\n \n\nGranted   \n-\n    \n-\n    -    \n-\n \n\nForfeited   \n-\n    \n-\n    -    \n-\n \n\nOutstanding, December 31, 2025   521    230.40    1.38    \n-\n \n\n \n\nF-42\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**14.**\n**SHARE BASED COMPENSATION (CONTINUED)**\n\n \n\nAs of December 31, 2024 and 2025, the\nGroup had options outstanding to purchase an aggregate of 521 shares and 521 shares, respectively with exercise prices above the fair\nvalue of the Group’s shares, resulting in aggregate intrinsic value of nil.\n\n \n\nNo compensation expenses relating to\nshare options granted to employees recognized for the years ended December 31, 2023, 2024 and 2025.\n\n \n\n*(b) Ordinary shares issued in 2023*\n\n \n\nDuring fiscal 2023, the Group issued\n12,912,096 ordinary shares to certain employees and non-employees. $6,467 recorded as general and administrative expenses, $28 recorded\nas selling and marketing expenses and $1,274 recorded as research and development expenses. The ordinary shares issued were fully vested\nas of December 31, 2023.\n\n \n\n*(c) Shares issued in 2024*\n\n \n\nOn June 1, 2024, the Group granted\n1,000,000 restricted shares to three senior managements as compensation cost for awards. The fair value of these restricted shares was\n$160 based on the closing share price $0.16 at June 1, 2024. These restricted shares will vest over two years with one-half of the shares\nvesting every year from the grant date.\n\n \n\nThe share-based compensation expense\nrecorded for restricted shares issued for management were $47 and $80 for the years ended December 31, 2024 and 2025, respectively. The\ntotal unrecognized share-based compensation expense of restricted shares issued for management as of December 31, 2025 was approximately\n$33, which is expected to be recognized over a weighted average period of 0.42 years.\n\n \n\nThe following table summarizes the\nrestricted shares activity for the year ended December 31, 2024 and 2025:\n\n \n\n  \nNumber\n\nof shares  \nWeighted\n\naverage\n\ngrant\n\ndate fair\n\nvalue\n\n(US$) \n\nOutstanding January 1, 2024 \n \n-\n  \n \n-\n \n\nGranted \n 1,000,000  \n 0.16 \n\nVested \n (291,667) \n 0.16 \n\nUnvested at December 31, 2024 \n 708,333  \n 0.16 \n\nGranted \n \n-\n  \n \n-\n \n\nVested \n (500,000) \n 0.16 \n\nUnvested at December 31, 2025 \n 208,333  \n 0.16 \n\n \n\nDuring fiscal 2024, the Group issued\n50,000 ordinary shares to a non-employee and $4 recorded as general and administrative expenses. The ordinary shares issued were fully\nvested as of December 31, 2024. During fiscal 2025, no ordinary shares issued to non-employee.\n\n \n\n*(d) Shares issued in 2025*\n\n \n\nDuring fiscal 2025, the Group issued\n16,500,002 ordinary shares to the management. $2,356 recorded as general and administrative expenses. These ordinary shares issued were\nfully vested as of December 31, 2025.\n\n \n\n**15.**\n**TAXATION**\n\n \n\n**Enterprise income tax (“EIT”)**\n\n \n\n*British Virgin Islands*\n\n \n\nThe Company is incorporated in the\nBritish Virgin Islands and conducts its primary business operations through the subsidiaries in the PRC, India and Hong Kong. Under the\ncurrent laws of the British Virgin Islands, the Company is not subject to tax on income or capital gains. Additionally, upon payments\nof dividends by the Company to its shareholders, no BVI withholding tax will be imposed.\n\n \n\nF-43\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**15.**\n**TAXATION (CONTINUED)**\n\n \n\n*Cayman Islands*\n\n \n\nBorqs International is incorporated\nin the Cayman Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC, India and Hong Kong.\nUnder the current laws of the Cayman Islands, Borqs International is not subject to tax on income or capital gains. Additionally, upon\npayments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.\n\n \n\n*Hong Kong*\n\n \n\nBorqs HK is subject to Hong Kong profits\ntax rate of 16.5% for the years ended December 31, 2023, 2024 and 2025. No provision for Borqs HK profits tax has been made in the consolidated\nfinancial statements as the entity had losses in the years ended December 31, 2023, 2024 and 2025. Additionally, upon payments of dividends\nby the Company to its shareholders, no HK withholding tax will be imposed.\n\n \n\n*India*\n\n \n\nBorqs India is subject to income tax\nrate of 25.17% for the years ended December 31, 2023, 2024 and 2025. Amounts of $1,078 are included as income tax expense for the years\nended December 31, 2023, $147 are included as income tax expense for the years ended December 31, 2024 and $945 are included as income\ntax expense for the years ended December 31, 2025.\n\n \n\n*The PRC*\n\n \n\nThe Company’s subsidiaries and\nVIE in the PRC are subject to the statutory rate of 25%, in accordance with the Enterprise Income Tax law (the “EIT Law”),\nwhich was effective since January 1, 2008, except for certain entities eligible for preferential tax rates.\n\n \n\nDividends, interests, rent or royalties\npayable by the Company’s PRC subsidiaries, to non-PRC resident enterprises, and proceeds from any such non-resident enterprise investor’s\ndisposition of assets (after deducting the net value of such assets) shall be subject to 10% withholding tax, unless the respective non-PRC\nresident enterprise’s jurisdiction of incorporation has a tax treaty or arrangements with China that provides for a reduced withholding\ntax rate or an exemption from withholding tax.\n\n \n\nBORQS Beijing was qualified for a High\nand New Technology Enterprises (“HNTE”) since 2012 and was eligible for a 15% preferential tax rate from 2012 to 2014. In\nJuly 2015, BORQS Beijing obtained a new HNTE certificate. BORQS Beijing has successfully renewed the HNTE certificate in December 2021\nwith effective term of three years until 2023. In accordance with the PRC Income Tax Laws, an enterprise awarded with the HNTE status\nmay enjoy a reduced EIT rate of 15%. For the year ended December 31, 2023, BORQS Beijing enjoyed a preferential tax rate of 15% and applied\nto 25% tax rate for the years ended December 31, 2024 and 2025.\n\n \n\nThe New EIT Law also provides that\nenterprises established under the laws of foreign countries or regions and whose “place of effective management” is located\nwithin the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of 25% on worldwide income. The\ndefinition of “place of effective management” refers to an establishment that exercises, in substance, overall management\nand control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2025, no detailed\ninterpretation or guidance has been issued to define “place of effective management”. Furthermore, as of December 31, 2025,\nthe administrative practice associated with interpreting and applying the concept of “place of effective management” is unclear.\nIf the Group is deemed as a PRC tax resident, it would be subject to PRC tax under the New CIT Law. The Group will continue to monitor\nchanges in the interpretation or guidance of this law.\n\n \n\nF-44\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**15.**\n**TAXATION (CONTINUED)**\n\n \n\n(Loss) profit from continuing operations\nbefore income taxes consisted of:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nNon-PRC \n (25,432) \n 13,576  \n 13,308 \n\nPRC \n (4,863) \n 3,894  \n (3,597)\n\n  \n    \n    \n   \n\n  \n (30,295) \n 17,470  \n 9,711 \n\n \n\nIncome tax benefit (expense) comprised\nof:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nCurrent \n 2,084  \n (8) \n (5)\n\nDeferred \n \n-\n  \n \n-\n  \n \n-\n \n\n  \n    \n    \n   \n\n  \n 2,084  \n (8) \n (5)\n\n \n\nThe reconciliation of tax computed\nby applying the statutory income tax rate of 25% for the years ended December 31, 2022, 2023 and 2024 applicable to the PRC operations\nto income tax expense was as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\n(Loss) income before income taxes \n (30,295) \n 17,470  \n 9,711 \n\n  \n    \n    \n   \n\nIncome tax income computed at the statutory income tax rate at 25% \n 7,574  \n (4,367) \n (2,428)\n\nNon-deductible expenses \n (82) \n 39  \n   \n\nNon-taxation income \n 17  \n \n-\n  \n \n-\n \n\nUnrecognized tax benefits \n 1,967  \n \n-\n  \n \n-\n \n\nPreferential rate \n (469) \n (502) \n \n-\n \n\nCurrent and deferred tax rate differences \n \n-\n  \n \n-\n  \n \n-\n \n\nForeign rate differences \n (42) \n 118  \n   \n\nChange of valuation allowance \n (7,567) \n 4,142  \n 2,423 \n\nPrior year provision to return true up \n 117  \n \n-\n  \n \n-\n \n\nR&D super deduction \n 569  \n 562  \n \n-\n \n\n  \n    \n    \n   \n\nIncome tax benefit (expense) \n 2,084  \n (8) \n (5)\n\n \n\nF-45\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**15.**\n**TAXATION (CONTINUED)**\n\n \n\nThe Group operates through several\nsubsidiaries and its Consolidated VIEs. Valuation allowance is considered for each of the entities where it was determined it was more\nlikely than not that the benefits of the deferred tax assets will not be realized.\n\n \n\nRealization of the net deferred tax\nassets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income,\nexclusive of reversing deductible temporary differences and tax loss or credit carry forwards.\n\n \n\nAs of December 31, 2025, the Group\nhad net tax losses from its PRC subsidiaries, as per filed tax returns, of $20,246 which can be carried forward per tax regulation to\noffset future taxable income. The PRC taxable losses will expire from 2025 to 2034 if not utilized. The Group has net tax losses from\nits HK subsidiary of $45,348, which will not expire.\n\n \n\n**Unrecognized Tax Benefits**\n\n \n\nAs of December 31, 2022, the Group\nrecognized an accrual of $1,990, in unrecognized tax benefits and its interest of $1,990, which is presented on a net basis against the\ndeferred tax assets related to tax loss carry forwards on the consolidated balance sheets. The unrecognized tax benefits and its related\ninterest are primarily related to under-reported intercompany profit. The amount of unrecognized tax benefits will change in the next\n12 months, pending clarification of current tax law or audit by the tax authorities, however, an estimate of the range of the possible\nchange cannot be made at this time. As of December 31, 2024 and 2025, the uncertainties have dismissed due to the tax examination period\nhas expired and the previously recognized tax benefits has been reversed.\n\n \n\nA roll-forward of unrecognized tax\nbenefits is as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nBalance at beginning of year \n 1,990  \n \n-\n  \n \n-\n \n\nReversal based on tax positions related to prior years \n (1,990) \n \n-\n  \n \n-\n \n\nAdditions based on tax positions related to the current year \n \n-\n  \n \n-\n  \n \n-\n \n\nForeign currency translation difference \n \n-\n  \n \n-\n  \n \n-\n \n\n  \n    \n    \n   \n\nBalance at end of year \n \n-\n  \n \n-\n  \n \n-\n \n\n \n\nIn the years ended December 31, 2024\nand 2025, the Group recorded interest expense accrued in relation to the unrecognized tax benefit of nil and nil in income tax expense,\nrespectively. As of December 31, 2025, the tax years ended December 31, 2019 through 2024 for the PRC subsidiaries remain open for statutory\nexamination by the PRC tax authorities.\n\n \n\nThe Organization for Economic Cooperation\nand Development (“OECD”) published Pillar Two model rules in December 2021, with the effect that a jurisdiction may enact\ndomestic tax laws (“Pillar Two legislation”) to implement the Pillar Two model rules on a globally agreed common approach.\nPillar Two legislation applies to a member of a multinational group within the scope of the Pillar Two model rules, which the Group is\nreasonably expected to fall into. It imposes a top - up tax on profits arising in a jurisdiction whenever the effective tax rate determined\nby the Pillar Two model rules on a jurisdictional basis is below a minimum rate of 15%. The Group has reviewed its corporate structure\nin light of the introduction of Pillar Two model rules in various jurisdictions and engaged external tax specialists in assessing its\ntax exposure. As at December 31 2025, the Group mainly operates in the Mainland of China, in which exposures to Pillar Two income taxes\nmight exist in the future although the legislation is not yet enacted. Besides, certain subsidiaries of the Group are located in jurisdictions\nincluding Hong Kong where Pillar Two legislation had been enacted or substantively enacted, but not yet in effect; it is estimated that\nthe Group’s income tax would not be materially different should those legislation had been in effect for the year ended December\n31 2025. The Group does not recognize any relevant tax expenses for the year ended December 31 2025.\n\n \n\nF-46\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**16.**\n**RESTRICTED NET ASSETS**\n\n \n\nThe Company’s ability to pay\ndividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries and VIE. Relevant PRC statutory\nlaws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of their retained earnings, if any,\nas determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the consolidated financial\nstatements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s\nPRC subsidiaries and VIE.\n\n \n\nIn accordance with the PRC Regulations\non Enterprises with Foreign Investment and the articles of association of the Company’s PRC subsidiaries, a foreign-invested enterprise\nestablished in the PRC is required to provide certain statutory reserves, namely the general reserve fund, the enterprise expansion fund\nand the staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts.\nA foreign-invested enterprise is required to allocate at least 10% of its annual net profit to the general reserve until such reserve\nhas reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. Appropriations to the enterprise\nexpansion fund and the staff welfare and bonus fund are at the discretion of the board of directors for all foreign-invested enterprises.\nThe aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The PRC subsidiaries were\nestablished as foreign-invested enterprises and therefore, are subject to the above mandated restrictions on distributable profits. As\nof December 31, 2024 and 2025 the Group’s PRC subsidiaries had appropriated $1,901 and $1,901, respectively, in its statutory reserves.\n\n \n\nForeign exchange and other regulations\nin the PRC may further restrict the Company’s VIE from transferring funds to the Company in the form of dividends, loans and advances.\nAmounts restricted include paid-in capital and statutory reserves of the Company’s PRC subsidiaries and the equity of the Consolidated\nVIEs, as determined pursuant to PRC generally accepted accounting principles. As of December 31, 2024 and 2025, restricted net assets\nof the Company’s PRC subsidiaries were $83,072 and $86,172, respectively.\n\n \n\nF-47\n\n \n\n** **\n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**17.**\n**Equity**\n\n \n\n \n**(a)**\n**Investment with KADI**\n\n \n\nOn December 15, 2018, the Group entered\ninto a Share Purchase Agreement (“Purchase Agreement”) with Shanghai KADI Machinery Technology Co., Ltd. (“KADI SH”),\nKADI Technologies Limited (“KADI HK”) (collectively, “KADI”) and Lin Hu and Shou Huajun, the sole shareholders\nof KADI SH and KADI HK (the “KADI’s Selling Shareholders”), for the purchase of 60% of the issued and outstanding ordinary\nshares of KADI SH (“KADI SH Shares”) and 60% of the issued and outstanding ordinary shares of KADI HK (“KADI HK Shares”,\ntogether with the KADI SH Shares, the “KADI Shares”). The transaction with KADI consists of total cash consideration of $4,600\nin installments and share consideration equivalent to $9,750 in installments upon achievement of earn-outs by KADI SH from 2018 to 2021.\nAs of December 31, 2018, $600 was prepaid to KADI SH, which was included in prepaid and other current assets in 2018 and written off in\n2019. The transaction did not close as of December 31, 2019 due to KADI not able to present audited financial statements as required by\nthe earn-out provisions of the agreement and that KADI has not performed the ownership change registration at the local jurisdiction.\nAlthough KADI was not able to present audited financial statements as required by the earn-out provisions of the agreement and has not\nperformed the ownership change registration, 8,503 of Borqs’ ordinary shares were issued to KADI on January 9, 2019, for which the\nGroup recorded the fair value of these shares in an aggregate of $5,217 in additional paid-in capital, with a corresponding amount included\nin subscription receivable. As a result, future capital commitments for KADI has been voided due to KADI’s breach of provisions\nof the agreements.\n\n \n\nThe Group has initiated arbitration\nproceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from\nKADI of i) a payment of $600 in cash previously paid to KADI, ii) the return of 8,503 ordinary shares of Borqs previously issued to the\nowners of KADI, and iii) payment in cash for loss of profit from KADI’s projected business in the amount of $5.3 million.\n\n \n\nOn January 16, 2024, the arbitrator\nin Hong Kong has issued the final award in favor of Borqs that KADI is to: i) return to Borqs the Advanced Payment of US$600,000; ii)\npay Borqs pre-award interest on the Advanced Payment for the period from October 1, 2021 to January 16, 2024 at the simple rate of 5.5%\nper annum; iii) pay Borqs post-award interest on the Advanced Payment for the period from January 16, 2024 until full repayment is made\nat the simple rate of 8.875% per annum; and iv) return to Borqs a total of 1,043,550 Borqs shares issued to the KADI parties in 2019 (not\nadjusted for the reverse-splits of Borqs shares).\n\n \n\nOn April 15, 2024, the arbitrator in\nHong Kong has issued the final award in favor of Borqs on costs incurred by Borqs related to the arbitration, that KADI is to pay Borqs\nfor legal expenses and fees in the amount of HK$955,743.93 plus interest at the rate of 8.875% per annum from April 15, 2024 until full\npayment is made.\n\n \n\nOn December 30, 2024, the Shanghai\nNo.2 Intermediate People’s Court upheld the arbitration decision from Hong Kong and has approved of the enforcement of the final\naward in favor of Borqs against KADI. The Company has received partial payment of the award from KADI as of the filing of this Annual\nReport and is working with PRC counsel on such enforcement and collection of the remainder of the award.\n\n \n\n \n**(b)**\n**Equity financing from Chongqing City Youtong Equity Investment Fund (“Chongqing Youtong”)**\n\n \n\nOn April 18, 2019, the Group entered\ninto an equity financing agreement with Chongqing Youtong owned by the Chongqing Government in the PRC. According to the agreement, Chongqing\nYoutong purchased 9.9 % equity interest of the Company equivalent to 19,449 ordinary shares with a total purchase consideration of $13,865\non May 16, 2019, for which 75% of the total purchase consideration amounting to $10,399 in cash was received. The remaining 25% of the\ntotal purchase consideration amounting to $3,466 will be contributed in the form of real property and equipment (the “Property Investment”)\nby Chongqing Youtong within six months from May 16, 2019 the date that the cash investment portion was completed. In May 2019, 19,449\nshares were issued and $10,399 in cash was received by the Group. However, the Property Investment has not yet been completed.\n\n \n\nIn February 2023, the Group entered\ninto a settlement agreement with Chongqing Youtong on the settlement of the equity financing. For the cash consideration with the amount\nof $10,399, the Group agreed to repay Chongqing Youtong the principal plus 8% annually interest with its ordinary shares. Besides, both\nparties agreed to not proceed with the remainder 25% investment and the related previous issued 4,862 shares will not withdraw. As a result,\nto compensate Youtong’s investment loss from the share price decline, the Group issued additional 4,668,704 ordinary shares in February\n2023 equal to approximately $13.46 million including interest expense from May 2019 to February 2023, with annual interest rate of 8%.\n\n \n\nBy entering into the agreement not\nto proceed with the remainder 25% investment in the form of real property and equipment, the amount of $3,669 was released from subscriptions\nreceivable, and was recognized as loss related to equity financing for the year ended December 31, 2022. Loss related to equity financing\nrecognized during the year ended December 31, 2023 was $14.16 million, which included the cash consideration of $10,399 and interest expense\nfrom May 2019 to December 2023 with annual interest rate of 8%.\n\n \n\nIn May 2025, the Group entered an agreement\nwith the counter-party to resolve the outstanding matters arising from the previous equity financing and subsequent agreements. To solve\nthe outstanding matters, the Group agreed to pay a settlement payment amount of $5.15 million to Chongqing Youtong. The Group made the\nfull payment of $5.15 million in May 2025, which was recognized as a loss related to contractual obligations and recorded as other expenses\nfor the year ended December 31, 2025. With the payment of this settlement, all obligations and claims between the Group and the Chongqing\nYoutong were fully settled.\n\n \n\nF-48\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n** **\n\n**17.**\n**Equity (CONTINUED)**\n\n \n\n \n**(c)**\n**Settlement of arbitration with Claimant Samsung Electronics Co., Ltd. (“Samsung”)**\n\n \n\nOn November 27, 2018, the Secretariat\nof the International Court of Arbitration for the International Chamber of Commerce issued a final award to Samsung Electronics Co., Ltd.\n(“Samsung”) that constituted the final decision on the Group’s dispute with Samsung over a sales contract. The court\norder required the Group to pay to Samsung total payments of $4,650 including: i) $4,280 as the “Principal Amount”, plus (ii)\naccrued interest of $370 computed from March 31, 2019 on the outstanding balance of the Principal Amount at a simple interest rate of\n9% per annum (together with the Principal Amount, collectively referred to as the “Settlement Payment”). On April 26, 2019,\nthe Group entered into a settlement agreement with Samsung according to which, the Group shall pay the full and total amount of the Settlement\nPayment in equal monthly installments over a period of twenty-four months beginning on March 31, 2019. In addition, a total of 11,509\nordinary shares were issued to Samsung as escrow shares in the year 2019 as security for the payments. The Group recorded the fair value\nof the shares issued in an aggregate of $6,401 in additional paid-in capital, with a corresponding amount included in subscription receivable.\nDue to cash constraints, particularly due to the COVID-19 pandemic, the Group has not made monthly installments to Samsung since the fourth\nquarter of 2019, and Samsung has not pursued alternative means of repayment from the Group.\n\n \n\nIn April 2022, the Group executed a\nsettlement agreement with Samsung regarding the payments. The total amount of principal and accrued interest as of the end of May 2022\nis approximately $4.4 million less $1.6 million paid in cash on May 27, 2022, equaling a net amount of approximately $2.8 million. According\nto the agreement, the Group shall pay the full and total amount of the payments in equal monthly installments over a period of eighteen\nmonths beginning on July 2022. In addition, 83,633 and 443,294 ordinary shares were issued to Samsung as escrow shares as security for\nthe payments during the year ended December 31, 2022 and 2023, respectively. The Group recorded the fair value of the shares issued in\nan aggregate of $2,760 and $1,321 in additional paid-in capital during the year ended December 31, 2022 and 2023, respectively, with a\ncorresponding amount included in subscription receivable.\n\n \n\nThe Group had been making monthly payments\nto Samsung and the entire amount including accrued interest was paid off as of March 7, 2024.\n\n \n\n \n**(d)**\n**Debt Repayments with ordinary shares**\n\n \n\nThe Group had a balance due to a cooperation\npartner in the amount of approximate $4.1 million. In August 2023, the Group resolved to convert a portion of the outstanding balance\ninto the Group’s ordinary shares. US$1.75 million of the balance owed to the cooperation partner has been converted at the price\nof $2.04 per share resulting in the issuance of 771,605 ordinary shares. The Group recognized a gain of $176 in gain on debt settlement\nduring the year ended December 31, 2023. \n\n \n\nF-49\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**17.**\n**Equity (CONTINUED)**\n\n \n\n \n**(e)**\n**Shares conversion from the holders of the convertible notes**\n\n \n\nSee Note 12 for details.\n\n \n\n \n**(f)**\n**Warrants exercised from the holders of the convertible notes**\n\n \n\nSee Note 12 for details. \n\n \n\n \n**(g)**\n**Acquisition of HHE**\n\n \n\nRefer to Note 4 for shares issued to\nHHE. \n\n \n\n \n**(h)**\n**Issuance of ordinary shares for a project**\n\n \n\nDuring the year ended December 31,\n2023, the Group issued 166,667 ordinary shares with fair value of $392 to an advisor for a project and recorded in subscription receivable.\n\n \n\n**18.**\n**FAIR VALUE MEASUREMENTS** \n\n \n\nAs of December 31, 2025, the Group’s\nfinancial assets measured at fair value on a recurring basis:\n\n \n\n  \nLevel 1  \nLevel 2  \nLevel 3  \nTotal \n\n  \n($)  \n($)  \n($)  \n($) \n\nMoney market fund \n 1,080  \n \n           -\n  \n \n             -\n  \n 1,080 \n\nEquity securities \n 3,808  \n \n-\n  \n \n-\n  \n 3,808 \n\nTotal \n 4,888  \n \n-\n  \n \n-\n  \n 4,888 \n\n \n\nMoney market fund and equity securities\nare measured using quoted prices in active market (Level 1 inputs).\n\n \n\nF-50\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**19.**\n**COMMITMENTS AND CONTINGENCIES**\n\n \n\n**Capital commitments and contingencies**\n\n \n\nRefer to Note 17(a) for details related\nto investments with KADI. As of the filing of this annual report, the Group is in negotiation with KADI for a reduced ownership of KADI\nor a rescission of the acquisition.\n\n \n\n \n\n**20.**\n**PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION**\n\n \n\n**Condensed balance sheets**\n\n \n\n  \n   \nAs of\nDecember 31, \n\n  \nNote  \n2024  \n2025 \n\n  \n   \n$  \n$ \n\nASSETS \n   \n   \n  \n\nCurrent assets \n   \n   \n  \n\nCash and cash equivalents \n             \n 1  \n 315 \n\nPrepaid expenses and other current assets \n    \n 25  \n 135 \n\nAmount due from related parties \n    \n 42,791  \n 128,269 \n\n  \n    \n    \n   \n\nTotal current assets \n    \n 42,817  \n 128,719 \n\n  \n    \n    \n   \n\nNon-current assets \n    \n    \n   \n\nInvestments in subsidiaries and Consolidated VIEs \n    \n (12,308) \n (100,114)\n\n  \n    \n    \n   \n\nTotal non-current assets \n    \n (12,308) \n (100,114)\n\n  \n    \n    \n   \n\nTotal assets \n    \n 30,509  \n 28,605 \n\n  \n    \n    \n   \n\nLIABILITIES AND SHAREHOLDERS’ EQUITY \n    \n    \n   \n\nCurrent liabilities \n    \n    \n   \n\nAccrued expenses and other payables \n    \n 13,434  \n 3,729 \n\n  \n    \n    \n   \n\nTotal current liabilities \n    \n 13,434  \n 3,729 \n\n  \n    \n    \n   \n\nTotal liabilities \n    \n 13,434  \n 3,729 \n\n  \n    \n    \n   \n\nShareholders’ equity \n    \n    \n   \n\nAdditional paid-in capital \n    \n 330,016  \n 332,452 \n\nAccumulated deficit \n    \n (314,842) \n (309,477)\n\nStatutory reserve \n    \n 1,901  \n 1,901 \n\n  \n    \n    \n   \n\nTotal shareholders’ equity \n    \n 17,075  \n 24,876 \n\n  \n    \n    \n   \n\nTotal liabilities and shareholders’ equity \n    \n 30,509  \n 28,605 \n\n \n\nF-51\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**20.**\n**PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)**\n\n \n\n**Condensed statements of operations**\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nOperating Expenses \n   \n   \n  \n\nGeneral and administrative expenses \n (2,045) \n (2,325) \n (7,318)\n\n  \n    \n    \n   \n\nOperating loss \n (2,045) \n (2,325) \n (7,318)\n\n  \n    \n    \n   \n\nShare of (losses) profit of subsidiaries and Consolidated VIEs \n (24,876) \n 19,648  \n 16,034 \n\n  \n    \n    \n   \n\n(Loss) income before income taxes \n (26,921) \n 17,323  \n 8,716 \n\nIncome tax expense \n \n-\n  \n \n-\n  \n \n-\n \n\n  \n    \n    \n   \n\nNet (loss) income \n (26,921) \n 17,323  \n 8,716 \n\n \n\n**Condensed statements of comprehensive\nincome (loss)**\n\n \n\n  \nFor the years ended\nDecember 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nNet (loss) income \n (26,921) \n 17,323  \n 8,716 \n\nOther comprehensive (loss) income, net of tax of nil: \n    \n    \n   \n\nForeign currency translation adjustments, net of tax of nil \n (262) \n (244) \n 409 \n\nOther comprehensive income (loss), net of tax of nil: \n    \n    \n   \n\nComprehensive (loss) income \n (27,183) \n 17,079  \n 9,125 \n\nComprehensive (loss) income attributable to the Company’s ordinary shareholders \n (27,201) \n 17,065  \n 9,113 \n\n \n\n**Condensed statements of cash\nflows**\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n$  \n$  \n$ \n\nNet cash generated from operating activities \n \n          -\n  \n 1  \n 314 \n\nNet cash generated from investing activities \n \n-\n  \n \n-\n  \n \n-\n \n\nNet cash generated from financing activities \n \n-\n  \n \n-\n  \n \n-\n \n\n  \n    \n    \n   \n\nNet increase in cash and cash equivalent and restricted cash \n \n-\n  \n 1  \n 314 \n\nCash and cash equivalent and restricted cash at beginning of the year \n \n-\n  \n \n-\n  \n 1 \n\n  \n    \n    \n   \n\nCash and cash equivalent and restricted cash at end of the year \n \n-\n  \n 1  \n 315 \n\n  \n    \n    \n   \n\nReconciliation of cash and cash equivalents and restricted cash \n    \n    \n   \n\n  \n    \n    \n   \n\nCash and cash equivalents at end of the year \n \n-\n  \n 1  \n 315 \n\nRestricted cash at the end of the year \n \n-\n  \n \n-\n  \n \n-\n \n\nTotal cash and cash equivalents and restricted cash at the end of year \n \n-\n  \n 1  \n 315 \n\n \n\nF-52\n\n \n\n \n\n**BORQS TECHNOLOGIES, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n**(Amounts in thousands of $, unless otherwise\nstated, except for number of shares and per share data)**\n\n \n\n**20.**\n**PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)**\n\n \n\n**(a) Basis of presentation**\n\n \n\nIn the Company-only financial statements,\nthe Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since inception.\n\n \n\nThe Company records its investment\nin its subsidiary under the equity method of accounting as prescribed in ASC Subtopic 323-10, *Investment-Equity Method and Joint Ventures*,\n(“ASC 323-10”), and such investments are presented on the balance sheet as “Investment in subsidiaries and Consolidated\nVIEs” and the share of the subsidiaries’ profit or losses are presented as “Share of profits (losses) of subsidiaries\nand Consolidated VIEs” on the statements of operations.\n\n \n\nThe subsidiaries did not pay any dividends\nto the Company for the years presented.\n\n \n\nCertain information and footnote disclosures\nnormally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted and as such, these Company-only\nfinancial statements should be read in conjunction with the Company’s consolidated financial statements.\n\n \n\n**(b) Intercompany transactions**\n\n \n\nThe Company had the following related\nparty balances as of December 31, 2024 and 2025:\n\n \n\n  \nAs of December 31, \n\n  \n2024  \n2025 \n\n  \n$  \n$ \n\nAmount due from (to) related parties \n   \n  \n\n- Borqs HK \n 23,505  \n 123,949 \n\n- Borqs Beijing \n (158) \n (246)\n\n- Borqs USA \n 808  \n 2,340 \n\n- Borqs International \n 18,636  \n \n-\n \n\n- Borqs Capital \n \n-\n  \n 2,226 \n\n \n\n**21.**\n**SUBSEQUENT EVENTS**\n\n \n\nSubsequent to the year ended December\n31, 2025, the Group cancelled all the 538,437 shares issued to Samsung and held in Escrow in February 2026.\n\n \n\nExcept for the subsequent event mentioned\nabove, the Group evaluated all events and transactions from December 31, 2025 up to the report date, there are no material subsequent\nevents that require disclosures in the consolidated financial statements.\n\n \n\nRegarding the earnout payments based\non the Company’s performance in 2025, the Company and Sasken are still determining the amount due to the Company.\nAs of the filing of this Annual Report, we are still in the process of finalizing the amount with Sasken.\n\n \n\nOn February 5, 2026 we filed a Form\n1120-F tax return with the U.S. Internal Revenue Service (“IRS”) indicating that for our sale of HHE in the year 2024, the amount\nof $1,794 was withheld from sales proceeds and paid to the IRS to cover taxes payable by the Company for the transaction.  In our\nfiling, we also indicated that the actual tax payable by the Company was $317 and therefore the Company is due a refund of $1,477. \nOn and around April 25, 2026, the Company received a notice dated March 23, 2026 from the IRS stating that the Company owes the IRS $317\nin tax plus penalties and interest totaling $442.  It is the opinion of the Company that the IRS completely ignored the indisputable\nfact that $1,794 was already paid in May 2024, for which the Company possesses hard evidence of the payment.  The Company will continue\nto correspond with the IRS via its tax 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