{"url_path":"/sec/brqsf/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 FINANCIAL INFORMATION**","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":980,"has_tables":true,"body_markdown":"**ITEM 8. FINANCIAL INFORMATION**\n\n \n\nThe financial statements required\nby this item can be found at the end of this report on Form 20-F, beginning on page F-1.\n\n \n\n**Legal Proceedings**\n\n \n\nWe were in arbitration before\nthe International Chamber of Commerce with Samsung Electronics Co., Ltd. (“Samsung”) to resolve a dispute regarding royalties\npayable to the Company under a software license agreement the Company had with Samsung. Samsung alleged that, for the period starting\nthe fourth quarter of 2010 through mid-2012, the Company was overpaid royalties of approximately $1.67 million due to a clerical error\nin Samsung’s accounting department that enabled the Company to receive royalties on sales of Samsung handsets that did not contain\nits software. Samsung was seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as reimbursements\nof reasonable fees including attorney fees and arbitration costs.\n\n \n\n63 \n\n \n\n \n\nAfter arbitration hearings\nheld in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an\narbitration award (the “Award”), which the Company received on November 29, 2018. Pursuant to the Award, the Company has the\nobligation to pay Samsung an aggregate of $2,546,401 plus an interest of 9% per annum starting May 16, 2018 until full payment is paid.\nSamsung was also awarded its attorney’s fees and expenses in the aggregate amount of approximately $1.73 million. The Company has\nreached an agreement with Samsung for settling the payments due Samsung by making 24 monthly payments beginning with April 2019. The Company\nhas pledged $5 million worth of ordinary shares in escrow as security for the payments, and in the event that the Company is in default\nof the scheduled payments, Samsung has the right to seize the escrow shares. Due to cash flow constraints resulting from the COVID-19\npandemic, we have not made payments to Samsung in the years 2020 and 2021. Beginning in June 2022, the Company has been making monthly\npayments to Samsung. All of the Award, including accrued interests, has been completely paid off as of March 7, 2024.\n\n \n\nWe have 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 $600,000 in cash previously paid to KADI, ii) the return of 1,043,550 ordinary shares of Borqs previously issued\nto the owners of KADI, and iii) payment in cash for loss of profit from KADI’s projected business 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\nin Hong 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\nShanghai No.2 Intermediate People’s Court upheld the arbitration decision from Hong Kong and has approved of the enforcement of\nthe final award in favor of Borqs against KADI. The Company has received partial payment of the award from KADI as of the filing of this\nAnnual Report and is working with PRC counsel on enforcement and collection of the remainder of the award.\n\n \n\nOther than the above-mentioned\ncases and closed legal proceedings between the Group and our suppliers and previous employees, the Group has not been named in any litigation\nwhere claims or counterclaims have been filed against us, as of the date of this annual report.\n\n \n\n**Dividend Policy**\n\n \n\nWe are a holding company and\nmay rely on dividends paid by our PRC subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions\nto our shareholders to the extent we choose to do so, to service any debt it may incur and to pay our operating expenses. Current PRC\nregulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance\nwith Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries are required to set aside at least 10% of\nour after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of our registered capital. Appropriations\nto the employee welfare funds are at the discretion of the board of directors of Borqs Beijing. These reserves are not distributable as\ncash dividends.\n\n \n\nCash transfers from PRC subsidiaries\nto our subsidiaries outside of China are subject to PRC government control of currency conversion. Restrictions on the availability of\nforeign currency may affect the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments\nto us or otherwise satisfy their foreign currency obligation. See “Risk Factors — Risks Related to Doing Business in China”,\n“Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company,”\nand “Restrictions on foreign currency may limit our ability to receive and use our revenue effectively.”\n\n \n\n**Significant Changes**\n\n \n\nThere have been no significant\nchanges since the date of the consolidated financial statements included in this annual report.\n\n \n\n64"}