{"url_path":"/sec/jxg/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1546383/0001213900-26-057231-index.html","accession_number":"0001213900-26-057231","cik":"0001546383","ticker":"JXG","issuer_name":"JX Luxventure Group Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1546383/0001213900-26-057231-index.html","primary_entity_key":"0001546383","primary_entity_name":"JX Luxventure Group Inc."},"word_count":10167,"has_tables":true,"body_markdown":"**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\nThe following\ndiscussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated\nfinancial statements and the related notes included in this annual report and in particular, “Item 4. Information on the Company\n— B. Business Overview.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual\nresults and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result\nof various factors, including those set forth under “Item 3. Key Information — D. Risk Factors” and elsewhere in this\nAnnual Report prepared our consolidated financial statements in accordance with International Financial Reporting Standards as\nissued by the International Accounting Standards Board.\n\n \n\n**A. Operating Results**\n\n \n\nOur operating results are primarily affected by\nthe following factors:\n\n \n\n \n●\n**Our ability to maintain and expand our brand portfolio or maintain and enhance our brand recognition,**We mainly depend on our brand portfolio to scale our business, attract and retain our brand partners and customers. Our Luxventure portfolio seamlessly connected various brands from our suppliers. Although we have devoted significant resources to and incurred large amount of expenses on sourcing, maintaining, promoting and expanding our brands, we cannot assure you that these efforts will be successful. In addition, maintaining and enhancing the recognition of our brands are also key to our success, which could be affected by various factors, including the effectiveness of our brand marketing strategy, publicity about our business, quality of products offered under the brands as well as preference of consumers, certain of which are beyond our control. Any failure to maintain and expand our brand portfolio or maintain and enhance our brand recognition could have a material and adverse effect on our business, results of operations and prospects.\n\n \n\n \n \n**Flexibility and sustainability of our product supply chain.** Our success largely depends on our ability to consistently gauge customers’ tastes and market trends, provide a balanced assortment of merchandize and source brands that satisfies customer demands in a timely manner. Our failure to anticipate, identify or react appropriately and timely to changes in customer preferences, tastes and market trends or economic conditions could lead to, among other things, missed opportunities, excess inventory or inventory shortages, markdowns and write-offs, all of which could negatively impact our profitability. In addition, failure to respond to changing customer preferences and trends in brand could negatively impact our brand image with our customers and result in diminished brand loyalty, and thus harm the prospects of our business.\n\n \n\n \n \n**The ability to develop, upgrade and apply our technologies to support and expand our business.**We rely on our technology infrastructure and operating systems to carry out the key aspects of our business, including identifying market trends in brands, selecting and partnering with quality brand partners, assisting in product designs for our private label brands, forecasting customers’ demands, supporting our product supply chain, enabling effective marketing and distribution, and refining customer services. We use third party social media platforms to promote our products. If we are unable to leverage third party social media platforms to effectively attract followers and convert them into active buyers, if there is any change, disruption or discontinuity in the features and functions of such social media platforms, our ability to acquire new consumers and our financial condition may suffer.\n\n \n\n73\n\n \n\n \n\n**Financial Statement Presentation**\n\n \n\nIn December 2020, the Company acquired Flower\nCrown, which at the time, contributed two new segments, tourism cross-border merchandize sales and tourism. Flower Crown add Technology\nSolution for Tourism Cross-border operation segment in 2022. In October 2022, the Company disposed of the whole menswear business segment,\nwhich was presented as discontinued operation as set out below.\n\n \n\nDuring 2025, the Company continued to expand its business operations\nin cross-boarder merchandize segment, focusing on wholesale trade sector and specializing in duty-free and cross-border consumer goods.\nWe also continue providing integrated solutions in wholesale trade, including logistics, supply chain management, and technology solutions\nto support the efficient distribution of tourism-related products.\n\n \n\n*Revenue. *During the periods covered\nby this section, we generated revenue from a) sales of tourism cross-border merchandize, b) sales of Software, and c) tourism products,\nwhich covers tourism package and airline ticket sale (including related services).\n\n \n\n*Cost of sales. *Cost of sales primarily\nconsisted of (a) the purchased costs of products online sold in connection with the revenue from cross-border merchandize, (b) the cost\nto purchase tourism supply up front and cancelling cost if any, (c) the cost for outsourcing the travelling work to certain travel agencies,\nand (d) cost on amortization of software, which are used for our software sales.\n\n \n\n*Gross profit and gross margin. *For\nthe periods covered by this section, our gross profit is equal to the difference between our net sales and cost of sales. Our gross margin\nis equal to the gross profit divided by net sales.\n\n \n\n*Administrative expenses. *For the periods\ncovered by this section, general and administrative expenses consisted primarily of compensation and benefits to our general management,\nfinance and administrative staff, rental costs, office supplies, utilities, and other expenses incurred in connection with general operations.\n\n \n\n**Comparison of Fiscal Years Ended December 31, 2025, 2024, and\n2023**\n\n \n\nThe following table sets forth key components\nof our results of operations, for the years ended December 31, 2025, 2024, and 2023, both in U.S. dollars and as a percentage of or revenue.\n\n \n\n  \nYear ended\nDecember 31, 2025  \nYear ended\nDecember 31, 2024  \nYear ended\nDecember 31, 2023 \n\n  \nAmount  \n% of\nSales  \nAmount  \n% of\nSales  \nAmount  \n% of\nSales \n\nRevenue \n 82,936,767  \n    \n 49,840,288  \n    \n 31,840,588  \n   \n\nCost of sales \n (72,501,980) \n -87% \n (41,487,972) \n -83% \n (26,384,219) \n -83%\n\nGross profit \n 10,434,787  \n 13% \n 8,352,316  \n 17% \n 5,456,369  \n 17%\n\nOperating expenses \n    \n    \n    \n    \n    \n 　 \n\nDistribution and selling expenses \n (7,725,421) \n -9% \n (2,651,904) \n -5% \n (58,981) \n 0%\n\nAdministrative expenses \n (13,574,769) \n -16% \n (1,830,214) \n -4% \n (2,076,876) \n -7%\n\nTotal operating expenses \n (21,300,190) \n -26% \n (4,482,118) \n -9% \n (2,135,857) \n -7%\n\nOther income \n 35,664  \n 0% \n 69,113  \n 0% \n 71,408  \n 0%\n\nOther gains and losses \n (69,682) \n 0% \n (107,384) \n 0% \n (342,954) \n -1%\n\nFinance costs \n (41,171) \n 0% \n (13,895) \n 0% \n (5,187) \n 0%\n\n(Loss)/profit before tax \n (10,940,592) \n -13% \n 3,818,032  \n 8% \n 3,043,779  \n 10%\n\nIncome tax \n (60,250) \n 0% \n (744,225) \n -1% \n -  \n 0%\n\nTotal (loss)/profit for the year \n (11,000,842) \n -13% \n 3,073,807  \n 6% \n 3,043,779  \n 10%\n\n \n\n74\n\n \n\n \n\nFlower Crown is a subsidiary operating three sub-segment\nbusiness, which are tourism (Luxury travel experiences), cross-border merchandise and B2B technology solution. The three sub-segments\nare presented as below:\n\n \n\n  \nTourism  \nTechnology  \nCross border\nmerchandize revenue \n\n  \nFor the year ended\nDecember 31,  \nFor the year ended\nDecember 31,  \nFor the year ended\nDecember 31, \n\nBy business \n2025  \n2024  \n2023  \n2025  \n2024  \n2023  \n2025  \n2024  \n2023 \n\nSales to external customers \n 30,669,239  \n 22,048,052  \n 21,561,671  \n 3,307,447  \n 1,530,812  \n 2,719,463  \n 48,960,081  \n 26,261,424  \n 7,559,454 \n\nSegment revenue \n 30,669,239  \n 22,048,052  \n 21,561,671  \n 3,307,447  \n 1,530,812  \n 2,719,463  \n 48,960,081  \n 26,261,424  \n 7,559,454 \n\nSegment gross margins/(loss) \n 462,297  \n 730,173  \n 1,981,107  \n 1,894,028  \n 589,968  \n 2,714,434  \n 8,078,462  \n 7,032,175  \n 760,828 \n\nGross margin rate \n 2% \n 3% \n 9% \n 57% \n 39% \n 99  \n 17% \n 27% \n 10%\n\n \n\nRevenues are recognized at a point in time and\ndenominated only in USD. Included in the “travel service”, majority (99.99%) of the revenue amount represents the revenue\nfor reselling of air-tickets requests by airline ticket agencies. Revenue for tickets purchased based on our judgment on potential trends,\nand revenue recorded from sales of tourism packages are insignificant of total revenue of tourism service.\n\n \n\nIn 2025, the total revenue increased to $83.0 million by 66% or $33.1\nmillion from $49.8 million in 2024. The increase was mainly due to $22.7 million increase in revenue in cross-border merchandize segment\nand $8.7 million in tourism segment.\n\n \n\nThe increase in cross-border merchandize segment of $22.7 million are\nmainly due to following reasons: (i) the Company expanded its imported cosmetics business in 2025 while 2024 is the first year of the\nCompany to run the business; (ii) the Company continued to allocate more resources into this sector.\n\n \n\nThe increase in revenue of tourism segment in\n2025 is mainly due to the Company offered lower price to the customer to take more market share.\n\n \n\nIn 2025, the revenue of technology segment generated\n$3.3 million compared to $1.5 million in the previous year due to more customers accepted the Company’s self-developed software.\n\n \n\nIn 2024, the total revenue increased to $49.8 million by 57% or $18.0\nmillion from $31.8 million in 2023. The increase was mainly due to the increase in revenue in cross-border merchandize segment. The increase\nin cross-border merchandize segment of $18.7 million are mainly due to following reasons: (i) the Company expanded its imported luxury\nvehicle business in 2024 while 2023 is the first year of the Company to run the business; (ii) the Company started to run imported cosmetics\nbusiness after acquiring certain brands distribution rights in 2024.\n\n \n\nIn 2024, the revenue of tourism segment generated\n$22.0 million compared to $21.6 million in previous year, representing a 2% increase.\n\n \n\nIn 2024, the revenue of technology segment generated $1.5 million compared\nto $2.7 million in the previous year due to our self-developed B2B technology solution for tourism cross-border merchandize were well\npenetrated in this niche industry and less potential clients left for the Company to promote. As a result, the Company started to sell\nupgraded system to these existing clients in 2024.\n\n \n\n75\n\n \n\n \n\nCost of sales and gross profit rate\n\n \n\nCost of sales primarily consisted of (a) the purchased\ncosts of products online sold in connection with the revenue from cross-border merchandize, (b) the cost to purchase tourism supply up\nfront and cancelling cost if any, (c) the cost for outsourcing the travelling work to certain travel agencies, and (d) cost on amortization\nof software, which are used for our software sales.\n\n  \n\nOur cost of sales increased from $41.5 million in year 2024 to $72.5\nmillion in year 2025, by 75%. The increase was mainly due to the increase of cost in connection with the increasing revenue in cross-border\nmerchandize segment and tourism segment in year 2025 compared to 2024.\n\n \n\nThe gross profit ratio declined from 17% in 2024\nto 13% in 2025. This decrease was primarily driven by a lower gross profit ratio in the cross-border merchandise segment, which fell from\n27% in 2024 to 17% in 2025. The reduction in the gross profit ratio for this segment mainly reflects lower sales volumes of high-margin\nimported luxury cars and yachts during 2025.\n\n \n\nOur cost of sales increased from $26.4 million in year 2023 to $41.5\nmillion in year 2024, by 57%. The increase was mainly due to the increase of cost in connection with the increasing cross-border merchandize\nsegment’s revenue in year 2024 compared to 2023.\n\n \n\nThe gross profit ratio kept at 17% in 2023 and 2024. However, the gross\nprofit ratio of our tourism segment decreased from 9% in 2023 to 3% in 2024, which contributed 44% of total revenue in 2024. The decrease\nin the gross profit ratio of our tourism segment mainly resulted from the Company intentionally decreasing its selling prices due to the\ncompetition in this segment. The gross profit ratio of technology sub-segment in 2024 decreased to 39% from 99% in 2023 due to the reason\nthat amortization of purchased software was recorded as cost of revenue in 2024, while no such amortization in 2023. The gross profit\nratio of cross-border merchandise sub-segment increased from 10% in 2023 to 27% in 2024. The increase of gross profit ratio is mainly\ndue to the higher gross margin of imported luxury cars and yachts sales in 2024.\n\n \n\nAdministrative expenses\n\n \n\nAdministrative expenses increased by $11.7 million or 587% to $13.6\nmillion for the year 2025 from $1.8 million for the year 2024. The increase was mainly due to $9.5 million share-based compensation to\nemployees, $1.0 million impairment for intangible assets and $0.8 million Directors’ compensation incurred in 2025.\n\n \n\nAdministrative expenses decreased by $0.2 million\nor 12% to $1.8 million for the year 2024 from $2.1 million for the year 2023. The change was mainly due to the Company cut down external\nservice fee by $0.2 million, from $0.5 million in 2023 to $0.3 million in 2024.\n\n \n\nDistribution and selling expenses\n\n \n\nFor the year ended December 31, 2025, distribution\nand selling expenses increased by $5.1 million, or 191%, to $7.7 million, compared with $2.6 million in 2024. The increase was primarily\nattributable to two factors: (i) the Company incurred approximately $3.9 million in promotional expenses to market its cross-border merchandise,\ncompared with around $0.8 million in 2024; and (ii) the Company acquired several distribution rights for imported cosmetics during 2024\nand 2025, leading to an incremental amortization expense of $1.6 million (increased from $1.8 million to $3.4 million).\n\n \n\nThe distribution and selling expenses increased by $2.6 million or\n4396% to $2.6 million for the year 2024 from $0.1 million for the year ended December 31, 2023, primarily due to the reason that (i) the\nCompany conducted a few exhibition events during year 2024 to promote its cross-border merchandise goods, which cost around $0.8 million\nin 2024, and (ii) the Company purchased several distribution rights of imported cosmetics, which resulted in an amortization expenses\nof $1.8 million in 2024.\n\n \n\n76\n\n \n\n \n\n(Loss)/profit for the year\n\n \n\nWe had a loss of $11.0 million in 2025 as compared to a profit of $3.1\nmillion in 2024, representing a decrease of 458%. Net margin was -13% for the year ended December 31, 2025, compared to 6% for the year\nended December 31, 2024.\n\n \n\nWe had a profit of $3.1 million in 2024 as compared\nto a profit of $3.0 million in 2023, representing an increase of 1%. Net margin was 6% for the year ended December 31, 2024, compared\nto 10% for the year ended December 31, 2023.\n\n \n\nProfit for the year decreased $14.1 million from 2024 to 2025 mainly\ndue to the operating expenses increased by $16.9 million, offset by gross profit increased by $2.1 million and income tax expenses decreased\nby $0.7 million.\n\n \n\nProfit for the year increased 1% from 2023 to\n2024 mainly due to the gross profit increased by $2.9 million and other losses decreased by $0.2 million, offset by the increased operating\nexpenses of $2.3 million and income tax expense of $0.7 million.\n\n \n\n**B. Liquidity and Capital Resources**\n\n \n\nAs of December 31, 2025, we had cash and cash equivalents of $700,727.\nOur cash and cash equivalents consist of cash on hand and cash in the banks. As of December 31, 2025, the Company had a net working capital\n(defined as total current assets deducted by total current liabilities) of $6,193,505, accumulated deficit of $82,334,728, net loss of\n$11,000,842, and net cash outflows from operating activities of $4,093,184.\n\n \n\nOur working capital is around $6.2 million, which is higher than the\noperating cash outflow of $4.1 million, which means that the cash and collections from receivables and prepayments support near-term operational\nneeds. Furthermore, included in the current liability of $18.5 million, $7.2 million is related party payables. Related-party payables\nare unsecured, interest-free, and due on demand to the controlling shareholders. They will continue to support the company’s operation\nand will not ask the Company to repay the loan when the Company is short of cash. Therefore, the related party payable is, to some degree,\nnot a current liability for the Company to repay within 1 year. As a result, the management of the company believes that its operating\nincome, combined with the related parties’ commitment to cover operating expenses through loans, will enable the business to continue\nits operations. In parallel, the Company’s management continually monitors its capital structure and operating plans and evaluates\nvarious potential funding alternatives that may be needed in order to finance the Company research and development activities, general\nand administrative expenses and growth strategy. These alternatives include raising funds through public or private equity markets and\neither from institutional or retail investors. Although there is no assurance that, if needed, the Company will be successful with its\nfundraising initiatives, management believes that the Company will be able to secure the necessary financing.\n\n \n\nGiven the above, the accompanying consolidated\nfinancial statements have been prepared assuming the Company will continue as a going concern.\n\n \n\nThe following table provides detailed information\nabout our net cash flow for all financial statement periods presented in this report:\n\n \n\n  \nFiscal Year Ended December 31, \n\n  \n2025  \n2024  \n2023 \n\nNet cash provided by (used in) operating activities \n$(4,093,184) \n$7,708,626  \n$(4,519,037)\n\nNet cash provided by (used in) investing activities \n (5,531,766) \n (12,011,122) \n 2,625,599 \n\nNet cash provided by financing activities \n 9,098,437  \n 5,140,029  \n 1,873,479 \n\nNet increase (decrease) in cash and cash equivalents \n (526,513) \n 837,533  \n (19,959)\n\nEffects of exchange rate change in cash \n 42,784  \n (60,388) \n (93,647)\n\nCash and cash equivalents at beginning of the period \n 1,184,456  \n 407,311  \n 520,916 \n\nCash and cash equivalent at end of the period \n$700,727  \n$1,184,456  \n$407,310 \n\n \n\n77\n\n \n\n \n\n**Operating Activities**\n\n \n\nThe net cash provided by operating activities\nconsists of profit before tax, as adjusted by finance costs, change in fair value of warrant liabilities, interest income, shared based\ncompensation, bad debt allowance, depreciation of property, plant and equipment, amortization of prepaid lease payment and trademark,\namortization of subsidies prepaid to distributors, amortization of prepayment and premiums under operating leases, provision(Reversal)\nof inventory obsolescence, provision of impairment loss in prepayments, loss(gain) on disposal of property, plant and equipment, deferred\nincome tax, which include trade and other receivables, prepayment and deferred expenses, inventory, trade and other payables.\n\n \n\nNet cash used in operating activities in fiscal year 2025 was $4.1\nmillion, compared with net cash provided by operating activities of $7.7 million in the year ended December 31, 2024. The cash outflow\nin 2025 is mainly resulted from net loss of $11.0 million, increase of trade and other receivables of $12.8 million, offset by depreciation\nand amortization of $5.1 million, impairment of intangible assets of $1.0 million and other non-cash expenses or losses of $9.6 million,\nand decrease of trade and other payables of $4.0 million.\n\n \n\nNet cash provided by operating activities in fiscal\nyear 2024 was $7.7 million, compared with net cash used in operating activities of $4.5 million in the year ended December 31, 2023. The\ncash inflow in 2024 is mainly resulted from net profit of $3.1 million, depreciation and amortization of $3.0 million and other non-cash\nexpenses or losses of $0.3 million, decrease of trade and other receivables of $1.4 million, and increase of tax payable of $0.7 million\nby netting off decrease of trade and other payables of $0.7 million.\n\n \n\n**Investing Activities**\n\n \n\nNet cash used in investing activities in fiscal\nyear 2025 was $5.5 million, compared with $12.0 million net cash used in investing activities in 2024. The net cash used in investing\nactivities in 2025 mainly resulted from cash used to purchase intangible assets of $5.6 million, offset by cash proceeds on disposal of\nproperty and equipment of $0.1 million.\n\n \n\nNet cash used in investing activities in fiscal\nyear 2024 was $12.0 million, compared with $2.6 million net cash provided by investing activities in 2023. The net cash used in investing\nactivities in 2024 mainly resulted from cash used to purchase intangible assets of $11.9 million, and cash used to purchase plant and\nequipment of $0.4 million, offset by cash proceeds on disposal of property and equipment of $0.2 million.\n\n \n\n**Financing Activities**\n\n \n\nNet cash generated from financing activities in\nfiscal year 2025 was $9.1 million, compared with $5.2 million net cash generated in financing activities in 2024. \n\n \n\nNet cash generated from financing activities in 2025\nmainly represents the proceeds from bank loans of $1.5 million and proceeds from related parties of $9.3 million, partially offset by\nrepayment of bank loans of $1.7 million.\n\n \n\nNet cash generated from financing activities in\nfiscal year 2024 was $5.2 million, compared with $1.8 million net cash generated in financing activities in 2023. \n\n \n\nNet cash generated from financing activities in 2024\nmainly represents the proceeds from bank loans of $1.7 million and proceeds from related parties of $3.5 million.\n\n \n\n78\n\n \n\n \n\n**The Company’s\nCash Flows and Summary Of Applicable Regulations**\n\n \n\nThe structure of cash\nflows within the entities in our corporate organization, and the applicable regulations, are as follows:\n\n \n\nOur corporate structure\nis a direct holding structure, that is, the overseas entity listed in the U.S., JX Luxventure Group Inc., incorporated Marshall Islands,\ncurrently has no material operations on its own. It directly owns wholly owns Flower Crown Holding, a Cayman Islands company, which wholly\nowns Flower Crown (China) Holding Group Co., Limited, a limited company incorporated in Hong Kong (“Flower Crown HK”) and,\nsince August 23, 2023, the Billion Place Limited (Hong Kong) Co., Limited (“Billion HK”), also a limited company incorporation\nin Hong Kong. Flower Crown HK wholly owns all of the share capital of JX Hainan or WFOE, our indirect PRC subsidiary, which, in turns,\nowns other PRC operating entities. In 2024, JX Hainan acquired 100% equity interest of Tianjin Baoliting Intelligence Technology Co.,\nLtd (“Baoliting”). Separately, Billion HK wholly owns other PRC operating entities, including newly-formed Baofu (Zhuhai)\nTechnology Co., Ltd. (“Baofu Technology”), Hainan Si Quan Run Hang International Travel Agency Co., Ltd. (“Hainan Travel”),\nand Hefei Si Quan Run Hang International Travel Agency Co., Ltd. (“Hefei Travel”).\n\n \n\nAs of the date of this\nAnnual Report, the Company has not established or maintained any cash management policies that dictate the purpose, amount and procedure\nof fund transfers among the Company, our subsidiaries, or investors. As of the date of this Annual Report, there have been no cash and\nasset transfers between the holding company and its PRC subsidiaries.\n\n \n\nWithin our direct holding structure, the cross-border\ntransfer of funds within our corporate group is conducted in compliance with the laws and regulations of the PRC. To date, none of our\nsubsidiaries have made any dividends or distributions to JX Luxventure Group Inc. and we have not made any dividends or distributions\nto our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any\ncash dividends will be paid to shareholders in the foreseeable future. If any of PRC subsidiaries determine to distribute dividends, it\nneed to transfer the dividends to JX Hainan, JX Shenzhen and Baofu Technology in accordance with the laws and regulations of the PRC,\nand then JX Hainan will transfer the dividends to JX Luxventure, and the dividends will be distributed from JX Luxventure Group Inc. to\nall shareholders respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors\nin other countries.\n\n \n\nUnder Marshall Islands\nlaw, the Company may pay dividends on its shares out of either profit or share premium amounts, provided that in no circumstance may a\ndividend be paid if such payment would result in the Company being unable to pay its debts as they become due in the ordinary course of\nbusiness. If we decide to pay dividends in the future, as a holding company, we will depend on receiving dividends from our PRC subsidiaries.\n\n \n\nAs a holding company,\nwe may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements. The ability\nof our PRC subsidiaries to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC operating\nsubsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance\nwith PRC accounting standards and regulations. Should our PRC subsidiaries incur debt on their own in the future, the instruments governing\nthat debt may restrict the ability to pay dividends or make other payments. To the extent our cash in the business is in the PRC/Hong\nKong or PRC/Hong Kong subsidiaries, the funds or assets may not be available to fund operations distribute dividends to our investors,\nor for other use outside of the PRC/Hong Kong, due to interventions in or the imposition of restrictions and limitations on the ability\nof us, our subsidiaries by the PRC government to transfer cash or assets. Any limitation on the ability of our PRC subsidiaries to distribute\ndividends to us may restrict our ability to satisfy our liquidity requirements.\n\n \n\n79\n\n \n\n \n\nIn addition, each of\nour PRC subsidiaries, as a Foreign Invested Enterprise, or FIE, are required to set aside at least 10% of its after-tax profits each year,\nif any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already\naccounted for over 50% of its registered capital. These reserves are not distributable as cash dividends. The PRC government may continue\nto strengthen its capital controls which would subject dividends distribution from our PRC subsidiaries to the Company to heightened scrutiny.\nThe PRC government imposes controls on the convertibility of RMB, the official currency of the PRC) into foreign currencies and, in certain\ncases, the remittance of currency out of China. The PRC government also imposes control on the conversion of RMB into foreign currencies\nand the remittance of currencies out of the PRC. Under existing PRC foreign exchange regulations, payments of current account items, including\nprofit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior\napproval from the State Administration of Foreign Exchange (“SAFE”) in the PRC, as long as certain procedural requirements\nare met. Approval from appropriate government authorities is required if RMB is converted into foreign currency and remitted out of China\nto pay capital expenses such as the repayment of loans denominated in foreign currencies.\n\n \n\nThe PRC government may, at its discretion, impose\nrestrictions on access to foreign currencies for current account transactions and, if this occurs in the future, we may not be able to\npay dividends in foreign currencies (i.e., U.S. dollars) to our shareholders and we may experience difficulties in completing the administrative\nprocedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Therefore, we may experience\ndifficulties in completing the processes necessary to obtain and remit foreign currency for the payment of any dividends.\n\n \n\nIn addition, the Enterprise Income Tax Law and\nits implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies\nto non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of\nother countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between Mainland China\nand the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to\na Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions\nor arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable\nwithholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received\nby our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our\nPRC subsidiaries. \n\n \n\n**Loans, Other Commitments, Contingencies**\n\n \n\nAs of December 31, 2025, the Company has two loans\noutstanding as below:\n\n \n\n  \nAnnual\nInterest  \nMaturity  \nDecember 31, \n\n  \nRate  \ndate  \n2025 \n\nIndustrial Bank \n 2.80% \n December 24, 2026  \n$1,072,486 \n\nIndustrial Bank \n 2.60% \n May 6, 2026  \n$500,493 \n\nTotal \n    \n    \n$1,572,979 \n\n \n\nWe may, however, in the future, require additional\ncash resources due to changing business conditions, implementation of our strategy to expand our business or other investments or acquisitions\nwe may decide to pursue. If our own financial resources are insufficient to satisfy the capital requirements, we may seek to sell additional\nequity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to\nour stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating\nand financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if\nat all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business\noperations and could harm our overall business prospects.\n\n \n\n80\n\n \n\n \n\n**C. Research and Development, Patents and Licenses, Etc.**\n\n \n\nOur industry is characterized by rapid technological\nchange, evolving industry standards and changing customer demands. These conditions require continuous expenditures on product research\nand development to enhance existing products create new products and avoid product obsolescence. See Item 3 “Key Information—D.\nRisk Factors—If we are unable to develop competitive new products and service offerings our future results of operations could be\nadversely affected,” — “If we are unable to keep pace with the rapid technological changes in our industry, demand for\nour products and services could decline which would adversely affect our revenue,” and — “Our technology may become\nobsolete which could materially adversely affect our ability to sell our products and services.” For a detailed analysis of research\nand development costs, see Item 5.A. “Operating Results—Results of Operations—Research and development expenses”.\n\n \n\n**D. Trend Information**\n\n \n\nOther than as disclosed elsewhere in this annual\nreport, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2021 that are reasonably\nlikely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause\nthe disclosed financial information to be not necessarily indicative of future operating results or financial conditions.\n\n \n\n**E. Off-Balance Sheet Arrangements**\n\n \n\nWe do not have any off-balance sheet arrangements\nthat have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales\nor expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our\nsecurities.\n\n \n\n**F. Tabular Disclosure of Contractual Obligations**\n\n \n\nWe have no other material long-term debt, capital\nor operating lease or fixed purchase obligations.\n\n \n\n**Holding Company Structure**\n\n \n\nJX Luxventure Group Inc. is our holding company\nwhich has no material operations of its own. We conduct all our operations through our operating subsidiaries in China. As a result, the\nCompany’s ability to pay dividends depends largely upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries\nincur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.\nIn addition, our subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined\nin accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries in China are required to set aside\nat least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of\nits registered capital. In addition, our subsidiaries in China may allocate a portion of its after-tax profits based on PRC accounting\nstandards to enterprise expansion funds and staff bonus and welfare funds at their discretion, and may allocate a portion of their after-tax\nprofits based on PRC accounting standards to a discretionary surplus fund at their discretion. The statutory reserve funds and the discretionary\nfunds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination\nby the banks designated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate\naccumulated profits and meet the requirements for statutory reserve funds.\n\n \n\n**Inflation**\n\n \n\nInflation and changing prices have not had a material\neffect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable\nfuture. However, our management will closely monitor price changes in the Chinese economy and the apparel industry and continually maintain\neffective cost controls in operations.\n\n \n\n81\n\n \n\n \n\n**Seasonality**\n\n** **\n\nOur business, like that of many retailers, is seasonal. Historically,\nwe have realized more of our revenue and earnings in the fourth quarter, which includes the majority of the holiday shopping season, than\nin any other fiscal quarter.\n\n \n\n**Critical Accounting Policies**\n\n \n\nThe preparation of financial statements is in\nconformity with IFRS as issued by the IASB. It requires the Company’s management to make assumptions, estimates and judgments that\naffect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. The Company\nhas identified certain accounting policies that are significant to the preparation of Company’s financial statements. These accounting\npolicies are important for an understanding of the Company’s financial condition and results of operation. Critical accounting policies\nare those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s\ndifficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently\nuncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance\nto financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s\ncurrent judgments. The Company believes the following critical accounting policies involve the most significant estimates and judgments\nused in the preparation of the Company’s financial statements.\n\n \n\nRevenue recognition\n\n \n\n*Revenue from contracts with customers*\n\n \n\nRevenue from contracts with customers is recognized\nwhen control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Company expects\nto be entitled in exchange for those goods or services.\n\n \n\nWhen the consideration in a contract includes\na variable amount, the amount of consideration is estimated to which the Company will be entitled in exchange for transferring the goods\nor services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable\nthat a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with\nthe variable consideration is subsequently resolved. Currently, the Company’s contracts do not include such variable amount.\n\n \n\nWhen the contract contains a financing component\nwhich provides the customer a significant benefit of financing the transfer of goods or services to the customer for more than one year,\nrevenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate\nfinancing transaction between the Company and the customer at contract inception. When the contract contains a financing component which\nprovides the Company a significant financial benefit for more than one year, revenue recognized under the contract includes the interest\nexpense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by\nthe customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects\nof a significant financing component, using the practical expedient in IFRS 15. Currently, the Company’s contract with its customers\ndo not include financial benefit for more than one year.\n\n \n\nNature and timing of satisfaction of performance\nobligations for each of the revenue streams are as follows:\n\n \n\n*Revenue from the sale of goods*\n\n \n\nPerformance obligation is satisfied at the point\nin time when control of the asset is transferred to the customer, generally on delivery and acceptance of the goods. The Company presents\nrevenues from such transactions on a gross basis in the consolidated statements of comprehensive loss, as the Company acts as a principal\nto take inventory risks of these goods.\n\n \n\n82\n\n \n\n \n\n*Revenue from the sale of Tourism Package*\n\n \n\nPerformance obligation is satisfied when the tourism\npackage is completed, generally when the tour group successfully returned from the tour destination to the place of origination. The Company\npresents revenues from such transactions on a gross basis in the consolidated statements of comprehensive loss, as the Company acts as\na principal to provide a package of tourism services and take a full obligation to provide such services even if the suppliers are not\nable to deliver service.\n\n \n\n*Revenue from reselling of airline tickets*\n\n \n\nThe Company is a reseller of airline tickets,\nit provides value-added services to its customers including guaranteed flight replacement and other financial benefits. The Company procured\nthe tickets from different airline companies and resell them to the online airline ticket agency companies. The airline ticket agency\ncompany will put an online bid inviting from its suppliers once it receives the demands from its online customers. The Company is one\nof the airline ticket suppliers. The Company procures the tickets in responding the air-ticket agency companies’ online bid inviting\nto ensure the seats are available to sell to the agency companies, or the Company procure the tickets based on its judgement on potential\ntrend of certain airlines within certain period. Once the Company’s deposit, the full amount of the air-ticket, was deducted by\nthe airline company and the Company agreed to secure the seats from the airline company, the purchase of air-tickets was recorded. The\nCompany decided how much and how soon to resell the airline tickets. The inventory period is from 1 minute to 4 months. The airline tickets\nare sold shortly after their purchase to lower the inventory risk. Sometimes, the Company holds the tickets longer to expect a higher\nmargin, but if the tickets cannot be sold before flight time, the Company have to sell the tickets even lower than the purchase price\nto avoid further loss. Thus, the Company bears the inventory risks of the airline tickets, and the Company has discretion in setting the\nprice for the specified service. Once the air-tickets are issued to passengers according to the online agency company’s instruction,\nthe revenue is recognized. In addition to the air-ticket of airline companies, the Company provided guaranteed flight replacement and\ncancellation to the platform companies. The platform can return the tickets to the Company without restriction, while the airline companies\ncan accept some of the return on certain conditions. Thus, the Company offered additional service plus the standard airline tickets to\nits customer. As the Company (i) bears the inventory risks of the air-tickets, (ii) provides additional services on the services procured\nby the airline companies, and (iii) has discretion in setting the price for the specified service, the Company is considered as a principal\nand recognize the revenue in a gross basis.\n\n \n\n*Other income*\n\n* *\n\nInterest income is recognized on an accrual basis\nusing the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life\nof the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.\n\n \n\nRental income is recognized on a time proportion\nbasis over the lease terms.\n\n \n\nDividend income is recognized when the shareholders’\nright to receive payment has been established, it is probable that the economic benefits associated with the dividend will flow to the\nCompany and the amount of the dividend can be measured reliably.\n\n \n\nBorrowing costs\n\n \n\nBorrowing costs directly attributable to the acquisition,\nconstruction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for\ntheir intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended\nuse or sale.\n\n \n\nAll other borrowing costs are recognized in profit\nor loss in the period in which they are incurred.\n\n \n\n83\n\n \n\n \n\nRetirement benefit costs\n\n \n\nPursuant to the relevant regulations of the PRC\ngovernment, the Company’s subsidiaries located in the PRC participate in a local municipal government retirement benefits scheme\n(the “Scheme”), whereby they contribute a prescribed percentage of the basic salaries of their employees to the Scheme to\nfund their retirement benefits. Once the Scheme has been funded via contributions by the Company’s participating subsidiaries, the\nlocal municipal government takes responsibility for the retirement benefits obligations of all existing and future retired employees of\nthose subsidiaries located in the PRC; accordingly, the only obligation of the Company with respect to the Scheme is to pay the on-going\nrequired contributions as long as the employees maintain employment with the Company. There are no provisions under the Scheme whereby\nforfeited contributions may be used to reduce future contributions. These plans are considered defined contribution plans. The Company\nhas no legal or constructive obligations to pay further contributions after its payment of the fixed contributions into the pension schemes.\nContributions to pension schemes are recognized as an expense in the period in which the related service is performed.\n\n \n\nTaxation\n\n \n\nThe tax expense for the period comprises current\nand deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive\nincome or directly in equity. In this case the tax is also recognized in other comprehensive income or directly in equity, respectively.\n\n \n\nThe current income tax charge is calculated on\nthe basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operates and generates\ntaxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation\nis subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.\n\n \n\nDeferred tax is recognized on temporary differences\nbetween the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in\nthe computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax\nassets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be\navailable against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized\nif the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets\nand liabilities in a transaction that affects neither the taxable profit nor the accounting profit.\n\n \n\nDeferred tax liabilities are recognized for taxable\ntemporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary\ndifference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from\ndeductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will\nbe sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the\nforeseeable future.\n\n \n\nThe carrying amount of deferred tax assets is\nreviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will\nbe available to allow all or part of the asset to be recovered.\n\n \n\nDeferred tax assets and liabilities are measured\nat the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates\n(and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities\nand assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period,\nto recover or settle the carrying amount of its assets and liabilities.\n\n \n\n84\n\n \n\n \n\nDeferred income tax assets and liabilities are\noffset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income\ntax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable\nentities where there is an intention to settle the balances on a net basis.\n\n \n\nCurrent and deferred tax are recognized in profit\nor loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the\ncurrent and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred\ntax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.\n\n \n\nLeasing\n\n \n\nIFRS 16 Leases requires lessees to recognize assets\nand liabilities for most leases based on a ‘right-of-use model’ which reflects that, at the commencement date, a lessee has\na financial obligation to make lease payments to the lessor for its right to use the underlying asset during the lease term. The lessor\nconveys that right to use the underlying asset at lease commencement, which is the time when it makes the underlying asset available for\nuse by the lessee.\n\n \n\nIFRS 16 defines a lease term as the non-cancellable\nperiod for which the lessee has the right to use an underlying asset including optional periods when an entity is reasonably certain to\nexercise an option to extend (or not to terminate) a lease.\n\n \n\nUnder IFRS 16 lessees may also elect not to recognize\nassets and liabilities for leases with a lease term of 12 months or less. In such cases a lessee recognizes the lease payments in profit\nor loss on a straight-line basis over the lease term. The exemption is required to be applied by class of underlying assets. Lessees can\nalso make an election for leases for which the underlying asset is of low value. This election can be made on a lease-by-lease basis.\nFor leases where the Company is the lessee, the lease term is either cancelable or no longer than 12 months, so the Group has elected\nnot to record the leased assets.\n\n \n\nLessor accounting under IFRS 16 is substantially\nunchanged from IAS 17. Lessors continue to classify leases as either operating or finance leases using similar principles as in IAS 17.\nIFRS 16 did not have any significant impact on leases where the Company is the lessor.\n\n \n\nProperty, plant and equipment\n\n \n\nProperty, plant and equipment (“PPE”)\nincluding buildings held for use in the production or supply of goods or services, or for administrative purposes other than construction\nin progress are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.\n\n \n\nDepreciation is provided to write off the cost\nof items of property, plant and equipment other than construction in progress over their estimated useful lives and after taking into\naccount of their estimated residual value, using the straight-line method.\n\n \n\nConstruction in progress includes property, plant\nand equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less\nany recognized impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when\ncompleted and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets\nare ready for their intended use.\n\n \n\nAn item of property, plant and equipment is derecognized\nupon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising\non de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is\nincluded in profit or loss in the period in which the item is de-recognized.\n\n \n\n85\n\n \n\n \n\nInventories\n\n \n\nInventories are stated at the lower of cost and\nnet realizable value. Costs of inventories are determined using the weighted average method. Net realizable value represents the estimated\nselling price for inventories less all estimated costs of completion and costs necessary to make the sale.\n\n \n\nFinancial instruments – investments and\nother financial assets\n\n \n\n*Initial recognition and measurement*\n\n \n\nFinancial assets are classified, at initial recognition,\nas subsequently measured at amortized cost, fair value through other comprehensive income, and fair value through profit or loss.\n\n \n\nThe classification of financial assets at initial\nrecognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing\nthem. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied\nthe practical expedient of not adjusting the effect of a significant financing component, the Company initially measures a financial asset\nat its fair value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables\nthat do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the\ntransaction price determined under IFRS 15 in accordance with the policies set out for “Revenue recognition”.\n\n \n\nIn order for a financial asset to be classified\nand measured at amortized cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments\nof principal and interest (“SPPI”) on the principal amount outstanding.\n\n \n\nThe Company’s business model for managing\nfinancial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether\ncash flows will result from collecting contractual cash flows, selling the financial assets, or both.\n\n \n\nAll regular way purchases and sales of financial\nassets are recognized on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases\nor sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation\nor convention in the marketplace.\n\n \n\n*Subsequent measurement*\n\n \n\nThe subsequent measurement of financial assets\ndepends on their classification as follows:\n\n \n\n*Financial assets at amortized cost (debt instruments)*\n\n \n\nThe Company measures financial assets at amortized\ncost if both of the following conditions are met:\n\n \n\n \n●\nThe financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows.\n\n \n\n \n●\nThe contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.\n\n \n\nFinancial assets at amortized cost are subsequently\nmeasured using the effective interest method and are subject to impairment. Gains and losses are recognized in the income statement when\nthe asset is derecognized, modified or impaired.\n\n \n\n86\n\n \n\n  \n\n*Financial assets at fair value through other\ncomprehensive income (debt instruments)*\n\n \n\nThe Company measures debt instruments at fair\nvalue through other comprehensive income if both of the following conditions are met:\n\n \n\n \n●\nThe financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling.\n\n \n\n \n●\nThe contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.\n\n \n\nFor debt instruments at fair value through other\ncomprehensive income, interest income, foreign exchange revaluation and impairment losses or reversals are recognized in the income statement\nand computed in the same manner as for financial assets measured at amortized cost. The remaining fair value changes are recognized in\nother comprehensive income. Upon derecognition, the cumulative fair value change recognized in other comprehensive income is recycled\nto the income statement.\n\n \n\n*Financial assets at fair value through other\ncomprehensive income (equity investments)*\n\n \n\nUpon initial recognition, the Company can elect\nto classify irrevocably its equity investments as equity investments designated at fair value through other comprehensive income when\nthey meet the definition of equity under IFRS 9 Financial Instruments. The Company may make an irrevocable election at initial recognition\nfor particular investments in equity instruments that would otherwise be measured at fair value through profit or loss to present subsequent\nchanges in fair value in other comprehensive income.\n\n \n\nGains and losses on these financial assets are\nnever recycled to the income statement. Dividends are recognized as other income in the income statement when the right of payment has\nbeen established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the\ndividend can be measured reliably, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial\nasset, in which case, such gains are recorded in other comprehensive income. Equity investments designated at fair value through other\ncomprehensive income are not subject to impairment assessment.\n\n \n\n*Financial assets at fair value through profit\nor loss*\n\n \n\nThe Company may, at initial recognition, irrevocably\ndesignate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement\nor recognition inconsistency (sometimes referred to as an ‘accounting mismatch’) that would otherwise arise from measuring\nassets or liabilities or recognizing the gains and losses on them on different bases.\n\n \n\nFinancial assets at fair value through profit\nor loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement.\nThis category includes derivative financial instruments and structured bank deposits.\n\n \n\nA derivative embedded in a hybrid contract, with\na financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if the economic characteristics\nand risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition\nof a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair\nvalue with changes in fair value recognized in the income statement. Reassessment only occurs if there is either a change in the terms\nof the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset\nout of the fair value through profit or loss category.\n\n \n\n87\n\n \n\n \n\nA derivative embedded within a hybrid contract\ncontaining a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required\nto be classified in its entirety as a financial asset at fair value through profit or loss.\n\n \n\nFinancial instruments – impairment of\nfinancial assets\n\n \n\nThe Company recognizes an allowance for ECLs for\nall debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows\ndue in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the\noriginal effective interest rate. The expected cash flow will include cash flows from the sale of collateral held or other credit enhancements\nthat are integral to the contractual terms.\n\n \n\nGeneral approach\n\n \n\nECLs are recognized in two stages. For credit\nexposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses\nthat result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there\nhas been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over\nthe remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).\n\n \n\nAt each reporting date, the Company assesses whether\nthe credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Company\ncompares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on\nthe financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available\nwithout undue cost or effort, including historical and forward-looking information.\n\n \n\nThe Company considers a financial asset in default\nwhen contractual payments are 120 days past due. However, in certain cases, the Company may also consider a financial asset to be in default\nwhen internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before\ntaking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation\nof recovering the contractual cash flow.\n\n \n\nDebt instruments at fair value through other comprehensive\nincome and financial assets at amortized cost are subject to impairment under the general approach and they are classified within the\nfollowing stages for measurement of ECLs except for trade receivables which apply the simplified approach as detailed below.\n\n \n\n \nStage 1 –  \nFinancial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs\n\n \n \n\n \nStage 2 –\nFinancial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs\n\n \n \n\n \nStage 3 –\nFinancial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs\n\n \n\nSimplified approach\n\n \n\nFor trade receivables that do not contain a significant\nfinancing component or when the Company applies the practical expedient of not adjusting the effect of a significant financing component,\nthe Company applies the simplified approach in calculating ECLs. Under the simplified approach, the Company does not track changes in\ncredit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision\nmatrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic\nenvironment.\n\n \n\n88\n\n \n\n \n\nFor trade receivables that contain a significant\nfinancing component and lease receivables, the Company chooses as its accounting policy to adopt the simplified approach in calculating\nECLs with policies as described above.\n\n \n\nFinancial instruments – derecognition\nof financial assets\n\n \n\nA financial asset (or, where applicable, a part\nof a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company’s\nconsolidated statement of financial position) when:\n\n \n\n \n●\nthe rights to receive cash flows from the asset have expired; or\n\n \n\n \n●\nthe Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.\n\n \n\nWhen the Company has transferred its rights\nto receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has\nretained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks\nand rewards of the asset nor transferred control of the asset, the Company continues to recognize the transferred asset to the\nextent of the Company’s continuing involvement. In that case, the Company also recognizes an associated liability. The\ntransferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has\nretained.\n\n \n\nContinuing involvement that takes the form of\na guarantee over the transferred asset is measured at the lower of the original amount of the asset and the maximum amount of consideration\nthat the Company could be required to repay.\n\n \n\nFinancial instruments – financial liabilities\n\n \n\nInitial recognition and measurement\n\n \n\nAll financial liabilities are recognized initially\nat fair value and, in the case of loans and borrowings, net of directly attributable transaction costs. The Company’s financial\nliabilities include trade payables, other payables, financial liabilities included in accruals and interest-bearing bank borrowings. \n\n \n\nSubsequent measurement\n\n \n\nAfter initial recognition, interest-bearing loans\nand borrowings are subsequently measured at amortized cost, using the effective interest rate method unless the effect of discounting\nwould be immaterial, in which case they are stated at cost. Gains and losses are recognized in the income statement when the liabilities\nare derecognized as well as through the effective interest rate amortization process.\n\n \n\nAmortized cost is calculated by taking into account\nany discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest\nrate amortization is included in finance costs in the income statement.\n\n \n\n89\n\n \n\n \n\nFinancial instruments – derecognition\nof financial liabilities\n\n \n\nFinancial liability is derecognized when the\nobligation under the liability is discharged or cancelled, or expires.\n\n \n\nWhen an existing financial liability is replaced\nby another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such\nan exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference\nbetween the respective carrying amounts is recognized in the income statement.\n\n \n\nFinancial instruments – offsetting financial\ninstruments\n\n \n\nFinancial assets and financial liabilities are\noffset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset\nthe recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. \n\n \n\n**G. Safe Harbor**\n\n \n\nSee “Introductory Notes—Forward-Looking\nInformation.”"}