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</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>UNITED
STATES</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SECURITIES
AND EXCHANGE COMMISSION</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>WASHINGTON,
DC 20549</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>FORM
<ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(Mark
One)</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement">&#9744;</ix:nonNumeric>
<b>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OR</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric>
<b>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the fiscal year ended <b><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OR</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric>
<b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OR</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric>
<b>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date
of event requiring this shell company report: Not applicable</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
the transition period from _______ to _______</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Commission
file number: <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-37593</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="-sec-ix-hidden: hidden-fact-0">BORQS
TECHNOLOGIES, INC.</span></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Exact
name of Registrant as specified in its charter)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Translation
of Registrant&#8217;s name into English)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">British
Virgin Islands</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Jurisdiction
of incorporation or organization)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">Office
B, 21/F, Legend Tower</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine2">7 Shing Yip Street</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kwun
Tong, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">Kowloon</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">Hong Kong</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Address
of principal executive offices)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName">Pat
Sek Yuen Chan</ix:nonNumeric>, Chairman &amp; Chief Executive Officer</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs
Technologies, Inc.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1">Office
B, 21/F, Legend Tower,</ix:nonNumeric> <ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine2">7 Shing Yip Street</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kwun
Tong, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown">Kowloon</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">Hong Kong</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Telephone:
<ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">+852</ix:nonNumeric> <ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">5188 1864</ix:nonNumeric>, Fax: <ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelFaxNumber">+852 2114 0183</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(b) of the Act:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"> <td style="font: 10pt Times New Roman, Times, Serif; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title of class</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 2%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading Symbol</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 2%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name of exchange on which registered</b></span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: #CCEEFF"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary shares, no par value</span></ix:nonNumeric></td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">BRQS</span></ix:nonNumeric></td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Capital Market</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(g) of the Act: None</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act: None</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
the number of outstanding shares of each of the issuer&#8217;s classes of capital or ordinary shares as of the close of the period covered
by the annual report: As of December 31, 2022, there were <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">57,182,633</ix:nonFraction> shares of the registrant&#8217;s ordinary shares, no par value,
issued and outstanding.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. &#9744; Yes&#160;&#9746;
<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"></p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. &#9744; Yes&#160;&#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric>&#160;&#9744; No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (&#167;232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).&#160;&#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric>&#160;&#9744; No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of &#8220;large accelerated filer&#8221;, &#8220;accelerated filer&#8221; and &#8220;emerging growth company&#8221;
in Rule 12b-2 of the Exchange Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 15%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large accelerated filer </span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 20%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated filer </span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 28%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 17%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Non-accelerated filer</ix:nonNumeric> </span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#9746;</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging growth company </span></td> <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityEmergingGrowthCompany">&#9744;</ix:nonNumeric></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards&#8224; provided
pursuant to Section 13(a) of the Exchange Act. &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8224;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
term &#8220;new or revised financial accounting standard&#8221; refers to any update issued by the Financial Accounting Standards Board
to its Accounting Standards Codification after April 5, 2012.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has filed a report on and attestation to its management&#8217;s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag">&#9744;</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation
received by any of the registrant&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:DocumentAccountingStandard">U.S. GAAP</ix:nonNumeric> &#9746;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 68%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">International Financial Reporting Standards as issued by the International<br/> Accounting Standards Board &#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other &#9744;</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
&#8220;Other&#8221; has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;
Item 17&#160;&#160;&#160;&#160;&#160;&#9744; Item 18</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;
Yes&#160;&#160;&#160;&#160;&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric> No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;
Yes&#160;&#160;&#160;&#160;&#160;&#9744; No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TABLE
OF CONTENTS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 80%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 10%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_031">PART I</a></span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 1.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_001">IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 2.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_002">OFFER STATISTICS AND EXPECTED TIMETABLE</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 3.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_003">KEY INFORMATION</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_004">INFORMATION ON THE COMPANY</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">44</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4A.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_005">UNRESOLVED STAFF COMMENTS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">54</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 5.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_006">OPERATING AND FINANCIAL REVIEW AND PROSPECTS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">55</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 6.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_007">DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">80</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 7.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_008">MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 8.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_009">FINANCIAL INFORMATION</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 9.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_010">THE OFFER AND LISTING</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 10.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_011">ADDITIONAL INFORMATION</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 11.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_012">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">98</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 12.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_013">DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">99</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_032">PART II</a></span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 13.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_014">DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 14.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_015">MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OR PROCEEDS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 15.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_016">CONTROLS AND PROCEDURES</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_017">RESERVED</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">102</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16A.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_018">AUDIT COMMITTEE FINANCIAL EXPERT</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">102</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16B.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_019">CODE OF ETHICS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">102</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16C.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_020">PRINCIPAL ACCOUNTANT FEES AND SERVICES</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">102</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16D.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_021">EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">103</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16E.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_022">PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">103</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16F.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_023">CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">103</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16G.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_024">CORPORATE GOVERNANCE</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">103</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16H.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_025">MINE SAFETY DISCLOSURE</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">104</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16I.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_026">DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">104</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_033">PART III</a></span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 17.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_028">FINANCIAL STATEMENTS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">105</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 18.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_029">FINANCIAL STATEMENTS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">105</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; ">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 19.</span></td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_030">EXHIBITS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">105</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
annual report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995, and such forward-looking statements may appear in the sections captioned &#8220;<i>Business</i>,&#8221; &#8220;<i>Risk Factors</i>,&#8221;
&#8220;<i>Management&#8217;s Discussion and Analysis of Financial Condition and Plan of Operations</i>&#8221; and elsewhere. Any and
all statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Terms such
as &#8220;may,&#8221; &#8220;might,&#8221; &#8220;would,&#8221; &#8220;should,&#8221; &#8220;could,&#8221; &#8220;project,&#8221; &#8220;estimate,&#8221;
&#8220;pro-forma,&#8221; &#8220;predict,&#8221; &#8220;potential,&#8221; &#8220;strategy,&#8221; &#8220;anticipate,&#8221; &#8220;attempt,&#8221;
&#8220;develop,&#8221; &#8220;plan,&#8221; &#8220;help,&#8221; &#8220;believe,&#8221; &#8220;continue,&#8221; &#8220;intend,&#8221; &#8220;expect,&#8221;
&#8220;future,&#8221; and terms of similar import (including the negative of any of these terms) may identify forward-looking statements.
However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this report
may include, without limitation, statements regarding the plans, forecasts and objectives of management for future operations, earnings
or loss per share, capital expenditures, dividends, capital structure or other financial items, our future financial performance, including
any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included
pursuant to the rules and regulations of the Securities and Exchange Commission (&#8220;SEC&#8221;), and the assumptions underlying or
relating to any such statement.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be
realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and
are subject to a number of risks and uncertainties and other influences, many of which we have no control over and are described more
fully in the sections discussing &#8220;Risk Factors&#8221;. Actual results and the timing of certain events and circumstances may differ
materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence
or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired
results may include, without limitation:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Market acceptance of our
    products and services;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Competition from existing
    products or new products that may emerge;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The implementation of our
    business model and strategic plans for our business and our products;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Estimates of our future
    revenue, expenses, capital requirements and our need for financing;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The timing of recognition
    of revenues under US GAAP;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our financial performance;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Current and future government
    regulations;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Developments relating to
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The impact of COVID-19
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other risks and uncertainties,
    including those listed under the section titled &#8220;<i>Risk Factors</i>.&#8221;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Readers
are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to
the risk factors. We disclaim any obligation to update the forward-looking statements contained in this report to reflect any new information
or future events or circumstances or otherwise, except as required by law. Readers should read this report in conjunction with the discussion
under the caption &#8220;<i>Risk Factors</i>,&#8221; our financial statements and the related notes thereto in this report, and other
documents which we may file from time to time with the SEC.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"></p><div>

</div><!-- Field: Page; Sequence: 4; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->ii<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PART
I</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Unless
the context otherwise requires, as used in this annual report, the terms &#8220;Company&#8221;, &#8220;Borqs&#8221;, &#8220;we&#8221;,
&#8220;us&#8221;, and &#8220;our&#8221; refer to Borqs Technologies, Inc. and any or all of its subsidiaries. Unless otherwise noted,
all industry and market data in this annual report is presented in U.S. dollars. Unless otherwise noted, all financial and other data
related to the Company in this annual report is presented in U.S. dollars. All references to &#8220;$&#8221; or &#8220;US&#8221; in this
annual report refer to U.S. dollars. All references to &#8220;RMB&#8221; in this annual report refer to Chinese Renminbi Yuan.</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
3. KEY INFORMATION</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>A.</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Selected Financial Data</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following selected consolidated financial data should be read in conjunction with &#8220;Item 5. Operating and Financial Review and Prospects&#8221;
and our consolidated financial statements and notes thereto included elsewhere in this Annual Report. The selected consolidated statements
of operations data for each of the years in the three-year period ended December 31, 2022, and the consolidated balance sheet data as
of December&#160;31, 2021 and 2022, are derived from our audited consolidated financial statements and notes which have been prepared
in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company completed its sale of the Mobile Virtual Network Operator Business Unit (&#8220;MVNO BU&#8221;) as of October 29, 2020. Due to
this transaction, the Company&#8217;s financial statements for the year ended December 31, 2020 for comparison purposes, are presented
with the MVNO BU as discontinued operations. The Company opted for the rule that only three years of operating results are required to
be presented in accordance with the applicable regulations of the British Virgin Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holu
Hou Energy LLC (&#8220;HHE&#8221;), which identified the innovative clean energy business, a separate segment was reclassified as held
for sale as of December 31, 2021 and 2022, for the carrying amounts will be recovered principally through a sale, and revenues and expenses
related to HHE have been reclassified as discontinued operations from October 19, 2021 to December 31, 2021, and for the year ended December
31, 2022 until it has been deconsolidated.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 5; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span>&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">32</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,760</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,024</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Assets held for sale</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,321</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">30,143</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">70,538</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">41,295</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Total shareholders&#8217; deficit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(17,286</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(11,152</td><td style="text-align: left">)</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>B.</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Capitalization and Indebtedness</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>C.</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Reasons for the Offer
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 6; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>D.</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risk Factors</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Summary
Risk Factors</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
principal factors and uncertainties that make investing in our ordinary shares risky, include, among others:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Risks
Related to the COVID-19 pandemic</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    expect to continue to experience unpredictable reductions in demand for certain of our products and services, and adverse effects
    on our operations, supply chains and financing possibilities</span></td></tr>
  </table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Risks
Related to our Business and Industry</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    ability to continue as a&#160;going concern.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We may undertake acquisitions,
    investments, joint ventures or other alliances in the future, which could expose us to new operational, regulatory and market risks.
    Such future and past undertakings may not be successful, which may adversely affect our business, results of operations, financial
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    by reliable alternative sources, our business could be materially harmed.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 7; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If our customers move more
    research and development work in-house, lower demand for our solutions could reduce our net revenues and harm our business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our yearly results may
    fluctuate significantly and may not fully reflect the underlying performance of our business.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If we fail to effectively
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    of our services, which may adversely affect our business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Most of our engagements
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    of open source software, there may be fewer technology barriers to entry in the Android platform and software market in which we
    compete, and it may be relatively easy for competitors, some of which may have greater resources than we have, to enter our markets
    and compete with us.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    may expose us to liability and harm our reputation and business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We are vulnerable to technology
    infrastructure failures, which could harm our reputation and business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    to use or adequately protect our intellectual property rights, which could harm our business reputation and competitive position.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We may not be able to manage
    our anticipated growth and our current and planned resources may not be adequate to support our expanding operations; consequently,
    our business, results of operations and prospects may be materially and adversely affected.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Due to intense competition
    for highly skilled personnel, we may fail to attract and retain qualified personnel to support our research and development operations;
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As mandated by the Committee
    on Foreign Investment in the United States (&#8220;CFIUS&#8221;), we must terminate our ownership in Holu Hou Energy LLC.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    on the continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We are subject to various
    anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and PRC and Indian
    anti-corruption and anti-bribery laws; any determination that we have violated such laws could damage our business and reputation,
    limit our ability to bid for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation
    (such as shareholder derivative suits), and commercial liabilities.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There can be no assurance
    that our securities, including our ordinary shares, will continue to be listed on Nasdaq or, if listed, that we will be able to comply
    with the continued listing standards of Nasdaq, which could limit investors&#8217; ability to make transactions in our securities
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 8; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Global economic and political
    conditions may adversely impact our business, operating results and financial condition.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    be involved in future litigation in which substantial monetary damages are sought.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We are in arbitration with
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    Purchase Agreement dated December 15, 2018 (the &#8220;KADI Agreement&#8221;) signed between Borqs and KADI.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If we fail to implement
    and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations,
    meet our reporting obligations or prevent fraud, and investor confidence and the market price of our ordinary shares may be adversely
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Risks
Related to Our Business Operations and Doing Business in China</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Chinese government
    exerts substantial influence over the manner in which we may conduct our business activities, and if we are unable to substantially
    comply with any PRC rules and regulations, our financial condition and results of operations may be materially adversely affected.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    intervention into business activities by U.S.-listed Chinese companies may indicate an expansion of the PRC&#8217;s authority that
    could negatively impact our existing and future operations in Hong Kong and China.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes in China&#8217;s
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material
    and negative impact our business operation, decrease the value of our ordinary shares and limit the legal protections available to
    us.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    exist with respect to the interpretation and implementation of any new PRC laws, rules and regulations relating to foreign investment
    and how it may impact the viability of our current corporate structure, corporate governance and our business operations.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If the Chinese government
    were to impose new requirements for permission or approval from the PRC Authorities including China Securities Regulatory Commission
    (&#8220;CSRC&#8221;) or CAC, or any other entity that is required to approve the listing of our shares on Nasdaq, to issue our ordinary
    shares to foreign investors or list on a foreign exchange, such action could significantly limit or completely hinder our ability
    to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks related to a future
    determination that the Public Company Accounting Oversight Board (the &#8220;PCAOB&#8221;) is unable to inspect or investigate our
    auditor completely.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There are significant legal
    and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with
    respect to foreign entities.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China&#8217;s economic,
    political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse
    effect on our business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainties with respect
    to the PRC legal system could harm us.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 9; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recent trade policy initiatives
    announced by the United States administration against the PRC may adversely affect our business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our subsidiaries in China
    are subject to restrictions on making dividends and other payments to it or any other affiliated company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The discontinuation of
    any of the preferential tax treatments currently available to our PRC subsidiaries could materially increase our tax liabilities.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We face uncertainty with
    respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We may not be able to obtain
    certain treaty benefits on dividends paid by our PRC subsidiary to us through our Hong Kong Subsidiary.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Restrictions on foreign
    currency may limit our ability to receive and use our revenue effectively.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fluctuations in the value
    of the RMB may have a material adverse effect on your investment.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC regulations relating
    to the establishment of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries
    to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries&#8217; ability
    to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Failure to comply with
    PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants
    or us to fines and other legal or administrative sanctions.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC regulations establish
    complex procedures for some acquisitions conducted by foreign investors, which could make it more difficult for us to pursue growth
    through acquisitions in China.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantial uncertainties
    exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may
    impact the viability of our current corporate structure, corporate governance and business operations.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The enforcement of the
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our failure to make adequate
    contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If the custodians or authorized
    users of our controlling non-tangible assets, including corporate chops and seals, fail to fulfill their responsibilities or misappropriate
    or misuse those assets, our business and operations could be materially and adversely affected.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 10; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Risks
Related to Our Securities</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span>&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If equity research analysts
    publish unfavorable commentary or downgrade our ordinary shares, the price and trading volume of our ordinary shares could decline.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Future equity issuances
    could result in dilution, which could cause our ordinary shares price to decline.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Future sales of our ordinary
    shares by existing shareholders may cause our ordinary shares price to decline.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Global economic uncertainty
    and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such
    as the conflict between Russia and Ukraine, could make it more difficult for us to access financing and could adversely affect our
    business and operations.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We may be classified as
    a passive foreign investment company, which could result in adverse U.S. federal income tax consequence to U.S. holders of our ordinary
    shares.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Investing
in our ordinary shares involves a high degree of risk. You should carefully consider the risks described below, as well as the other
information in this report, including our consolidated financial statements and the related notes and &#8220;Management&#8217;s Discussion
and Analysis of Financial Condition and Results of Operations,&#8221; before deciding whether to invest in our ordinary shares. The occurrence
of any of the events or developments described below could materially and adversely affect our business, financial condition, results
of operations and growth prospects. In such an event, the market price of our ordinary shares could decline, and you may lose all or
part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may
also impair our business, financial condition, results of operations and growth prospects.</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
due to the COVID-19 pandemic.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have experienced and expect to continue to experience unpredictable reductions in demand for certain of our products and services, and
adverse effects on our operations, supply chains and financing possibilities.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
February 2020, we have experienced reductions and cancellations of orders due to effects of the COVID-19 pandemic on the demand from
certain of our customers. COVID-19 has had an adverse effect on our business, financial condition and results of operations. Our revenue
for the year 2020 was negatively impacted by the pandemic by as much as a reduction of 73.0% as compared to 2019; and our ability to
obtain debt financing or raise equity-based capital may not be adequate for the Company&#8217;s current operations. As the assessable
risks due to COVID-19 change in India and China, our operations can be affected, including due to the restrictions from accessing office
facilities and limitations on domestic travels which can hamper our ability to efficiently manage the manufacturing of products since
our contracted factories are located over various cities in China.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
our sales were negatively impacted by the pandemic in 2020, we cut back our operational costs by reduction of approximately 20% of our
workforce in India and 40% of our headcount in China. We constantly evaluate our financial position according to changes in the international
business environment and depending on forecast of orders from our customers in the near future, we may further reduce staffing as necessary.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Even
though the COVID-19 pandemic has since abated, the extent to which COVID-19 may continue to negatively impact our business is highly
uncertain and cannot be accurately predicted. Although our revenues in 2022 improved to $52.5 million as compared to $26.8 million in
2020 and $29.6 million in 2021, the impact of the COVID-19 or any other possible pandemic in the future may cause our revenues in future
periods to decline.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 11; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Related to our Business and Industry</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Summary
of Risks Associated with Our Business Due to Changing PRC Rules and Regulations</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely
affect our business, financial condition, results of operations, cash flows and prospects that you should consider before making a decision
to invest in our ordinary share and warrants, including risks and uncertainties, among others, the following:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Chinese government
    exerts substantial influence over the manner in which we may conduct our business activities, and if we are unable to substantially
    comply with any PRC rules and regulations, our financial condition and results of operations may be materially adversely affected.
    See &#8220;<i>Risk Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes in China&#8217;s
    economic, political or social conditions or government policies could have a material adverse effect on our business and results
    of operations. See &#8220;<i>Risk Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for
    additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainties and quick
    change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material
    and negative impact on our business operation, decrease the value of our ordinary shares and warrants and limit the legal protections
    available to us. See &#8220;<i>Risk Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for
    additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any change of regulations
    and rules by Chinese government may intervene or influence our operations at any time and any additional control over offerings conducted
    overseas and/or foreign investment in China- based issuers could result in a material change in our operations and/or the value of
    our ordinary shares and could significantly limit or completely hinder our ability to offer our ordinary shares to investors and
    cause the value of such securities to significantly decline or be worthless. See &#8220;<i>Risk Factors -- Risks Related to Our Business
    Operations and Doing Business in China&#8221; for additional information.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our ordinary shares may
    be delisted or prohibited from being traded under the Holding Foreign Companies Accountable Act (&#8220;HFCAA&#8221;) if the Public
    Company Accounting Oversight Board (&#8220;PCAOB&#8221;) were unable to fully inspect our auditor. The delisting or the cessation
    of trading of our ordinary shares, or the threat of them being delisted or prohibited from being traded on a national securities
    exchange or in the over-the-counter market, may materially and adversely affect the value and/or liquidity of your investment. Additionally,
    if the PCAOB were unable to conduct full inspections of our auditor, it would deprive our investors of the benefits of such inspections.
    Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect
    or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC, and (2) Hong Kong.
    In addition, the PCAOB&#8217;s report identified the specific registered public accounting firms which are subject to these determinations.
    Our auditor, Yu Certified Public Accountant PC, is headquartered in New York, New York, and has been inspected by the PCAOB on a
    regular basis. Our auditor is not headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject
    to the PCAOB&#8217;s determination. Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor&#8217;s
    work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our
    access to the U.S. capital markets and trading of our securities may be prohibited under the HFCA Act. See &#8220;<i>Risk Factors
    -- Risks Related to Our Business Operations and Doing Business in China</i>&#8221; for additional information.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 12; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any failure to comply with
    PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants
    or us to fines and other legal or administrative sanctions. See &#8220;<i>Risk Factors -- Risks Related to Our Business Operations
    and Doing Business in China&#8221; </i>for additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If we are classified as
    a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and
    our non-PRC shareholders. See &#8220;<i>Risk Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221;
    </i>for additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulatory bodies of the
    United States may be limited in their ability to conduct investigations or inspections of our operations in China. See &#8220;<i>Risk
    Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantial uncertainties
    exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact
    the viability of our current corporate structure, corporate governance, business operations and financial results. See &#8220;<i>Risk
    Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It will be difficult to
    acquire jurisdiction and enforce liabilities against our officers, directors and assets based in Hong Kong. See &#8220;<i>Risk Factors
    -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for additional information.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Hong Kong legal system
    embodies uncertainties which could negatively affect our listing on Nasdaq and limit the legal protections available to you and us.
    See &#8220;<i>Risk Factors -- Risks Related to Our Business Operations and Doing Business in China&#8221; </i>for additional information<i>.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since 2020 and continuing
    into 2023, the Chinese government has been implementing increasingly stringent rules and regulations on its domestic business activities,
    particularly for companies whose shares are listed on U.S. exchanges. Such policy changes have caused profound impact on the value
    of the affected companies&#8217; equities and resulted in significant drop in market valuation for their shareholders. The recent
    regulatory changes in China have focused on the following industries: </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 72pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)
Cryptocurrency mining and coin offerings</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 72pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2)
Social media and cyber security</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 72pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3)
Online gaming</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 72pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4)
Ride-hailing</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 72pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5)
Extra-curriculum education and tutoring</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 72pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">6)
Variable interest entity structures</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company does not participate in any of the above six categories, and particularly our division that operated a MVNO business under a
variable interest entity structure in China was sold as of October 29, 2020. Also, as indicated in this 2022 Annual Report filed on Form
20-F, our revenues recognized from activities in China represent 30.1%, 21.8% and 1.6% of our total net revenues for the years 2022,
2021 and 2020, respectively. However, as the rules and regulations in China continue to evolve, the Company may become affected in future
periods causing the public market valuation of our shares to decline.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We are incorporated under
    the laws of the British Virgin Islands. Our principal executive offices are located in Hong Kong. We are a global leader in software,
    development services and products providing customizable, differentiated and scalable Android-based smart connected devices and cloud
    service solutions. We are also a leading provider of commercial grade Android platform software for mobile chipset manufacturers,
    mobile device OEMs and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer
    applications We are not a Critical Information Infrastructure Operator (&#8220;CIIO&#8221;) or a Data Processing Operator (&#8220;DPO&#8221;)
    as defined in Cybersecurity Review Measures (Revised Draft for Public Comments) published by Cyberspace Administration of China or
    the CAC on July 10, 2021. The subsidiary Beijing Big Cloud Century Technology Ltd (&#8220;BC-Tech&#8221;) used to operate a mobile
    virtual network operator (&#8220;MVNO&#8221;) business in China with a VIE structure. The VIE entity was a holding company known
    as Beijing Big Cloud Network Technology Co. Ltd (&#8220;BC-NW&#8221;) which owned the operating company known as Yuantel (Beijing)
    Telecommunications Technology Co., Ltd (&#8220;Yuantel&#8221;). Yuantel was sold as of October 29, 2020. BC-NW was re-organized with
    the VIE structure dismantled and became directly owned by BC-Tech, and therefore BC-NW remains on the Company&#8217;s organization
    chart. Therefore, we are not covered by the permission and requirements from the China Securities Regulatory Commission (&#8220;CSRC&#8221;),
    CAC or any other entity that is required to approve of the VIE&#8217;s operations, and we have received all requisite permissions
    to operate our business in China and no permission has been denied.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We do not believe we are
    required to obtain any permission from any PRC governmental authorities to offer securities to foreign investors. We have been closely
    monitoring regulatory developments in China regarding any necessary approvals from the CSRC and other PRC governmental authorities
    required for overseas listings, on the U.S. exchanges or on a foreign exchange other than the U.S., including the listing of our
    shares on Nasdaq. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory
    objection to our listing on Nasdaq from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty
    as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other
    capital markets activities. If we inadvertently conclude that the approvals of the CSRC, or any other regulatory authority are not
    required for our listing on Nasdaq, or applicable laws, regulations, or interpretations change and we are required to obtain approvals
    in the future, obtaining such approvals could significantly limit or completely hinder our ability to offer or continue to offer
    securities to investors and cause the value of our securities, including the ordinary shares, to significantly decline or be worthless.
    Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading
    price of our securities. In addition, these regulatory agencies may impose fines and penalties on our operations in China, limit
    our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds
    from any overseas securities offering into China or take other actions that could have a material adverse effect on our business,
    financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, or other PRC
    regulatory agencies also may take actions requiring us, or making it advisable for us, to halt any of our securities offerings before
    settlement and delivery of our ordinary shares. Consequently, if you engage in market trading or other activities in anticipation
    of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. <i>See &#8220;Risk Factors
    &#8211;Risks Related to Our Business Operations and Doing Business in China&#8221;.</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
incurred losses and total cash outflows from operations, and we had a deteriorated net current assets position. There is substantial
doubt about our ability to continue as a&#160;going concern.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had cash and cash equivalents of approximately $11.3 million and generated a net loss from continuing operations of approximately $29.0
million and cash inflows of approximately $3.4 million for the year then ended. We cannot anticipate when, if ever, we will become profitable.
Although we have improved the efficiency of our networks and operations and adopted related cost reduction measures,&#160;we cannot assure
you that we will continue to achieve such efficiency or sustain such cost reductions. If we are unable to generate revenues that significantly
exceed our costs and expenses, we will continue to incur losses in the future.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ability to continue as a going concern is dependent upon our continued operations, which in turn is dependent upon our ability to meet
our financial requirements. Our ability to meet the working capital requirements is subject to the risks relating to the demand for and
prices of our services in the market, the economic conditions in our target markets, the successful operation of our connected solution,
timely collection of payment from our customers and the availability of additional funding. In the next 12 months, we will use the cash
inflows including short-term supply chain financing, advances from customers and financing possibilities from financial institutions.
However, there is no guarantee such financing mechanism will be available at terms acceptable to us.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
audited consolidated financial statements included in this annual report on Form&#160;20-F were prepared on the basis of our continuing
as a going concern. Facts and circumstances including recurring losses, net cash outflows and deteriorated net current assets position
raise substantial doubt about our ability to continue as a going concern. If we become unable to continue as a going concern, we may
have to liquidate our&#160;assets, and the value we receive for our&#160;assets&#160;in liquidation or dissolution could be significantly
lower than the values reflected in our audited consolidated financial statements. Our lack of cash resources and our potential inability
to continue as a going concern may materially and adversely affect the price of our shares and our ability to raise new capital or to
continue our operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Although
our previously defaulted loans were completely paid off as of February 17, 2021, we may become in default with loans in the future and
the following risks will reappear.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Covenants
governing our loan facilities restrict, among other things, our ability to:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">pay dividends or distributions,
    repurchase or redeem equity;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">incur or permit to exist
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">guarantee or otherwise
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">acquire any assets, except
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">sell all or substantially
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ability to comply with these provisions may be affected by events beyond our control. Any defaults under our future loan agreements could
adversely affect our growth, our financial condition, our results of operations and our ability to make payments on our debt. The ability
to make payments of principal and interest on indebtedness will depend on our financial condition, which is subject to general economic
conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control.
If sufficient cash flow is not generated from operations to service such debt, we may be required, among other things, to:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">seek additional financing
    in the debt or equity markets;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">delay, curtail or abandon
    altogether our research &amp; development or investment plans;</span></td></tr>
  </table><div>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">refinance or restructure
    all or a portion of our indebtedness; or</span></td></tr>
  </table><div>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">sell selected assets.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Such
measures might be insufficient to service the indebtedness. In addition, any such financing, refinancing or sale of assets may not be
available on commercially reasonable terms, or at all. If funds are not available when needed, or available on acceptable terms, we may
be required to delay, scale back or eliminate some of our obligations, including reduction of operations and deliveries of products to
our customers. In addition, we may not be able to grow market share, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, which could negatively impact our business, operating results and financial condition.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company entered into agreements on December 14, 2020 with PFG and LMFA Financing LLC (&#8220;LMFA&#8221;), a Florida limited liability
company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA will purchase approximately $18 million
of debt in tranches. As of February 10, 2021, LMFA completed the purchase of $17.87 million of principal, accrued interest and applicable
fees (the &#8220;Debt&#8221;), converted into and sold all 22.73 million shares of the Company&#8217;s ordinary shares by February 10,
2021. With the Company settling another $1.27 million of Debt directly with the senior lender by the issuance of 1.51 million shares
on February 17, 2021 which the senior lender subsequently sold, the Company&#8217;s defaulted Debts with the senior lender totaling $19.14
million have been eliminated since then.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have more current liabilities than current assets as of December 31, 2022. </i></b></span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On our balance sheet as of
December 31, 2022, there were current assets of $28.0 million and current liabilities of $37.9 million. Although profit margin improvements
coupled with better financing facilities in future periods may reverse this situation, there is no assurance of how long this situation
may remain or if we can ever achieve healthier liquidity ratios. If this situation persists for too long, it will hamper the Company&#8217;s
ability to operate effectively and will likely create pressure on the market price of our ordinary shares.</p><div>
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</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
alternative mobile operating system platforms become more widely used or accepted, or mobile chipset manufacturers, mobile device Original
Equipment Manufacturers (&#8220;OEMs&#8221; and each an &#8220;OEM&#8221;) and mobile operators do not continue to make product and service
offerings compatible with the Android platform, our business could be materially harmed.</i></b></span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
mobile operating system platform industry is intensely competitive and characterized by rapid technological changes, which often result
in shifts in market share among the industry&#8217;s participants as one operating system may become more widely used than others. For
example, in the past the Symbian mobile operating system platform, or Symbian, from Nokia Corporation, or Nokia, dominated market share
for consumer products and the BlackBerry mobile operating system platform, or BlackBerry, from Research in Motion Limited, or RIM, dominated
market share for enterprise products. In the past five years, with the rise of the iOS mobile operating system platform, or iOS, from
Apple Inc., or Apple, and the Android platform, both the Symbian and Blackberry platforms have experienced a substantial decline. There
can be no assurance that the Android platform will continue to compete effectively with alternative mobile operating system platforms,
such as the iOS platform or Windows Mobile operating system platform, or Windows Mobile, from Microsoft Corporation. If these or other
mobile operating system platforms become more widely used or accepted, such as operating system platforms being developed by Baidu, Inc.,
or Baidu, and Alibaba.com Ltd., or Alibaba, in China, the market appeal of the Android platform and our Android+ software and service
platform solutions could be diminished, which could materially adversely affect our business and financial performance.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
the competitiveness of our Android+ software and service platform solutions is dependent upon the continued compatibility of the Android
platform with the offerings of our customers. If these customers choose not to continue to adopt the Android platform or they are unable
to retain or increase their market share, the demand for our Android+ software and service platform solutions may be diminished, which
could materially adversely affect our business and financial performance.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
generate a significant portion of our net revenues from a small number of major customers and key projects and any loss of business from
these customers or key projects could reduce our net revenues and significantly harm our business.</i></b></span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have derived and believe
that in the foreseeable future we will continue to derive, a significant portion of our net revenues from a small number of major customers
and key projects. Our top five customers accounted for 88.2%, 87.8% and 86.4% of our net revenues in 2020, 2021 and 2022, respectively.</p><div>
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</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ability to maintain close relationships with our major customers is essential to the growth and profitability of our business. However,
the volume of work performed for a specific customer is likely to vary from year-to-year and project-to-project, especially since we
are generally not the exclusive Android platform software and service solutions provider for our customers, some of our customers have
in-house research and development capabilities and we do not have long-term purchase commitments from any of our customers. A major customer
in one year may not provide the same level of net revenues for us in any subsequent year. The products we provide to our customers, and
the net revenues and income from those products may decline or vary as the type and quantity of products changes over time. In addition,
reliance on any individual customer for a significant portion of our net revenues may give that customer a degree of pricing leverage
when negotiating contracts and terms of service with us. In addition, a number of factors not within our control could cause the loss
of, or reduction in, business or revenues from any customer, and these factors are not predictable. These factors include, among others,
a customer&#8217;s decision to re-negotiate the royalty payment of a contract if the volume of unit sales exceeds original expectations,
pricing pressure from competitors, a change in a customer&#8217;s business strategy, or failure of a mobile chipset manufacturer or mobile
device OEM to develop competitive products. Our customers may also choose to pursue alternative technologies and develop alternative
products in addition to, or in lieu of, our products, either on their own or in collaboration with others, including our competitors.
The loss of any major customer or key project, or a significant decrease in the volume of customer demand or the price, at which we sell
our products to customers, could materially adversely affect our financial condition and results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have limited experience with our current product offerings, which makes it difficult to predict our future operating results.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
our inception in 2007 through 2014, we focused primarily on providing our Android+ software platform solutions to mobile chipset manufacturers,
mobile device OEMs and mobile operators as well as complete product solutions of mobile connected devices for enterprise and consumer
applications. In 2014, after acquiring Yuantel, we entered into the MVNO business. However, the success of these businesses depends on
many factors, including timely and successful research and development, pricing, market and consumer acceptance of such new products
and the product offerings of our competitors. If new product offerings are not successful, our revenue growth will suffer and our results
of operations may be harmed. In November 2018, our board of directors approved the sale of the MVNO business unit, and we entered into
agreements with buyers in February 2019 to sell all of the Consolidated VIEs that hold the MVNO operation. Due to an investigation into
several individuals employed by the MVNO business unit as described in &#8220;Item 4. Information on the Company&#8221; below, only partial
sales proceeds were received in 2019. The Company executed a new agreement with the buyers of the MVNO business unit as of September
1, 2020 and the balance of the sales proceeds was received by October 29, 2020 and the sale was deemed completed on the same date.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
operate in multiple rapidly evolving industries. If we fail to keep up with technological developments and changing requirements of our
customers, business, financial condition and results of operations may be materially and adversely affected.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
mobile industry is rapidly evolving and subject to continuous technological developments. Our success depends on our ability to keep
up with these technological developments and the resulting changes in customers&#8217; demands. There may also be changes in the industry
landscape as different types of platforms compete with one another for market share. If we do not adapt our Android+ software and service
platform solutions to such changes in an effective and timely manner as more mobile operating system platforms become available in the
future, we may suffer a loss in market share. Given that we operate in a rapidly evolving industry, we also need to continuously invest
significant resources in research and development in order to enhance our existing products and to respond to changes in customer preference,
new challenges and industry changes in a timely and effective manner. If we fail to keep up with technological developments and continue
to innovate to meet the needs of our customers, our Android+ software and service platform solutions may become less attractive to customers,
which in turn may adversely affect our reputation, competitiveness, results of operations and prospects.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
face intense competition from onshore and offshore third party software providers in the Android platform and software market, and, if
we are unable to compete effectively, we may lose customers and our revenues may decline.</i></b></span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Android platform and software market is highly fragmented and competitive, and we expect competition to persist and intensify from both
existing competitors and new market entrants. We believe that the principal competitive factors in our industry are reliability and efficiency,
performance, product features and functionality, development complexity and time-to-market, price, support for multiple architectures
and processors, interoperability with other systems, support for emerging industry and customer standards and protocols and levels of
training, technical services and customer support.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business model is to provide a full suite of Android+ software and service platform solutions to a broad range of customers, including
mobile chipset manufacturers, mobile device OEMs and mobile operators. As of the date of this report, we are not aware of any significant
independent competitor that provides a full range of Android platform software and service solutions as we do to the range of customers
it has, although we have a number of competitors that provide one or several Android platform software and/or service solutions to one
or more of our range of customers. See &#8220;Business &#8212; Competition.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, we face competition from companies seeking to compete with the Android platform by developing their own operating systems,
such as Baidu and Alibaba in China, and major mobile device OEMs, such as Foxconn Technology Group and BYD Electronic (International)
Company Limited, which are able to develop low-level software for mobile chipsets, as well as Huawei, GTE and Xiaomi.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that we presently compete favorably with respect to each segment identified above. However, the market for Android platform software
and service solutions is still rapidly evolving, and we may not be able to compete successfully against current and potential competitors
in the future. In addition, some of our independent competitors are more focused on one or several particular segments of the value chain
and may deliver better services in those segments than we do. Furthermore, some of our competitors may have significantly greater financial,
technical, marketing, sales and other resources and significantly greater name recognition than we have. If we are unable to compete
successfully on the principal competitive factors described above or otherwise, our business could be harmed.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may undertake acquisitions, investments, joint ventures or other strategic alliances in the future, which could expose us to new operational,
regulatory and market risks. In addition, such future and past undertakings may not be successful, which may adversely affect our business,
results of operations, financial condition and prospects.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
intend to grow both organically by expanding our current business lines and geographic coverage and through acquisitions, investments,
joint ventures or other strategic alliances if the appropriate opportunities arise. These potential business plans, acquisitions, investments,
joint ventures and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with
additional capital requirements. In addition, we may not be able to identify suitable future acquisition or investment candidates or
joint venture or alliance partners. Even if we identify suitable candidates or partners, we may be unable to complete an acquisition,
investment or alliance on terms commercially acceptable to us.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, our ability to successfully integrate acquired companies and their operations may be adversely affected by a number of factors,
including, among others, the ability to capitalize on anticipated synergies, diversion of resources and management&#8217;s attention,
difficulties in retaining personnel of the acquired companies, unanticipated problems or legal liabilities and tax and accounting issues.
If we fail to integrate any acquired company efficiently, our earnings, revenues, gross margins, operating margins and business operations
could be adversely affected. The integration of acquired companies is a complex, time-consuming and expensive process.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
are dependent upon the Android platform and, if Google determines to no longer develop the Android platform and our further development
is not taken up by reliable alternative sources, our business could be materially harmed.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business model is dependent upon the Android platform, which is a free and fully open source mobile software platform developed by Google.
The Android platform has been updated frequently since our original release and the development of the Android platform is an ongoing
process which we do not control. If Google determines to no longer develop the Android platform or our further development is not taken
up by reliable alternative sources, such as another third party or the open source community, demand for our Android+ software and service
platform solutions could decline significantly and our revenue and financial condition could be materially harmed.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
our customers move more research and development work in-house, lower demand for our solutions could reduce our net revenues and harm
our business.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Collaboration
with customers is essential to the growth and profitability of our business. However, our customers may elect to move more research and
development work in-house, and reduce collaboration with us for Android platform projects. There are many factors beyond our control
that could cause our customers to move their work in-house, such as spending reductions due to a challenging economic environment, corporate
restructuring, cost control, pricing pressure and concerns regarding the protection of technology know-how, trade secrets and other intellectual
property rights. If our customers decide to change their strategy by moving more research and development work in-house, our net revenues
may decline, and our business, financial condition and results of operations may be adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
yearly results may fluctuate significantly and may not fully reflect the underlying performance of our business.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
yearly operating results, including the levels of our revenue, gross margin, profitability, cash flow and deferred revenue, may vary
significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results
of any one year should not be relied upon as an indication of future performance. Our yearly financial results may fluctuate as a result
of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance
of our business. Fluctuations in yearly results may negatively impact the value of our ordinary shares. Factors that may cause fluctuations
in our yearly financial results include, but are not limited to:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our ability to attract
    new customers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our ability to convert
    users of our limited free versions to paying customers;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the addition or loss of
    large customers, including through acquisitions or consolidations;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our customer retention
    rate;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the timing of recognition
    of revenue;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the amount and timing of
    operating expenses related to the maintenance and expansion of our business, operations and infrastructure;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">network outages or security
    breaches;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general economic, industry
    and market conditions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 48px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">increases or decreases
    in the number of features in our services or pricing changes upon any renewals of customer agreements;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 18; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes in our pricing policies or those of our competitors;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the timing and success of new services and service introductions by us and our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we fail to effectively manage our technical
operations infrastructure, our customers may experience service outages and delays in the further deployment of our services, which may
adversely affect our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have experienced significant
growth in the number of users and the amount of data that our operations infrastructure supports. We seek to maintain sufficient excess
capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate
the rapid provisioning of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly
manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and
the evolution of our services. However, the provision of new hosting infrastructure requires significant lead-time. We have experienced,
and may in the future experience, website disruptions, outages and other performance problems. These problems may be caused by a variety
of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and
denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an
acceptable period of time, which may harm our reputation and operating results. Furthermore, if we do not accurately predict our infrastructure
requirements, our existing customers may experience service outages that may subject us to financial penalties, financial liabilities
and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek
to obtain additional capacity, which could adversely affect our reputation and our revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Most of our engagements with customers are
for a specific project only and do not provide for subsequent engagements. If we are unable to generate a substantial number of new engagements
for projects on a continuing basis, our business and results of operations will be adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our customers generally retain
us on a project-by-project basis in connection with specific projects rather than on a recurring basis under long-term contracts. Historically,
a significant portion of our net revenues has been comprised of software fees, relating to one-time research and engineering work performed
for customers. For 2020, 2021 and 2022, our net revenues from software fees were $10.6 million, $10.7 million and $13.1 million, respectively,
representing 39.5%, 36.3% and 24.9% of total net revenues, respectively. Although a significant amount of our net revenues are generated
from repeat business, which we define as revenues from a customer who also contributed to our revenues during the prior fiscal year, our
engagements with our customers are typically for individual projects that are often on a non-exclusive, project-by-project basis. In addition,
a majority of our customer contracts from which we generate product fees can be terminated by customers with or without cause. There are
many factors outside of our control that might lead customers to terminate a contract or project with us, including, among others:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">financial difficulties for our customers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">business going to our competitors or remaining in-house;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">unsuccessful launch of a product;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">disclosure of core technology by a third party; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">mergers and acquisitions or significant corporate restructurings by our customers.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 19; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, some of our customer
contracts specify that if a change of control occurs during the term of the contract, the customer has the right to terminate the contract
upon advance notice. If our customers terminate our contracts before completion or choose not to renew their contracts, our business,
financial condition and results of operations may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Therefore, we have to continuously
seek new engagements while our current engagements are being performed or are completed or terminated, and we are constantly seeking to
expand our business with existing customers and secure new customers. If we are unable to generate a substantial number of new engagements
on a continuing basis, our business and results of operations will be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because of the characteristics of open source
software, there may be fewer technology barriers to entry in the Android platform and software market in which we compete, and it may
be relatively easy for competitors, some of which may have greater resources than we have, to enter our markets and compete with us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">One of the characteristics
of open source software is that anyone can modify and redistribute the existing open source software and use it to compete against us.
Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies. It is
possible for new competitors with greater resources than us to develop their own Android platform software and service solutions, potentially
reducing the demand for, and putting pricing pressure on, our Android+ software and service platform solutions. In addition, some competitors
make their open source software available for free download and use on an <i>ad hoc</i> basis, or may position their open source software
as a loss leader in order to win customers. There can be no assurance that we will be able to compete successfully against current and
future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced
operating margins and loss of market share, any of which could seriously harm our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Security and privacy breaches may expose
us to liability and harm our reputation and business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As part of our business we
receive and process information about our employees, customers and partners, and we may store (or contract with third parties to store)
our customers&#8217; data. There are numerous laws governing privacy and the storage, sharing, use, disclosure and protection of personally
identifiable information and user data. Specifically, personally identifiable and other confidential information is increasingly subject
to legislation and regulations in numerous domestic and international jurisdictions. The regulatory framework for privacy protection in
China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. We could be adversely affected
if legislation or regulations in China and elsewhere on the world where we have business operations are expanded to require changes in
business practices or privacy policies, or if the relevant governmental authorities in China and elsewhere on the world where we have
business operations interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition
and results of operations. For example, in November 2016, China released the Cybersecurity Law, which took effect in June 2017. The Cybersecurity
Law requires network operators to perform certain functions related to cybersecurity protection and the strengthening of network information
management. For instance, under the Cybersecurity Law, network operators of key information infrastructure, including network operators
of key information infrastructures in public communications and information industry, generally shall, during their operations in the
PRC, store the personal information and important data collected and produced within the territory of the PRC and their purchase of network
products and services that may affect national securities shall be subject to national cybersecurity review. While we take security measures
relating to our Android+ software and service platform solutions, specifically, and our operations (including MVNO business unit), generally,
those measures may not prevent security breaches that could harm our business and we cannot assure you that the measures we have taken
or will take are adequate under the Cybersecurity Law and other relevant laws and regulations. Advances in computer capabilities, inadequate
technology or facility security measures or other factors may result in a compromise or breach of our systems and the data we store and
process. Our security measures may be breached as a result of actions by third parties or employee error or malfeasance. A party who is
able to circumvent our security measures or exploit inadequacies in our security measures, could, among other things, misappropriate proprietary
information (including information about our employees, customers and partners and our customers&#8217; information), cause the loss or
disclosure of some or all of this information, cause interruptions in our operations or our customers&#8217; or expose our customers to
computer viruses or other disruptions or vulnerabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any compromise of our systems
or the data it stores or processes could result in a loss of confidence in the security of our Android+ software and service platform
solutions, damage our reputation, disrupt our business, lead to legal liability and adversely affect our financial condition and results
of operations. Moreover, a compromise of our systems could remain undetected for an extended period of time, exacerbating the impact of
that compromise. Actual or perceived vulnerabilities may lead to claims against us by our customers, partners or other third parties,
which could be material. While our customer agreements typically contain provisions that seek to limit our liability, there is no assurance
these provisions will be enforceable and effective under applicable law. In addition, the cost and operational consequences of implementing
further data protection measures could be significant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are vulnerable to technology infrastructure
failures, which could harm our reputation and business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We rely on our technology
infrastructure for many functions, including selling our Android+ software and service platform solutions, supporting our customers and
billing, collecting and making payments. We also rely on our own technology infrastructure, which is located on a third-party site, as
well as the technology infrastructure of third parties, to provide some of our back-end services. This technology infrastructure may be
vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer intrusions
and viruses, software errors, computer denial-of-service attacks and other events. A significant number of the systems making up this
infrastructure are not redundant, and our disaster recovery planning is not sufficient for every eventuality. This technology infrastructure
is also subject to break-ins, sabotage and intentional acts of vandalism by internal employees, contractors and third parties. Despite
any precautions we or our third-party partners may take, such problems could result in, among other consequences, interruptions in our
services and loss of data, which could harm our reputation, business and financial condition. We do not carry business interruption insurance
sufficient to protect us from all losses that may result from interruptions in our services as a result of technology infrastructure failures
or to cover all contingencies. Any interruption in the availability of our websites and on-line interactions with customers and partners
would create a large volume of questions and complaints that would need to be addressed by our support personnel. If our support personnel
cannot meet this demand, customer and partner satisfaction levels may fall, which in turn could cause additional claims, reduced revenue,
reputation damage or loss of customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to continue to use or
adequately protect our intellectual property rights, which could harm our business reputation and competitive position.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although Android is an open
source mobile software platform for mobile devices, we are not required to share the source code for our Android software, which we have
invested significant resources to develop. Accordingly, we believe that patents, trademarks, trade secrets, copyright, software registration
and other intellectual property we use are important to our business. We rely on a combination of patent, trademark, copyright, software
registration and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual
provisions to protect our intellectual property and brand name. Any failure by us to maintain or protect our intellectual property rights,
including any unauthorized use of our intellectual property by third parties or use of &#8220;Borqs&#8221; as a company name to conduct
software or services business, may adversely affect our current and future revenues and our reputation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the validity,
enforceability and scope of protection available under intellectual property laws with respect to the mobile and Internet industries in
China, where a significant part of our business and operations are located, are uncertain and still evolving. Implementation and enforcement
of PRC intellectual property-related laws have historically been deficient, ineffective and hampered by corruption and local protectionism.
Accordingly, protection of intellectual property rights in China may not be as effective as in the United States or other countries. Furthermore,
policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or
defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such
litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and
management attention, which could harm our business and competitive position.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also may be required to
enter into license agreements with certain third parties to use their intellectual property for our business operations. If such third
parties fail to perform under these license agreements or if the agreements are terminated for any reason, our business and results of
operations may be negatively impacted. Furthermore, if we are deemed to be using third parties&#8217; intellectual property without due
authorization, we may become subject to legal proceedings or sanctions, which may be time-consuming and costly to defend, divert management
attention and resources or require us to enter into licensing agreements, which may not be available on commercial terms, or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The international nature of our business
exposes it to risks that could adversely affect our financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We conduct our business throughout
the world in multiple locations. Our corporate structure also spans multiple jurisdictions, with our parent holding company incorporated
in the British Virgin Islands and intermediate and operating subsidiaries incorporated in China, Hong Kong, India and Brazil, with branch
offices in Japan and South Korea. In addition, one of our growth strategies is to further expand our business in Europe and into the United
States. As a result, we are exposed to risks typically associated with conducting business internationally, many of which are beyond our
control. These risks include, among others:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The occurrence of any of
these events could have a material adverse effect on our results of operations and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, we are in the
process of implementing policies and procedures designed to facilitate compliance with laws and regulations in various jurisdictions applicable
to us, but there can be no assurance that our employees, contractors or agents will not violate such laws and regulations or our policies.
Any such violations could, individually or in the aggregate, materially and adversely affect our financial condition and operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to manage our anticipated
growth and our current and planned resources may not be adequate to support our expanding operations; consequently, our business, results
of operations and prospects may be materially and adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have experienced rapid
growth since we commenced operations. Our rapid expansion may expose us to new challenges and risks. To manage the further expansion of
our business and the growth of our operations and personnel, we need to continuously expand and enhance our infrastructure and technology,
and improve our operational and financial systems and procedures and controls, and enlarge our financing resources. For example, we currently
manage all of our human resources functions manually and expect that we will need to upgrade our current system as we continue to increase
our headcount. We also need to expand, train and manage our growing employee base. In addition, our management will be required to obtain,
maintain or expand relationships with mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as other third-party
business partners. We cannot assure you that our current and planned personnel, infrastructure, systems, procedures and controls will
be adequate to support our expanding operations. If we fail to manage our expansion effectively, our business, results of operations and
prospects may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Due to intense competition for highly skilled
personnel, we may fail to attract and retain qualified personnel to support our research and development operations; as a result, our
ability to bid for and obtain new projects may be adversely affected and our net revenues could decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The mobile industry relies
on the talents and efforts of highly skilled personnel, and our success depends to a significant extent on our ability to recruit, train,
develop, retain and motivate qualified personnel for all areas of our organization. Competition in our industry for qualified employees,
especially technical employees, is intense, and our competitors directly target our employees from time to time. We have also experienced
employees leaving us to start competing businesses or to join the in-house research and development teams of our customers. The loss of
the technical knowledge and industry expertise of any of these individuals could seriously impede our success. Moreover, the loss of these
individuals, particularly to a competitor, some of which are in a position to offer greater compensation, and any resulting loss of customers
or trade secrets and technological expertise could further lead to a reduction in our market share and adversely affect our business.
If we are required to increase the compensation payable to our qualified employees to compete with certain competitors with greater resources
than we have or to discourage employees from leaving us to start competing businesses, our operating expenses will increase which, in
turn, will adversely affect our results or operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>As mandated by the Committee on Foreign
Investment in the United States (&#8220;CFIUS&#8221;), we must terminate our ownership in Holu Hou Energy LLC.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 13, 2022, Borqs
Technologies received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
(CFIUS) stating that the Company is required to fully divest its ownership interests and rights in HHE due to HHE&#8217;s solar energy
storage system and EnergyShare technology for Multi-Dwelling Residential Units being deemed a potential national security risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 31, 2022, the
Company resolved that in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Company
must adhere to, including: (i) Entering into a National Security Agreement with various departments of the US government with a plan that
is effective, monitorable and verifiable to divest Borqs&#8217; investment interests and rights in HHE; (ii) Selection of a trustee and
entering into a Divestment Trust Agreement, and assigning the Company&#8217;s interest in HHE to the trustee; and, (iii) Selection of
a nationally recognized investment bank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of
December 31, 2022, terminate its control of HHE by (i) removal of all of the Group&#8217;s representatives from HHE&#8217;s Board of Directors,
(ii) relinquishment of Class A Membership Unit voting rights, and (iii) reduction of the Group&#8217;s ownership of HHE from 51% down
to 49% by assigning 2% of the ownership back to HHE. By taking above actions, the Company no longer has a controlling interest in HHE
and result in deconsolidation of HHE as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 16, 2023, the Company
and HHE entered into a National Security Agreement (&#8220;NSA&#8221;) with the Department of Defense and Department of Treasury. The
NSA provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill
provisions which provide that the Company shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any
changes to the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession
of any assets of HHE. Further, upon the completion of the Divestment, the Company shall terminate or irrevocably waive any information,
consent, board appointment, board observer, or other governance rights held by the Company, except for any and all rights that are determined
by the U.S. Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the
Divestment: engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes;
assigning and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs&#8217;
administrative and technical influence over HHE; and creating a plan to divest all of Borqs&#8217; investment interests and rights in
HHE. Pursuant to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment
Trust Agreement (&#8220;DTA&#8221;) dated March 20, 2023 entered into between Borqs, HHE and a trustee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2023, the Company engaged
Cantor Fitzgerald &amp; Co. (&#8220;Cantor Fitzgerald&#8221;) as its exclusive financial advisor with respect to the divestment of the
Company&#8217;s ownership in HHE. In the event that a transaction is not consummated within the timeframe mandated by CFIUS, the Company&#8217;s
ownership in HHE will continue to remain in the trust.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our success depends substantially on the
continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose their services.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our future success heavily
depends upon the continued services of our senior executives and other key employees. In particular, we rely on the expertise, experience,
customer relationships and reputation of Pat Chan, our founder, chairman and chief executive officer. We currently do not maintain key
man life insurance for any of the senior members of our management team or other key employees. If one or more of our senior executives
or key employees are unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may
not be able to replace them easily or at all. In addition, competition for senior executives and key employees in our industry is intense,
and we may be unable to retain our senior executives and key employees or attract and retain new senior executive and key employees in
the future, in which case our business may be severely disrupted, and our financial condition and results of operations may be materially
and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any of our senior executives
or key employees joins a competitor or forms a competing company, it may lose customers, know-how and other key employees and staff members
to them. Also, if any of our business development managers, who generally keep a close relationship with our customers, joins a competitor
or forms a competing company, we may lose customers, and our net revenues may be materially and adversely affected. Additionally, there
could be unauthorized disclosure or use of our technical knowledge, practices or procedures by such employees. All of our executives and
key employees have entered into employment agreements with us that contain non-competition provisions, non-solicitation and nondisclosure
covenants. However, if any dispute arises between our executive officers or key employees and us, such non-competition, non-solicitation
and nondisclosure provisions might not provide effective protection to us, especially in China, where most of these executive officers
and key employees reside, in light of the uncertainties with China&#8217;s legal system. See &#8220;Risk Factors &#8212; Risks Related
to Doing Business in China &#8212; Uncertainties with respect to the PRC legal system could harm us.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to various anti-corruption
and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and PRC and Indian anti-corruption and
anti-bribery laws; any determination that we have violated such laws could damage our business and reputation, limit our ability to bid
for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation (such as shareholder
derivative suits), and commercial liabilities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to anti-corruption
and anti-bribery laws in the United States, United Kingdom, China, and India that prohibit certain improper payments made directly or
indirectly to government departments, agencies, and instrumentalities; officials of those government departments, agencies, and instrumentalities;
political parties and their officials; candidates for political office; officials of public international organizations; persons acting
on behalf of the foregoing; and commercial counterparties. These laws include the U.S. Foreign Corrupt Practices Act, the U.K. Bribery
Act 2010, the PRC Criminal Law, the PRC Anti-Unfair Competition Law, the Indian Prevention of Corruption Act 1988, the Indian Penal Code
and anti-corruption laws in various Indian states.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are engaged in business
in a number of countries that are regarded as posing significant risks of corruption. Of particular note, we conduct operations, have
agreements with state-controlled enterprises and other third parties and make sales in the PRC, and we have research and development activities
in India, each of which may be exposed to corruption risk. It is our policy to implement safeguards and procedures to prohibit these practices
by our employees, officers, directors, or by third parties acting on our behalf. However, we cannot rule out the risk that any of our
employees, officers, directors, or third parties acting on our behalf may engage in breaches of our policies or anti-corruption laws,
for which we might be held responsible.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Allegations of violations
of these anti-corruption and anti-bribery laws, and investigation into such allegations, could negatively affect our reputation, business,
operating results, and financial condition. The violation of these laws may result in substantial monetary and even criminal sanctions,
follow-on civil litigation (such as shareholder derivative suits), and monitoring of our compliance program by the United States or other
governments, each of which could negatively affect our reputation, business, operating results, and financial condition. In addition,
the United States or other governments may seek to hold us liable for violations of these laws committed by companies in which we invest
or acquire.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>There can be no assurance that our securities,
including our ordinary shares, will continue to be listed on Nasdaq or, if listed, that we will be able to comply with the continued listing
standards of Nasdaq, which could limit investors&#8217; ability to make transactions in our securities and subject us to additional trading
restrictions.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To continue listing our ordinary
shares on Nasdaq, we are required to demonstrate compliance with Nasdaq&#8217;s continued listing requirements, particularly the requirement
to maintain a minimum $1.00 bid price per share. On August 18, 2021, we received a letter from the Nasdaq Listing Qualifications Staff
(&#8220;Nasdaq&#8221;) notifying us that we were not in compliance with the minimum bid price requirement set forth in Nasdaq&#8217;s
rules for continued listing on the Nasdaq. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of
US$1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency
continues for a period of 30 consecutive business days. Based on the closing bid price of our ordinary shares for the 30 consecutive business
days from July 7, 2021 to August 17, 2021, we did not meet the minimum bid price requirement. The letter did not impact our listing on
the Nasdaq Capital Market and, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided 180 calendar days, or until February
14, 2022, to regain compliance with Nasdaq Listing Rule 5550(a)(2). On February 15, 2022, we received a letter from the Staff informing
us that we are eligible for another 180-day period, or until August 15, 2022 to regain compliance with the minimum $1 bid price requirement.
We provided written notice, as required by Nasdaq, of our intention to cure the deficiency during the second compliance period by effecting
a reverse stock split, if necessary. Compliance can be attained during this additional time period if the closing bid price of our ordinary
shares is at least $1 per share for a minimum of 10 consecutive business days. If during the compliance period the ordinary shares have
a closing bid price of $0.10 or less for 10 consecutive trading days, Nasdaq&#8217;s Listing Qualifications Department shall issue a Staff
Delisting Determination. On June 27, 2022, the Company completed a reverse stock split of the Company&#8217;s common shares at the ratio
of one-for-sixteen to enable the Company to regain compliance with Nasdaq Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">On
October 28, 2022, the Company received written notification from the Nasdaq Stock Market LLC, notifying the Company that it is not in
compliance with the minimum bid price requirement set forth in Nasdaq&#8217;s rules for continued listing on the Nasdaq and that the Company&#8217;s
listed securities did not maintain a minimum market value of listed securities of $35 million (&#8220;MVLS&#8221;) for a period of 30
consecutive business days and that the Company did not meet the MVLS requirement set forth in Nasdaq Listing Rule 5550(b)(2) for continued
listing on the Nasdaq. Based on the closing bid price of the Company&#8217;s ordinary shares for the 30 consecutive business days from September
16, 2022 to October 27, 2022, the Company no longer meets the minimum bid price requirement. To regain compliance under Nasdaq Listing
Rule 5550(a)(2), the Company&#8217;s ordinary shares must have a closing bid price of at least US$1.00 for a minimum of 10 consecutive trading
days. In the event the Company does not regain compliance by April 26, 2023, the Company may be eligible for additional time to regain
compliance with the minimum bid price requirement and MLVS requirement or may face delisting. If during any compliance period the ordinary
shares have a closing bid price of $0.10 or less for 10 consecutive trading days, Nasdaq&#8217;s Listing Qualifications Department shall
issue a Staff Delisting Determination regarding the minimum bid price requirement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">To
regain compliance under Nasdaq Listing Rule 5550(b)(2), the Company&#8217;s MVLS had to close at $35 million or more for a minimum of
10 consecutive trading days for Nasdaq to provide the Company a written confirmation of compliance and deem the matter closed. The Company
had until April 26, 2023 to regain compliance with the MLVS requirement. On March 14, 2023, the Company received written notification
from Nasdaq notifying the Company that Nasdaq had determined that for the 10 consecutive trading days, from February 28 through March
13, 2023, the Company&#8217;s MVLS had been $35 million or greater. Accordingly, the Company has regained compliance with the Rule.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 3, 2023, the Company
received written notification from the Listing Qualifications Staff of Nasdaq indicating that the Company has not regained compliance
with the minimum bid price of $1 required for continued listing on The Nasdaq Capital Market. The Company has engaged the firm of Donohoe
Advisory Associates LLC to request a hearing which will stay the suspension or delisting action pending the hearing and the expiration
of any extension period granted by the Panel following the hearing. Consequently, the Company&#8217;s ordinary shares are expected to
remain listed on The Nasdaq Capital Market at least until the Panel renders a decision following the hearing. There can be no assurance
that the Panel will determine to continue the Company&#8217;s listing on The Nasdaq Capital Market or that the Company will timely evidence
compliance with the terms of any extension that may be granted by the Panel following the hearing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business operations are
not affected by the receipt of these notices. We intend to monitor the closing bid price of our ordinary shares and may, if appropriate,
consider implementing available options, including, but not limited to, implementing a reverse share split of its outstanding ordinary
shares, financing and issuing additional ordinary shares, to regain compliance with the minimum bid price and maintain compliance with
the minimum market value requirement under the Nasdaq Listing Rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, we cannot assure
you that we will be able to meet Nasdaq&#8217;s other continued listing standards. If our ordinary shares are delisted by Nasdaq, and
we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter
market. If this were to occur, then, as with our public warrants, which have been delisted from Nasdaq and are trading on the OTC Markets,
we could face significant material adverse consequences, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">less liquid trading market for our securities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The National Securities Markets
Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which
are referred to as &#8220;covered securities.&#8221; If our ordinary shares remain listed on Nasdaq, our ordinary shares will be covered
securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to
investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate
or bar the sale of covered securities in a particular case. If our securities were no longer listed on Nasdaq and therefore not &#8220;covered
securities&#8221;, we would be subject to regulation in each state in which we offer our securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Global economic and political conditions
may adversely impact our business, operating results and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Economic conditions, market
and political instability, trade disputes among the United State, China, India and European countries and political conflicts, such&#160;as
between Russia and Ukraine, could adversely affect our business relationships with customers and suppliers. Any adverse financial or economic
impact to our customers may impact their ability to pay timely or result in their inability to pay. It may also impact their ability to
fund future purchases or increase the sales cycles which could lead to a reduction in revenue and accounts receivable. Our suppliers may
increase their prices or may be unable to supply needed raw materials on a timely basis due to global supply change interruptions which
could result in our inability to meet customers&#8217; demand or affect our gross margins. Our suppliers may also impose more stringent
payment terms on us. The timing and nature of any recovery from the effects of adverse economic conditions or market and political instability
on credit and financial markets is uncertain, and there can be no assurance that market conditions will improve in the near future or
that our results will not be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may, from time to time, be involved in
future litigation in which substantial monetary damages are sought.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may from time to time be
involved in future litigation in which substantial monetary damages are sought. Litigation claims may relate to intellectual property,
contracts, employment, securities and other matters arising out of the conduct of our current and past business activities. Any claims,
whether with or without merit, could be time consuming, expensive to defend, and could divert management&#8217;s attention and resources.
We maintain insurance against some, but not all, of these potential claims, and the levels of insurance we do maintain may not be adequate
to fully cover any and all losses. Nonetheless, the results of any future litigation or claims are inherently unpredictable, and such
outcomes could have a material adverse effect on our results of operations, cash from operating activities or financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were in arbitration before
the International Chamber of Commerce with Samsung Electronics Co., Ltd. (&#8220;Samsung&#8221;) to resolve a dispute regarding royalties
payable to the Company under a software license agreement the Company had with Samsung. Samsung alleged that, for the period starting
the fourth quarter of 2010 through mid-2012, the Company was overpaid royalties in the amount of approximately $1.67 million due to a
clerical error in Samsung&#8217;s accounting department that enabled the Company to receive royalties on sales of Samsung handsets that
did not contain its software. Samsung was seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as
reimbursements of reasonable fees including attorney fees and arbitration costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">After arbitration hearings
held in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an
arbitration award (the &#8220;Award&#8221;), which the Company received on November 29, 2018. Pursuant to the Award, the Company was obligated
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. Samsung was
also awarded its attorney&#8217;s fees and expenses in the aggregate amount of approximately $1.73 million. The Company has reached an
agreement with Samsung for settling the payments due to Samsung by making 24 monthly payments beginning in April 2019. The Company has
pledged $5 million worth of ordinary shares in escrow as security for the payments and in the event that the Company is in default of
the scheduled payments, Samsung has the right to seize the escrow shares. If we fail to make timely payments to Samsung, we may be subject
to additional potential litigation damages resulting in a material adverse impact to the Company. Due to cash flow constraints resulting
from the COVID-19 pandemic, we have not made payments to Samsung in the years 2020 and 2021. Beginning in June 2022, the Company has been
making monthly payments to Samsung with the anticipation that all of the Award including accrued interests will be completely paid off
by December 2023.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are in arbitration with Shanghai Kadi
Technologies Limited (&#8220;KADI&#8221;) and its owners due to KADI&#8217;s breach of contract according to the Share Purchase Agreement
dated December 15, 2018 (the &#8220;KADI Agreement&#8221;) signed between Borqs and KADI.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have initiated arbitration
proceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from
KADI 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
to the owners of KADI, and iii) payment in cash for loss of profit from KADI&#8217;s projected business in the amount of $5.3 million.
As of the filing of this annual report, the arbitration is still on-going and there is no assurance that the outcome of the proceedings
will be in favor of Borqs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we fail to implement and maintain effective
internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations
or prevent fraud, and investor confidence and the market price of our ordinary shares may be adversely impacted.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are required to evaluate
the effectiveness of disclosure controls and procedures and internal control over financial reporting. As defined in standards established
by the United States Public Company Accounting Oversight Board, or the PCAOB, a &#8220;material weakness&#8221; is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company&#8217;s annual or interim financial statements will not be prevented or detected on a timely basis; and a
&#8220;significant deficiency&#8221; is less severe than a material weakness in that it is unlikely to have a material impact on financial
statements but is important enough to merit attention by those responsible for oversight of the company&#8217;s financial reporting. Based
on that evaluation, our management concluded that these controls were ineffective as of December 31, 2022. In the years ended December
31, 2022 and 2021, we did not maintain sufficient controls over financial reporting processes due to an insufficient number of financial
reporting personnel with an appropriate level of knowledge and experience in U.S. GAAP and SEC reporting requirements and financial reporting
programs to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related
disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. This deficiency constitutes as a material weakness of our internal
control over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2019 the Company identified
a qualified external professional consultant for a senior financial and reporting role and the individual officially joined the Company
as a financial director in January 2019. We have taken multiple steps to implement measures designed to improve our internal control over
financial reporting to remediate the material weakness and hence our management concluded that the material weakness was being mitigated
as of December 31, 2019 by multiple factors including: (a) hiring of a financial director with over 15 years of US GAAP audit experience
in 2019 to help set up workflows for the strengthening of internal controls and preserving accuracy in preparing consolidated financial
statements, (b) since December 2018, our Chairperson of the Audit Committee, a member of the Washington State board of Accountancy since
the year 1989, has been regularly providing the Company with advice on procedures and interpretation of US GAAP rules and regulations.
In addition, we plan to take a number of other measures to strengthen our internal control over financial reporting, including (i) continuing
to hire additional qualified professionals with experience in U.S. GAAP accounting and SEC reporting to lead accounting and financial
reporting matters; (ii) organizing regular training for our accounting staffs, especially the trainings related to U.S. GAAP and SEC reporting
requirements; and (iii) establishing effective oversight and clarifying reporting requirements for non-recurring and complex transactions
to ensure consolidated financial statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting
requirements. In October 2021, the Company hired a seasoned Chief Financial Officer with significant U.S. financial reporting experiences
handling all periodic financial reporting and filing requirements with the SEC.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a public company in
the United States subject to the Sarbanes Oxley Act of 2002. Section 404 of the Sarbanes Oxley Act, or Section 404, requires us to include
a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F. Our
management concluded that our internal control over financial reporting is not effective. In addition, once we cease to be an &#8220;emerging
growth company&#8221; as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report
on the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over
financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may
issue an adverse opinion if it is not satisfied with our internal controls or the level at which our controls are documented, designed,
operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place
a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to
timely complete our evaluation testing and any required remediation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the course of documenting
and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and
deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control
over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on
an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Moreover, our internal
control over financial reporting may not prevent or detect all errors and -fraud. A control system, no matter how well it is designed
and operated cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and
instances of fraud will be detected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that the Company&#8217;s
financial reporting persons possess significant US GAAP experience to be a valuable resource for us with respect to financial reporting
work. We believe we have adequate personnel with knowledge and experience with US GAAP for the preparation of our annual report for the
year 2022. Since December 2018, our Chairperson of the Audit Committee has been regularly providing the Company with advice on procedures
and interpretation of US GAAP rules and regulations. The Chairperson of the Audit Committee has been a member of the Washington State
Board of Accountancy since the year 1989. However, if we fail to achieve and maintain an effective internal control environment, we could
suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors
to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of
operations, and lead to a decline in the market price of our ordinary shares. Additionally, ineffective internal control over financial
reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock
exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial
statements from prior periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks</b>&#160;<b>Related to Our Business Operations and Doing Business
in China</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Chinese government exerts substantial
influence over the manner in which we may conduct our business activities, and if we are unable to substantially comply with any PRC rules
and regulations, our financial condition and results of operations may be materially adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Chinese government has
exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state
ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation,
environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose
new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part
to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision
not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in
the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof,
and could require us to divest ourselves of any interest we then hold in Chinese properties.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As such, our business operations
and the industries we operate in may be subject to various government and regulatory interference in the provinces in which they operate.
We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government
sub-divisions. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for
any failure to comply. In the event that we are not able to substantially comply with any existing or newly adopted laws and regulations,
our business operations may be materially adversely affected and the value of our ordinary shares may significantly decrease.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The recent PRC government intervention into
business activities by U.S.-listed Chinese companies may indicate an expansion of the PRC&#8217;s authority that could negatively impact
our existing and future operations in Hong Kong and China.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Recently, the Chinese government
announced that it would exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based
issuers. Under the new measures, China will improve regulation of cross-border data flows and security, police illegal activity in the
securities market and punish fraudulent securities issuances, market manipulation and insider trading. China will also monitor sources
of funding for securities investment and control leverage ratios. The Cyberspace Administration of China (&#8220;CAC&#8221;) has also
opened a cybersecurity probe into several large U.S.-listed technology companies focusing on anti-monopoly and financial technology regulation
and, more recently with the passage of the Data Security Law, how companies collect, store, process and transfer data. If we are subject
to such a probe or if we are required to comply with stepped-up supervisory requirements, valuable time from our management and money
may be expended in complying and/or responding to the probe and requirements, thus diverting valuable resources and attention away from
our operations. This may, in turn, negatively impact our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Borqs is incorporated under
the laws of the British Virgin Islands with our principal headquarters in Hong Kong. We are not a mainland Chinese firm, and we are not
required to obtain permission from the government of the PRC to issue our ordinary shares to foreign investors. However, as a company
with limited operations in Hong Kong and the PRC, and given the Chinese government&#8217;s significant oversight authority over the conduct
of business in Hong Kong and the PRC, there is always a risk that the Chinese government may seek to affect operations of any company
with any level of operations in mainland China or Hong Kong, including its ability to offer or continue to offer securities to investors,
list its securities on a U.S. or other foreign exchange, conduct its business or accept foreign investment. In light of China&#8217;s
recent expansion of authority in Hong Kong, there are risks and uncertainties which we cannot foresee for the time being, and rules and
regulations in China can change quickly with little or no advance notice. The Chinese government may intervene or influence our current
and future operations in Hong Kong and China at any time, or may exert more control over offerings conducted overseas and/or foreign investment
in issuers likes ourselves.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any or all of the foregoing
were to occur, this could result in a material change in our Company&#8217;s operations and/or the value of our ordinary shares and/or
significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such
securities to significantly decline or be worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Changes in China&#8217;s economic, political
or social conditions or government policies could have a material adverse effect on our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All of our manufacturing operations
are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant
degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Chinese economy differs
from the economies of most developed countries in many respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing
the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved
corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In
addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies
and change of enforcement practice of such rules and policies can change quickly with little advance notice. The Chinese government also
exercises significant control over China&#8217;s economic growth through allocating resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While the Chinese economy
has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the
economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some
of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial condition and
results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any prolonged
slowdown in the Chinese economy may reduce the demand for our products and materially and adversely affect our business and results of
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Uncertainties and quick change in the interpretation
and enforcement of Chinese laws and regulations with little advance notice could result in a material and negative impact our business
operation, decrease the value of our ordinary shares and limit the legal protections available to us.&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The PRC legal system is based
on written statutes, and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and
the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement
of these laws, regulations and rules involves uncertainties. The enforcement of laws and that rules and regulations in China can change
quickly with little advance notice and the risk that the Chinese government may intervene or influence our operations at any time, or
may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, could result in a material
change in our operations and/or the value of our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot rule out the possibility
that the PRC government will institute a licensing regime or pre-approval requirement covering our industry at some point in the future.
If such a licensing regime or approval requirement were introduced, we cannot assure you that we would be able to obtain any newly required
license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time, we may
have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities
have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the
outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore,
the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or
at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime
after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual
property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Substantial uncertainties exist with respect
to the interpretation and implementation of any new PRC laws, rules and regulations relating to foreign investment and how it may impact
the viability of our current corporate structure, corporate governance and our business operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March&#160;15, 2019, the
National People&#8217;s Congress promulgated the Foreign Investment Law, which came into effect on January&#160;1, 2020 and replaced the
three existing laws regulating foreign investment in China, namely, the Sino-foreign&#160;Equity Joint Venture Enterprise Law, the Sino-foreign&#160;Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested&#160;Enterprise Law, together with their implementation rules and ancillary
regulations. The existing foreign-invested&#160;enterprises, or FIEs, established prior to the effectiveness of the Foreign Investment
Law may keep their corporate forms within five years. The Foreign Investment Law stipulates that China implements the management system
of pre-establishment&#160;national treatment plus a negative list to foreign investment, and the government generally will not expropriate
foreign investment, except under certain special circumstances, in which case it will provide fair and reasonable compensation to foreign
investors. Foreign investors are barred from investing in prohibited industries on the negative list and must comply with the specified
requirements when investing in restricted industries on such list. On December 26, 2019, the State Council promulgated the Implementing
Regulations of the Foreign Investment Law, which came into effect on January&#160;1, 2020 and further requires that FIEs and domestic
enterprises be treated equally with respect to policy making and implementation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Foreign Investment
Law, &#8220;foreign investment&#8221; means any foreign investor&#8217;s direct or indirect investment in the PRC, including: (i) establishing
FIEs in the PRC either individually or jointly with other investors; (ii) obtaining stock shares, stock equity, property shares, other
similar interests in Chinese domestic enterprises; (iii)&#160;investing in new project in the PRC either individually or jointly with
other investors; and (iv) making investment through other means provided by laws, administrative regulations or State Council provisions.
Although the Foreign Investment Law does not explicitly classify the contractual arrangements, as a form of foreign investment, it contains
a catch-all&#160;provision under the definition of &#8220;foreign investment,&#8221; which includes investments made by foreign investors
in China through other means stipulated by laws or administrative regulations or other methods prescribed by the State Council without
elaboration on the meaning of &#8220;other means.&#8221; However, the Implementing Regulations of the Foreign Investment Law still does
not specify whether foreign investment includes contractual arrangements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If the Chinese government were to impose
new requirements for permission or approval from the PRC Authorities including China Securities Regulatory Commission (&#8220;CSRC&#8221;)
or CAC, or any other entity that is required to approve the listing of our shares on Nasdaq, to issue our ordinary shares to foreign investors
or list on a foreign exchange, such action could significantly limit or completely hinder our ability to offer or continue to offer securities
to investors and cause the value of such securities to significantly decline or be worthless.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of annual report,
we and our PRC subsidiaries, (1) are not required to obtain permissions from any PRC authorities to operate or issue our Ordinary Shares
to foreign investors, (2) are not subject to permission requirements from the CSRC, CAC or any other entity that is required to approve
of our PRC subsidiaries&#8217; operations, and (3) have not received or were denied such permissions by any PRC authorities. Nevertheless,
the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued
the &#8220;Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,&#8221; or the Opinions, which were made
available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities,
and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment,
it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to list on
U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, since these statements
and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and
what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and
the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign
investments and list on an U.S. exchange. If, (i) we inadvertently conclude that such approvals or permissions are not required, or (ii)
applicable laws, regulations, or interpretations change and we are required to obtain such approvals and permissions in the future, and
we are unable to obtain such approvals and permissions, Borqs will not be able to perform R&amp;D and manufacturing in China, our revenues
will be adversely affected and we will have to expand our R&amp;D activities in India and relocate our manufacturing activities outside
China to India or other Asian countries. Also, if applicable laws, regulations, or interpretations change, and we are required to obtain
permission or approval from the PRC authority for the offering and listing of our Ordinary Shares in the U.S. in the future, and if any
of such permission or approval were not received maintained, or subsequently rescinded, it may significantly limit or completely hinder
our ability to list our shares or cause the value of our Ordinary Shares to significantly decline or become worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Risks related to a future determination
that the Public Company Accounting Oversight Board (the &#8220;PCAOB&#8221;) is unable to inspect or investigate our auditor completely.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Holding Foreign Companies
Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed
audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive&#160;years
beginning in 2021, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over-the-counter
trading market in the U.S.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 24, 2021, the SEC
adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. A company
will be required to comply with these rules if the SEC identifies it as having a &#8220;non-inspection&#8221; year under a process to
be subsequently established by the SEC.&#160;The SEC is assessing how to implement other requirements of the HFCA Act, including the listing
and trading prohibition requirements described above. Furthermore, on June 22, 2021, the U.S.&#160;Senate passed the Accelerating Holding
Foreign Companies Accountable Act (&#8220;AHFCAA&#8221;), which has since been signed into law, amending the HFCA Act and requiring the
SEC to prohibit an issuer&#8217;s securities from trading on any U.S.&#160;stock exchanges if its auditor is not subject to PCAOB inspections
for two consecutive years instead of three consecutive&#160;years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 22, 2021, the
PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under
the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign
jurisdiction because of a position taken by one or more authorities in that jurisdiction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 2, 2021, the SEC
announced the adoption of amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules
apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (Commission-Identified Issuers).
The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned
or controlled by a governmental entity in the public accounting firm&#8217;s foreign jurisdiction. The amendments also require that a
Commission-Identified Issuer that is a &#8220;foreign issuer,&#8221; as defined in Exchange Act Rule 3b-4, provide certain additional
disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the adopting release provides
notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain
Commission-Identified Issuers, as required by the HFCAA. A Commission-Identified Issuer will be required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended Dec. 31, 2021, the registrant will be required to comply with the submission
or disclosure requirements in its annual report filing covering the fiscal year ended Dec. 31, 2022. On December 16, 2021, the PCAOB issued
a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered
in: (1) mainland China, and (2) Hong Kong.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The audit report included
in our Form 20-F for the years ended December 31, 2020, 2021 and 2022, were issued by Yu Certified Public Accountant P.C. (&#8220;Yu CPA&#8221;),
an independent registered public accounting firm with the PCAOB, and as an auditor of publicly traded companies in the U.S., is subject
to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional
standards. Our auditor is headquartered in New York, NY, and has been inspected by the PCAOB on a regular basis. The PCAOB currently has
access to inspect the working papers of our auditor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">However, the recent developments
would add uncertainties to our listing and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more
stringent criteria to us after considering the effectiveness of our auditor&#8217;s audit procedures and quality control procedures, adequacy
of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC may propose additional
rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President&#8217;s
Working Group on Financial Markets, or the PWG, issued the Report on Protecting United&#160;States Investors from Significant Risks from
Chinese Companies to the then President of the United&#160;States. This report recommended the SEC implement five recommendations to address
companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts
of these recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations were more stringent
than the HFCA Act. For example, if a company&#8217;s auditor was not subject to PCAOB inspection, the report recommended that the transition
period before a company would be delisted would end on January 1, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC has announced that
the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations
in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any,
of the PWG recommendations will be adopted. The implications of this possible regulation in addition to the requirements of the HFCA Act
are uncertain. Such uncertainty could cause the market price of our ordinary shares to be materially and adversely affected, and our securities
could be delisted or prohibited from being traded on the national securities exchange earlier than would be required by the HFCA Act.
If our Ordinary Shares are unable to be listed on another securities exchange by then, such a delisting would substantially impair your
ability to sell or purchase our Ordinary Shares when you wish to do so, and the risk and uncertainty associated with a potential delisting
would have a negative impact on the price of our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>There are significant legal and other obstacles
to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We conduct a significant part
of our business operations in China, and some of our directors and senior management are based in China, which is an emerging market.
The SEC, U.S. Department of Justice and other authorities often have substantial difficulties in bringing and enforcing actions against
non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China. Additionally,
our public shareholders may have limited rights and few practical remedies in emerging markets where we operate, as shareholder claims
that are common in the United States, including class action securities law and fraud claims, generally are difficult to pursue as a matter
of law or practicality in many emerging markets, including China. For example, in China, there are significant legal and other obstacles
to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.
Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of
another country or region to implement cross-border supervision and administration, the regulatory cooperation with the securities regulatory
authorities in the Unities States has not been efficient in the absence of a mutual and practical cooperation mechanism. According to
Article 177 of the PRC Securities Law which became effective in March 2020, no foreign securities regulator is allowed to directly conduct
investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC
securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities
business activities to foreign securities regulators.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result, our public shareholders
may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or
controlling shareholders than they would as public shareholders of a company incorporated in the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>China&#8217;s economic, political and social
conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A substantial portion of our
operations are conducted in China, and a significant portion of our net revenues are derived from customers where the contracting entity
is located in China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may
undertake are subject, to a significant extent, to economic, political and legal developments in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">China&#8217;s economy differs
from the economies of most developed countries in many respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the
past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our services
and products depend, in large part, on economic conditions in China. Any slowdown in China&#8217;s economic growth may cause our potential
customers to delay or cancel their plans to purchase our services and products, which in turn could reduce our net revenues.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although China&#8217;s economy
has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to
play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant
control over China&#8217;s economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these
policies, laws and regulations could adversely affect the economy in China and could have a material adverse effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The PRC government has implemented
various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources,
which have for the most part had a positive effect on our business growth. However, we cannot assure you that the PRC government will
not repeal or alter these measures or introduce new measures that will have a negative effect on us. China&#8217;s social and political
conditions may also not be as stable as those of the United States and other developed countries. Any sudden changes to China&#8217;s
political system or the occurrence of widespread social unrest could have a material adverse effect on our business and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the year ended December
31, 2020, we derived about 20.3% of our revenues from customers located in India. In recent years, skirmishes occurred over the Sino-Indian
border and the relationship between the two countries has been in distress. Although there had been no official statements from either
governments that directly affected commercial activities between the two countries, tension may escalate in the future to have a negative
impact on our businesses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to social unrest in Hong
Kong SAR throughout 2019 which also extended into 2020, China passed a new national security law for Hong Kong which became effective
on June 30, 2020. In reaction, the United States has imposed sanctions against Hong Kong&#8217;s chief executive and ten other senior
officials. Although the U.S. sanctions so far do not implicate any commercial activities involving Hong Kong, it is an area of concern
if more sanctions from the U.S. may impact our Company&#8217;s ability to maintain a sound business relationship with our customers in
the U.S.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Uncertainties with respect to the PRC legal
system could harm us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operations in China are
governed by PRC government laws and regulations. The PRC legal system is a civil law system based on written statutes. Unlike common law
systems, prior court decisions have limited precedential value. Borqs Beijing is generally subject to laws and regulations applicable
to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises, and our other wholly-owned subsidiaries
in China may be subject to certain laws and regulations in connection with investments made by foreign-invested enterprises.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since 1979, PRC legislation
and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China
has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume
of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.
In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely
basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until
sometime after the violation. Moreover, some regulatory requirements issued by certain PRC government authorities may not be consistently
applied by other government authorities, including local government authorities, thus making strict compliance with all regulatory requirements
impractical, or in some circumstances, impossible. Any litigation in China may be protracted and result in substantial costs and diversion
of resources and management attention.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, some of the
PRC laws and regulations governing our business operations in China are vague and their official interpretation and enforcement may involve
substantial uncertainty. These include, but are not limited to, laws and regulations governing our business and the enforcement and performance
of our contractual arrangements in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. Despite
their uncertainty, we will be required to comply.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Recent trade policy initiatives announced
by the United States administration against the PRC may adversely affect our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 15, 2020, the United
States and China executed an enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China&#8217;s
economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and
foreign exchange. The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S.
goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt
and effective implementation and enforcement. The United States agreed to modify its Section 301 tariff actions in a significant way.
The United States first imposed tariffs on imports from China based on the findings of the Section 301 investigation on China&#8217;s
acts, policies, and practices related to technology transfer, intellectual property, and innovation. The United States will be maintaining
25 percent tariffs on approximately $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of Chinese
imports.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, political tensions
between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, tensions over Taiwan
sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the PRC central
government, the executive orders issued by former U.S. President Donald J. Trump in August 2020 that prohibit certain transactions with
certain Chinese companies, and various restrictions related to the Chinese semiconductor industry imposed by the U.S. government. Against
this backdrop, China has implemented, and may further implement, measures in response to the changing trade policies, treaties, tariffs
and sanctions and restrictions against Chinese companies initiated by the U.S. government.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our subsidiaries in China are subject to
restrictions on making dividends and other payments to it or any other affiliated company.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a holding company and
may rely on dividends paid by our PRC subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions
to 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
regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance
with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries are required to set aside at least 10% of
our after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of our registered capital. Appropriations
to the employee welfare funds are at the discretion of the board of directors of Borqs Beijing. These reserves are not distributable as
cash dividends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, under the PRC
Enterprise Income Tax Law, or the EIT Law, which became effective on January 1, 2008, dividends paid to us by our PRC subsidiaries are
subject to withholding tax. Currently, the withholding tax rate is 10.0% (subject to reductions by the relevant tax treaties, if applicable).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, if our PRC subsidiaries
incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other
payments to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, our PRC subsidiaries
have not paid dividends to us out of their accumulated profits. In the future, we do not expect to receive dividends from our PRC subsidiaries
because the accumulated profits of these PRC subsidiaries are expected to be used for their own business or expansions. Any limitation
on the ability of our PRC subsidiaries to distribute dividends or other payments to us could materially and adversely limit our ability
to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our
business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The discontinuation of any of the preferential
tax treatments currently available to our PRC subsidiaries could materially increase our tax liabilities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Preferential tax treatments
and incentives granted to our PRC subsidiaries by PRC governmental authorities are subject to review and may be adjusted or revoked at
any time in the future. The discontinuation or revocation of any preferential tax treatments and incentives currently available to them
will cause their effective tax rate to materially increase, which will decrease our net income and may adversely affect our financial
condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face uncertainty with respect to indirect
transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 3, 2015, the State
Administration of Taxation (the &#8220;SAT&#8221;) issued a Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect
Transfer of Properties by Non-Tax Resident Enterprises, or Public Notice 7, where a non-resident enterprise transfers taxable assets,
through the offshore transfer of a foreign intermediate holding company, the non-resident enterprise, being the transferor, maybe subject
to PRC enterprise income tax, if the indirect transfer is considered to be an arrangement which does not have a reasonable commercial
purpose to circumvent enterprise income tax payment obligations. In addition, Public Notice 7 further provides certain criteria on how
to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of
equity through a public securities market. Public Notice 7 also brings challenges to both the foreign transferor and transferee (or other
person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an &#8220;indirect transfer&#8221;
by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise
being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a &#8220;substance over form&#8221; principle, the PRC tax authority may re-characterize such indirect transfer
as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result, gains derived
from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for
the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10% for the transfer of equity interests in a
PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails
to withhold the taxes and the transferor fails to pay the taxes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 17, 2017, the SAT
issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-Resident Enterprises, or Announcement 37, which
became effective on December 1, 2017. The Announcement 37 further clarifies the practice and procedure of the withholding of non-resident
enterprise income tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We face uncertainties with
respect to the reporting and consequences of private equity financing transactions, share exchange or other transactions involving the
transfer of our ordinary shares by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident
companies or other taxable assets by us. We and other non-resident enterprises in our group may be subject to filing obligations or being
taxed if we and other non-resident enterprises affiliated with us are transferors in such transactions, and may be subject to withholding
obligations if we and other non-resident enterprises affiliated with us are transferees in such transactions, under Public Notice 7 and
Announcement 37. For the transfer of shares in us by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested
to assist in the filing under Public Notice 7 and Announcement 37. As a result, we may be required to expend valuable resources to comply
with Public Notice 7 and Announcement 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these
circulars, or to establish that we and other non-resident enterprises affiliated with us should not be taxed under these circulars. The
PRC tax authorities have the discretion under Public Notice 7 and Announcement 37 to make adjustments to the taxable capital gains based
on the difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make
adjustments to the taxable income of the transactions under Public Notice 7 and Announcement 37, our income tax costs associated with
such transactions will be increased in the event that we are a transferee of such transactions, which may have an adverse effect on our
financial condition and results of operations. Heightened scrutiny over acquisition transactions by the PRC tax authorities may also have
a negative impact on potential acquisitions we may pursue in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may not be able to obtain certain treaty benefits on dividends
paid by our PRC subsidiary to us through our Hong Kong Subsidiary.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the EIT Law, dividends
generated from retained earnings after January 1, 2008 from a PRC company to a foreign parent company are subject to a withholding tax
rate of 10.0% unless the foreign parent&#8217;s jurisdiction of incorporation has a tax treaty with China that provides for a preferential
withholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance
of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income or the Hong Kong Tax Treaty, which became effective
on August 21, 2006, a company incorporated in Hong Kong, such as Borqs Hong Kong, will be subject to withholding income tax at a rate
of 5% on dividends it receives from our PRC subsidiary if it holds a 25.0% or more interest in that particular PRC subsidiary at all times
within the 12-month period immediately preceding the distribution of dividends and be a &#8220;beneficial owner&#8221; of the dividends.
In February 2018, the SAT issued the <i>Announcement on Issues Relating to Beneficial Owners under Tax Treaties</i>, or the SAT Announcement
9, which became effective from April 1, 2018 and supersedes the <i>Notice on Interpretation and Determination of Beneficial Owners under
Tax Treaties</i> issued by the SAT on October 27, 2009 (or the Circular 601) and the <i>Announcement Regarding Recognition of Beneficial
Owners under Tax Treaties </i>released by the SAT on June 29, 2012 (or the Announcement 30). Pursuant to Announcement 9, applicants who
intend to prove their status of the &#8220;beneficial owner&#8221; shall submit the relevant documents to the relevant tax bureau according
to the <i>Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers&#8217; Enjoyment of the Treatment under
Tax Agreements</i> and the SAT Announcement 9. &#8220;Beneficial Owners&#8221; are residents who have ownership and the right to dispose
of the income or the rights and properties giving rise to the income. These rules also set forth certain adverse factors against the recognition
of a &#8220;Beneficial Owner&#8221;, such as not carrying out substantive business activities. Whether a non-resident enterprise may obtain
tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC tax authority and will be determined by the
PRC tax authority on a case-by-case basis. SAT Announcement 9 further provides that a comprehensive analysis should be made when determining
the beneficial owner status based on various factors that supported by various types of documents including the articles of association,
financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures,
functions and risk assumption as well as relevant contracts and other information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2015, the SAT promulgated
the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or SAT Circular 60, which became effective
on November 1, 2015. SAT Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant
tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises may, if they determine by self-assessment
that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply for the reduced withholding tax rate, and file necessary
forms and supporting documents when performing tax filings, which will be subject to post-filing examinations by the relevant tax authorities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result, although our
PRC subsidiary, Borqs Beijing, is currently wholly owned by Borqs Hong Kong, we cannot assure you that we would be entitled to the tax
treaty benefits and enjoy the favorable 5.0% rate applicable under the Hong Kong Tax on dividends. If Borqs Hong Kong cannot be recognized
as the beneficial owner of the dividends to be paid by our PRC subsidiaries to us, such dividends will be subject to a normal withholding
tax of 10% as provided by the EIT Law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Restrictions on foreign currency may limit
our ability to receive and use our revenue effectively.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The PRC government imposes
controls on the conversion of the Renminbi into foreign currencies and, in certain cases, the remittance of foreign currency out of China.
We receive part of our revenue in Renminbi. Under our current corporate structure, our British Virgin Islands holding company primarily
relies on dividend payments from our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have. Under existing
PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related
foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange
(&#8220;SAFE&#8221;), by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without
prior approval of SAFE, accumulated after-tax profits generated from the operations of Borqs Beijing in China may be used to pay dividends
to us. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into
foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As
a result, we need to obtain approval from SAFE to use cash generated from the operations of our PRC subsidiaries to pay off any debt in
a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency
other than Renminbi. The PRC government may at our discretion restrict access to foreign currencies for current account transactions in
the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency
demands, we may not be able to pay dividends in foreign currencies to our shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fluctuations in the value of the RMB may
have a material adverse effect on your investment.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of the RMB against
the U.S. Dollar and other currencies is affected by, among other things, changes in China&#8217;s political and economic conditions and
China&#8217;s foreign exchange policies. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi
to the U.S. Dollar, and the RMB appreciated more than 20.0% against the U.S. Dollar over the following three years. However, the People&#8217;s
Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy
goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. Dollar had been stable and traded
within a narrow band. However, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem
with the U.S. Dollar. Since June 2010, the Renminbi has fluctuated against the U.S. Dollar, at times significantly and unpredictably,
and in recent months the RMB has depreciated significantly against the U.S. Dollar. It is difficult to predict how market forces or PRC
or U.S.&#160;government policy may impact the exchange rate between the RMB and the U.S. Dollar in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Approximately half of our
revenues and costs are denominated in RMB. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenues,
earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars. For example, an
appreciation of RMB against the U.S.&#160;dollar would make any new RMB denominated investments or expenditures more costly to us, to
the extent that it needs to convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar would also
result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial
assets into RMB, as RMB is our reporting currency. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly
reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ordinary shares. Furthermore,
a significant depreciation of the RMB against the U.S. dollar may have a material adverse impact on our cash flow in the event we need
to convert our RMB into U.S. dollars to repay our U.S. dollar denominated payment obligations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>PRC regulations relating to the establishment
of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or
penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries&#8217; ability to increase their
registered capital or distribute profits to us, or may otherwise adversely affect us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SAFE issued the Notice
on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round-Trip Investment Activities of Domestic Residents
Conducted via Offshore Special Purpose Companies on October 26, 2005, or Circular 75, requiring PRC residents, including PRC resident
individuals and PRC companies, to register with the local SAFE branch before establishing or controlling any company outside of China
for the purpose of capital financing with assets or equities of PRC companies owned by such PRC residents, referred to in the notice as
an &#8220;offshore special purpose vehicle.&#8221; The PRC resident individuals include not only PRC citizens, but also foreign natural
persons who habitually reside in China due to economic interests. SAFE promulgated the Circular on Relevant Issues Concerning Foreign
Exchange Control on Domestic Residents&#8217; Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles,
or Circular 37, on July 4, 2014, which replaced the Circular 75. Circular 37 requires PRC residents to register with local branches of
SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and
financing, with such PRC residents&#8217; legally owned assets or equity interests in domestic enterprises or offshore assets or interests,
referred to in Circular 37 as a &#8220;special purpose vehicle.&#8221; Under Circular 37, a PRC resident who is a foreign nature person
is not required to complete the registration if he/she uses assets outside China or equity interests in offshore entities to special purpose
vehicles. The term &#8220;control&#8221; under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making
rights acquired by the PRC residents in the offshore special purpose vehicles or PRC companies by such means as acquisition, trust, proxy,
voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the registration in the
event of any changes with respect to the basic information of the special purpose vehicle, such as changes in a PRC resident individual
shareholder, name or operation period; or any significant changes with respect to the special purpose vehicle, such as increase or decrease
of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. If the shareholders of
the offshore holding company who are PRC residents do not complete their registration with the local SAFE branches, the PRC subsidiaries
may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the offshore
company, and the offshore company may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover,
failure to comply with SAFE registration and amendment requirements described above could result in liability under PRC law for evasion
of applicable foreign exchange restrictions. On February 28, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign
Exchange Administration Policy on Direct Investment, or Circular 13, which became effective on June 1, 2015. In accordance with Circular
13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct
investment, including those required under the Circular 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision
of SAFE, directly examine the applications and conduct the registration.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> We
requested all of our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners
fall within the ambit of Circular 37 and Circular 13 and to register with the local SAFE branch as required under Circular 37 and Circular
13 as applicable. As of the date of this report, we are aware that a few of our natural person shareholders who are not PRC citizens may
otherwise be deemed as PRC residents pursuant to the definitions under the SAFE regulations, but we are not aware that any of them uses
assets inside China or equity interest in PRC companies to invest in the Company. Before the issuance of Circular 37, we had attempted
to submit applications to the Beijing branch of SAFE for such individual shareholders in accordance with Circular 75, but those applications
were not accepted by the Beijing branch of SAFE because those individuals are not PRC citizens. After Circular 37 became effective, we
understand these individuals are not required to conduct the registrations since they do not use assets within China or equity interests
in PRC companies to invest in the Company. We cannot assure you, however, that the SAFE&#8217;s opinion will be the same as our opinion
and all of these individuals can successfully complete required filings or updates on a timely manner, or at all in the event these individuals
required to conduct the filings. Besides, we have issued and may in future issue shares to certain PRC citizens for the purpose of acquisition
of other companies and we have or will request them to register with the local SAFE branch as required under Circular 37 and Circular
13. We cannot assure you, however, that the all of these individuals can successfully complete required filings or updates on a timely
manner, or at all. Furthermore, as there is uncertainty concerning the reconciliation of the new regulations with other approval requirements,
it is unclear how these regulations, and any further regulation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant government authorities. We can provide no assurance that we currently are, and we will in the
future continue to be, fully informed of identities of all our shareholders or beneficial owners who are PRC residents, and we cannot
provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain
or update any applicable registrations or comply with other requirements required by Circular 37 and Circular 13 or other related rules
in a timely manner. Any failure or inability by any of our shareholders or beneficial owners who are PRC residents to comply with SAFE
regulations may subject them to fines or other legal sanctions, such as potential liability for our PRC subsidiaries and, in some instances,
for their legal representatives and other liable individuals, as well as restrictions on our ability to contribute additional capital
into our PRC subsidiaries or our PRC subsidiaries&#8217; ability to distribute dividends to, or obtain foreign-exchange-denominated loans
from our offshore holding companies. As a result, our business operations and our ability to make distributions to you could be materially
and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with PRC regulations regarding
the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal
or administrative sanctions.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2006, the People&#8217;s
Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, which set forth the respective requirements
for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account.
In January 2007, SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among
other things, specified approval requirements for certain capital account transactions such as a PRC citizen&#8217;s participation in
the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In February 2012, SAFE promulgated the
Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas
Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for
Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued
by SAFE in March 2007. Under these rules, PRC residents who participate in stock incentive plans in an overseas publicly-listed company
are required to register with SAFE or our local branches and complete certain other procedures. Participants of a stock incentive plan
who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another
qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock
incentive plan on behalf of our participants. Such participants must also retain an overseas entrusted institution to handle matters in
connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition,
the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the
stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We and our PRC resident employees
who participate in our employee stock incentive plans are subject to these regulations. If we or our PRC option grantees fail to comply
with these regulations, we or our PRC option grantees may be subject to fines and other legal or administrative sanctions. We started
to process the SAFE application for our employee stock option plan during fiscal year 2021. The application is still pending as of December
31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>PRC regulations establish complex procedures
for some acquisitions conducted by foreign investors, which could make it more difficult for us to pursue growth through acquisitions
in China.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Regulations on Mergers
and Acquisitions of Domestic Enterprises by Foreign Investors, adopted by six PRC regulatory agencies in August 2006 and amended in June
2009, among other things, established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time-consuming and complex. In addition, the Implementing Rules Concerning Security Review on the Mergers and Acquisitions
by Foreign Investors of Domestic Enterprises, issued by the Ministry of Commerce in August 2011, specify that mergers and acquisitions
by foreign investors involved in &#8220;an industry related to national security&#8221; are subject to strict review by the Ministry of
Commerce, and prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy
or contractual control arrangement. We believe that our business is not in an industry related to national security, but it cannot preclude
the possibility that the Ministry of Commerce or other government agencies may publish explanations contrary to our understanding or broaden
the scope of such security reviews in the future, in which case our future acquisitions in the PRC, including those by way of entering
into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Moreover, the Anti-Monopoly Law
requires that the Ministry of Commerce be notified in advance of any concentration of undertaking if certain filing thresholds are triggered.
We may grow our business in part by directly acquiring complementary businesses in China. Complying with the requirements of the laws
and regulations mentioned above and other PRC regulations to complete such transactions could be time-consuming, and any required approval
processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions,
which could affect our ability to expand our business or maintain our market share. Our ability to expand our business or maintain or
expand our market share through future acquisitions would as such be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Substantial uncertainties exist with respect
to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability
of our current corporate structure, corporate governance and business operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ministry of Commerce (&#8220;MOFCOM&#8221;)
published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of
existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.
The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in
line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and
domestic investments. A draft Foreign Investment Law drafted by the MOFCOM and the National Development and Reform Commission, or the
NDRC, has been included in the list of draft laws submitted to the Standing Committee of the National People&#8217;s Congress for deliberation
under the 2018 Legislation Plan of the State Council. However, it is uncertain when the draft would be signed into law and whether the
draft version submitted for deliberation or the final version would have any substantial changes from the draft version published by the
MOFCOM. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure,
corporate governance and business operations in many aspects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Among other things, the draft
Foreign Investment Law expands the definition of foreign investment and introduces the principle of &#8220;actual control&#8221; in determining
whether a company should be treated as a foreign-invested enterprise, or a FIE. According to the definition set forth in the draft Foreign
Investment Law, FIEs refer to enterprises established in China pursuant to PRC law that are solely or partially invested by foreign investors.
The draft Foreign Investment Law specifically provides that entities established in China (without direct foreign equity ownership) but
&#8220;controlled&#8221; by foreign investors, through contract or trust for example, will be treated as FIEs. Once an entity falls within
the definition of FIE, it may be subject to foreign investment &#8220;restrictions&#8221; or &#8220;prohibitions&#8221; set forth in a
&#8220;negative list&#8221; to be separately issued by the State Council later. If a FIE proposes to conduct business in an industry subject
to foreign investment &#8220;restrictions&#8221; in the &#8220;negative list,&#8221; the FIE must go through a market entry clearance
by the Ministry of Commerce before being established. A FIE is prohibited from conducting business in an industry subject to foreign investment
&#8220;prohibitions&#8221; in the &#8220;negative list&#8221;. However, a FIE, during the market entry clearance process, may apply in
writing to be treated as a PRC domestic enterprise if its foreign investor(s) is/are ultimately &#8220;controlled&#8221; by PRC government
authorities and its affiliates and/or PRC citizens. In this connection, &#8220;control&#8221; is broadly defined in the draft law to cover
the following summarized categories: (i)&#160;holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50%
of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision
making bodies, or having the voting power to exert material influence on the board, the shareholders&#8217; meeting or other equivalent
decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject
entity&#8217;s operations, financial matters or other key aspects of business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The &#8220;variable interest
entity&#8221; structure, or VIE structure, has been adopted by many PRC-based companies, including us with respect to our MVNO business,
to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under
the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs,
if they are ultimately &#8220;controlled&#8221; by foreign investors. Therefore, for any companies with a VIE structure in an industry
category that is included in the &#8220;negative list&#8221; as restricted industry, the VIE structure may be deemed legitimate only if
the ultimate controlling person(s) is/are of PRC nationality (either PRC government authorities and its affiliates or PRC citizens). Conversely,
if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any
operation in the industry category on the &#8220;negative list&#8221; without market entry clearance may be considered as illegal.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The draft Foreign Investment
Law has not taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, whether or not
these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point. Moreover, it is uncertain
whether the telecommunication business, in which our variable interest entity operates, will be subject to the foreign investment restrictions
or prohibitions set forth in the &#8220;negative list&#8221; to be issued. If the enacted version of the Foreign Investment Law and the
final &#8220;negative list&#8221; mandate further actions, such as Ministry of Commerce market entry clearance, to be completed by companies
with existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The draft Foreign Investment
Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance,
the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the
applicable FIEs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Aside from investment implementation
report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is
mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant
with this information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the
persons directly responsible may be subject to criminal liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The enforcement of the labor laws and other
labor-related regulations in the PRC may adversely affect our results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 29, 2007, the Standing
Committee of the National People&#8217;s Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008 and
was revised on December 28, 2012. The Labor Contract Law introduces specific provisions related to fixed-term employment contracts, part-time
employment, probation, consultation with labor union and employee assemblies, employment without a written contract, dismissal of employees,
severance, and collective bargaining, which together represent enhanced enforcement of labor laws and regulations. According to the Labor
Contract Law, an employer is obliged to sign an unlimited-term labor contract with any employee who has worked for the employer for ten
consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into
twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. The employer must pay severance to an
employee where a labor contract is terminated or expires, with certain exceptions. In addition, the government has continued to introduce
various new labor-related regulations after the effectiveness of the Labor Contract Law. Among other things, it is required that that
annual leave ranging from five to 15 days be made available to employees and that the employee be compensated for any untaken annual leave
days in the amount of three times of the employee&#8217;s daily salary, subject to certain exceptions. As a result of these regulations
designed to enhance labor protection and increasing labor costs in China, our labor costs have increased. In addition, as the interpretation
and implementation of these new regulations are still evolving, we cannot assure you that our employment practice will at all times be
deemed in compliance with the new regulations. If we are subject to severe penalties or incur significant liabilities in connection with
labor disputes or investigations, our business and results of operations may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our failure to make adequate contributions
to various employee benefit plans as required by PRC regulations may subject us to penalties.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Companies operating in China
are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds
and other welfare-oriented payment obligations. Our failure to make contributions to various employee benefit plans and to comply with
applicable PRC labor-related laws may subject us to late payment penalties. If we are subject to such penalties in relation to the underpaid
employee benefits, our financial condition and results of operations may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If the custodians or authorized users of
our controlling non-tangible assets, including corporate chops and seals, fail to fulfill their responsibilities or misappropriate or
misuse those assets, our business and operations could be materially and adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In China, a company chop or
seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Under PRC law, legal
documents for corporate transactions, including contracts and leases that our business relies upon, are executed using &#8220;corporate
chops,&#8221; which are instruments that contain either the official seal of the signing entity or the signature of a legal representative
whose designation is registered and filed with the State Administration for Industry and Commerce, or SAIC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our PRC subsidiaries generally
execute legal documents with corporate chops. One or more of our corporate chops may be used to, among other things, execute commercial
sales or purchase contracts, procurement contracts and office leases, open bank accounts, issue checks and to issue invoices. We believe
that it has sufficient controls in place over access to and use of the chops. Our chops, or chops, including the chops at headquarters
level and of each PRC subsidiary, are kept securely at our legal department under the direction of the executive officers at vice president
level or higher. Use of chops requires proper approvals in accordance with our internal control procedures. The custodian at our legal
department also maintains a log to keep a detailed record or each use of the chops.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">However, we cannot assure
you that unauthorized access to or use of those chops can be prevented. Our designated employees who hold the corporate chops could abuse
their authority by, for example, binding us to contracts against our interests or intentions, which could result in economic harm, disruption
or our operations or other damages to them as a result of any contractual obligations, or resulting disputes, that might arise. If the
party contracting with us asserted that we did not act in good faith under such circumstances, then we could incur costs to nullify such
contracts. Such corporate or legal action could involve significant time and resources, while distracting management from our operations.
In addition, we may not be able to recover corporate assets that are sold or transferred out of our control in the event of such a misappropriation
if a transferee relies on the apparent authority of the representative and acts in good faith.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a designated employee uses
a chop in an effort to obtain control over one or more of our PRC subsidiaries, we would need to take legal action to seek the return
of the applicable chop(s), apply for a new chop(s) with the relevant authorities or otherwise seek legal redress for the violation of
their duties. During any period where we lose effective control of the corporate activities of one or more of our PRC subsidiaries as
a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted and we could lose the economic
benefits of that aspect of our business. To the extent those chops are stolen or are used by unauthorized persons or for unauthorized
purposes, the corporate governance of these entities could be severely and adversely compromised and the operations of those entities
could be significantly and adversely impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Our Securities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If equity research analysts publish unfavorable
commentary or downgrade our ordinary shares, the price and trading volume of our ordinary shares could decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The trading market for our
ordinary shares could be affected by whether equity research analysts publish research or reports about us and our business. We cannot
predict at this time whether any research analysts will publish research and reports on us and our ordinary shares. If one or more equity
analysts do cover us and our ordinary shares and publish research reports about us, the price of our stock could decline if one or more
securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or
our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any of the analysts who
elect to cover us downgrades our stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could
lose visibility in the market, which in turn could cause our ordinary shares price or trading volume to decline and our ordinary shares
to be less liquid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Future equity issuances could result in
dilution, which could cause our ordinary shares price to decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are generally not restricted
from issuing additional ordinary shares, and there is no limit to the number of ordinary shares that we are authorized to issue by our
memorandum and articles of association. We may issue additional ordinary shares in the future pursuant to current or future equity compensation
plans, upon conversions of preferred shares or debt, upon exercise of warrants or in connection with future acquisitions or financings.
If we choose to raise capital by selling our ordinary shares for any reason, the issuance would have a dilutive effect on the holders
of our ordinary shares and could have a material negative effect on the market price of our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Future sales of our ordinary shares by existing
shareholders may cause our ordinary shares price to decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our existing shareholders
sell, or indicate an intent to sell, amounts of our ordinary shares in the public market after the contractual lock-up and other legal
restrictions on resale lapse, the trading price of our ordinary shares could decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may issue additional preferred
shares in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our
ordinary shares, which could depress the price of our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board also has the power,
without shareholder approval, to set the terms of any series of preferred shares that may be issued, including voting rights, dividend
rights and preferences over our ordinary shares with respect to dividends or in the event of a dissolution, liquidation or winding up
and other terms. In the event that we issue preferred shares in the future that have preference over our ordinary shares with respect
to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute
the voting power of our ordinary shares, the rights of the holders of our ordinary shares or the market price of our ordinary shares could
be adversely affected. In addition, the ability of our Board to issue preferred shares without any action on the part of our shareholders
may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span><b><i>Global
economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and
conflicts, such as the conflict between Russia and Ukraine, could make it more difficult for us to access financing and could adversely
affect our business and operations.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span>Our
abilities to raise capital and operate our business are subject to the risk of adverse changes in the market value of our securities.
Periods of macroeconomic weakness or recession and heightened market volatility caused by adverse geopolitical developments could increase
these risks, potentially resulting in adverse impacts on our ability to raise further capital on favorable terms. The impact of geopolitical
tension, such as a deterioration in the relationships among the US, China, India and European countries or an escalation in conflict between
Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the US and/or
other countries against governmental or other entities in, for example, Russia, also could lead to disruption, instability and volatility
in global trade patterns, which may in turn impact our ability to source necessary reagents, raw materials and other inputs for our operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be classified as a passive foreign
investment company, which could result in adverse U.S. federal income tax consequence to U.S. holders of our ordinary shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not made a determination
as to whether we would be classified as a &#8220;passive foreign investment company,&#8221; or PFIC, for U.S. federal income tax purposes
for our preceding taxable year nor can we assure you that we will not be a PFIC for our current taxable year or any future taxable year.
A foreign (non-U.S) corporation will be considered a PFIC for any taxable year if either (1)&#160;at least 75% of its gross income is
passive income or (2)&#160;or least 50% of the value of its assets (generally based on an average of the quarterly values of the assets
during a taxable year) is attributable to assets that produce or are held for the production of passive income. PFIC status depends on
the composition of our assets and income and the value of our assets (including, among others, a pro rata portion of the income and assets
of each subsidiary in which we own, directly or indirectly, at least 25% (by value) of the equity interest) from time to time. Depending
on the amount of cash or cash equivalents we currently hold, which are generally treated as passive assets, and because the calculation
of the value of our assets may be based in part on the value of our ordinary shares, which is likely to fluctuate, we may be a PFIC for
any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. Holder (as defined in the section entitled &#8220;Taxation
&#8211; U.S. Federal Income Taxation &#8211; General&#8221;) held an ordinary share or warrant, certain adverse U.S. federal income tax
consequences could apply to such U.S. Holder. For more information, see &#8220;Taxation &#8211; U.S. Federal Income Taxation &#8211; U.S.
Holders &#8211; Passive Foreign Investment Company Rules.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 4. INFORMATION ON THE COMPANY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Borqs Technologies, Inc. (formerly
known as &#8220;Pacific Special Acquisition Corp.&#8221;, and hereinafter referred to as the &#8220;Company&#8221; &#8220;Borqs Technologies&#8221;,
&#8220;Borqs&#8221; or &#8220;we&#8221;) was incorporated in the British Virgin Islands on July 1, 2015. The Company was formed for the
purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the
assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or
entities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 18, 2017, the Company
acquired 100% of the equity interest of BORQS International Holding Corp. (&#8220;Borqs International&#8221;) and its subsidiaries (collectively
referred to as &#8220;Borqs Group&#8221; or together with the BVI parent company collectively referred to as the &#8220;Group&#8221;)
in an all-stock merger transaction. Concurrent with the completion of the acquisition of Borqs International, the Company changed its
name from &#8220;Pacific Special Acquisition Corp.&#8221;, to &#8220;Borqs Technologies, Inc.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have employees i) with
the majority of them in Bangalore, India engaged in software engineering in the mobile communication industry, ii) in Beijing, China engaged
in hardware supply chain management and manufacturing, and iii) in Hawaii, Wisconsin and California of the U.S. engaged in design and
installation of solar power and storage solutions for the residential and commercial markets. Our parent company is in the British Virgin
Islands and our agent in the BVI is Kingston Chambers and their address is P.O. Box 173, Road Town, Tortola, British Virgin Islands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a global leader in
software, development services and products providing customizable, differentiated and scalable Android-based smart connected devices
and cloud service solutions. We are a leading provider of commercial grade Android platform software for mobile chipset manufacturers,
mobile device OEMs and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer
applications. We acquired 51% ownership in HHE on October 19, 2021, which designs and commercializes solar power and energy storage solutions
to residential and commercial customers in the United States. As of December 31, 2022, we are in the process of divesting our interest
in HHE as mandated by CFIUS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Connected Solutions business
unit (the &#8220;Connected Solutions BU&#8221;) works closely with chipset partners to develop new connected devices. Borqs developed
the reference Android software platform and hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions
customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment
needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software
and BorqsWare Server Software. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things
(&#8220;IoT&#8221;) devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop
their own mobile end-to-end services for their devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Previously we operated a mobile
virtual network operator (&#8220;MVNO&#8221;) business via a variable interest entity (&#8220;VIE&#8221;) in China. This business was
sold on October 29, 2020; prior to its disposition we accounted for its activities as discontinued operations and its assets and liabilities
were listed as assets and liabilities held for sale. The sale of this business unit was final and completed as of October 29, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the years ended December
31, 2020, 2021 and 2022, Borqs generated 98.4%, 78.2% and 69.9% of its Connected Solutions BU revenues from customers headquartered outside
of China and 1.6%, 21.8% and 30.1%&#160;from customers headquartered in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have dedicated significant
resources to research and development, and have research and development centers in Beijing, China and Bangalore, India. As of December
31, 2022, 208 out of the 315 employees and contractors were technical professionals dedicated to platform research and development and
product specific customization in India and China.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following customers accounted
for near 10% or more of our total revenues, for the years indicated:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; width: 9%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">2022</span></td><td style="font-family: Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; width: 77%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">Metro
    (Suzhou) Technologies Co Ltd</span></td><td style="font-family: Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">30.1</span></td><td style="font-family: Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">GreatCall,
    Inc.</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">19.9</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">ECOM
    Instruments</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">14.1</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; ">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">2021</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">GreatCall,
    Inc.</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">25.1</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">ECOM
    Instruments</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">24.5</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">Qualcomm
    India Ltd.</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">16.4</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; ">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">2020</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">GreatCall,
    Inc.</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">41.9</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">ECOM
    Instruments</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">23.1</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">Qualcomm
    India Ltd.</span></td><td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif">14.4</span></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif">%</span></td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>History and Development of the Company</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Corporate Organizational Chart</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following diagram illustrates
our current corporate structure and the place of formation, ownership interest and affiliation of each of our subsidiaries and un-consolidated
minority interests in certain entities as of the date of this report.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_001.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Borqs Entities Including Wholly-Owned Subsidiaries
and Consolidated Affiliated Entities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Technologies, Inc. (BRQS) &#8211; the BVI parent holding company and the listing company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs International Hold Corp (BHolding) &#8211; the Cayman Island holding company that was the parent company prior to our listing on NASDAQ in August 2017.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 49; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Technologies USA, Inc. (BTUSA) &#8211; a US entity responsible for commercial contracts with customers that require a US entity for contractual basis.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Technologies (HK) Limited (BTHK&#65289;&#8211; a Hong Kong entity responsible for signing commercial contracts that do not use Chinese RMB or Indian Rupee. This entity is currently idle. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Hong Kong Limited (BHK) &#8211; a Hong Kong entity that holds 60% of the shares of Borqs Technologies Ltd (BTCHN), holds 60% of the shares of Borqs KK (BKK), and holds 100% of Borqs Chongqing Ltd (BCQ) and 100% of Borqs Beijing Ltd (BBJ). This entity signs a majority of our commercial contracts with international customers. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Software Solutions Private Ltd (BIN) &#8211; an Indian entity responsible for our software engineering R&amp;D and for signing commercial contracts that require the Indian Rupee currency. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Beijing Ltd. (BBJ) &#8211; a wholly foreign owned enterprise, a &#8220;WFOE&#8221; as it is called, in China. This entity is responsible for the general administration and hardware R&amp;D purposes. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Chongqing Ltd. (BCQ) &#8211; a wholly owned foreign enterprise in China that is a holding company for Beijing Big Cloud Century Technology Ltd, and it is responsible for the purchasing and management of the component supplies for the manufacturing of our products. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beijing Big Cloud Century Technology Ltd. (BC-Tech) &#8211; an entity in China and is a holding company for Beijing Big Cloud Network Technology Co. Ltd and Beijing Borqs Software Technology Co. Ltd. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="text-align: justify; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beijing Borqs Software Technology Co. Ltd. (BSW) &#8211; an entity in China and is responsible for our software R&amp;D. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="text-align: justify; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beijing Big Cloud Network Technology Co. Ltd (BC-NW) &#8211; an entity in China that was formerly the holding company of our VIE entities engaged in the business of mobile virtual network operator (&#8220;MVNO&#8221;). The VIE entities and the MVNO business was sold as of October 2020. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="text-align: justify; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Technologies Ltd. (BTCHN) &#8211; a Sino-foreign entity is in China for setting up a manufacturing facility in Huzhou, China, and is a holding company for Borqs Huzhou Ltd (BHZ). </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="text-align: justify; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs Huzhou Ltd. (BHZ) &#8211; an entity is in China and is responsible for operations of our hardware manufacturing activities in Huzhou, China. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 48px">&#160;</td>
    <td style="text-align: justify; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679; </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borqs KK (BKK) &#8211; an entity is in Japan and is responsible for sales activities in Japan. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have dedicated significant
resources to research and development, and have research and development centers in Bangalore, India and Beijing, China. As of December
31, 2022, out of our total employed headcount of 315 employees and contractors, 208 were technical professionals dedicated to platform
research and development and product specific customization.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For additional information,
see Note 1 in our consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Business Units</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We had two business units
(&#8220;BU&#8221;), Connected Solutions and Solar Power before the deconsolidation of HHE. And we have only one BU, Connected Solutions
as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Connected Solutions BU
develops wireless smart connected devices and cloud solutions. Borqs provides Connected Solutions&#8217; customers with customized, integrated,
commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare
software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The
BorqsWare Client Software platform consists of three major components: the latest commercial grade Android software that works with particular
mobile chipsets, functionality enhancements of the open source Android software and mobile operator required services. Based on the BorqsWare
Client Software platform, customers may require Borqs to provide further customization based on their specific market needs. The BorqsWare
Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (&#8220;IoT&#8221;) devices.
The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end
services for their devices. The BorqsWare Server Software provides software necessary for upgrades, charging and various APIs that enhance
the customers&#8217; services. Based on BorqsWare Server Software service platform, customers may require us to provide further customization
based on their specific needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Solar Power BU, HHE of
which we acquired 51% ownership in October 2021, is a Delaware limited liability company that brings state-of-the-art energy storage systems
to both residential and commercial markets. With operations in Hawaii, Wisconsin and California, HHE designs and develops proprietary
storage system and software and control platform solutions. The HHE team is made up of renewable energy industry veterans, engineering
and deploying energy storage systems that enable greater energy independence.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 13, 2022, Borqs
Technologies received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
(&#8220;CFIUS&#8221;) stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests and rights
in Holu Hou Energy LLC (&#8220;HHE&#8221;) due to HHE&#8217;s solar energy storage system and EnergyShare technology for Multi-Dwelling
Residential Units being deemed a potential national security risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 16, 2023, the Company
and HHE entered into a National Security Agreement (&#8220;NSA&#8221;) with the Department of Defense and Department of Treasury. The
NSA provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill
provisions which provide that the Company shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any
changes to the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession
of any assets of HHE. Further, upon the completion of the Divestment, the Company shall terminate or irrevocably waive any information,
consent, board appointment, board observer, or other governance rights held by the Company, except for any and all rights that are determined
by the U.S. Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the
Divestment: engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes;
assigning and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs&#8217;
administrative and technical influence over HHE; and creating a plan to divest all of Borqs&#8217; investment interests and rights in
HHE. Pursuant to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment
Trust Agreement (&#8220;DTA&#8221;) dated March 20, 2023 entered into between Borqs, HHE and a trustee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As above, the Solar Power
BU, a separate segment was deconsolidated on December 31, 2022, and reclassified as held for sale as of December 31, 2021 and 2022, for
the carrying amounts will be recovered principally through a sale and revenues and expenses related to HHE have been reclassified in the
accompanying consolidated financial statements as discontinued operations for fiscal 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Connected Solutions BU</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Connected Solutions BU
helps customers design, develop and realize the commercialization of their connected devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Ideation &amp; Design
&#8212;</i></b>&#160;Based on customer requirements on the type of connected device the customer want to have, we can help customers design
the product ID and user interface. We have the design engineering to provide 2D/3D rendering. The Company can provide physical mockup
with different color, material and finishes, so the customer can hold and &#8220;feel&#8221; the mockup before finalizing the product
ID.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Software IP Development
&#8212;</i></b>&#160;IoT devices are often highly customized and require special software to display the data (e.g. circular watch display
and user interface), to reduce the power consumption (e.g., a small battery in a wearable device), to perform specific functions (e.g.,
push-to-talk) and to connect to the mobile network. The Company has developed a large number of software libraries that can be reused
for various connected devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Product Realization
&#8212;</i></b>&#160;Some customers have limited hardware design capabilities. The Company has a strong hardware research and development
team to help customers to design the hardware, including the PCBA design and mechanical design. The Company can also provide turn-key
services to help customer to handle the manufacturing logistics (including supply chain and EMS management) in order to manufacture the
product. The Company has the experiences and resources to manage the factory supply chain, quality control and other manufacturing logistics.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Connected Solutions business
unit works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and
hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions customers with customized, integrated, commercial
grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software
platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare
Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (&#8220;IoT&#8221;) devices.
The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end
services for their devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Connected Solutions BU
has a global customer base covering the core parts of the Android platform value chain, including mobile chipset manufacturers, mobile
device OEMs and mobile operators. As of December 2018, Borqs has collaborated with six mobile chipset manufacturers and 29 mobile device
OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software
platform solutions are embedded in more than 17 million units worldwide.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Solar Power BU</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We acquired 51% controlling
interest in HHE as of October 19, 2021. HHE develops and commercializes solar power systems that consist of solar modules including solar
panels and electrical components, controllers, inverters and lithium based battery modules associated with the solar modules so as to
provide total independent energy solutions to our residential and commercial customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;HHE designs, develops,
integrates and installs solar power systems to the residential and commercial customers. The financial results of HHE from the date of
acquisition up to December 31, 2021 were consolidated into Borqs&#8217; financial statements. HHE recognizes revenues when the solar power
projects are fully completed. During the period of consolidation, no solar power projects were completed, and consequently no revenues
from HHE was recognized. The cash receipts from customers from ongoing projects and newly started projects were booked as deferred revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">HHE was deconsolidated on
December 31, 2022. Assets and liabilities related to HHE, which the Group acquired in October 2021 were reclassified as held for sale
as of December 31, 2021 and 2022, and revenues and expenses related to Solar Energy segment were reclassified as discontinued operations
for all periods presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Customers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s primary
customers are mobile chipset manufacturers, mobile device OEMs and mobile operators. For the year ended December 31, 2022, Metro (Suzhou)
Technologies Co Ltd, GreatCall, Inc., Qualcomm India Ltd and ECOM Instruments accounted for 30.1%, 19.9%, 16.5% and 14.1% of our net revenues,
respectively. For the year ended December 31, 2021, GreatCall, Inc., ECOM Instruments and Qualcomm India Ltd accounted for 25.1%, 24.5%
and 16.4% of our net revenues, respectively. For the year ended December 31, 2020, GreatCall, Inc., ECOM Instruments and Qualcomm India
Ltd accounted for 41.9%, 23.1% and 14.4% of our net revenues, respectively.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">
</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">
</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Connected Solutions BU
designs chipsets and related software for mobile connected devices. The Company outsources manufacturing of connected devices to third-party
factories. The Company sources components and raw materials from suppliers mainly in Asia, and consigns such components and raw materials
to other factories to manufacture and assemble. The Company serves as an original design manufacturer (ODM) of the products for its customers.
The Company sells the final products to its commercial customers. The Company&#8217;s commercial customers are responsible for marketing
and retail distribution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and Development</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has dedicated
significant resources to research and development, with research and development centers in Bangalore, India, Beijing, China and Wisconsin,
the United States. As of December 31, 2022, 208 of our 315 employees and contractors were technical professionals dedicated to platform
research and development and product specific customization. Technical professionals have diverse backgrounds and experience gained through
employment with leading mobile chipset designers and manufacturers, mobile device OEMs, internet content providers and other software
and hardware enterprises, and also solar energy usage, storage, load balancing and system controlling software systems.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">
</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s research
and development centers work together to develop core proprietary software, and each center focuses on project specific implementation
related to specific hardware platforms and customer specifications. The Company technical professionals are divided into two core groups,
one focused on our Android+ software platform solutions, and one focused on our Android+ service platform solutions. Each group is further
divided into sub-groups for platform development, system engineering and architecture, low-level software development, high-level application
development, program management, system testing and verification and software configuration management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current research and development
efforts are focused on developing the BorqsWare software and service platform solutions to improve and enhance the following aspects of
the Android platform:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A typical research and development
project is staffed with members of the sales team, a research and development team comprised of a project manager, a platform development
team, a customer development team and a system testing team, as well as finance personnel. At the beginning of a project, a member of
the sales team will work with a project manager to simultaneously track research and development and commercial milestones. The project
manager is responsible for ensuring the research and development milestones are achieved in a timely manner, including system testing,
and a member of the sales team is responsible for tracking sales milestones. Finance personnel review each invoice and determine the appropriate
accounting treatment under U.S. Generally Accepted Accounting Principles (&#8220;U.S. GAAP&#8221;). A typical research and development
project takes between six to nine months to complete. In general, a significant portion of each research and development project consists
of existing Android platform software and service solutions, while incorporating necessary customizations for a particular customer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Intellectual Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company regards patents,
copyrights, trademarks, software registrations, trade secrets and similar intellectual property as critical to its success. The Company
relies on a combination of trademark, copyright, patent, software registration and trade secret laws, and enters into confidentiality
agreements with employees and relevant third parties to protect our intellectual property rights. All employees enter into agreements
requiring them to keep confidential all proprietary and other information relating to customers, methods, technologies, business practices
and trade secrets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has been granted
133 patents in China and 8 patents in the United States as of December 31, 2022. The Company also has 83 software copyrights and 20 trademarks
registered in China. In addition, the Company has registered its domain name with various domain name registration services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Competition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company believes that
the marketplace for connected devices is highly fragmented, but that few are capable of providing an end-to-end solution with software,
hardware, product realization. The solar industry is anchored with several large companies while many small companies across the U.S.
also provide customized installations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The market for connected devices
and solar solutions is rapidly evolving, and in the future the Company may not be able to compete successfully against current and potential
competitors. The Company expects competition to intensify as new competitors enter the market, and as existing competitors attempt to
diversify and expand their software and service solutions offerings. The primary competitors for the Company include traditional hardware-centric
OEMs and software development companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Some of the Company&#8217;s competitors have significantly greater financial, technical, marketing, sales and other resources and significantly greater name recognition than we have.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Competitive Strengths</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the following factors
differentiate us from our competitors and contribute to our success:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Strategic relationships with leading
chipset vendors.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company works closely
with leading chipset vendors in their software development, including software for their latest state-of-the-art chipsets. The Company
develops connected device products and solutions based on these chipsets. These relationships enable the Company to develop a competitive
product portfolio.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Strong software capabilities
across core parts of the Android platform value chain drive a full suite of BorqsWare software and services platform solutions and a significant
time to market advantage for customers.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has focused on
building its innovative technology platform to serve customers across the core parts of the Android platform value chain. We believe the
Company was first to develop commercial grade software to support video telephony for Android. In collaboration with China Mobile, the
Company developed the base chipset software to deploy Android-based mobile devices to support China Mobile&#8217;s TD-SCDMA network.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Unique technologies in
our subsidiary&#8217;s solar solution, particularly in the battery management system provides a comparative advantage for our solar energy
plus storage systems.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our proprietary software and
battery management system enables reduction in hardware costs as compared to other systems with similar power output levels, especially
for multiple-unit residential applications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Global customer base and extensive
industry relationships</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company had more than
50 customers as of December 31, 2022, including some of the world&#8217;s leading companies in the mobile industry. Its diversified customer
base includes mobile chipset manufacturers, mobile device original equipment manufacturers (&#8220;OEMs&#8221;) and mobile operators.
Through 2021, the Company has collaborated with more than six mobile chipset manufacturers (including Intel, Qualcomm, Marvell) and 29
connected device OEMs (including LGE, Micromax, Acer, Motorola and Vizio) to commercially launch Android-based devices in 11 countries,
and more than 18 million mobile devices sold worldwide have BorqsWare software platform solutions embedded. Our products have been deployed
by more than 10 service providers (including AT&amp;T, China Mobile, Claro, Orange, Reliance Jio, Sprint, Verizon) on four continents.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Significant resources dedicated to
research and development; Patents</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company dedicated significant
financial and human resources to research and development needed to build a full suite of connected device software and service platform
solutions to address evolving customer needs across the core parts of the Android platform value chain.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Government Regulation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s operations
are subject to extensive and complex state, provincial and local laws, rules and regulations. The PRC government restricts or imposes
conditions on foreign investment in telecommunication business. Borqs International Holding Corp and its PRC subsidiaries are considered
foreign persons or foreign-invested enterprises under PRC foreign investment related laws. As a result, they are subject to PRC legal
restrictions on or conditions for foreign ownership of telecommunication business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 55; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Employees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had 315 employees and contractors worldwide including 194 in India, 80 in China and Hong Kong, and 41 international employees. None of
our employees are represented by a labor union. Out of our total headcount, 208 are engineers and technical staff engaged in R&amp;D and
design work.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company pays most of its
employees a base salary and performance-based bonuses, including annual incentive bonuses and project-based bonuses. It pays commissions
to sales personnel. Employees are also eligible to participate in the Company&#8217;s stock incentive program.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is required under
PRC laws and regulations to participate in a government-mandated, defined benefit plan for its full-time employees, pursuant to which
we provide social welfare benefits, such as pension, medical care, unemployment insurance, work-related injury insurance, maternity insurance
and employee housing fund. The Company employees are not covered by any collective bargaining agreement. The Company believes it has good
relations with its employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company uses a variety
of methods to recruit technical professionals to ensure that it has sufficient research and development and other expertise on an ongoing
basis, including the company website, an external online recruiting website, targeted technical forums, campus recruitment at leading
technical universities and institutions, job fairs and internal referrals from current employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company offers training
programs to its employees covering professional training such as training related to customer service and product management and technical
training such as training related to telephony and project management. The Company holds periodic workshops to enhance the leadership
skills of management personnel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Description of Properties</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s principal
executive offices are located in Hong Kong. The Company leased office and warehouse spaces pursuant to leases as described below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="border-bottom: black 1.5pt solid; width: 21%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Lease Expiration Date</b></span></td>
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  <tr style="background-color: rgb(204,238,255)">
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  <tr>
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  <tr style="background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company mostly subcontracts manufacturing
to other factories. At the Company&#8217;s Huzhou facility, there is an assembly line with capacity for half a million units per year
for small orders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Segments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
operate in one reportable segment, which is the Connected Solutions. See Note 2, Segment Reporting, of our notes to consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 56; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Geographic Concentration</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
the Company&#8217;s connected solutions net revenues from customers, in absolute amount and as a percentage of net revenues, based on
location of the customer&#8217;s headquarters.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s connected
solutions net revenues from customers with headquarters in the United States are attributed to its ongoing collaboration with a prominent
mobile chipset vendor and other mobile device OEMs. From 2020 to 2022, we engaged with one significant customer in India who continued
to place significant orders with us in all three years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Recent Developments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Senior Debt Purchased by LMFA Financing LLC</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company entered into Agreements
dated December 14, 2020 with Partners For Growth which was its senior lender and LMFA Financing LLC (&#8220;LMFA&#8221;), a Florida limited
liability company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA was committed to purchase up to
be approximately $18 million of debt in tranches, which when completed would eliminate substantially all of the debt with the Company&#8217;s
senior lender. LMFA would convert the purchased debt into common shares of the Company, pursuant to a court order that allows the conversion
shares to be issued as unrestricted securities in a transaction that is exempt from registration under Section 3(a)(10) of the Securities
Act of 1933, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of February 10, 2021, LMFA
has completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted into and sold all 22.73 million
shares of the Company&#8217;s ordinary shares. With the Company settling another $1.27 million of debt, accrued interest and applicable
fees directly with the senior lender by the issuance of 1.51 million shares on February 17, 2021 which the senior lender subsequently
sold, the Company&#8217;s defaulted Debts with the senior lender totaling $19.14 million have been eliminated since.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Convertible Notes Sold</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million (the &#8220;May 25 Notes&#8221;). The notes are due in
two years, have an annual interest rate of 10%, convertible into ordinary shares of Borqs at $0.44325 per share (post reverse split adjusted)
and has 100% warrant coverage with the warrants exercisable for cash or cashlessly at the closing bid price of 2 days prior to exercising
but not less than $0.41 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company signed agreements
with institutional and individual investors for sale of convertible notes on February 25, 2021 for $20 million (the &#8220;Feb 25 Notes&#8221;)
and on April 14, 2021 for $3 million (the &#8220;April 14 Notes&#8221;). The notes are due in two years, have an annual interest rate
of 8%, convertible into ordinary shares of Borqs at 10% discount from the market price and has 90% warrant coverage with the warrants
exercisable cashless or for cash at $2.222 per share for the Feb 25 Notes and $1.540 for the Apr 14 Notes. The conversion price is at
$1.539 per share for the Feb 25 Notes and $1.071 per share for the Apr 14 Notes, or at a one-time reset at 90% of the market price at
the time of effectiveness of the required registration statement, whichever is lower. One-third of the notes are sold at the execution
of definitive agreements and two-thirds of the notes were sold upon the effectiveness of a registration statement filed by the Company
and such effectiveness was declared by the SEC on May 3, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company sold convertible
notes on September 14, 2021 to institutional and individual investors for $13.575 million (the &#8220;Sep 14 Notes&#8221;). The notes
are due in two years, have an annual interest rate of 8%, convertible into ordinary shares of Borqs at 10% discount from the market price
and has 90% warrant coverage with the warrants exercisable cashless or for cash at $0.8682 per share. The conversion price is at $0.6534
per share, or at a one-time reset at 90% of the market price of the time of effectiveness of registration statement or when Rule 144 becomes
applicable, whichever is lower.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million. The notes are due in two years, have 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 90% of the closing bid
price of the ordinary shares on the date that such shares are first eligible to be sold, assigned or transferred under Rule 144 or Regulation
S, as applicable, whichever is lower but in no event at less than $0.10 per ordinary share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Proceeds will be used for
the procurement of orders the Company expects to receive from its customers in 2023 and also for development of the next generation 5G
products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Available Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our annual reports on Form&#160;20-F,
current reports on Form&#160;6-K, and other forms and periodic reports as a foreign private issuer, are available free of charge on our
website (<i>www.borqs.com</i>) as soon as reasonably practicable after we have electronically filed such materials with or furnished such
materials to the Securities and Exchange Commission. They are also available at <i>www.sec.gov</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 4A. UNRESOLVED STAFF COMMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following discussion of
the results of our operations and our financial condition should be read in conjunction with the financial statements and the notes to
those statements included in &#8220;Item 18. Financial Statements&#8221;. This discussion contains forward-looking statements that involve
risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements
as a result of many factors, including those set forth in &#8220;Item 3. Key Information&#8211;D. Risk Factors&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">References in this Annual
Report to &#8220;we,&#8221; &#8220;us&#8221; or the &#8220;Company&#8221; refer to Borqs Technologies, Inc. References to our &#8220;management&#8221;
or our &#8220;management team&#8221; refers to our officers and directors. The following discussion and analysis of the Company&#8217;s
financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained
elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Management&#8217;s Discussion and Analysis
of Financial Condition and Results of Operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Special Note Regarding Forward-Looking Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Annual Report includes
&#8220;forward-looking statements&#8221; within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of historical fact included in this Annual Report including,
without limitation, statements in this &#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations&#8221;
regarding the Company&#8217;s financial position, business strategy and the plans and objectives of management for future operations,
are forward-looking statements. Words such as &#8220;expect,&#8221; &#8220;believe,&#8221; &#8220;anticipate,&#8221; &#8220;intend,&#8221;
&#8220;estimate,&#8221; &#8220;seek&#8221; and variations and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future performance, but reflect management&#8217;s current beliefs,
based on information currently available. A number of factors could cause actual events, performance or results to differ materially from
the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could
cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section
of this Annual Report. The Company&#8217;s securities filings can be accessed on the EDGAR section of the SEC&#8217;s website at <i>www.sec.gov</i>.
Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Borqs Technologies, Inc. (&#8220;we&#8221;,
&#8220;the Company&#8221; or &#8220;Borqs&#8221;) is a company focused on software, development services and products providing customizable,
differentiated and scalable Android-based smart connected devices and cloud service solutions. We are a leading provider of commercial
grade Android platform software for mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as complete product
solutions of mobile connected devices for enterprise and consumer applications. In recent years, we have been awarded significant business
contracts from Intel and Qualcomm, leading global chipset manufacturers. Particularly, significant contracts from Qualcomm were awarded
to us in 2019, 2020 and also in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Company&#8217;s
acquisition of Borqs International Holding Corp (&#8220;Borqs International&#8221;) by way of merger, which completed on August 18, 2017,
Borqs International became a wholly-owned subsidiary of the Company, with the Company adopting the business of Borqs International and
its consolidated subsidiaries going forward and reporting the historical consolidated financial statements of Borqs International on future
SEC filings as those of the Company, which was renamed Borqs Technologies, Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Connected Solutions business
unit works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and
hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions customers with customized, integrated, commercial
grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software
platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare
Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (&#8220;IoT&#8221;) devices.
The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end
services for their devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the years ended December
31, 2020, 2021 and 2022, Borqs generated 98.4%, 78.2% and 69.9% of its connected solutions net revenues from customers headquartered outside
of China and 1.6%, 21.8%&#160;and 30.1%&#160;of its net revenues from customers headquartered within China.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We acquired 51% ownership
of HHE on October 19, 2021. HHE designs, develops, integrates and installs solar power systems to the residential and commercial customers
including solar panels and lithium battery based energy storage systems. HHE recognizes revenues when the solar power projects are fully
completed. The cash receipts from customers from ongoing projects and newly started projects were booked as deferred revenue. For the
year ended December 31, 2021, the financial results of HHE from the date of acquisition up to December 31, 2021 were consolidated into
Borqs&#8217; financial statements. During the period of consolidation in 2021, no solar power projects were completed, and consequently
no revenues from HHE was recognized. For the year ended December 2022, revenues from HHE were $4.0 million and classified in discontinued
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">We have dedicated significant
resources to research and development, and have research and development centers in Beijing, China and Bangalore, India. As of December
31, 2022, 208 of our 315 employees and contractors were technical professionals dedicated to platform research and development and product
specific customization.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have achieved significant
growth since inception in 2007. Net revenues from continuing operations of the Connected Solutions BU increased for the years ended December
31, from $75.1 million in 2015 to $85.4 million in 2016, to $122.2 million in 2017, to $128.4 million in 2018, but scaled back to $98.9
million in 2019. Our operations were significantly affected by the COVID-19 pandemic in 2020, and recorded only $26.8 million in revenues
for the year 2020. We grew back to $29.6 million in revenues for the year 2021. We recorded a net loss of $12.8 million in 2017 which
included non-cash merger related costs of $14.5 million. In the year 2018 we incurred a net loss of $72.0 million which included $6.2
million in cost of goods for one transaction in which the related revenue was not recognized in 2018 due to uncertainty in collectability,
non-recurring charges of $5.3 million in arbitration loss, write-off and provision for doubtful accounts and current assets of $30.1 million,
write-down of historical inventory due to loss &amp; obsolescence of $11.8 million, impairment of long-term investment of $13.0 million,
deferred income tax benefits of $1.7 million, impairment of intangible assets due to the pending sale of the MVNO business unit of $0.8
million, share based compensation of $1 million, and $3.0 million in stock offering expenses. In the year 2020, we incurred a net loss
of $34.8 million which included professional fees of $3.6 million, salaries and welfare of $2.6 million, non-recurring penalties of $1.1
million, share-based compensation expense of $20.0 million and contingency loss of $3.1 million and allowance for doubtful accounts of
$4.4 million, offset by gain on disposal of Yuantel of $10.1 million. In the year 2021, we incurred a net loss of $56.6 million which
included professional fees of $2.1 million, salaries and welfare of $6.1 million, interest expense related to debt discount of $9.9 million,
share-based compensation expense of $17.5 million and impairment loss of $1.3 million and loss on debt settlement of $17.2 million, offset
by reversal of contingency loss of $3.3 million and gain on debt forgiveness of $2.1 million. In the year 2022, we incurred a net loss
of $38.9 million, consisted of loss from continuing operation of $29.0 million and loss from discontinued operation of $9.9 million. For
the loss from continued operation, which included professional fees of $1.4 million, salaries and welfare of $6.1 million, interest expense
related to debt discount of $11.4 million, share-based compensation expense of $3.4 million.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Key Factors Affecting Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue mix impacts our overall
gross profit and gross margin. In particular:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>Connected Solutions BU</b>.&#8195;Revenue
from product sales is the largest component of Connected Solutions BU revenue. Product sales gross margin is primarily affected by competition,
cost of components and intellectual property royalties. Gross margin for engineering design fees and software royalties tends to be higher
because the associated cost of revenues is lower than that for hardware products and pricing is less subject to competitive pressure.
In addition, because product sales and software royalties are generally calculated on a per-unit basis, our revenue will vary depending
upon the volume of product sales. Engineering design fees are generally not related to volume of product sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Connected Solutions BU net
revenues and gross profits are affected by general factors in the highly competitive mobile industry, such as shifts in consumer preferences
and customer demands, technological innovations, competing mobile operating systems, and pricing trends. Results are also affected by
developments in the Android platform and software market specifically, such as Google&#8217;s continued support of the Android platform,
continued availability of a free and open source software license for that platform, continued deployment of the Android platform, and
continued outsourcing of software development to third party providers. Unfavorable changes in any of these factors could affect market
demand for our solutions and materially adversely affect our revenues and results of operations. Revenues and gross profit in the Connected
Solutions BU are also affected by Company-specific factors, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We rely on a limited number of customers for a significant portion of our net revenues, particularly our relationship with a customer that is a prominent mobile chipset manufacturer. We also rely on this mobile chipset manufacturer from a strategic viewpoint, since products that we develop for this customer may also be scaled to other mobile device OEM customers. We devote a significant portion of our research and development resources to this effort. Our results of operations would be significantly harmed if our collaboration with this customer was to decline or its Android-related product development efforts were not successful.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our ability to grow our net revenues depends on our ability to expand our customer base, both in terms of number of customers and geographic concentration, and also increase the number of projects we undertake for existing and new customers. Our ability to do so depends on the success of our products and services and those of our customers, and on our marketing and sales performance.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our ability to maintain our position as one of the largest independent Android platform software company will require us to continue to strengthen our technology expertise and capabilities by focusing our research and development to maintain technology leadership and offer advanced Android platform software and service solutions on our customers&#8217; demanding timelines. In addition, our ability to grow our revenues will largely depend on how quickly we and our customers can roll out new products and services.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>Solar Power BU</b>. HHE
designs, develops, integrates and installs solar power systems to the residential and commercial customers. The financial results of HHE
from the date of acquisition up to December 31, 2021 were consolidated into Borqs&#8217; financial statements. HHE recognizes revenues
when the solar power projects are fully completed. During the period of consolidation, no solar power projects were completed, and consequently
no revenues from HHE was recognized.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 13, 2022, Borqs
Technologies received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
(&#8220;CFIUS&#8221;) stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests and rights
in Holu Hou Energy LLC (&#8220;HHE&#8221;) due to HHE&#8217;s solar energy storage system and EnergyShare technology for Multi-Dwelling
Residential Units being deemed a potential national security risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 31, 2022, the
Company resolved that in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Company
must adhere to, including: (i) Entering into a National Security Agreement with various departments of the US government with a plan that
is effective, monitorable and verifiable to divest Borqs&#8217; investment interests and rights in HHE; (ii) Selection of a trustee and
entering into a Divestment Trust Agreement, and assigning the Company&#8217;s interest in HHE to the trustee; and, (iii) Selection of
a nationally recognized investment bank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of
December 31, 2022, terminate its control of HHE by (i) removal of all of the Company&#8217;s representatives from HHE&#8217;s Board of
Directors, (ii) relinquishment of Class A Membership Unit voting rights, and (iii) reduction of the Company&#8217;s ownership of HHE from
51% down to 49% by assigning 2% of the ownership back to HHE. By taking above actions, the Company no longer has a controlling interest
in HHE and result in deconsolidation of HHE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 16, 2023, the Company
and HHE entered into a National Security Agreement (&#8220;NSA&#8221;) with the Department of Defense and Department of Treasury. The
NSA provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill
provisions which provide that the Company shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any
changes to the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession
of any assets of HHE. Further, upon the completion of the Divestment, the Company shall terminate or irrevocably waive any information,
consent, board appointment, board observer, or other governance rights held by the Company, except for any and all rights that are determined
by the U.S. Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the
Divestment: engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes;
assigning and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs&#8217;
administrative and technical influence over HHE; and creating a plan to divest all of Borqs&#8217; investment interests and rights in
HHE. Pursuant to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment
Trust Agreement (&#8220;DTA&#8221;) dated March 20, 2023 entered into between Borqs, HHE and a trustee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s solar
power business met the criteria to be reported as a discontinued operation and, as a result, HHE&#8217;s historical financial results
are reflected in the Company&#8217;s consolidated financial statements as a discontinued operation, and assets and liabilities were retrospectively
reclassified as assets and liabilities held for sale for all periods presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The aggregate amount of cash
and cash equivalent and restricted cash are not materially affected by currency fluctuations because the majority of our revenues are
denominated in U.S. Dollars based on contracts made in Hong Kong. Financings from sales of equity and working capital loans are denominated
in U.S. Dollars and executed in Hong Kong and the Cayman Islands, and repayments have been made in U.S. Dollars outside of China, thus
not requiring approval from the PRC State Administration of Foreign Exchange. Personnel and personnel-related expenses are primarily paid
in the Indian and Chinese currencies, and costs of components used in the Connected Solutions and Solar Power Business Units and hardware
revenues are primarily paid in U.S. Dollars. As of December 31, 2022, we held cash and cash equivalents totaling $11.3 million on a consolidated
basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 62; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
a summary of the Company&#8217;s consolidated results of operations for the periods indicated. The activities indicated herewith were
from our Connected Solutions BU, our continuing operations; they did not include activities from our MVNO BU which were classified as
discontinued operations. This information should be read in conjunction with our consolidated financial statements and related notes included
elsewhere or incorporated by reference in this Annual Report. The operating results in any period are not necessarily indicative of results
that may be expected for any future period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Comparisons of Fiscal Years Ended December
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b>&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For year ended December 31,
2020, we incurred a net loss of $34.8 million which included professional fees of $3.6 million, salaries and welfare of $2.6 million,
non-recurring penalties of $1.1 million, share-based compensation expense of $20.0 million, impairment of intangible assets of $0.7 million
and contingency loss of $3.1 million&#160;&#160; and allowance for doubtful accounts of $4.4 million, offset by gain on disposal of a
subsidiary of $10.1 million. For the year ended December 31, 2021, we incurred a net loss of $56.6 million which included professional
fees of $2.1 million, salaries and welfare of $6.1 million, interest expense related to debt discount of $9.9 million, share-based compensation
expense of $17.5 million and impairment loss of $1.3 million and loss on debt settlement of $17.2 million, offset by reversal of contingency
loss of $3.3 million and gain on debt forgiveness of $2.1 million. For the year ended December 31, 2022, we incurred a net loss of $38.9
million, consisted of loss from continuing operation of $29.0 million and loss from discontinued operation of $9.9 million. For the loss
from continued operation, which included professional fees of $1.4 million, salaries and welfare of $6.1 million, interest expense related
to debt discount of $11.4 million, share-based compensation expense of $3.4 million.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Revenue</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our net revenues represent
our gross revenues, less PRC value added taxes and other deductions. Connected Solutions BU net revenues consist of engineering design
fees, software royalties and product sales. MVNO BU net revenues, which business was sold as of October 29, 2020 were classified as discontinued
operations, consist primarily of monthly recurring revenue. Solar Power BU net revenues include solar panel and energy storage systems
sales and service fees, which were classified as discontinued operations for the year ended December 31, 2021 and 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2022, net revenues from Connected Solutions BU were $52.5 million representing a 77.7% increase from the previous year. The increase
in business activities in 2022 was mainly attributable to the increase in both our hardware and software revenue. For the year ended December
31, 2021, all of our revenue of $29.6 million were generated from Connected Solutions BU. Although there was continuous impact of COVID-19
pandemic, our revenue increased $2.8 million or 10.5% when comparing with fiscal 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As our Connected Solutions
BU did not engage in any retail activities in the countries where our customers were located and also not within China; and we concluded
the fluctuations in our revenues between the years were not indicative of market conditions. Instead, our hardware sales of our Connected
Solution BU comprised of all made-to-order products with quantities as stipulated by our customers, and also included consumer and industrial
use devices as well. As such, the orders we receive from our customers may not adhere to seasonality and therefore fluctuations in our
business activity levels may not conform to any particular trend.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As our Solar Power BU, HHE,
which was acquired on October 19, 2021, designs, develops, integrates and installs solar power systems including solar panels and energy
storage systems for residential and commercial customers, we recognize revenues when the solar power systems are delivered, installed
and connected through various phases, and are fully completed according to milestone-based contracts. The cash receipts from customers
from ongoing projects and newly started projects were booked as deferred revenue. During the period of consolidation in 2021, no solar
power projects were completed, and consequently no revenues from HHE was recognized. For the year ended December 31, 2022, the revenues
for our Solar Power BU was $4.0 million, and was classified in discontinued operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Revenues &#8212; Connected Solutions
BU</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Connected Solutions BU net
revenues consist of engineering design fees, software royalties and product sales. It represents our continuing operation for the years
ended December 31, 2020, 2021 and 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As discussed more fully under
&#8220;&#8212; Critical Accounting Policies and Estimates &#8212; Revenue Recognition &#8212; Project-Based Software Contracts,&#8221;
the Company&#8217;s project-based software contracts include post-contract support, or PCS, where the customer has the right to receive
unspecified upgrades/enhancements on a when-and-if available basis. Since we are unable to establish vendor-specific objective evidence
of fair value of post contract services, or PCS, revenues from project-based software contracts are recognized on a straight-line basis
over the longest expected delivery period of undelivered elements of the arrangement, which is typically the PCS period. Project-based
software contracts that include PCS, which have a typical PCS period of 12 months. As a result of this revenue recognition method, some
portion of the net revenues we report in each period is recognition of deferred revenues from contracts entered into in prior periods
and for which the research and development and engineering work has already been completed. In addition, a majority of the project-based
software contracts provide for usage-based royalties. We recognize royalties upon the receipt of quarterly usage reports provided by customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
our net revenues, as well as the components of such revenues, for the periods indicated, both in absolute amount and as a percentage of
total net revenues:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Software</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Software net revenues were
$10.6, $10.7 and $13.1 million in the years ended December 31, 2020, 2021 and 2022, respectively, representing 39.5%, 36.3% and 24.9%
of our continuing operations Connected Solutions BU net revenues. For the year ended December 31, 2020, our software net revenues were
$10.6 million which represented 39.5% of total net revenues, as our software activities were not affected as severely as our hardware
activities by the COVID-19 pandemic. For the year ended December 31, 2021, our software net revenues were $10.7 million which represented
36.3% of total net revenues. It was stable when comparing with our software net revenues for the year ended December 31, 2020. For the
year ended December 31, 2022, our software net revenues were $13.1 million which represented 24.9% of total net revenues. It increased
22% when comparing with our software net revenues for the year ended December 31, 2021. The software revenue increased mainly due to the
related service orders increased and new customers signed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Hardware</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Hardware net revenues were
$16.2 million, $18.8 million and $39.5 million in the years ended December 31, 2020, 2021 and 2022, respectively, representing 60.5%,
63.7% and 75.1% of our continuing operations Connected Solutions BU net revenues. Again, as discussed above, these fluctuations may not
be attributed to any particular market trend since our sales were all made to order for our industrial customers. Types of products include
wearables such as trackers and smart watches, ruggedized handsets, tablets and smart phones and mobile connectivity modules. As described
above, hardware sales comprised of all made-to-order products with quantities as stipulated by our customers and included consumer and
industrial use devices as well. As such, the orders we receive from our customers may not adhere to seasonality and therefore fluctuations
in our business activity levels may not conform to any particular trend.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All hardware sales were contracted
and made to order, and our sales were final without taking returns. Small percentages of replacement units and parts were provided to
customers and those costs were included in cost of revenues. We provide engineering design work as specified by our customers, and production
begins after the customer accepts the design. We are responsible for procurement of all components, materials and tooling, and for selection
of third-party factories for product assembly. Revenue is recognized when ownership of products is transferred to the customers. We are
not engaged in the marketing and distribution of the hardware products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Customer Concentration</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were initially focused
on research and development efforts for providing BorqsWare software platform solutions to mobile device OEMs. We have since leveraged
our deep technology expertise to provide BorqsWare software platform solutions to mobile chipset manufacturers. The following table sets
forth net revenues by type of customer, both in absolute amount and as a percentage of net revenues for the periods presented:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect our net revenues
from mobile device OEMs to continue to grow as we develop more connected devices, especially IoT products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Geographic Concentration</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
our net revenues from customers based on location of the customer&#8217;s headquarters, both in absolute amount and as a percentage of
net revenues. These figures do not take into account the geographic location of end-users of customer products:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s net revenues
from customers with headquarters in the United States are attributed to its ongoing collaboration with a prominent mobile chipset vendor
and other mobile device OEMs. From 2020 to 2021, revenues from customers with headquarters in China declined, while our main customer
in India, Reliance Retail Limited, continued to place significant orders with us through 2021. From 2021 to 2022, revenues from customers
with headquarters in China increased mainly due to a customer, named Metro (Suzhou) Technologies Co Ltd placed more orders during the
year ended December 31, 2022. Our main customer in the United States for the years 2021 and 2022 was GreatCall, Inc.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Revenues from discontinued operations
&#8212; MVNO BU</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The MVNO BU provides a full
range of 2G/3G/4G mobile communication services to consumers, as well as some traditional commercial telephony services. In 2014, the
MVNO BU entered into a business agreement with China Unicom, the incumbent mainland China mobile network operator to obtain bulk access
to network services at wholesale rates in 2014. The MVNO BU has its own brand in mainland China, &#8220;Yuantel.&#8221; MVNO BU net revenues,
consisting of &#8220;MVNO&#8221; and &#8220;Other&#8221; revenues are entirely from mainland China. &#8220;Other&#8221; revenues are primarily
related to traditional commercial telephony services, such as conference call services. We intended to sell the MVNO BU in 2018 and as
of February 2019, we signed agreements with buyers for all of our interests in the MVNO BU. The sale was originally scheduled to be completed
by the end of 2019. Due to the on-going investigation by the Yunnan Public Security Bureau, we received only partial payment from the
sale in 2019. A new agreement was executed with the buyers as of September 1, 2020 and the sale was finally completed as of October 29,
2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;Net Revenues from discontinued operations
&#8212; Solar Power BU</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For our Solar Power BU, HHE
designs, develops, integrates and installs solar power systems to the residential and commercial customers including solar panels and
lithium battery based energy storage systems. HHE recognizes revenues when the solar power projects are fully completed. The financial
results of HHE from October 19, 2021 to December 31, 2021, and for the year ended December 31, 2022 were classified as discontinued operations.
During the period of from October 19, 2021 to December 31, 2021, no solar power projects were completed, and consequently no revenues
from HHE was recognized. During the year ended December 31, 2022, $4.0 million revenue recognized and recorded in the discontinued operations.
The cash receipts from customers from ongoing projects and newly started projects were booked as deferred revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cost of Revenues</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 65.25pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cost of our continuing operations
Connected Solutions BU revenues primarily consists of personnel and personnel-related costs associated with engineering projects paid
for by customers, and costs of hardware components used to manufacture products. Cost of our discontinued operations MVNO BU revenues
primarily consists of wholesale traffic fees, paid to the incumbent operator, based on traffic consumed by subscribers to the MVNO network.
The incumbent operator also charges us a minimum wholesale tariff based on the number of mobile phone numbers issued to the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
cost of revenues, both in absolute amount and as a percentage of total cost of revenues, for Connected Solutions BU revenue from our continuing
operation, and MVNO BU revenue and Solar Power BU revenue from our discontinued operations. Activities for the MVNO BU only included those
from January 1 through October 29, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Connected Solutions BU cost
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cost of revenue increased $1.8 million or 7% when comparing with that of fiscal 2020. It mainly attributes to the hardware cost increase
of $2.1 million, and offset by the software cost decreased of $0.3 million. Connected Solutions BU cost of revenues increase significantly
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Gross Profit and Gross Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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and $11.1 million, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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profits include gross profits from software projects and gross profits from hardware projects. As shown in the following table, software
and hardware gross margins in the year ended December 31, 2020 was 8.3% and 4.4% respectively, which were lower than the normal levels
due to the COVID-19 pandemic. For the year ended December 31, 2021, our gross margins increased in both software and hardware 12.1% and
6.9% respectively from the year ended December 31, 2020. For the year ended December 31, 2022, our gross margins increased in both software
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2020, general and administrative expenses were $33.3 million which included professional fees of $3.6 million, salaries and welfare
of $2.6 million, impairment of intangible assets of $0.7 million, non-recurring penalties of $1.1 million, share-based compensation expense
of $18.1 million and allowance for doubtful accounts of $4.4 million. For the year ended December 31, 2021, general and administrative
expenses were $23.6 million which included professional fees of $2.1 million, salaries and welfare of $3.7 million, impairment loss of
$1.3 million, share-based compensation expense of $17.4 million, offset by reversal of allowance for doubtful accounts of $1.8 million.
For the year ended December 31, 2022, general and administrative expenses were $7.2 million which mainly included professional fees of
$1.4 million, salaries and welfare of $3.4 million, and share-based compensation of $2.2 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For our discontinued operations
MVNO BU, the operating expenses which consisted of selling, administrative and research expenses were $6.1 million or 20.9% of revenues
for the year 2020 up to October 29, 2020 when the MVNO BU was sold. For our discontinued operations Solar Power BU, the operating expenses
which consisted of selling and administrative expenses were $1.1 million and $4.0 million for the years ended December 31, 2021 and 2022,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Research and Development Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Research and development expenses
include payroll, employee benefits, share-based compensation and other headcount-related expenses associated with the development of the
BorqsWare software platform and solar power systems, as well as outsourcing and third party service expenses. Research and development
expenses also include rent, depreciation and other expenses for platform development and other projects that are not customer-specific.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Selling and Marketing Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Selling and marketing expenses
include payroll, employee benefits and other expenses relating to our sales and marketing personnel, travel, rent and other expenses relating
to our marketing activities, including entertainment and advertising. For the discontinued operations MVNO BU, we paid our franchisees
commission to sell products, which are recognized as selling and marketing expenses. For the discontinued operations Solar Power BU, the
selling and marketing expenses mainly consisted of payroll and other staff costs relating to the sales and marketing personnel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>General and Administrative Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our general and administrative
expenses include payroll, employee benefits, professional fees, rent, travel and other administrative costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">General and administrative
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2020, general and administrative expenses included professional fees of $3.6 million, salaries and welfare of $2.6 million, non-recurring
penalties of $1.1 million, share-based compensation expense of $18.1 million and allowance for doubtful accounts of $4.4 million included
a rebate receivable of $1.4 million written off due to the circumstance changed and lack of collectability for the year ended December
31, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2021, general and administrative expenses included professional fees of $2.1 million, salaries and welfare of $3.7 million, impairment
loss of $1.3 million, share-based compensation expense of $17.4 million, offset by reversal of allowance for doubtful accounts of $1.8
million.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2022, general and administrative expenses included professional fees of $1.4 million, salaries and welfare of $3.4 million, and share-based
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other Operating Income &#8211; or expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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as &#8220;Other operating income&#8221;. We recognized $nil, $0.2 million and $0.1 million of other operating income in the years ended
December 31, 2020, 2021 and 2022, respectively. Subsidies are recorded as a liability when received and recognized as other operating
income when the related projects are completed and the subsidies are not subject to future return. Under the requirements of the government
subsidies, we are obligated to make progress on the related technology development projects, based on the timetable established by the
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other Income/Expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Interest expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2022, the interest expense of $11.7 million mainly consisted of interest expense related to our convertible notes discount of $11.4
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2021, the interest expense of $11.7 million mainly consisted of interest expense related to our convertible notes discount of $9.9
million. The debt discount, together with the related issuance cost are amortized as interest expense, using the effective interest method,
from the issuance date to the earliest maturity date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other income</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2021, other income of $2.4 million mainly included gain on debt forgiveness of $2.1 million. We entered into an account payable forgiveness
agreement with a supplier in December 2021.We have long cooperation relationship with the supplier, and there was long-aging balance of
account payable due to the supplier. The supplier agreed to waive part of the long-aging account payable balance with the amount of $2.1
million, and retained the remaining part of the balance. According to the agreement, we wrote off $2.1 million of liability and recorded
as other income in the consolidated statement of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2022, other expense of $2.1 million mainly included an expense related to Samsung arbitration compensation. The Company executed a
settlement agreement with Samsung regarding the payments with a payment period of eighteen months beginning on July 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2021, other expense of $3.2 million mainly included an expense related to a lawsuit. We had a balance due to a debtor. The original
debtor claimed that we have breached the previously agreed settlement agreement, and transferred the debt to the third-party company during
the year ended December 31, 2021. We recorded $2.1 million as other expense in the consolidated statement of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Contingency (loss) reversal</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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31, 2020, one of the nominee shareholders of Big Cloud Network denied his entrustment relationship with us and claimed his rights and
interests proceeds of the disposal of Yuantel. Although there were agreements between the Group and the nominee shareholder, there was
no direct evidence to show the entrustment relationship between both parties, which may not be supported by the existing PRC laws and
regulation. As a result, we assessed that a probable loss could be incurred. We estimated a loss ranged from $3.2 million to $3.6 million
based on the best estimate of the information available. Because of there was no amount within the range would be a better estimate than
any other amount, the minimum amount of $3.1 million was recorded as a contingent loss during the year ended December 31, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2021, the nominee shareholder of Big Cloud Network signed an agreement with us, to transfer his equity share in Big Cloud Network
to one of the Group&#8217;s subsidiaries. By transferring all the shareholder&#8217;s rights and obligations under the agreement, the
nominee shareholder no longer has any rights in Big Cloud Network or rights and interests in the proceeds of disposal of Yuantel. As a
result, the probable loss has been reversed with the amount of $3.3 million has been recorded as gain on reversal of contingent loss during
the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loss (gain) on debt settlement</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We entered into Agreements
dated December 14, 2020 with PFG and LMFA Financing LLC (&#8220;LMFA&#8221;), a Florida limited liability company and wholly owned subsidiary
of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA was committed to purchase up to be approximately $18 million of debt in tranches,
which when completed would eliminate substantially all of the debt with the Company&#8217;s senior lender. LMFA would convert the purchased
debt into common shares of the Company, pursuant to a court order that allows the conversion shares to be issued as unrestricted securities
in a transaction that is exempt from registration under Section 3(a)(10) of the Securities Act of 1933, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of February 10, 2021, LMFA
completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted and sold all 1.42 million (post
reverse split adjusted) shares of the Company&#8217;s ordinary shares. With the Company settling another $1.27 million of debt, accrued
interest and applicable fees directly with the senior lender by the issuance of 94,170 (post reverse split adjusted) shares on February
17, 2021 which the senior lender subsequently sold, the Company&#8217;s defaulted Debts with the senior lender totaling $19.14 million
have been eliminated since. We recognized loss of $16.6 million in loss on debt settlement during fiscal year 2021.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We entered into a $1 million
short term loan agreement with American West Pacific International Investment Corporation (&#8220;AWP&#8221;) in December 2020, to fund
the Company&#8217;s working capital purposes. The loan had an original term of six months with interest of 12% per annum. And 250,000
(post reverse split adjusted) restricted ordinary shares to be held in escrow at Continental Stock Transfer &amp; Trust Company as collateral.
On June 15, 2021, we have settled the $1 million loan principal with 99,206 (post reverse split adjusted) shares. We recognized loss of
$0.6 million in loss on debt settlement during fiscal year 2021.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded total loss on
debt settlement of $17.2 million during the year ended December 31, 2021.&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2022, we recorded $0.2 million gain on debt settlement, represented gain on a loan settlement with our ordinary shares issued.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loss on additional acquisition cost in shares
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a loss on additional
acquisition cost in shares to HHE of $6.0 million during the year ended December 31, 2022.&#160;The Company issued additional 5 million
shares to HHE for the substantial loss in value for the share consideration during the acquisition of HHE in 2021.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loss related to equity financing</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a loss related
to equity financing of $3.7 million during the year ended December 31, 2022.&#160;The Company entered into an equity financing agreement
with a third-party company on May 16, 2019. According to the agreement, the counter-party purchased 9.9 % equity interest of the Company
equivalent to 233,392 (post reverse split adjusted) ordinary shares with a total purchase consideration of $13,865, for which 75% of the
total purchase consideration amounting to $10,399 in cash was received. The remaining 25% of the total purchase consideration will be
contributed in the form of real property and equipment.&#160;In February 2023, the Company entered into a settlement agreement with the
third-party on the settlement of the equity financing. Both parties agreed to not proceed with the remainder 25% investment in the form
of real property and equipment, and the related previous issued 58,348 (post reverse split adjusted) shares will not withdraw. As a result,
the amount was released from subscriptions receivable and recorded as loss related to equity financing during the year ended December
31, 2022.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loss on deconsolidation of a subsidiary</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a loss on deconsolidation
of HHE of $3.6 million during the year ended December 31, 2022.&#160;The Company no longer has a controlling interest in HHE as at December
31, 2022 and result in deconsolidation of HHE.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income Tax Expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our effective tax rate was
1.1%, -0.8% and 0.2% for years ended December 31, 2020, 2021 and 2022, respectively. The fluctuation through these years was primarily
due to the fact that the loss experienced by certain of our subsidiaries could not be used to offset gains in other subsidiaries. The
Group recorded valuation allowance for the entities, which were considered more likely than not that a portion of the deferred tax assets
will not be realized through sufficient future earnings.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Liquidity and Capital Resources</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash used in operating activities
for the year ended December 31, 2022 was $5.5 million, primarily consisted of net loss of $29.0 million, reversal of provisions on accounts
receivable and other current assets of $0.02 million, and adding back non-cash items including share-based compensation expenses to employees
and non-employees of $3.4 million, amortization of intangible assets of $1.4 million, depreciation of property and equipment of $0.4 million,
amortization of right of used assets of $0.5 million, interest expense related to the convertible notes discount of $11.4 million, gain
on loan conversion of $0.2 million, loss on shares compensation of $6.0 million, loss related to equity financing of $3.7 million and
loss on deconsolidation of a subsidiary of $3.6 million. Cash used in operating assets and liabilities included decrease in accrued expenses
of $3.7 million, decrease in amount due to related parties of $1.8 million, increase in account payable of $1.4 million and decrease in
account receivable of $1.1 million, while cash generated from changes in operating assets and liabilities included decrease in prepaid
expenses and other current assets of $6.3 million, increase in advance from customers and contract liabilities of $3.6 million, and increase
in inventory of $2.0 million.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">
</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash used in investing activities
for the year ended December 31, 2022 was $3.4 million, which mainly included purchase of time deposit of $1.4 million, Cash disposed of
from deconsolidation of a subsidiary of $1.1 million, purchase of property, plant and equipment of $0.7 million and investment in convertible
bond and cash loan of $0.1 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash generated by financing
activities for the year ended December 31, 2022 was $14.9 million which included proceeds from issuance of convertible notes of $15.1
million, and proceeds from capital injection from non-controlling shareholders of a subsidiary of $0.1 million, proceeds from short-term
and long-term loans of $0.3 million, offset by repayment of bank and other borrowings of $0.6 million.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have in the past breached
certain financial covenants under our loan agreements with SPD Silicon Valley Bank Co., Ltd. (&#8220;SVB&#8221;) and PFG4 during 2017
and the year ended December 31, 2018. No liabilities were generated by the breaches. Such breach could result in acceleration of the repayment
according to the contract term. For the year ended December 31, 2018, certain covenants were not met; but we had not been notified by
lenders that they intend to seek to accelerate the loan payments because of such breaches and neither lender had expressly waived such
breaches and any resulting defaults. As of April 18, 2019, all of the SSVB loans were replaced by PFG, which became our sole commercial
lender. Although all of the covenants obligated to SSVB no longer existed since the SSVB loans were paid off, the Company did not meet
certain financial covenants according to the loan agreements with PFG.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 28, 2019, PFG executed
an agreement with the Company effective in July 2019, which waived our covenant defaults up through the end of June 2019, and allowed
the Company to begin testing of newly agreed upon revenue and EBITDA covenants which are more reflective of the operations of the Company
without the MVNO BU, starting with the month of August 2019. Specifically, (i) quarterly revenue requirements were reduced to $27,500,000
commencing with the quarter ending September 30, 2019; provided that any failure to meet such requirement may be cured by evidencing at
least $120,000,000 in trailing 12-month revenue; and (ii) the three-month trailing EBITDA target was reduced to $1,350,000, commencing
with the month ended August 31, 2019. In connection with the execution of such waiver agreement, the Company paid a waiver and modification
fee of $30,000, subject to an additional $20,000 fee in the event that the above-referenced financial covenants are not met in future
periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 8, 2019, the Group
entered into a new revolving line of credit facility (the &#8220;RLOC&#8221;) with PFG5 for $12,500,000. Under the agreement: (i) $9,500,000
may be drawn upon request at any time on or after the closing date and (ii) so long as there is no uncured default at the time of drawdown
and if the Company has received at least US$10,000 in cash proceeds from the sale of its equity securities to investors, then an additional
$3,000,000 may be drawn. Any outstanding amounts under the RLOC will accrue interest at a rate of 11% per annum with a maturity date of
March 8, 2021 (the &#8220;Maturity Date&#8221;). The Group shall pay interest only on principal outstanding on the RLOC until the Maturity
Date, on which date the entire unpaid principal balance on the RLOC plus any and all accrued and unpaid interest shall be repaid. In March
2019, the Company drew down $9,500,000 from the RLOC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of October 2019, due to
geographic changes in our business activities, significant amounts of our accounts receivable shifted from our Hong Kong subsidiary to
our Indian subsidiary. This reduction of accounts receivable from our Hong Kong entity has caused a covenant breach according to the PFG
loan agreements and caused the interest rate of the PFG loans to be increased to 18%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Senior Debt Purchased by
LMFA Financing LLC</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company entered into Agreements
dated December 14, 2020 with PFG and LMFA Financing LLC (&#8220;LMFA&#8221;), a Florida limited liability company and wholly owned subsidiary
of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA was committed to purchase up to be approximately $18 million of debt in tranches,
which when completed would eliminate substantially all of the debt with the Company&#8217;s senior lender. LMFA would convert the purchased
debt into common shares of the Company, pursuant to a court order that allows the conversion shares to be issued as unrestricted securities
in a transaction that is exempt from registration under Section 3(a)(10) of the Securities Act of 1933, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of February 10, 2021, LMFA
completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted and sold all 1.42 million (post
reverse split adjusted) shares of the Company&#8217;s ordinary shares. With the Company settling another $1.27 million of debt, accrued
interest and applicable fees directly with the senior lender by the issuance of 94,170 (post reverse split adjusted) shares on February
17, 2021 which the senior lender subsequently sold, the Company&#8217;s defaulted Debts with the senior lender totaling $19.14 million
have been eliminated since.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Convertible Notes Sold</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million (the &#8220;May 25 Notes&#8221;). The notes are due in
two years, have an annual interest rate of 10%, convertible into ordinary shares of Borqs at $0.44325 per share (post reverse split adjusted)
and has 100% warrant coverage with the warrants exercisable for cash or cashlessly at the closing bid price of 2 days prior to exercising
but not less than $0.41 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company signed agreements
with institutional and individual investors for sale of convertible notes on February 25, 2021 for $20 million (the &#8220;Feb 25 Notes&#8221;)
and on April 14, 2021 for $3 million (the &#8220;Apr 14 Notes&#8221;). The notes are due in two years, have an annual interest rate of
8%, convertible into ordinary shares of Borqs at 10% discount from the market price and has 90% warrant coverage with the warrants exercisable
cashless or for cash at $2.222 per share for the Feb 25 Notes and $1.540 for the Apr 14 Notes. The conversion price is at $1.539 per share
for the Feb 25 Notes and $1.071 per share for the Apr 14 Notes, or at a one-time reset at 90% of the market price at the time of effectiveness
of the required registration statement, whichever is lower. One-third of the notes were sold at the execution of definitive agreements
and two-thirds of the notes were sold upon the effectiveness of a registration statement on May 4, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company signed agreement
with institutional and individual investors for sale of convertible notes on September 14, 2021 for $27.15 million (the Sep 14 Notes).
The notes are due in two years, have an annual interest rate of 8%, convertible into ordinary shares of Borqs at 10% discount from the
market price and has 90% warrant coverage with the warrants exercisable cashless or for cash at $0.8682 per share. The conversion price
is at $0.6534 per share or at a one-time reset at 90% of the market price at the time of effectiveness of the required registration statement
or availability to trade the converted shares under Rule 144, whichever is lower. Only half, or $13.575 million of the notes were sold.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Proceeds from the sale of
notes were used for the procurement of orders the Company expects to receive from its customers, for development of the next generation
5G products, and also for acquisition of 51% of HHE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 25, 2022, the Company
signed agreements with institutional and individual investors, for the sale of $16 million in secured convertible notes. The notes are
due in two years, have 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 90% of the closing bid price of the ordinary shares on the date that such shares are first eligible to be sold, assigned
or transferred under Rule 144 or Regulation S, as applicable, whichever is lower but in no event at less than $0.10 per ordinary share.
The Company also issued warrants to purchase an aggregate of 96,793,708 ordinary shares at an exercise price of $0.2090 per share, subject
to adjustment in certain conditions. The Company issued the notes and warrants on May 25, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were operating at a loss
for the years ended December 31, 2021 and 2022. Our ability to meet the working capital requirements is subject to the risks relating
to the demand for and prices of our services in the market, the economic conditions in our target markets, the successful operation of
our connected solution, timely collection of payment from our customers and the availability of additional funding. In the next 12 months,
we will rely on the sale of convertible notes of which one-third has been completed and the other two-third to be completed upon the effectiveness
of a registration statement to be filed by the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The sale of equity and convertible
debt securities will result in dilution to our shareholders and certain of those securities may have rights senior to those of our shares
of capital stock. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing,
these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could
require us to relinquish valuable rights. Economic conditions may affect the availability of funds and activity in equity markets. We
do not know whether additional funding will be available on acceptable terms, or at all. If we are not able to secure additional funding
when needed, we may have to delay, reduce the scope of, or eliminate certain of our programs, or make changes to our operating plans.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Impact of the COVID-19
pandemic</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As discussed earlier in the
Rick Factors section of this report, we have experienced since February 2020 reductions and cancellations of orders due to effects of
the COVID-19 pandemic has on the demand from certain of our customers. We expect this negative effect on global business activities will
continue to have pressure on the Company&#8217;s sales as the pandemic environment persists and perhaps even post the pandemic. In addition,
since our operations span over the countries of the United States, India, China and South Korea, international and intra-country travel
restrictions will continue to hamper our operations and have negative effects including delays and uncertainties on our supply chain delivery
schedules and our abilities to secure financing for our working capital needs. We expect the impacts of COVID-19 to have an adverse effect
on our business, financial condition and results of operations. Our revenue for the year 2020 was negatively impacted by the pandemic
by a reduction of 73.0% as compared to 2019. Although our revenues in 2022 improved 77.7% as compared to 2021, the impact of the continuing
COVID-19 pandemic in the year 2023 and beyond is still unknown as of the filing of this annual report and may cause our revenues in future
periods to decline. As the assessable risks due to COVID-19 change in the countries of India and China, our operations can be affected,
including the restrictions from accessing office facilities and limitations on domestic travels which can hamper our ability to efficiently
manage the manufacturing of products since our contracted factories are located over various cities in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As our sales have been negatively
impacted by the pandemic in 2020, we cut back our operational costs by reduction of approximately 20% of our workforce in India and 40%
of our headcount in China. We constantly evaluate our financial position according to changes in the international business environment
and depending on forecast of orders from our customers in the near future, we may further reduce staffing as necessary.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash transfers from our subsidiaries
inside China to our subsidiaries outside of China are subject to PRC government control of foreign exchange. Restrictions on the availability
of foreign currency may affect the ability of our subsidiaries inside China to remit sufficient foreign currency to pay dividends or other
payments to us, or otherwise satisfy their obligations. See &#8220;Item 1A. Risk Factors &#8212; Risks Related to Doing Business in China
&#8212; Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company&#8221;
and &#8220;Item 1A. Risk Factors &#8212; Risks Related to Doing Business in China &#8212;Restrictions on foreign currency may limit our
ability to receive and use our revenue effectively.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Critical Accounting Policies</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company prepares its financial
statements in accordance with U.S. GAAP, which requires it to make judgments, estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the end of each fiscal period and the reported amounts
of revenues and expenses during each fiscal period. The Company continually evaluates these judgments and estimates based on its own historical
experience, knowledge and assessment of current business and other conditions, and expectations regarding the future based on available
information and assumptions that it believes to be reasonable, which together form the basis for making judgments that are not readily
apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could
differ from those estimates. Some of the Company&#8217;s accounting policies require a higher degree of judgment than others in their
application.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selection of critical
accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results
to changes in conditions and assumptions are factors that should be considered when reviewing the Company&#8217;s financial statements.
The Company believes the following accounting policies involve the most significant judgments and estimates used in the preparation of
its financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Revenue Recognition</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company recognizes revenue
when persuasive evidence of an arrangement exists, as evidenced by signed contracts, delivery has occurred, the sales price is fixed or
determinable and collection is reasonably assured.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Project-based Contracts</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company accounts for revenue
from project-based software contracts as &#8220;Software&#8221; revenue. The Company&#8217;s project-based contracts are generally considered
multiple element arrangements since they include perpetual software licenses, development services, such as customization, modification,
implementation and integration, and post-contract support where customers have the right to receive unspecified upgrades and enhancements
on a when-and-if-available basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company provides customized
Android+ software platform solutions that are developed to maximize the commercial grade quality or performance of open source Android+
software for integration with particular chipsets. The Group also provides customized Android+ service platform solutions that are end-to-end
software developed for mobile operators to allow data synchronization between their platform and mobile devices. The Company charges its
customers, mainly including mobile device manufacturers and mobile operators, fixed fees for project-based software contracts, as well
as per chip or per mobile device royalty fees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of January 1, 2019, the
Company adopted ASC 606 for revenue recognition from contracts with customers. For the sales derived from software development project
in which the customer&#8217;s contract specifies the technical requirements of the software product, the Company recognizes revenue upon
the customers sign off the final acceptance and it is probable that the Company will collect the payments. For the sales derived from
this type of software development project with a post-contract-service period (&#8220;PCS Period&#8221;), the Company recognizes revenue
upon the PCS period ends and it is probable that the Company will collect the payments. The Company recognizes non-recurring engineering
fees upon the customers sign off the final acceptance and it is probable that the Company will collect the payments (start of hardware
product delivery schedule).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additional discussions on
ASC 606 are provided in below Note 2 of the Accompanying Notes to Financial Statements, under the heading (u) Revenue recognition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Service Contracts</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company provides research
and development services to certain customer to develop software where fees are charged on a time and material basis and the Company is
not responsible for the outcome of such development projects. The revenue is recognized as the &#8220;Software&#8221; revenue as the services
are delivered.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Connected Devices Sales Contracts</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company accounts for revenue
from sales of connected devices as &#8220;Hardware&#8221; revenue. Revenue is recognized when sale of each final hardware product to the
customers are delivered.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Warranty is provided to all
connected device customers as an integral part of the product sales. The Company has determined that the likelihood of claims arising
from warranties is remote, based on historical experience. The basis for the warranty accrual is reviewed periodically based on actual
experience.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Solar Power Solutions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 19, 2021, the Company
purchased 51% controlling interest in Holu Hou Energy, LLC (HHE). HHE engages in the design and installation of solar power systems including
solar panels and energy storage systems for residential and commercial use. On December 13, 2022, Borqs Technologies received a letter
from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States (CFIUS) stating that the Company
is required to fully divest its ownership interests and rights in HHE due to HHE&#8217;s solar energy storage system and EnergyShare technology
for Multi-Dwelling Residential Units being deemed a potential national security risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the mandates from the
CFIUS, HHE was deconsolidated on December 31, 2022. Assets and liabilities related to HHE, which the Group acquired in October 2021 were
reclassified as held for sale as of December 31, 2021 and 2022, and revenues and expenses related to Solar Energy segment were reclassified
as discontinued operations for all periods presented. HHE was deconsolidated as of December 31, 2022.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>MVNO Subscriber Usage Payment</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s MVNO subscribers
pay a fee based on the actual minutes of voice call made, megabytes of data consumed, number of SMS/MMS sent and supplementary services
(e.g. caller-ID display) subscribed. These are considered as &#8220;MVNO&#8221; revenue. The Company is the principal in providing the
bundled voice and data services to Chinese consumers, thus revenue is recognized on a gross basis. Revenue is recognized when the services
are actually used. Our MVNO business unit was sold as of October 29, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Traditional Telecom Services</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company provides traditional
telecom services such as voice conferencing services and 400 toll free services. These are considered as &#8220;Others&#8221; revenue
and are recognized based on the actual consumption by customers. This activity also ended with the sale of the MVNO business unit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Discontinued operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A component of a reporting
entity or a 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, having the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued
operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity&#8217;s operations and financial
results. Discontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed
of, if the component either (1) represents a strategic shift or (2) have a major impact on an entity&#8217;s financial results and operations.
In the consolidated statement of operations, result from discontinued operations is reported separately from the income and expenses from
continuing operations and prior periods are presented on a comparative basis. Cash flows for discontinued operations are presented separately.
Assets and liabilities of the discontinued operations are classified as held for sale when the carrying amounts will be recovered principally
through a sale transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income Taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In preparing its consolidated
financial statements, the Company must estimate its income taxes in each of the jurisdictions in which it operates. The Company estimates
actual tax exposure and assess temporary differences resulting from different treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which is included in the consolidated balance sheet. The Company must then
assess the likelihood that it will recover its deferred tax assets from future taxable income. If the Company believes that recovery is
not likely, it must establish a valuation allowance. To the extent it establishes a valuation allowance or increases this allowance, the
Company must include an expense within the tax provision in its consolidated statement of operations. If actual results differ from these
estimates or the Company adjusts these estimates in future periods, it may need to establish an additional valuation allowance, which
could materially impact its financial position and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">U.S. GAAP requires that an
entity recognize the impact of an uncertain income tax position on the income tax return at the largest amount that is more likely than
not to be sustained upon audit by the relevant tax authority. If the Company ultimately determines that payment of these liabilities
will be unnecessary, it will reverse the liability and recognize a tax benefit during that period. Conversely, the Company records additional
tax charges in a period in which it determines that a recorded tax liability is less than the expected ultimate assessment. The Company
did not recognize any significant unrecognized tax benefits during the periods presented in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Uncertainties exist with respect
to the application of the EIT Law and its implementation rules to the Company&#8217;s operations, specifically with respect to tax residency
status. The EIT Law specifies that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes
if their &#8220;de facto management bodies&#8221; are located within the PRC. The EIT Law&#8217;s implementation rules define the term
&#8220;de facto management bodies&#8221; as establishments that carry out substantial and overall management and control over the manufacturing
and business operations, personnel, accounting, properties, etc. of an enterprise. On April 22, 2009, the Notice Regarding the Determination
of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or
Circular 82, was issued. Circular 82 provides certain specific criteria for determining whether the &#8220;de facto management body&#8221;
of a Chinese-controlled offshore-incorporated enterprise is located in China. Further the Administrative Measures of Enterprise Income
Tax of Chinese controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin No. 45, took effect on September 1, 2011, and
provides more guidance on the implementation of Circular 82.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">According to Circular 82,
a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC tax resident by virtue of having a &#8220;de facto management
body&#8221; in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions
set forth in Circular 82 are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating
to the enterprise&#8217;s financial and human resource matters are made or are subject to approval by organizations or personnel in the
PRC; (iii) the enterprise&#8217;s primary assets, accounting books and records, company seals and board and shareholder resolutions are
located or maintained in the PRC; and (iv) at least 50.0% of voting board members or senior executives habitually reside in the PRC. In
addition, Bulletin No. 45 provides clarification in resident status determination, post-determination administration and competent tax
authorities. It also specifies that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese-controlled
offshore- incorporated enterprise, the payer should not withhold 10% income tax when paying certain Chinese-sourced income, such as dividends,
interest and royalties to the Chinese-controlled offshore-incorporated enterprise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although both the circular
and the bulletin only apply to offshore enterprises controlled by PRC enterprises and not those by PRC or foreign individuals, the determination
criteria set forth in the circular and administration clarification made in the bulletin may reflect the SAT&#8217;s general position
on how the &#8220;de facto management body&#8221; test should be applied in determining the tax residency status of offshore enterprises
and the administration measures should be implemented, regardless of whether they are controlled by PRC enterprises or PRC individuals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Despite the uncertainties
resulting from limited PRC tax guidance on the issue, the Company does not believe that its legal entities organized outside of the PRC
are tax residents under the EIT Law. If one or more of its legal entities organized outside of the PRC were characterized as PRC tax residents,
the Company&#8217;s results of operations would be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Recent Accounting Pronouncements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Refer to Note&#160;2, Summary
of Significant Accounting Policies - Recent accounting pronouncements, of the notes to our consolidated financial statements included
in this Annual Report for information regarding the effect of newly adopted accounting pronouncements on our financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Off-Balance Sheet Arrangements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With the exception of items
discussed under &#8220;Contractual Obligations&#8221; below we do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources that are material
to investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 79; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Contractual Obligations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, payment
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Related Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(a) Related parties</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
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  <tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other than disclosed elsewhere, The Group had
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All balances with related
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 31, 2018, the Group
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by a key management of the Group (see Note 19 in our consolidated financial statements), bearing an interest rate of 8% per annum to fund
the Company&#8217;s working capital (the &#8220;Bluecap Loan&#8221;). The loan does not carry a maturity date and the outstanding principal
balance as of December 31, 2021 and 2022 were $1.8 million and nil million, respectively, which were payable on demand.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Quantitative and Qualitative Disclosures
about Market Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Credit Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is subject to
the risk of loss arising from the credit risk related to the possible inability of its customers to pay for the products and services
that it sells to them. The Company attempts to limit its credit risk by monitoring the creditworthiness of the Company&#8217;s customers
to whom it extends credit and establishing credit limits in accordance with its credit policy. The Company performs credit evaluations
on substantially all customers requesting credit and will not extend credit to customers for whom it has substantial concerns and will
deal with those customers on a cash basis. The Company offers billing terms that allow certain customers to remit payment during a period
of time ranging from 3 to 6 months.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company normally has limited
risk from credit concentration as no individual customer represents greater than 20% of the outstanding accounts receivable balance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has cash held
by Silicon Valley Bank as of December 31, 2022. On March 10, 2023, the California Department of Financial Protection and Innovation closed
Silicon Valley Bank and appointed the Federal Deposit Insurance Corporation (&#8220;FDIC&#8221;) as receiver. On March 12, 2023, the U.S.
Department of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of Silicon Valley
Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts.
The Company received full access to the funds in its deposit and money market accounts on March 13, 2023. In light of actions by the federal
government to fully protect deposit accounts, the Company has not experienced any credit losses on its deposits of cash.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business activities in
the year ended December 31, 2022 experienced similar credit concentration as in 2021. Even though the worldwide economy has recovered
from the global Covid-19 pandemic, due to the rising inflation and interest rates, we expect our sales to increase in the year 2023 from
the lows of 2020 and 2021, but not fully reaching the pre-pandemic 2019 levels.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Liquidity Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is also exposed
to liquidity risk, which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business
needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company
will turn to other financial institutions for supply chain financing which can be costly and negatively affect the gross margin. If adequate
working capital funding is not available, or not available at acceptable terms, we may have to decline the capital intensive hardware
projects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Interest Rate Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company does not enter
into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate
risk exposure. The Company has not been exposed nor does it anticipate being exposed to material risks due to changes in interest rates.
A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on the Company&#8217;s
consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Currency Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The majority of our revenues
are denominated in US Dollars while about half of our costs are denominated in Renminbi, which is not freely convertible into foreign
currencies. All foreign exchange transactions take place either through the People&#8217;s Bank of China (&#8220;PBOC&#8221;) or other
authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory
institutions requires submitting a payment application form together with suppliers&#8217; invoices and signed contracts. The value of
Renminbi is subject to changes in central government policies and to international economic and political developments affecting supply
and demand in the foreign exchange markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A hypothetical 10% change
in foreign exchange rates during any of the preceding periods presented would have had an insignificant effect on our consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Certain Transactions for the Years Ended December
31, 2021 and 2022, and Subsequent Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Equity financing from Chongqing City Youtong
Equity Investment Fund (&#8220;Chongqing Youtong&#8221;)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">On April 18, 2019, the Group
entered into an equity financing agreement with Chongqing Youtong owned by the Chongqing Government in the PRC. According to the agreement,
Chongqing Youtong purchased 9.9% equity interest of the Company at that time which was equivalent to 233,392 (post reverse split adjusted)
ordinary shares with a total purchase consideration of $13.87 million on May 16, 2019, for which 75% of the total purchase consideration
amounting to $10.40 million in cash was received. Both parties have agreed to not proceed with the remainder 25% investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">In February 2023, the Company
entered into a settlement agreement with Chongqing Youtong on the settlement of the equity financing. For the cash consideration with
the amount of $10,399, the Company agreed to repay Chongqing Youtong the principal plus 8% annually interest with its ordinary shares.
Besides, both parties agreed to not proceed with the remainder 25% investment and the related previous issued 58,348 (post reverse split
adjusted) shares will not withdraw. Also, to compensate the loss from the share price decline, the Company issued additional 56,024,444
ordinary shares on February 28, 2023 to settle the deal.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loan from HSBC</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 30, 2019, the Group
entered into a banking facility agreement with HSBC for a credit facility of $5 million with an interest rate of London Interbank Offered
Rate (LIBOR) plus 1% and a maturity date of one year. $4.5 million were drawn in June 2019 and another $0.5 million were drawn in July
2019 for working capital purposes. This loan was completely re-paid in June 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loans from Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 27, 2020, the
Company entered into a loan agreement with an individual shareholder who loaned the Company $1.25 million in cash. The loan accrues interest
at the rate of 6% per annum, and the principal together with accrued interest are due in 15 months but was extended by agreement until
December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An agreement was executed
between the Company and the lender on May 3, 2022 for the complete repayment of the loan principal and accrued interest by the issuance
to the lender 338,968 (post reverse split adjusted) ordinary shares of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Senior Debt Purchased by LMFA Financing
LLC</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company entered into Agreements
dated December 14, 2020 with Partners For Growth which was its senior lender and LMFA Financing LLC (&#8220;LMFA&#8221;), a Florida limited
liability company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA is committed to purchase up to
be approximately $18 million of debt in tranches, which when completed will eliminate substantially all of the debt with the Company&#8217;s
senior lender. LMFA will convert the purchased debt into common shares of the Company, pursuant to a court order that allows the conversion
shares to be issued as unrestricted securities in a transaction that is exempt from registration under Section 3(a)(10) of the Securities
Act of 1933, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of February 10, 2021, LMFA
has completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted into and sold all 1.42 million
(post reverse split adjusted) shares of the Company&#8217;s ordinary shares. With the Company settling another $1.27 million of debt,
accrued interest and applicable fees directly with the senior lender by the issuance of 94,170 (post reverse split adjusted) shares on
February 17, 2021 which the senior lender subsequently sold, the Company&#8217;s defaulted Debts with the senior lender totaling $19.14
million have been eliminated.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Convertible Notes Sold</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million (the &#8220;May 25 Notes&#8221;). The notes are due in
two years, have an annual interest rate of 10%, convertible into ordinary shares of Borqs at $0.44325 per share (post reverse split adjusted)
and has 100% warrant coverage with the warrants exercisable for cash or cashlessly at the closing bid price of 2 days prior to exercising
but not less than $0.41 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company signed agreements
with institutional and individual investors for sale of convertible notes on February 25, 2021 for $20 million (the &#8220;Feb 25 Notes&#8221;)
and on April 14, 2021 for $3 million (the &#8220;Apr 14 Notes&#8221;). The notes are due in two years, have an annual interest rate of
8%, convertible into ordinary shares of Borqs at 10% discount from the market price and has 90% warrant coverage with the warrants exercisable
cashless or for cash at $2.222 per share for the Feb 25 Notes and $1.540 for the Apr 14 Notes. The conversion price is at $1.539 per share
for the Feb 25 Notes and $1.071 per share for the Apr 14 Notes, or at a one-time reset at 90% of the market price at the time of effectiveness
of the required registration statement, whichever is lower. One-third of the notes were sold at the execution of definitive agreements
and two-thirds of the notes were sold upon the effectiveness of a registration statement on May 4, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company signed agreement
with institutional and individual investors for sale of convertible notes on September 14, 2021 for $27.15 million (the Sep 14 Notes).
The notes are due in two years, have an annual interest rate of 8%, convertible into ordinary shares of Borqs at 10% discount from the
market price and has 90% warrant coverage with the warrants exercisable cashless or for cash at $0.8682 per share. The conversion price
is at $0.6534 per share or at a one-time reset at 90% of the market price at the time of effectiveness of the required registration statement
or availability to trade the converted shares under Rule 144, whichever is lower. Only half, or $13.575 million of the notes were sold.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Proceeds from the sale of
notes were used for the procurement of orders the Company expects to receive from its customers, for development of the next generation
5G products, and also for acquisition of 51% of HHE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Directors and Executive Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
information regarding our executive officers and directors as of April 15, 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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expires at<br/>
annual stockholders</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>meeting in year</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td style="text-align: left; vertical-align: top">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; width: 23%; text-align: left">Pat Sek Yuen Chan</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">60</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Class I Director</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">Heung Sang Addy (Dexter) Fong</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">63</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Class II Director</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; text-align: left">Ji (Richard) Li</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">63</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Class I Director</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">Shizhu (Steve) Long</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">61</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Class II Director</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left; vertical-align: top">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left; vertical-align: top">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">50</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Chief Financial Officer</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">Anthony K. Chan</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">68</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Executive Director of Finance and US Operations</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; vertical-align: top">Simon Sun</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">56</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Executive Vice President and Co-General Manager of Connected Solutions Business Unit</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">Hareesh Ramanna</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">61</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Executive Vice President and Co-General Manager of Connected Solutions Business Unit</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The principal occupation and
business experience of our directors and executive officers is as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Pat Sek Yuen Chan, </i>58,
is the Chairman of our board of directors, as well as our Chief Executive Officer and President. He was the founder and Chairman of the
board of directors of Borqs International, and since 2007 he served as Borqs International&#8217;s Chief Executive Officer and President.
Mr. Chan has over 20 years of experience in the mobile network communications sector. Prior to founding Borqs, Mr. Chan served as Senior
Vice President and General Manager of the infrastructure business unit of UTStarcom Inc., a telecommunications equipment company, from
2000 to 2007. Earlier, Mr. Chan was an engineering manager in Motorola responsible for the development of the GPRS switching. Mr. Chan
is an established entrepreneur and has received many awards, including the &#8220;High-Caliber Talent from Overseas Award&#8221; from
the PRC government, and &#8220;2012 Beijing Entrepreneur of the Year&#8221; from Silicon Dragon. Mr. Chan received his bachelor&#8217;s
degree in computer science from the University of Toronto and his master&#8217;s degree in computer science from the University of British
Columbia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Wan Yu (Lawrence) Chow,
Ph.D.,</i> 60, was elected as an independent board member by our stockholders in December 2018. Dr. Chow has almost 30 years of experience
in the ICT industry, he has extensive working experience with large and complex global FinTech, Telco + Network Equipment Provider &amp;
Education industries with successful track record of delivering outstanding commercial and technical results in Fortune 500 organizations
to small start-ups. He started his career in 1989 at various Silicon Valley tech companies including Xerox Corporation, Amdahl Corporation
and Sun Microsystems. At Sun Micro, Dr. Chow served as the Chief Technical Consultant from 1993 to 1999 for the Greater China region.
After serving as the Director of Strategic Alliance for PeopleSoft Inc., North Asia, from 2000 to 2001, he rejoined Sun Micro Greater
China as its CTO/NEP Technology Office from 2002 to 2008. He joined SAP China as Managing Partner from 2012 to 2015. Currently, he is
serving as Director and Strategic Partner for QLIK Greater China since 2017. Dr. Chow received two Bachelor&#8217;s Degrees in Computer
Science and Information System from Oregon State University in 1988 and earned a Master&#8217;s Degree in Computer Science from Pacific
W. University in 1993. He received another Master&#8217;s Degree in Education Management from Tarlac State University in 2011. Dr. Chow
received his PhD in Education Management from HKMA/Tarlac State University in 2015.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Heung Sang Addy (Dexter)
Fong,</i> 63, was elected as an independent board member by our stockholders in March 2020. He was also appointed as the Chairperson of
the Audit Committee, our Audit Committee &#8220;financial expert,&#8221; as member of the Compensation Committee, and as a member of the
Enterprise Risk Oversight Committee. Mr. Fong has almost 36 years of experiences in cross border financial investments and business operations.
Since 2017, he has served as the chief financial officer of Adlai Nortye Biopharma Ltd. Mr. Fong also led the B-round fundraising of Adlai
Nortye Biopharma Ltd, but funding US$53 million. He was the managing director of Bonus Eventus Securities Ltd. from 2015 to 2017, and
was the chief financial officer of China Harmony Auto Holding Ltd. from 2012 to 2015 where he managed the company&#8217;s initial public
offering process onto the Hong Kong Stock Exchange (ticker HK: 03826). From 2009 to 2011, he was the director and chief financial officer
of China Electric Motor, Inc. (NASDAQ: CELM) and Apollo Solar, Inc. (OTC: ASOE). Mr. Fong has held various financial executive positions
for companies with businesses between China and the U.S. and his experience as an independent board member includes: Universal Technology
(HK: 1026) from 2006 to 2013; China Housing and Land Development Inc. (NASDAQ: CHLN) from 2010 to 2014; independent director and audit
committee chair for Sisram Med (HK: 01696) since 2017; and Kandi Technologies Corp (NASDAQ: KNDI) from 2007 to 2011. He also worked as
a manager for KPMG from 1996 to 1997, and for Deloitte &amp; Touch&#233; and Ernst &amp; Young in the U.S. from 1993 to 1995. He was
an auditor for Deloitte &amp; Touch&#233; from 1989 to 1992. Mr. Fong received his Bachelor&#8217;s degree in History from the Hong
Kong Baptist University in 1982, an MBA in Accounting from the University of Nevada in 1988; he also earned a Master&#8217;s Degree in
Accounting from the University of Illinois in 1993. Mr. Fong is a member of AICPA &amp; HKICPA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Ji (Richard) Li</i>, 63,
was elected as an independent board member by our stockholders in December 2018. Mr. Li has 23 years of experience in the telecom industry
and he worked in various multinational companies. He started his career in 1982 as a lecturer in Huazhong University of Science and Technology
in China. He was the General Manager of UTStarcom Inc. Shenzhen Office from 1995 to 2001, where he led a team to develop telecom switches
based on soft switch technology, and the product was launched in China with more than 50 million subscribers. Mr. Li was the Founder of
Fiberxon, Inc. from 2001 to 2004, where he led a team to develop fiber optics equipment, and this company was successful sold to MRV Communication.
He was the founder and served as the Chief Executive Officer of AngleCare Inc. from 2005 to 2006, and led a team to develop mobile health
care applications. Mr. Li was the CEO and General Manager of Wuhan HSC Technology Inc. from 2006 to 2007, he led a team to develop advertisement
systems used for public transit systems and were successfully used in the Wuhan Taxi network. He has been serving as General Manager of
Vinko Technology Inc. from 2010 to 2014, he led a team to develop telecom payment systems in China. He is currently an Angel Investor
since 2014. Mr. Li received his Master&#8217;s Degree in Information Engineering from Huazhong University of Science and Technology.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Shizhu (Steve) Long</i>,
61, was elected as an independent board member by our stockholders in March 2020. Mr. Long is an experienced telecommunication executive
who has been working in the telecom industry for the last 25 years. Currently, he is the chief technology officer of Shenzhen Skyworth
Digital Technology Corporation, which focuses on research and development, manufacture and sale of STB and broadband devices. He has comprehensive
knowledge of the current telecommunications systems and equipment platforms. He recently had key research and development roles in the
development of carrier class IPTV systems working with China Mobile Communications Corporations (&#8220;CMCC&#8221;) to develop mobile
phone backend service and information aggregation services. His latest research areas are broadband intellectual property-based advanced
content delivery services and pertinent terminals. His other major research and development achievements include the development of the
core network of personal handy-phone system (&#8220;PHS&#8221;), which was deployed in more than 150 systems all over China. Prior to
joining UTStarcom Corp to start his telecommunication industry career in 1998, Mr. Long was a professor at the HuaZhong University of
Science and Technology. He is also a rapporteur of the International Telecommunication Union (&#8220;ITU&#8221;) of Geneva, Switzerland,
particularly for Study Group 9 &#8211; Broadband cable and TV. Mr. Long received his Bachelor and Master degrees in Engineering from the
HuaZhong University of Science and Technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Henry Sun,</i> 50, is the
Chief Financial Officer since October 1, 2021. Mr. Sun founded Reach China LLC in 2016, a cross-border consulting firm helping both American
and Chinese companies with capital market introductions and international business development. From January&#160;2011 to August&#160;2016,
Mr.&#160;Sun served as the CFO of Highpower International,&#160;Inc., a lithium battery company listed on Nasdaq. From November&#160;2009
to December&#160;2010, Mr.&#160;Sun was the CFO of Zoomlion Concrete Machinery Company, a division of Zoomlion that was listed on both
the Shanghai and Hong Kong stock exchanges.&#160;&#160;Mr.&#160;Sun also held financial management roles with various public and private
companies including Merrill Lynch from 2003 to 2005. Mr.&#160;Sun has extensive experiences in financial reporting and planning, corporate
finance and SEC compliance, investor relations, capital raising, as well as managing relationships with investment bankers.&#160; Mr.&#160;Sun
holds a MBA degree from the Thunderbird School of Global Management at Arizona State University, and a Bachelor of Engineering degree
from the Beijing University of Posts and Telecommunications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Anthony Chan,</i> 68, is
the Executive Director of Finance and US Operations since October 1, 2021, prior to which he was the Chief Financial Officer and Executive
Vice President, Corporate Finance and joined the company in April 2015. Mr. Chan has over 30 years of experience in U.S. and China cross
border investments and business operations. From July 2013 until March 2015, Mr. Chan served as the President of Asia Sourcing for Portables
Unlimited in New York, a distributor of T-Mobile USA. From March 2009 until July 2013, he served as the CFO for Tianjin Tong Guang Digital
Broadcasting Co. Ltd, a mobile communications products company. For the 20 years prior to that, he was involved in multiple investment
and technology transfer projects between China, the U.S and Europe, in the areas of communication products, chemical fibers, textile machinery
and medical equipment. Mr. Chan received both his bachelor&#8217;s and MBA degrees from the University of California at Berkeley.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Simon Sun,</i> 56, is the
Executive Vice President, Co-General Manager of Borqs&#8217;s Connected Solutions Business Unit and has served the company since November
2013. Mr. Sun has over 20 years of experience in research and development and product engineering in the mobile industry. He served as
the Co-Founder and Chief Executive Officer of Nollec Wireless, Ltd., a mobile handset design house, from July 2007 to October 2013. He
was the VP of engineering for CEC Wireless, another mobile handset design house in China from September 2006 to June 2007. Mr. Sun received
his bachelor&#8217;s degree in Industrial Engineering from Tianjin University of China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Hareesh Ramanna,</i> 61,
is our Executive Vice President, Co-General Manager of Connected Solutions Business Unit, Managing Director of India Operations and Head
of Software Development, and has served our company since July 2009. Mr. Ramanna has over 20 years of experience in the mobile industry.
Prior to joining us, he served as a Senior Director and Head of Mobile Devices Software in Global Software Group, Motorola India Electronic
Limited from May 1992 to November 2008. Mr. Ramanna received his bachelor&#8217;s degree in Electronics and Communication from National
Institute of Engineering in 1983, Post-Graduation Certification from Indian Institute of Science and an advanced leadership Certification
from McGill University in collaboration with Lancaster University of UK and Indian Institute of Management in Bangalore.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Executive Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our executive officers are
designated by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or
executive officers. There are no arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which
any person referred to above was selected as a director or member of senior management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Board of Directors and Corporate Governance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with our memorandum
and articles of association, our Board is divided into three classes, with the number of directors in each class to be as nearly equal
as possible. The Company held its last annual general meeting (&#8220;AGM&#8221;) on October 28, 2022. Our existing Class III directors
will serve until our 2024 AGM, our existing Class II directors will serve until our 2023 AGM and our existing Class I directors will serve
until our 2025 AGM. At each annual general meeting, directors elected to succeed those directors whose terms expire shall be elected for
a term of office to expire at the third annual general meeting following their election.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors, which
is elected by our shareholders, is responsible for directing and overseeing our business and affairs. In carrying out its responsibilities,
the board selects and monitors our top management, provides oversight of our financial reporting processes, and determines and implements
our corporate governance policies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors and
management are committed to good corporate governance to ensure that we are managed for the long-term benefit of our stockholders, and
we have a variety of policies and procedures to promote such goals. To that end, during the past year, our board and management periodically
reviewed our corporate governance policies and practices to ensure that they remain consistent with the requirements of the U.S. securities
laws, SEC rules, and the listing standards of The Nasdaq Stock Market (&#8220;Nasdaq&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Meetings of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors and
committees of the board held 2 regular meetings plus executed on 14 unanimous written consents for the review and decision making on Company
matters during the year 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Stockholder Communications with the Board of
Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Stockholders and other parties
interested in communicating directly with the board of directors may do so by writing to: Board of Directors, c/o Borqs Technologies,
Inc., Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong, or by e-mail to sandra.dou@borqs.net. Stockholders
and others may direct their correspondence to our Secretary.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<b>Independence of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Nasdaq listing standards require
that a majority of our Board be independent directors. An &#8220;independent director&#8221; is a person, other than an officer or employee
of the Company or its subsidiaries, who has no relationship which in the opinion of the Company&#8217;s board of directors would interfere
with the director&#8217;s exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined
that Mr. Chow, Mr. Fong, Mr. Li and Mr. Long are &#8220;independent directors&#8221; as defined in the Nasdaq listing standards and applicable
SEC rules. Our independent directors will hold regularly scheduled meetings at which only independent directors are present.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Board Leadership Structure and Role in Risk
Oversight</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Board does not have a
lead independent director. Pat Chan is our Chief Executive Officer and Chairman of the Board.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Committees of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Audit Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The members of our Audit Committee
are Mr. Fong (chairman of the committee), Mr. Chow and Mr. Li, each of whom is an independent director. Each member of the Audit Committee
is financially literate and our Board determined Mr. Fong qualifies as our &#8220;audit committee financial expert,&#8221; as such term
is defined in Item 401(h) of Regulation S-K. Our Audit Committee charter details the responsibilities of the Audit Committee, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Compensation Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The members of our Compensation
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charter details the principal functions of the Compensation Committee, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The charter also provides
that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or
other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However,
before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Compensation Committee
will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Nominating and Corporate Governance Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The members of our Nominating
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Enterprise Risk Oversight Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The members of our Enterprise
Risk Oversight Committee are Mr. Fong (chairman of the committee), Mr. Chow and Mr. Li, each of whom is an independent director. Our Enterprise
Risk Oversight Committee charter details the principal functions of the committee, including, carrying out the responsibility of overseeing
the effectiveness of risk management policies, procedures and practices implemented by management of the Company with respect to strategic,
operational, environmental, health and safety, human resources, legal and compliance and other risks faced by the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Risk and Information Security Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The members of our Risk and
Security Committee are Mr. Chow (chairman of the committee) and Mr. Fong, each of whom is an independent director. Our Risk and Security
Committee charter details the principal functions of the committee, including, overseeing and reviewing the Company&#8217;s internal controls
to protect the Company&#8217;s information and proprietary assets. Mr. Pat Chan, CEO of the Company, also serves as the Chief Information
Officer for the committee; and Mr. Anthony Chan, Executive Director of Finance &amp; US Operations, also serves as the Chief Risk Office
for the committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Involvement in Certain Legal Proceedings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No executive officer or director
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><!-- Field: Page; Sequence: 90; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->86<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Executive Compensation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Summary Compensation Table</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pat Chan, Henry Sun, and Anthony
Chan are referred to in this Annual Report as our named executive officers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
information regarding the compensation awarded to, or earned by, the named executive officers for the past two fiscal years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Summary Compensation Table</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">397,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Anthony K. Chan<br/> <i>Executive Director of Finance &amp; US Operations</i></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2022</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">565,739</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">565,739</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 14, 2020, the
Company&#8217;s board of directors approved the issuance of restricted ordinary shares to all staff with a number equal to 50% of the
vested options in exchange for the cancellation of the vested options previously awarded to the recipients. As a result, 185,230 shares
and 95,238 shares were awarded to the CEO and the CFO, respectively. Issued from the Company&#8217;s 2017 Equity Incentive Plan, such
shares were valued at $1.05 per share which was the closing price on the trading day immediately preceded the day of the approval by the
board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to stringent operational
cash flows caused by the COVID-19 pandemic, the Mr. Anthony Chan, voluntarily forfeited his salary for the period from April 1 to December
31 of the year 2020 in the amount of $189,000. Mr. Chan did not have a cash salary for the years ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Stock awards made to the executive
officers were approved by the Board of Directors and valued as of the date of grant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Outstanding Equity Awards at 2022 Year-End</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the issuance of restricted
ordinary shares in exchange for all vested stock options as described in the previous section, there was no outstanding vested or unvested
stock options held by any executives as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Borqs Technologies, Inc. Equity Incentive Plan</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with our acquisition
of Borqs International by way of merger, we assumed the obligations under outstanding stock options issued under the Borqs International
2007 Global Share Plan, as adjusted to give effect to the merger. Those outstanding options to purchase shares of Borqs International
were converted into options to purchase 2,825,273 of our ordinary shares, with exercise prices ranging from $2.12 to $9.10 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective August 18, 2017,
we adopted the Borqs Technologies, Inc. 2017 Equity Incentive Plan (&#8220;Equity Incentive Plan&#8221;), with five million ordinary shares
issuable pursuant to equity awards under the plan. The number of ordinary shares reserved for issuance under the Equity Incentive Plan
will increase automatically on January 1 of each of 2018 through 2027 by a number of shares that is equal to 5% of the aggregate number
of outstanding ordinary shares as of the immediately preceding December 31. Our Board may reduce the size of this increase in any particular
year. Outstanding awards under the 2007 Global Share Plan were assumed under the Equity Incentive Plan as of our acquisition of Borqs
International by way of merger on August 18, 2017. Due to the issuance of restricted ordinary shares to our staff in exchange for all
vested stock options as described in the previous section, there was no outstanding vested held by our staff as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the following
shares will be available for grant and issuance under our Equity Incentive Plan:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">shares subject to options or share appreciation rights granted under our Equity Incentive Plan that cease to be subject to the option or stock appreciation right for any reason other than exercise of the option or share appreciation right;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">shares subject to awards granted under our Equity Incentive Plan that are subsequently forfeited or repurchased by us at the original issue price;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shares that otherwise become
available for grant and issuance because of the provisions above will not include shares subject to awards that initially became available
due to our substitution of outstanding awards granted by another company in an acquisition of that company or otherwise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Eligibility. </i>The Equity
Incentive Plan provides for the grant of incentive stock options to our employees and any parent and subsidiary corporations&#8217; employees
and for the grant of nonqualified share options, restricted shares, restricted share units, share appreciation rights, share bonuses and
performance awards to our employees, directors and consultants and our parent and subsidiary corporations employees and consultants. No
more than 5,000,000 shares may be issued as incentive stock options under the Equity Incentive Plan. In addition, no participant in the
plan may receive awards for more than 2,000,000 shares in any calendar year, except that new employees are eligible to be granted up to
a maximum of award of 4,000,000 shares. Authorized number of shares under the Plan automatically increases at the end of each year by
5% of the then outstanding ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Administration. </i>The
Equity Incentive Plan is administered by the Board or by our Compensation Committee; in this plan description we refer to the Board or
Compensation Committee as the plan administrator. The plan administrator determines the terms of all awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Types of Awards. </i>The
Equity Incentive Plan allows for the grant of options, restricted shares, restricted share units, share appreciation rights, share bonuses
and performance awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Award Agreements. </i>All
awards under the Equity Incentive Plan are evidenced by an award agreement which shall set forth the number of shares subject to the award
and the terms and conditions of the award, which shall be consistent with the Equity Incentive Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Term of Awards. </i>The
term of awards granted under the Equity Incentive Plan is ten years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Vesting Schedule and Price.
</i>The plan administrator has the sole discretion in setting the vesting period and, if applicable, exercise schedule of an award, determining
that an award may not vest for a specified period after it is granted and accelerating the vesting period of an award. The plan administrator
determines the exercise or purchase price of each award, to the extent applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Transferability. </i>Unless
the plan administrator provides otherwise, the Equity Incentive Plan does not allow for the transfer of awards other than by will or the
laws of descent and distribution. Unless otherwise permitted by the plan administrator, options may be exercised during the lifetime of
the optionee only by the optionee or the optionee&#8217;s guardian or legal representative.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Changes in Capitalization.
</i>In the event there is a specified type of change in our capital structure without our receipt of consideration, such as a share split,
or if required by applicable law, appropriate adjustments will be made to the share maximums and exercise prices, as applicable, of outstanding
awards under the Equity Incentive Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Change in Control Transactions.
</i>In the event of specified types of mergers or consolidations, a sale, lease, or other disposition of all or substantially all of our
assets or a corporate transaction, outstanding awards under our Equity Incentive Plan may be assumed or replaced by any surviving or acquiring
corporation; the surviving or acquiring corporation may substitute similar awards for those outstanding under our Equity Incentive Plan;
outstanding awards may be settled for the full value of such outstanding award (whether or not then vested or exercisable) in cash, cash
equivalents, or securities (or a combination thereof) of the successor entity with payment deferred until the date or dates the award
would have become exercisable or vested; or outstanding awards may be terminated for no consideration. The plan administrator, may, on
a discretionary basis, accelerate, in full or in part, the vesting and exercisability of the awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Governing Law and Compliance
with Law. </i>The Equity Incentive Plan and awards granted under it are governed by and construed in accordance with the laws of the British
Virgin Islands. Shares will not be issued under an award unless the issuance is permitted by applicable law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Amendment and Termination.
</i>The Equity Incentive Plan terminates ten years from the date it was approved by our shareholders, unless it is terminated earlier
by our Board. Our Board may amend or terminate our Equity Incentive Plan at any time. Our Board generally may amend the plan without shareholder
approval unless required by applicable law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Employment Agreements and Other Arrangements
with Named Executive Officers</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under our employment agreement
with Pat Sek Yuen Chan, Mr. Chan serves as our President and Chief Executive Officer at a base salary of $382,200, In the event Mr. Chan&#8217;s
employment would be terminated upon the occurrence of a merger with another company that has been in a loss position for three years or
declared in bankruptcy, dissolved or liquidated, or if changes in the law result in the company or Mr. Chan unable to legally perform
the contract, the Company will pay Mr. Chan an appropriate subsidy and compensation pursuant to the terms of the arrangement and in accordance
with the provisions of relevant Chinese laws and regulations. Mr. Chan also agreed not to hold any appointment for any other entity that
has a competitive relationship with the Company during, and for one year following the termination of, his employment arrangement with
us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under our employment agreement
with Henry Sun, Mr. Sun serves as our Chief Financial Officer beginning on October 1, 2021, and receives monthly compensation in the amount
of $20,000 per month, subject to periodic review and adjustment. The term of Mr. Sun&#8217;s employment agreement is four years unless
both parties mutually agree to extend the term. We may terminate the agreement without any reason by giving Mr. Sun not less than one
month&#8217;s prior notice in writing. We may also terminate this agreement without any notice period or termination payment under limited
circumstances set forth in Mr. Sun&#8217;s employment agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->89<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The employment agreement with
Anthony K. Chan has expired. Mr. Chan is currently serving as our Executive Director of Finance and US Operations without an agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Director Compensation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2022, our non-employee directors were entitled to receive cash compensation and an option to purchase ordinary shares or restricted
stock awards. All nonemployee directors receive an annual fee of $30,000, and the chairperson of the Audit Committee receives an additional
$18,000 per year and the chairperson of the Compensation Committee receives an additional $5,000 per year. Directors are entitled to be
reimbursed for their reasonable expenses incurred in attending meetings of the Board and committees of the Board. The following table
sets forth the compensation paid to each person who served as a member of our Board in 2022 Pat Chan, our Chief Executive Officer and
Chairman of the Board, did not receive any additional compensation for his service as a director, and his compensation is detailed in
the Summary Compensation Table and related disclosures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Director Compensation Table</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below shows the
compensation received by each of our non-employee directors for their services during 2022. Our non-employee directors do not receive
fringe or other benefits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Equity Awards for Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the issuance of restricted
ordinary shares in exchange for all options as described in the previous section, there was no outstanding vested or unvested stock options
held by the directors as of December 31, 2022</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Compensation Committee Interlocks and Insider
Participation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of this Annual
Report, no officer or employee serves as a member of the Compensation Committee. None of our executive officers serves as a member of
the Board or Compensation Committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Limitation of Liability and Indemnification
of Directors and Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our memorandum and articles
of association, the BVI Business Companies Act, (as amended), and the common law of the British Virgin Islands allow us to indemnify our
officers and directors from certain liabilities. Our memorandum and articles of association provides that we may indemnify, hold harmless
and exonerate against all direct and indirect costs, fees and expenses of any type or nature whatsoever, any person who (a) is or was
a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was a director, officer, key
employee, adviser of our company; or (b) is or was, at the request of our company, serving as a director of, or in any other capacity
is or was acting for, another Enterprise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><!-- Field: Page; Sequence: 94; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->90<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will only indemnify the
individual in question if the relevant indemnitee acted honestly and in good faith with a view to the best interests of our company and,
in the case of criminal proceedings, the indemnitee had no reasonable cause to believe that his conduct was unlawful. The decision of
our directors as to whether an indemnitee acted honestly and in good faith and with a view to the best interests of our company and as
to whether such indemnitee had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for
the purposes of our charter, unless a question of law is involved.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The termination of any proceedings
by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the
relevant indemnitee did not act honestly and in good faith and with a view to the best interests of our company or that such indemnitee
had reasonable cause to believe that his conduct was unlawful.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may purchase and maintain
insurance, purchase or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter
of credit, or surety bond in relation to any indemnitee or who at our request is or was serving as a Director, officer or liquidator of,
or in any other capacity is or was acting for, another Enterprise, against any liability asserted against the person and incurred by him
in that capacity, whether or not we have or would have had the power to indemnify him against the liability as provided in our memorandum
and articles of association.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have insurance policies
under which, subject to the limitations of the policies, coverage is provided to our directors and officers against loss arising from
claims made by reason of breach of fiduciary duty or other wrongful acts as a director or officer, including claims relating to public
securities matters, and to us with respect to payments that may be made by us to these officers and directors pursuant to our indemnification
obligations or otherwise as a matter of law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into indemnification
agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained
in the BVI Companies Act, 2004 or our charter. These indemnification agreements require us, among other things, to indemnify our directors
and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also
require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit
or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive
officers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At present, we are not aware
of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or
is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for
indemnification.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->91<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Major Shareholders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table presents
information as to the beneficial ownership of our ordinary shares as of March 31, 2023 by:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each shareholder known by us to be the beneficial owner of more than 5% of our ordinary shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each of our directors;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">all of our directors and executive officers as a group.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Beneficial ownership is determined
in accordance with the rules of the SEC and thus represents voting or investment power with respect to our securities. Unless otherwise
indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where applicable. Ordinary shares subject to options that are currently
exercisable or exercisable within 60&#160;days of March 31, 2023 are deemed to be outstanding and to be beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Percentage ownership of our
ordinary shares in the following table is based on 175,383,130 ordinary shares outstanding on March 31, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of <br/> Shares</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">%</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Name and Address of Beneficial Owners of 5% or more</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Chongqing City Youtong Equity Investment Fund LLP (1)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">56,257,838</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">32.08</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Holu Hou Energy LLC (2)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">28,877,184</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">16.47</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">Directors and Executive Officers (3)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Pat Sek Yuen Chan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6,943,988</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3.96</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Wan Yu (Lawrence) Chow</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">239,375</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Heung Sang Addy (Dexter) Fong</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">350,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Ji (Richard) Li</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">239,375</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Shizhu (Steve) Long</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">241,161</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>Henry Sun</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,143,750</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Anthony K. Chan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,719,379</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2.69</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Hareesh Ramanna</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,670,198</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Simon Sun</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,100,340</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">All directors and officers as a group (9 persons)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">16,647,566</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9.49</td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Less than one percent</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1)</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The business address for Chongqing City
    Youtong Equity Investment Fund LLP is Industrial Park, No.123 Jin Tong Avenue, Adm Com &#8211; Tongnan District, Chongqing, China.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></td></tr>
  <tr style="vertical-align: top">
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2)</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address for Holu Hou Energy LLC is 919 N Market St, Ste 950, Wilmington, DE 19801, USA</span></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unless otherwise indicated, the business address of each of the individuals is Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->92<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Related Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See above &#8220;Item 5. Operating
and Financial Review and Prospects &#8211; Related Party Transactions&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Interests of Experts and Counsel</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 8. FINANCIAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The financial statements required
by this item can be found at the end of this report on Form 20-F, beginning on page F-1.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Legal Proceedings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were in arbitration before
the International Chamber of Commerce with Samsung Electronics Co., Ltd. (&#8220;Samsung&#8221;) to resolve a dispute regarding royalties
payable to the Company under a software license agreement the Company had with Samsung. Samsung alleged that, for the period starting
the fourth quarter of 2010 through mid-2012, the Company was overpaid royalties in the amount of approximately $1.67 million due to a
clerical error in Samsung&#8217;s accounting department that enabled the Company to receive royalties on sales of Samsung handsets that
did not contain its software. Samsung was seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as
reimbursements of reasonable fees including attorney fees and arbitration costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">After arbitration hearings
held in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an
arbitration award (the &#8220;Award&#8221;), which the Company received on November 29, 2018. Pursuant to the Award, the Company has the
obligation 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.
Samsung was also awarded its attorney&#8217;s fees and expenses in the aggregate amount of approximately $1.73 million. The Company has
reached an agreement with Samsung for settling the payments due Samsung by making 24 monthly payments beginning with April 2019. The Company
has pledged $5 million worth of ordinary shares in escrow as security for the payments and in the event that the Company is in default
of the scheduled payments, Samsung has the right to seize the escrow shares. Due to cash flow constraints resulting from the COVID-19
pandemic, we have not made payments to Samsung in the years 2020 and 2021. Beginning in June 2022, the Company has been making monthly
payments to Samsung with the anticipation that all of the Award including accrued interests will be completely paid off by December 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have initiated arbitration
proceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from
KADI 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
to the owners of KADI, and iii) payment in cash for loss of profit from KADI&#8217;s projected business in the amount of $5.3 million.
As of the filing of this annual report, the arbitration is still on-going and there is no assurance that the outcome of the proceedings
will be in favor of Borqs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other than the above-mentioned
cases and closed legal proceedings between the Group and our suppliers and previous employees, the Group has not been named in any litigation
where claims or counterclaims have been filed against us, as of the date of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->93<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Dividend Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a holding company and
may rely on dividends paid by our PRC subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions
to 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
regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance
with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries are required to set aside at least 10% of
our after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of our registered capital. Appropriations
to the employee welfare funds are at the discretion of the board of directors of Borqs Beijing. These reserves are not distributable as
cash dividends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash transfers from PRC subsidiaries
to our subsidiaries outside of China are subject to PRC government control of currency conversion. Restrictions on the availability of
foreign currency may affect the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments
to us, or otherwise satisfy their foreign currency obligation. See &#8220;Risk Factors &#8212; Risks Related to Doing Business in China&#8221;,
&#8220;Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company&#8221;
and &#8220;Restrictions on foreign currency may limit our ability to receive and use our revenue effectively.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Significant Changes</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There have been no significant
changes since the date of the consolidated financial statements included in this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 9. THE OFFER AND LISTING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>A.</b></td><td><b>Offering and Listing Details</b></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">See &#8220;&#8212;C. Markets.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>B.</b></td><td><b>Plan of Distribution</b></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>C.</b></td><td><b>Markets</b></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ordinary shares are listed on the Nasdaq Capital
Market under the symbol, &#8220;BRQS&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>D.</b></td><td><b>Selling Shareholders</b></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>E.</b></td><td><b>Dilution</b></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in">F.</td><td><b>Expenses of the Issue</b></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>







</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 10. ADDITIONAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>A.</b></span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Share Capital</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>B.</b></span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Memorandum and Articles of Incorporation</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our amended and restated memorandum
and articles of association has been filed with the SEC on Form 8-K on August 24, 2017. Those amended and restated articles of association
contained in such filing are incorporated by reference.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>C.</b></span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Material contracts</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Attached as exhibits to this
annual report are the contracts we consider to be both material and outside the ordinary course of business during the two-year period
immediately preceding the date of this annual report. We refer you to &#8220;Item 4. Information on the Company &#8211; A. History and
Development of the Company&#8221;, &#8220;Item 4. Information on the Company &#8211;Overview&#8221;, and &#8220;Item 5. Operating and
Financial Review and Prospects &#8211; B. Liquidity and Capital Resources &#8211; Related Party Transactions&#8221; for a discussion of
these contracts. Other than as discussed in this annual report, we have no material contracts, other than contracts entered into in the
ordinary course of business, to which we are a party.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>D.</b></span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Exchange controls</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under British Virgin Islands
law, there are currently no restrictions on the export or import of capital, including foreign exchange controls, or restrictions that
affect the remittance of dividends, interest or other payments to non-resident holders of our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>E.</b></span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Taxation</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>The following discussion
of British Virgin Islands and United States federal income tax consequences of an investment in our ordinary shares is based upon laws
and relevant interpretations thereof in effect as of the date of this report, all of which are subject to change. This discussion does
not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state,
local and other tax laws.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>British Virgin Islands Taxation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company and all dividends,
interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident in the BVI and any capital
gains realized with respect to any shares, debt obligations, or other securities of the Company by persons who are not resident in the
BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No estate, inheritance, succession
or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with respect to any shares, debt obligation
or other securities of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All instruments relating to
transfers of property to or by the Company and all instruments relating to transactions in respect of the shares, debt obligations or
other securities of the Company and all instruments relating to other transactions relating to the business of the Company are exempt
from payment of stamp duty in the BVI. This assumes that the Company does not hold an interest in real estate in the BVI.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are currently no withholding
taxes or exchange control regulations in the BVI applicable to the Company or its members.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>United States Federal Income Taxation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following discussion is
a summary of U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the ownership and disposition
of our ordinary shares. This summary applies only to U.S. Holders that hold our ordinary shares as capital assets (generally, property
held for investment) and that have the U.S. dollar as their functional currency. This summary is based on U.S. tax laws in effect as of
the date of this report, on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this report, and judicial
and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which
could apply retroactively and could affect the tax consequences described below. Moreover, this summary does not address the U.S. federal
estate, gift, Medicare, backup withholding, and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations,
relating to the ownership and disposition of our ordinary shares. The following summary does not address all aspects of U.S. federal income
taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations
such as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">banks and other financial institutions;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">insurance companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">pension plans;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">cooperatives;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">regulated investment companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">real estate investment trusts;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">broker-dealers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">traders that elect to use a mark-to-market method of accounting;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">certain former U.S. citizens or long-term residents;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">tax-exempt entities (including private foundations);</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons liable for alternative minimum tax;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons holding stock as part of a straddle, hedging, conversion or integrated transaction;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 100; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->96<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Investors are urged to consult their own tax
advisors regarding the application of U.S. federal taxation to their particular circumstances, and the state, local, non-U.S., or other
tax consequences of the ownership and disposition of our ordinary shares.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For purposes of this discussion,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions, or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a partnership (or other
entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment
of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships
holding our ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Passive Foreign Investment Company Considerations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A non-U.S. corporation, such
as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i)&#160;75% or more
of its gross income for such year consists of certain types of &#8220;passive&#8221; income or (ii)&#160;50% or more of the value of its
assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production
of passive income (the &#8220;asset test&#8221;). For this purpose, cash and cash equivalents are categorized as passive assets and the
company&#8217;s goodwill and other unbooked intangibles are taken into account as non-passive assets. Passive income generally includes,
among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning
a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly
or indirectly, more than 25% (by value) of the stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the law in this regard
is not clear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposes because we exercise effective control
over the consolidated VIEs and are entitled to substantially all of their economic benefits. As a result, we consolidate their results
of operations in our consolidated U.S.&#160;GAAP financial statements. If it were determined that we are not the owner of the consolidated
VIEs for U.S. federal income tax purposes, we would likely be treated as a PFIC for the current taxable year and any subsequent taxable
year. Assuming that we are the owner of the VIEs for U.S. federal income tax purposes, and based upon our current and expected income
and assets (including goodwill, other unbooked intangibles, and the cash proceeds following our initial public offering), we do not presently
expect to be a PFIC for the current taxable year or the foreseeable future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 101; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->97<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While we do not expect to
be or become a PFIC in the current or foreseeable taxable years, no assurance can be given in this regard because the determination of
whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income
and assets. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets
and the cash raised in our initial public offering. Under circumstances where our revenue from activities that produce passive income
significantly increase relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant
amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. In addition, because there
are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification
of certain income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming
a PFIC for the current or subsequent taxable years. If we were classified as a PFIC for any year during which a U.S. Holder held our ordinary
shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held our ordinary shares
even if we cease to be a PFIC in subsequent years, unless certain elections are made.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>F.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Dividends and paying agents</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>G.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Statement by experts</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>H.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Documents on display</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We file annual reports and
other information with the SEC. You may inspect and copy any report or document we file, including this annual report and the accompanying
exhibits, at the website maintained by the SEC at http://www.sec.gov, as well as on our website at http://www.borqs.com. Information on
our website does not constitute a part of this annual report and is not incorporated by reference.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will also provide without
charge to each person, including any beneficial owner of our ordinary shares, upon written or oral request of that person, a copy of any
and all of the information that has been incorporated by reference in this annual report. Please direct such requests to Investor Relations,
Borqs Technologies, Inc., Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong. Telephone number +852 5188
1864 or facsimile number +852 2114 0183.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>I.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Subsidiary information</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Credit Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See above &#8220;Item 5. Operating
and Financial Review and Prospects &#8211; Quantitative and Qualitative Disclosures about Market Risk &#8211; Credit Risk&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>


</div><!-- Field: Page; Sequence: 102; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->98<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Liquidity Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See above &#8220;Item 5. Operating
and Financial Review and Prospects &#8211; Quantitative and Qualitative Disclosures about Market Risk &#8211; Liquidity Risk&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Interest Rate Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company currently does
not have any variable-rate borrowings, and has not entered into investments for trading or speculative purposes and have not used any
derivative financial instruments to manage our interest rate risk exposure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Currency Exchange Rate Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We generate almost all of
our revenue from the Connected Solutions BU in U.S. Dollars and all of our revenue from the MVNO BU in Chinese Rmb Yuan. The majority
of our general and administrative expenses are in Chinese Rmb Yuan and Indian Rupees. We paid for our costs of good in either US Dollars
or Chinese Rmb Yuan depending on the source of the materials and components. For accounting purposes, non-US Dollars balance sheet items
are converted to US Dollars at the mean exchange rate as of the date of the balance sheet, and non-US Dollars income and expense items
are converted to US Dollars at the average exchange rate for the period of the reporting. We do not consider the risk from exchange rate
fluctuations to be material for our results of operations, as during the year ended December 31, 2022, these foreign exchange fluctuations
represented 2.7% of our revenues. However, the portion of our business conducted in other currencies could increase in the future, which
could expand our exposure to losses arising from exchange rate fluctuations. We have not hedged currency exchange risks associated with
our expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Inflation Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do business globally with
international customers and suppliers. Our gross margin and operations can be adversely affected by global inflationary situations such
as rising costs for raw materials, components, shipping and labor. The Company faces challenges in maintaining profitability of operations
in economies experiencing high inflation rates caused by global Covid pandemic and political tension between Russia and Ukraine. The inflation
rate in the U.S. has reached 40 year high in the beginning of 2022. It has affected the whole world economy, including our sourcing costs
and business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->99<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_032"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART II</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See section on risk factors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OR PROCEEDS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 15. CONTROLS AND PROCEDURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(a)</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Disclosure Controls and Procedures</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Chief Executive Officer
and our Chief Financial Officer, after evaluating the effectiveness of our &#8220;disclosure controls and procedures&#8221; (as defined
in the Securities Exchange Act of 1934 (&#8220;Exchange Act&#8221;) Rules 13a-15(e) or 15d-15(e)) as of December 31, 2022 as required
by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, have concluded that, due to the outstanding material weakness described below,
our disclosure controls and procedures are ineffective in ensuring that the information required to be disclosed by us in the reports
that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in
the SEC&#8217;s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to
allow timely decisions regarding required disclosure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(b)</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Management&#8217;s Annual Report on Internal Control over Financial Reporting</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is
a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the framework set
forth in the report Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or COSO. The COSO framework summarizes each of the components of a company&#8217;s internal control system, including (i)
the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on that evaluation,
our management concluded that these controls were ineffective as of December 31, 2022. In the years ended December 31, 2021 and 2020,
we did not maintain sufficient controls over financial reporting processes due to an insufficient number of financial reporting personnel
with an appropriate level of knowledge and experience in U.S. GAAP and SEC reporting requirements and financial reporting programs to
properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures
to fulfill U.S. GAAP and SEC financial reporting requirements. This deficiency constitutes as a material weakness of our internal control
over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 104; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->100<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Management identified the
following significant deficiencies relating to the IT controls in our MVNO business. However, the MVNO business was sold and disposed
of completely as of October 29, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Super system administrator access of key business information systems of MVNO BU can be obtained by out-sourced third-party developers. Such super system administrator access can be used to add, delete, or modify the business data in the key business information systems.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have completed the sale
of Yuantel as of October 29, 2020 and shall not have the same IT system deficiencies for the future periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(c)</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Changes in Internal Control over Financial Reporting</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We identified one material
weaknesses in internal control over financial reporting during our preparation of the financial statements for the fiscal year ended December
31, 2019 which was due to an insufficient number of accounting and financial reporting personnel with the requisite knowledge and experience
in application of U.S. GAAP and SEC requirements for financial reporting programs. During 2019 and 2020, the Company sought after professionals
to join our accounting team for U.S. GAAP and SEC financial reporting related matters. The Company faced challenges in recruitment during
the COVID-19 pandemic and finally acquired adequate financial reporting staff late in 2020. We have taken multiple steps to implement
measures designed to improve our internal control over financial reporting to remediate the material weakness including hiring of a financial
manager with US GAAP and SEC reporting experiences to help set up workflows for the strengthening of internal controls and preserving
accuracy in preparing consolidated financial statements, and also since December 2018, our Chairperson of the Audit Committee, a member
of the Washington State board of Accountancy since the year 1989, has been regularly providing the Company with advice on procedures and
interpretation of US GAAP rules and regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We plan to take measures to
further strengthen our internal control over financial reporting, including (i) continuing to hire additional qualified professionals
with experience in U.S. GAAP accounting and SEC reporting to lead accounting and financial reporting matters; (ii) organizing regular
training for our accounting staffs, especially the trainings related to U.S. GAAP and SEC reporting requirements; and (iii) establishing
effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure consolidated financial
statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting requirements. As of December
2019, we have adopted the following guidelines and established the following committees of the Board to implement measures to remediate
our internal control deficiencies in order to meet the requirements imposed by Section 404 of the Sarbanes Oxley Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->101<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 0.5in; text-align: justify">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other than as described above,
there were no changes in our internal controls over financial reporting that occurred during the year ended December 31, 2022 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16. RESERVED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors has
determined that Mr. Heung Sang Addy Fong (also known as Dexter Fong), an independent director and a member of our audit committee, is
an &#8220;Audit Committee Financial Expert&#8221; under Section 407(d)(5) of Regulation S-K promulgated under the Securities and Exchange
Act of 1934, as amended, and the corporate governance rules of the Nasdaq Stock Market. The previous Audit Committee Financial Expert,
Mr. Joseph Wai Leung Wong, resigned as of January 2, 2019 due to health reasons and the Board of Directors on March 4, 2019, elected Mr.
Fong as an independent director. The Board also determined that Mr. Fong qualifies as an &#8220;Audit Committee Financial Expert&#8221;
and appointed Mr. Fong as a member and the chairperson of the Audit Committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16B. CODE OF ETHICS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Code of Business Conduct
and Ethics for Employees (&#8220;Code of Ethics&#8221;) applies to all of our employees, including our chief executive officer, chief
financial officer and principal accounting officer. Our Code of Ethics is available on our corporate website, <i>www.borqs.com</i>. If
we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to file a current report on Form 6-K to disclose
amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, principal financial officer
and principal accounting officer by posting the required information on our website.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
the aggregate fees for audit and other services provided by our independent registered public accounting firm, Yu Certified Public Accountant,
P.C. (&#8220;Yu CPA&#8221;), for the years ended December 31, 2021 and 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold">$&#8217;000</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Audit fees</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">505</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">600</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Other audit service fees</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Tax review fee</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">All other fees</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">Total fees</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">505</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">600</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 106; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->102<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Audit fees for the years ended
December 31, 2021 and 2022 related to professional services rendered for the audit of our financial statements for the years ended December
31, 2021 and 2022, and the review of the financial statements included in our quarterly reports when we were a domestic filer, and review
of documents provided in connection with our regulatory filings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with our charter,
the audit committee is required to pre-approve all audit and non-audit services to be performed by the independent auditors and the related
fees for such services other than prohibited non-auditing services as promulgated under rules and regulations of the SEC (subject to the
inadvertent de minimis exceptions set forth in the Sarbanes-Oxley Act of 2002 and the SEC rules). All services performed by Yu CPA for
our benefit were pre-approved by the audit committee in accordance with its charter and all applicable laws, rules and regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16E. PURCHASES OF EQUITY SECURITIES BY
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING
ACCOUNTANT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16G. CORPORATE GOVERNANCE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a &#8220;foreign private
issuer,&#8221; as defined by the SEC, we are permitted to follow home country corporate governance practices, instead of certain corporate
governance practices required by Nasdaq for domestic issuers, with certain exceptions. While we voluntarily follow most Nasdaq corporate
governance rules, we follow British Virgin Islands corporate governance practices in lieu of Nasdaq corporate governance rules as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"></p><div>

</div><!-- Field: Page; Sequence: 107; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->103<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>


</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16H. MINE SAFETY DISCLOSURE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-transform: uppercase">&#160;</span></p><div>

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16I.&#160;Disclosure
Regarding Foreign Jurisdictions that Prevent Inspections.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-transform: uppercase"><b>ITEM
16J.&#160;INSIDER TRADING POLICIES</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has an Insider
Trading Policy in place. Under this Insider Trading Policy, every Borqs employee, contractor, consultant and board member is prohibited
from trading in Borqs stock while in possession of material nonpublic information about Borqs, and are prohibited from giving material
nonpublic information about Borqs or others to anyone who might trade on the basis of that information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This policy applies to all
transactions in Borqs securities, including ordinary shares of Borqs, restricted stock units and stock options, however acquired, and
any other type of securities that Borqs may issue, such as preferred stock, convertible notes, warrants and exchange-traded options or
other derivative securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All covered persons under
the policy are permitted to trade in Borqs securities only during the trading window period that begins after the close of trading on
the first full trading day following the widespread public release of our quarterly or year-end operating results, and ends at the close
of trading on the twentieth calendar day in the third month of the then-current quarter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While in possession of material
nonpublic information, even if a trading window is in effect, no covered person possessing material nonpublic information about Borqs
may trade in Company securities. Persons possessing such information may trade during a trading window only after the close of trading
on the second full trading day following our widespread public release of such information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 108; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->104<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_033"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART III</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 17. FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See Item 18.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 18. FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The financial information
required by this item, together with the reports of Yu Certified Public Account PC, is set forth on pages F-1 through F-73 and are filed
as part of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 19. EXHIBITS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    Number</b></span></td>
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    <td style="white-space: nowrap; width: 1%; text-align: center">&#160;</td>
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    <td style="white-space: nowrap; width: 1%; text-align: center">&#160;</td>
    <td style="white-space: nowrap; width: 5%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Filing<br/>
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    <td style="white-space: nowrap; width: 1%; text-align: center">&#160;</td>
    <td style="white-space: nowrap; width: 5%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Filed<br/>
    Herewith</b></span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.1</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex3-1_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amended and Restated Memorandum and Articles of Association</span></a></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8-K</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.1&#160;</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8/24/17</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
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    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex10-10_borqs.htm">Borqs Technologies, Inc. 2017 Equity Incentive Plan, as amended</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8-K</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.10</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8/24/17</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
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    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390017009163/f8k081817ex10-11_borqstech.htm">Form of Warrant, dated August 18, 2017, by and between the Company and each of Warrant Holders</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8-K</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.11</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8/24/17</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.3</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390018017642/f8k1218ex10-4_borqstech.htm">Form of Warrant issued to Partners For Growth V, L.P.</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8-K</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.4</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12/20/18</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.4</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390020002443/f20f2018ex2-4_borqstechno.htm">Description of Securities</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.4</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2/4/2020</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.1</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-20_borqstechno.htm">Loan and Security Agreement, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth V, L.P.</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.20</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7/2/18</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.2</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-21_borqstechno.htm">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.</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.21</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7/2/18</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.3</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-22_borqstechno.htm">Deed Of Guarantee and Indemnity, Effective as of April 30, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.22</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7/2/18</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.4</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390018008637/fs12018a2ex10-23_borqstechno.htm">Debenture, Effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.</a></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.23</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7/2/18</span></td>
    <td style="text-align: center">&#160;</td>
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    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
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    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
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    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
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    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
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    <td style="width: 5%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7/2/18</span></td>
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    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.38</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8/6/18</span></td>
    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.42</span></td>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.43</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
    <td style="text-align: center">&#160;</td>
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    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.44</span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
    <td style="text-align: center">&#160;</td>
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    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390018012590/fs12018a6ex10-45_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></a></td>
    <td style="text-align: center">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.54</span></td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
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    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
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    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
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    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">S-1/A</span></td>
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    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-223034</span></td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.58</span></td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/14/18</span></td>
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  <tr style="background-color: #CCEEFF">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="background-color: rgb(204,238,255)">
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    <td style="vertical-align: bottom; width: 61%; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-78_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Loan Agreement of December 30, 2020 with American West Pacific International Investment Corporation</span></a></td>
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    <td style="vertical-align: top; width: 5%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.78</span></td>
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    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-79_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Settlement Agreement with Growth V, L.P. of February 11, 2021</span></a></td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.79</span></td>
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    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4/26/2021</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
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  <tr style="background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.80</span></td>
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    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-80_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form of Securities Purchase Agreement.</span></a></td>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
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  <tr>
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.81</span></td>
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    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-81_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form of Convertible Note.</span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.81</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4/26/2021</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.82</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-82_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form of Warrant.</span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.82</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4/26/2021</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.83</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021022875/f20f2020ex4-83_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form of Registration Rights Agreement.</span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.83</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4/26/2021</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.84</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390020029193/f20f2019ex4-77_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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</span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">001-37593</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.77</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9/30/2020</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.85</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021056794/ea149964ex10-32_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Membership Interest Purchase Agreement</span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-259856</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.32</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11/04/2021</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.86</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1650575/000121390021056794/ea149964ex10-33_borqstech.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Limited Liability Company Agreement</span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">333-259856</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11/04/2021</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.1</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex8-1_borqstech.htm">List of Subsidiaries</a></span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">X</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font-family: Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif">11.1</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif"><a href="f20f2022ex11-1_borqstech.htm">Insider trading policy of the Company</a></span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif">20-F</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; vertical-align: top; text-align: center"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">X</span></p></td></tr>
  <tr>
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.1</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex12-1_borqstech.htm">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.</a></span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">20-F</span></td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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  <tr style="background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.2</span></td>
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    <td style="vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex12-2_borqstech.htm">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.</a></span></td>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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  <tr>
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    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
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  <tr style="background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.INS</span></td>
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    <td style="vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Instance Document.</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 114; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->110<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SIGNATURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The registrant hereby certifies
that 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
annual report on its behalf.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BORQS TECHNOLOGIES, INC.</b></span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td colspan="2">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="width: 60%">&#160;</td>
    <td style="width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pat Sek Yuen Chan</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Date: May 15, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt">&#160;</td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: bottom; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page</b></span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Financial Statements for the Years Ended December 31, 2021 and 2022</span></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td></tr> <tr> <td style="vertical-align: top; width: 89%; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reports of Independent Registered Public Accounting Firms (PCAOB ID # <ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">5910</ix:nonNumeric>)</span></a></td> <td style="vertical-align: bottom; width: 1%; text-align: justify">&#160;</td> <td style="vertical-align: top; width: 10%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2 &#8211; F-5</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Balance Sheets as of December 31, 2021 and 2022</span></a></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6 &#8211; F-7</span></td></tr> <tr> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Operations for the Years Ended December 31, 2020, 2021 and 2022</span></a></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-8 &#8211; F-9</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020, 2021 and 2022</span></a></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-10</span></td></tr> <tr> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_new"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Shareholders&#8217; (Deficit) Equity for the Years Ended December 31, 2020, 2021 and 2022</span></a></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-11 &#8211; F-13</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022</span></a></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-14 &#8211; F-15</span></td></tr> <tr> <td style="vertical-align: top; padding-left: 9pt; text-align: justify; text-indent: -9pt"><a href="#Fin_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes to the Consolidated Financial Statements</span></a></td> <td style="vertical-align: bottom; text-align: justify">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-16 &#8211; F-73</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_002.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="Fin_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the Shareholders and the Board of Directors
of</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Borqs Technologies, Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Opinion on the Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of Borqs Technologies, Inc. (the &#8220;Company&#8221;) and its subsidiaries, variable interest entities (the &#8220;VIE&#8221;)
and the VIE&#8217;s subsidiaries (collectively referred to as the &#8220;Group&#8221;), as of December 31, 2022 and 2021, the related
consolidated statements of operations, consolidated statements of comprehensive income (loss), consolidated statements of shareholders&#8217;
(deficit) equity, and consolidated statements of cash flows, for each of the three years ended December 31, 2022, and the related notes
(collectively referred to as the &#8220;consolidated financial statements&#8221;). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial positions of the Group as of December 31, 2022 and 2021, and the results of its
operations and its cash flows, for each of the three years ended December 31, 2022, in conformity with generally accepted accounting principles
in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Emphasis of Matter - Going Concern </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial statements
have been prepared assuming the Group will continue as a going concern. As discussed in Note 2(b) to the consolidated financial statements,
the Group has continued to incur losses, and it has not yet to generate favorable working capital; in addition, the Group&#8217;s operations
were still adversely impacted by COVID-19 pandemic. These conditions raise substantial doubt about its ability to continue as a going
concern. Management&#8217;s plan regarding these matters is also described in Note 2(b). The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These consolidated financial statements are the
responsibility of the Group&#8217;s management. Our responsibility is to express an opinion on the Group&#8217;s consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (&#8220;PCAOB&#8221;)
and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group&#8217;s internal
control over financial reporting. Accordingly, we express no such opinion.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 117; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_002.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Critical Audit Matters</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The critical audit matters communicated below
is the matters, arising from the current audit of the consolidated financial statements, which was communicated or required to be communicated
to the audit committee, and that (i) related to accounts or disclosures which are material to the consolidated financial statements, and
(ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter,
in any way, our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Deconsolidation of Holu Hou Energy LLC</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As described in Note 4(a) to the consolidated
financial statements, on October 19, 2021, the Group completed the acquisition of a 51% interest in Holu Hou Energy LLC (referred as &#8220;HHE&#8221;),
for an aggregate consideration of $6.78 million, in which the cash consideration was $3.25 million, contingent consideration liabilities
were $1.67 million. The acquisition was accounted for under the acquisition method of accounting which resulted in the recognition of
identifiable intangible assets, as developed technology, of $4.49 million and goodwill of $12.21 million as of December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As described in Note 4(c), in December 2022, the
Group have received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
(&#8220;CFIUS&#8221;), stating that the Group was required to fully divest its ownership interests and rights in HHE since HHE&#8217;s
solar energy storage system and related technology for multi-dwelling residential units were deemed a potential national security risk.
Upon such a requirement from CFIUS and the Group&#8217;s resolution to fully comply with the requirement in this letter from CFIUS and
terminate its control of HHE as of December 31, 2022, the Group no longer had a controlling interest in HHE resulting in deconsolidation
of HHE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group accounted for the deconsolidation of
HHE by derecognizing the assets and liabilities of HHE and recognizing a loss in net loss attributable to the Company, which involved
the valuation of the fair value of the retained non-controlling interest in HHE at the date of deconsolidation. Upon the deconsolidation
of HHE, the Group recorded its non-controlling investment in HHE as equity investments without readily determinable fair value (referred
as &#8220;equity investment&#8221;). Based on the valuation of the retained non-controlling interest in HHE, as of December 31, 2022,
the fair value of such equity investment was zero and the Group recognized $3.61 million in net loss attributable to the Company from
the deconsolidation of HHE and $5.39 million as the loss on the retained non-controlling interest.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_002.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Auditing the valuation of the retained non-controlling
interest in HHE upon the deconsolidation, required a high degree of auditor judgments and an increased extent of efforts, due to the estimates
uncertainty and the application of valuation techniques built in part, on assumptions around the future performance forecast of HHE, including
assumptions impacted by future events, such as revenue growth rates for both existing and any future pipeline contracts, discount rates,
expected volatility, forecasted results, such as revenue growth rates and EBITDA, and the comparable competitors selected in the market.
Changes in these assumptions can have a material effect on the valuation assessment of the retained non-controlling interest in HHE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Addressing the matter involved performing procedures
and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures
included, (i) evaluating management&#8217;s assumptions and methodology used to for estimate the fair value of HHE; (ii) evaluating the
appropriateness of the valuation models; (iii) testing the completeness, accuracy, and relevance of underlying data used in the models;
(iv) evaluating the reasonableness of significant assumptions and judgments made by management, including the revenue growth rate assumptions
for both existing and any future pipeline contracts, discount rates, expected volatility; (v) comparing the future operating results to
economic growth data, industry data, and growth rates utilized in the valuation analyses by the Group; (vi) evaluating the reasonableness
of the selection set of comparable competitors, and the reasonableness of parameters chosen by the valuation professionals, implemented
in the market approach; (vii) reviewing the documents related to the CFIUS&#8217; actions, such as the CFIUS letter, the Board resolution,
and the communication between the Group and CFIUS; (viii) reviewing the legal opinions from legal counsels on the timing of ceased control
from the Group over HHE; and (ix) evaluating the competence, capabilities and objectivity of the valuation professionals engaged by the
Group.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Going Concern Assessment</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements of the Group
are prepared on the going concern basis of accounting as described in note 2(b) to the consolidated financial statements. The Group has
stated in the notes to its financial statements that material uncertainty exists about its ability to continue as a going concern. There
is a key judgement as to whether there is substantial doubt regarding the Group&#8217;s ability to continue as a going concern.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group has prepared future cash flow forecasts
which involves judgement and estimation of key variables such as planned fund-raising activities, planned capital expenditures, future
production volumes and market conditions with future economic conditions, including the impact of the global COVID-19 pandemic, and effects
of key events including convertible note and debt restructure as described in Note 1(c), Note 13, and Note 20.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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described above is complex and involves a high degree of auditor judgment to assess the reasonableness of the cash flow forecasts, planned
financing actions and other assumptions used in the Groups going concern analysis. The Groups ability to execute the planned financing
actions are especially judgmental, provided the global financial markets and economic conditions have been, and continue to be, volatile
as a result of the COVID-19 pandemic and a series of unpredictable events.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 119; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img alt="" src="image_002.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Addressing the matter involved performing procedures
and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures
included, among others, (i) evaluating management&#8217;s assumptions and methodology used in the model to estimate the future cash flows
for the next 12 months from the date of our opinion, by comparing assumptions used by management against historical performance, economic
and industry indicators, and the publicly available information; (ii) assessing the key assumptions, including those pertaining to revenue
and the timing of significant payments in the cash flow forecast by comparing them to available purchase order, underlying agreements,
and market data; (iii) comparing the assumptions to those used in impairment assessments, such as long-lived assets; (iv) performing sensitivity
analysis on key assumptions, such as input prices and selling prices to determine their impact on the projections of future cash flows;
and (v) evaluating the sufficiency of the Group&#8217;s disclosures with respect to going concern assessment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="Fin_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of US dollar (&#8220;$&#8221;),
unless otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Current assets:</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 9%; text-align: center">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashAndCashEquivalentsAtCarryingValue" scale="3" unitRef="usd">6,117</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Total assets</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 121; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED BALANCE SHEETS (CONTINUED)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of US dollar (&#8220;$&#8221;),
unless otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Note</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 9%; text-align: center">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">(11)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-6">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-7">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-8">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="3" unitRef="usd">754</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Contingent consideration &#8211; non-current</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Other non-current liabilities</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherLiabilities" scale="3" unitRef="usd">15</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Non-current liabilities held for sale</td><td>&#160;</td>
    <td style="text-align: center">(1)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Total liabilities</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="3" unitRef="usd">70,538</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-12">&#160;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-13">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Shareholders&#8217; deficit:</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-14">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-15">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Additional paid-in capital</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdditionalPaidInCapital" scale="3" unitRef="usd">310,267</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Subscriptions receivable</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="brqs:SubscriptionsReceivable" scale="3" sign="-" unitRef="usd">14,378</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Statutory reserve</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Accumulated deficit</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Accumulated other comprehensive loss</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 1.5pt">(15)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" scale="3" sign="-" unitRef="usd">1,091</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Total Borqs Technologies, Inc. shareholders&#8217; deficit</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US">Giving retroactive effect to the reverse split on June 27, 2022</ix:footnote></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="Fin_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENT OF OPERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: right">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: right">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InvestmentIncomeInterest" scale="3" unitRef="usd">3</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InvestmentIncomeInterest" scale="3" unitRef="usd">47</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Interest expense</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InterestExpense" scale="3" unitRef="usd">11,680</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InterestExpense" scale="3" unitRef="usd">11,732</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Other income</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherNonoperatingIncome" scale="3" unitRef="usd">231</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherNonoperatingIncome" scale="3" unitRef="usd">240</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Other expense</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherNonoperatingExpense" scale="3" unitRef="usd">210</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherNonoperatingExpense" scale="3" unitRef="usd">3,207</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherNonoperatingExpense" scale="3" unitRef="usd">2,123</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Gain (loss) on disposal of subsidiary</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainOrLossOnSaleOfStockInSubsidiary" scale="3" unitRef="usd">10,096</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainOrLossOnSaleOfStockInSubsidiary" scale="3" sign="-" unitRef="usd">303</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-23">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: right">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfOtherAssets" scale="3" unitRef="usd">3,277</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-24">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Gain (loss) on debt settlement</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainsLossesOnExtinguishmentOfDebt" scale="3" sign="-" unitRef="usd">17,199</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Loss related to equity financing</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-25">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-26">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromEquityMethodInvestments" scale="3" sign="-" unitRef="usd">3,669</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.25in">Change in fair value of contingent consideration for the acquisition of HHE</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-27">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:FairValueAdjustmentOfWarrants" scale="3" unitRef="usd">111</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-28">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Loss on additional acquisition cost to HHE in shares</td><td>&#160;</td>
    <td style="text-align: right">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 123; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td>&#160;</td><td>&#160;</td>
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Net loss per share from continuing operations attributable to Borqs Technologies, Inc.</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsPerDilutedShare" scale="0" sign="-" unitRef="usdPershares">1.25</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Net (loss) earnings per share from discontinued operations attributable to Borqs Technologies, Inc.</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare" scale="0" sign="-" unitRef="usdPershares">0.23</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Earnings (loss) per share&#8212;Diluted *:</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DiscontinuedOperationIncomeLossFromDiscontinuedOperationNetOfTaxPerDilutedShare" scale="0" sign="-" unitRef="usdPershares">0.10</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DiscontinuedOperationIncomeLossFromDiscontinuedOperationNetOfTaxPerDilutedShare" scale="0" sign="-" unitRef="usdPershares">0.23</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Net loss per share attributable to Borqs Technologies, Inc.</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">Loss per share&#8212;Basic *:</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares">7.58</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares">1.48</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Loss per share&#8212;Diluted *:</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">12.76</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">7.58</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">1.48</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Number of ordinary shares used in earnings per share computation:</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Weighted-average number of ordinary shares used in calculating continuing operations&#8212;basic *</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfSharesOutstandingBasic" scale="0" unitRef="shares">7,370,719</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfSharesOutstandingBasic" scale="0" unitRef="shares">22,951,092</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Weighted-average number of ordinary shares used in calculating continuing operations&#8212;diluted *</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Giving retroactive effect to the reverse split on June 27, 2022</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="Fin_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(LOSS)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="Fin_new"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#8217;
(DEFICIT) EQUITY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-39">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-40">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Disposal of Yuantel(2)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-48">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Contribution by management (5)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-50">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-51">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-52">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-53">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Issuance of ordinary shares for collateral (6)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-55">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-56">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-57">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-58">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-59">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-60">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Share-based compensation (7)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-61">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c16" decimals="-3" format="ixt:num-dot-decimal" id="ix_43_fact" name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" scale="3" unitRef="usd">19,994</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 126; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#8217;
(DEFICIT) EQUITY (CONTINUED)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Debt equity conversion settlement
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-81; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-82; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-83; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c38" decimals="-3" format="ixt:num-dot-decimal" id="ix_29_fact" name="us-gaap:StockIssuedDuringPeriodValueConversionOfConvertibleSecurities" scale="3" unitRef="usd">36,092</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-84; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Disposal of a subsidiary</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-85; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-86; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-87; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-88; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-89; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Issuance of warrants associated with
    convertible notes (8)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-90; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c33" decimals="-3" format="ixt:num-dot-decimal" id="ix_53_fact" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalWarrantIssued" scale="3" unitRef="usd">12,950</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-91; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-92; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-93; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-94; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c38" decimals="-3" format="ixt:num-dot-decimal" id="ix_54_fact" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalWarrantIssued" scale="3" unitRef="usd">12,950</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-95; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_55_fact" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalWarrantIssued" scale="3" unitRef="usd">12,950</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Shares conversion of convertible notes (8)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" id="ix_7_fact" name="brqs:SharesConversionOfConvertibleNotesinShares" scale="0" unitRef="shares">1,496,271</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-96; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c33" decimals="-3" format="ixt:num-dot-decimal" id="ix_56_fact" name="us-gaap:StockIssuedDuringPeriodValueConversionOfUnits" scale="3" unitRef="usd">21,433</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-97; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-98; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-99; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-100; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c38" decimals="-3" format="ixt:num-dot-decimal" id="ix_57_fact" name="us-gaap:StockIssuedDuringPeriodValueConversionOfUnits" scale="3" unitRef="usd">21,433</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-101; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_58_fact" name="us-gaap:StockIssuedDuringPeriodValueConversionOfUnits" scale="3" unitRef="usd">21,433</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Warrants exercised into shares (8)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Shares released from escrow (6)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-108; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-109; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-110; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-111; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-112; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-113; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_42_fact" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="3" unitRef="usd">4,080</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Acquisition of a subsidiary (9)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-114; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c33" decimals="-3" format="ixt:num-dot-decimal" id="ix_70_fact" name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" scale="3" unitRef="usd">5,516</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-115; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-116; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-117; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-118; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_73_fact" name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" scale="3" unitRef="usd">12,029</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Capital injection from non-controlling
    shareholders of a subsidiary (10)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-119; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-120; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-121; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-122; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-123; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-124; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-125; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c39" decimals="-3" format="ixt:num-dot-decimal" id="ix_12_fact" name="us-gaap:ProceedsFromMinorityShareholders" scale="3" unitRef="usd">297</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_13_fact" name="us-gaap:ProceedsFromMinorityShareholders" scale="3" unitRef="usd">297</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Share-based
    compensation (7)</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" id="ix_10_fact" name="brqs:StockIssuedDuringSharebasedCompensationinShares" scale="0" unitRef="shares">594,980</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-126; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c33" decimals="-3" format="ixt:num-dot-decimal" id="ix_46_fact" name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" scale="3" unitRef="usd">14,665</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-127; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-128; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-129; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-130; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c38" decimals="-3" format="ixt:num-dot-decimal" id="ix_47_fact" name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" scale="3" unitRef="usd">14,665</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-131; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_48_fact" name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" scale="3" unitRef="usd">14,665</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US">Giving retroactive effect to the reverse split on June 27, 2022</ix:footnote></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 127; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#8217;
(DEFICIT) EQUITY (CONTINUED)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b>&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 2(gg) for information regarding subscription receivables.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><ix:footnote id="ix_6_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 1(c) for information regarding transactions related to equity interests in Yuantel.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="text-align: justify"><ix:footnote id="ix_7_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 20(d) for information regarding repurchase of ordinary shares.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="text-align: justify"><ix:footnote id="ix_8_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 20(g) for information regarding debt repayment settlement.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td><td style="text-align: justify"><ix:footnote id="ix_9_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 20(h) for information regarding contribution by management.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td><td style="text-align: justify"><ix:footnote id="ix_10_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 20(i) for information regarding issuance of shares for collateral.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td><td style="text-align: justify"><ix:footnote id="ix_11_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 16(a)(b) for information regarding share-based compensation.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(8)</span></td><td style="text-align: justify"><ix:footnote id="ix_12_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 14 for information regarding warrants granted associated with convertible notes.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(9)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 4 for information regarding acquisition of HHE.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(10)</span></td><td style="text-align: justify"><ix:footnote id="ix_3_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
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</tr></table><div>

</div><p style="margin: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(11)</span></td><td style="text-align: justify"><ix:footnote id="ix_4_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
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</tr></table><div>

</div><p style="margin: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(12)</span></td><td style="text-align: justify"><ix:footnote id="ix_5_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
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</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 128; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="Fin_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">CASH FLOWS FROM OPERATING ACTIVITIES</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 54%; text-align: left; text-indent: -9pt; padding-left: 0.25in">Net loss</td><td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: center"></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLoss" scale="3" sign="-" unitRef="usd">34,787</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLoss" scale="3" sign="-" unitRef="usd">56,602</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLoss" scale="3" sign="-" unitRef="usd">38,861</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Adjustments to reconcile net loss to net cash used in operating activities:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Provision (reversal of provision) on accounts receivables &amp; other current assets</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:ProvisionOnAccountsReceivables" scale="3" sign="-" unitRef="usd">20</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Depreciation of property and equipment</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DepreciationDepletionAndAmortization" scale="3" unitRef="usd">149</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DepreciationDepletionAndAmortization" scale="3" unitRef="usd">123</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DepreciationDepletionAndAmortization" scale="3" unitRef="usd">376</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Amortization of intangible assets</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfIntangibleAssets" scale="3" unitRef="usd">2,110</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfIntangibleAssets" scale="3" unitRef="usd">1,427</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Amortization of right of use asset</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:AmortizationOfRightOfUseAssets" scale="3" unitRef="usd">815</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:AmortizationOfRightOfUseAssets" scale="3" unitRef="usd">829</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:AmortizationOfRightOfUseAssets" scale="3" unitRef="usd">537</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Loss on disposal of property and equipment</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfPropertyPlantEquipment" scale="3" sign="-" unitRef="usd">10</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-210">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-211">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 27pt">Impairment of inventory</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:DisposalOfIntangibleAssets" scale="3" unitRef="usd">782</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:DisposalOfIntangibleAssets" scale="3" unitRef="usd">1,268</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-212">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Impairment of intangible assets</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ImpairmentOfIntangibleAssetsFinitelived" scale="3" unitRef="usd">724</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-213">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-214">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Deferred income tax (benefits) expenses</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxesAndTaxCredits" scale="3" sign="-" unitRef="usd">1,003</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxesAndTaxCredits" scale="3" unitRef="usd">680</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxesAndTaxCredits" scale="3" sign="-" unitRef="usd">55</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Interest expense related to debt discount</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-215">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:PaidInKindInterests" scale="3" unitRef="usd">9,945</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:PaidInKindInterests" scale="3" unitRef="usd">11,387</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Share-based compensation expenses</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="3" unitRef="usd">3,002</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="3" unitRef="usd">7,937</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="3" unitRef="usd">2,782</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">(Gain) loss on debt settlement</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossRelatedToLitigationSettlement" scale="3" unitRef="usd">26</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossRelatedToLitigationSettlement" scale="3" sign="-" unitRef="usd">17,199</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossRelatedToLitigationSettlement" scale="3" unitRef="usd">217</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">(Gain) loss on disposal of subsidiary</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfStockInSubsidiaryOrEquityMethodInvestee" scale="3" unitRef="usd">10,096</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfStockInSubsidiaryOrEquityMethodInvestee" scale="3" sign="-" unitRef="usd">303</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-216">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Non-employee share-based compensation expenses</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:NonemployeeCompensationExpenses" scale="3" unitRef="usd">16,992</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:NonemployeeCompensationExpenses" scale="3" unitRef="usd">9,596</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:NonemployeeCompensationExpenses" scale="3" unitRef="usd">604</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Contingency loss</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:ContingencyLoss" scale="3" unitRef="usd">3,065</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-217">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Reversal of contingency loss</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-218">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:ReversalOfContingencyLoss" scale="3" sign="-" unitRef="usd">3,277</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-219">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Gain from debt forgiveness</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-220">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:GainFromDebtForgiveness" scale="3" sign="-" unitRef="usd">2,094</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-221">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Change in fair value of contingent consideration for the acquisition of HHE</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-222">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:ChangeInFairValueOfContingentConsiderationForTheAcquisitionOfHHE" scale="3" unitRef="usd">111</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-223">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Loss on additional acquisition cost to HHE in shares</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-224">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-225">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 27pt">Inventories</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Contract assets</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Prepaid expenses and other current assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-231">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-232">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Accounts payable</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayableTrade" scale="3" sign="-" unitRef="usd">2,984</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Accrued expenses and other payables</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Advances from customers and contract liabilities</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Amounts due to related parties</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" scale="3" sign="-" unitRef="usd">351</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" scale="3" sign="-" unitRef="usd">1,766</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Deferred revenues</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="3" sign="-" unitRef="usd">28</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="3" unitRef="usd">9</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Long-term payable</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccountsPayable" scale="3" sign="-" unitRef="usd">361</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccountsPayable" scale="3" sign="-" unitRef="usd">252</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Income tax payable</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable" scale="3" sign="-" unitRef="usd">1,454</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable" scale="3" sign="-" unitRef="usd">392</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Right of use asset</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:IncreaseDecreaseInRightOfUseAsset" scale="3" sign="-" unitRef="usd">1,796</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Lease liabilities</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:IncreaseDecreaseInOperatingLeaseLiabilities" scale="3" unitRef="usd">132</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:IncreaseDecreaseInOperatingLeaseLiabilities" scale="3" unitRef="usd">542</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Other non-current liabilities</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherNoncurrentLiabilities" scale="3" sign="-" unitRef="usd">68</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherNoncurrentLiabilities" scale="3" sign="-" unitRef="usd">15</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Net cash used in operating activities</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="3" sign="-" unitRef="usd">28,738</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="3" sign="-" unitRef="usd">5,523</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-234">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Investment in time deposit</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Investment in convertible bond and cash loan</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-235">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Proceeds from acquisition of a subsidiary, net of cash acquired</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-236">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Net cash generated from (used in) investing activities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="3" sign="-" unitRef="usd">3,371</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 129; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Note</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">CASH FLOWS FROM FINANCING ACTIVITIES</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 54%; text-align: left; text-indent: -9pt; padding-left: 9pt">Proceeds from short-term bank and other borrowings</td><td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: center"></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromBankDebt" scale="3" unitRef="usd">5,300</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromBankDebt" scale="3" unitRef="usd">3,507</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromBankDebt" scale="3" unitRef="usd">155</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Repayments of short-term bank and other borrowings</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="3" unitRef="usd">7,905</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="3" unitRef="usd">3,906</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="3" unitRef="usd">579</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Proceeds from long-term bank and other borrowings</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLongTermLinesOfCredit" scale="3" unitRef="usd">1,250</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLongTermLinesOfCredit" scale="3" unitRef="usd">112</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Repayments of long-term bank and other borrowings</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="3" unitRef="usd">111</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="3" unitRef="usd">1</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Proceeds from issuance of convertible notes</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-237">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromConvertibleDebt" scale="3" unitRef="usd">34,427</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Proceeds from exercising of warrants</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-238">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:ProceedsFromExercisingOfWarrants" scale="3" unitRef="usd">55</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Proceeds from non-controlling shareholders of a subsidiary</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-239">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Net cash (used in) generated from financing activities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Cash and cash equivalents and restricted cash at the end of year</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:CashAndCashEquivalentsAndRestrictedCashOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">6,328</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:CashAndCashEquivalentsAndRestrictedCashOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">11,337</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Reconciliation of cash and cash equivalents and restricted cash of the continuing operations</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:CashAndCashEquivalentsOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">3,044</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:CashAndCashEquivalentsOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">6,117</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:CashAndCashEquivalentsOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">11,305</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Restricted cash of continuing operations at the end of year</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:RestrictedCashOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">37</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:RestrictedCashOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">211</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:RestrictedCashOfContinuingOperationsAtTheEndOfYear" scale="3" unitRef="usd">32</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Total cash and cash equivalents and restricted cash of continuing operations</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="brqs:TotalCashAndCashEquivalentsAndRestrictedCashOfContinuingOperations" scale="3" unitRef="usd">3,081</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:TotalCashAndCashEquivalentsAndRestrictedCashOfContinuingOperations" scale="3" unitRef="usd">6,328</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:TotalCashAndCashEquivalentsAndRestrictedCashOfContinuingOperations" scale="3" unitRef="usd">11,337</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Reconciliation of cash and cash equivalents and restricted cash of the discontinued operations</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Cash and cash equivalents of discontinued operations at the end of year</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-241">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Restricted cash of discontinued operations at the end of year</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-242">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-243">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 0.25in">Total cash and cash equivalents and restricted cash of discontinued operations</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="Fin_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_1" escape="true" name="us-gaap:BusinessDescriptionAndBasisOfPresentationTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_2" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Borqs Technologies, Inc. (formerly
known as &#8220;Pacific Special Acquisition Corp.&#8221;, the &#8220;Company&#8221; or &#8220;Borqs Technologies&#8221;) was incorporated
in the British Virgin Islands on July 1, 2015. The Company was formed for the purpose of acquiring, engaging in a share exchange, share
reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging
in any other similar business combination with one or more businesses or entities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_3" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On August 18, 2017, the Company acquired
<ix:nonFraction contextRef="c64" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">100</ix:nonFraction>% equity interest of BORQS International Holding Corp. (&#8220;Borqs International&#8221;) and its subsidiaries, variable interest
entities (the &#8220;VIE&#8221;) and the VIE&#8217;s subsidiaries (collectively referred to as &#8220;Borqs Group&#8221; hereinafter)
(the Company and Borqs Group collectively referred to as the &#8220;Group&#8221;) in an all-stock transaction (the &#8220;Merger&#8221;).
Concurrent with the completion of the acquisition of Borqs International, the Company changed its name from Pacific Special Acquisition
Corp.&#8221; to Borqs Technologies, Inc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_4" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In November 2018, the Company&#8217;s
board of directors approved the plan to dispose all of its tangible and intangible assets related to the VIE and the VIE&#8217;s subsidiaries
through a series of agreements as discussed in Note 1 (c).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_5" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Borqs Group are principally engaged
in the provision of commercial grade Android+ platform solutions and hardware product manufactured in the People&#8217;s Republic of China
(the &#8220;PRC&#8221;) and sold almost entirely outside of the PRC.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_7" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(a) As of the balance sheet date, the
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</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_8" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfVariableInterestEntitiesTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION
(CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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foreign ownership in certain telecommunication related businesses. To comply with these foreign ownership restrictions, the Group conducts
its businesses in the PRC through the VIE using contractual agreements (the &#8220;VIE Agreements&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_10" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group funds Big Cloud Network through
loans to the two Big Cloud Network&#8217;s shareholders, (collectively the &#8220;Nominee Shareholders&#8221;). The effective control
of Big Cloud Network is held by the Group, through a series of contractual agreements between Borqs Beijing and Big Cloud Network whereby
Big Cloud Network became the Consolidated VIE of the Group. Through the contractual agreements, the Group receives substantially all of
the economic benefits of Big Cloud Network.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_11" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Big Cloud Network provides MVNO services
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of Yuantel Telecom which is the entity that operates the business and holds the MVNO license from the Chinese Ministry of Industry and
Information Technology as of December 31, 2018. Refer to Note 1(c) for transitions related to equity interests in Yuantel during the year
ended December 31, 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_12" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following is a summary of the key
terms of the latest VIE Agreements:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_13" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Loan agreements </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_14" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Borqs Beijing and the Nominee Shareholders
entered into loan agreements for Borqs Beijing to provide interest free loans of RMB<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NotesPayable" scale="3" unitRef="cny">50,000</ix:nonFraction> to the Nominee Shareholders, respectively,
for the purpose of providing capital to Big Cloud Network to develop its MVNO business. There is no fixed term for the loans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_15" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Power of attorney agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c0" name="brqs:PowerOfAttorneyAgreementDescription"><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_16" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Nominee Shareholders of Big Cloud
Network entered into the power of attorney agreement whereby they authorized Borqs Beijing or its designated party to act on behalf of
the Nominee Shareholders as exclusive agent and attorney with all respect to all matters concerning the shareholding including but not
limited to (1) attend shareholders&#8217; meetings of Big Cloud Network; (2) exercise all the shareholders&#8217; rights, including voting
rights; and (3) designate and appoint on behalf of each shareholder the senior management members of Big Cloud Network. The power of attorney
remains irrevocable and continuously valid from the date of execution so long as each Nominee Shareholder remains as a shareholder of
Big Cloud Network. The power of attorney agreement was subsequently reassigned to Borqs International.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_17" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Exclusive option agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c0" name="brqs:ExclusiveOptionAgreementDescription"><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_18" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Pursuant to the exclusive option agreement
entered into between the Nominee Shareholders and Borqs Beijing or its designated party, the Nominee Shareholders granted Borqs Beijing
or its designated party, an irrevocable and exclusive right to purchase all or part of the equity interests held by the Nominee Shareholders
in Big Cloud Network, to the extent permitted under the PRC laws, at an amount equal to RMB10 or the minimum consideration permitted under
the applicable PRC law. The purchase consideration in excess of RMB10 shall be refunded by the Nominee Shareholders to Borqs Beijing or
Borqs Beijing may deduct the excess amount upon payment of consideration. The Nominee Shareholders shall not declare dividend or any form
of distribution or grant loans in any form without the prior consent of Borqs Beijing or its designated party. The term of the agreement
is 10 years, expiring on June 22, 2024 which will be automatically renewed every three-year thereafter if Borqs Beijing or its designated
party does not provide notice of termination to the Nominee Shareholders fifteen days prior to expiration.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_19" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Exclusive technical &amp; support
agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c0" name="brqs:ExclusiveTechnicalAndSupportAgreementDescription"><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_20" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Pursuant to the agreement entered into
between Borqs Beijing and Big Cloud Network, Big Cloud Network engaged Borqs Beijing or its designated party as its exclusive provider
of technical, consulting and other services in relation to its major business during the contractual period in return for service fees
which will be determined at the sole discretion of Borqs Beijing or its designated party. The term of the agreement is 10 years, expiring
on June 22, 2024, which will be automatically renewed every three-year thereafter if Borqs Beijing or its designated party does not provide
notice of termination to the Nominee Shareholders fifteen days prior to expiration.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 132; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION
(CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_22" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Pursuant to the business cooperation
agreement entered into between Borqs Beijing and Big Cloud Network, Borqs Beijing or its designated party agreed to provide unlimited
financial support for the VIE&#8217;s daily operating activities through entrusted loans and agree to forgo the right to seek repayment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_23" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Share pledge agreements</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_24" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Pursuant to the agreement, the Nominee
Shareholders pledged all of their equity interests in Big Cloud Network to Borqs Beijing as collateral to guarantee the repayment of the
loans and to secure their obligations under the above agreements. The Nominee Shareholders agreed not to transfer or otherwise create
any encumbrance on their equity interests in Big Cloud Network without prior consent of Borqs Beijing. The share pledge agreements will
remain effective until all the obligations under above agreements have been satisfied in full or all of the guarantee liabilities have
been repaid.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_25" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Despite the lack of technical majority
ownership, there exists a parent-subsidiary relationship between Borqs Beijing&#8217;s designee, Borqs International, and Big Cloud Network
through the irrevocable power of attorney agreement, whereby the Nominee Shareholders effectively assigned all of the voting rights underlying
their equity interest in Big Cloud Network to Borqs International. Furthermore, pursuant to the exclusive option agreement and share pledge
agreements, Borqs International, via Borqs Beijing, obtained effective control over Big Cloud Network through the ability to exercise
all the rights of Nominee Shareholders and therefore the power to govern the activities that most significantly impact the economic performance
of Big Cloud Network. In addition, through the VIE Agreements, Borqs International demonstrates its ability and intention to continue
the ability to absorb substantially all the expected losses and the majority of the profit of the VIE, and therefore have the rights to
the economic benefits of the VIE. Thus, Borqs International consolidates Big Cloud Network and its subsidiaries under ASC Subtopic 810-10,
<i>Consolidation Overall</i>, (&#8220;ASC 810-10&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_26" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In the opinion of the Group&#8217;s
management and PRC counsel, (i) the ownership structure of the Consolidated VIEs is in compliance with all existing PRC laws and regulations
in any material respect, (ii) each of the VIE Agreements is valid, legally binding and enforceable to each party of such agreements and
will not result in any violation of PRC laws or regulations currently in effect; and (iii) each of the Group&#8217;s PRC subsidiaries,
VIE and VIE&#8217;s subsidiaries have the necessary corporate power and authority to conduct its business as described in its business
scope under its business license, which is in full force and effect, and the Group&#8217;s business operation in PRC are in compliance
with existing PRC laws and regulations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_27" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">However, uncertainties in the PRC legal
system could cause the relevant regulatory authorities to find the current VIE Agreements and businesses to be in violation of any existing
or future PRC laws or regulations. If Borqs International, the primary beneficiary or any of its current or future VIEs are found in violation
of any existing or future laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC
regulatory authorities would have broad discretion in dealing with such violations, including levying fines, confiscating the income of
the primary beneficiary, and the VIE, revoking the business licenses or operating licenses of the primary beneficiary, and the VIE, shutting
down the Group&#8217;s servers, discontinuing or placing restrictions or onerous conditions on the Group&#8217;s operations, requiring
the Group to undergo a costly and disruptive restructuring or enforcing actions that could be harmful to the Group&#8217;s business. Any
of these actions could cause significant disruption to the Group&#8217;s business operations and severely damage the Group&#8217;s reputation,
which would in turn materially and adversely affect the Group&#8217;s business and results of operations. In addition, if the imposition
of any of these penalties causes the primary beneficiary to lose the rights to direct the activities of the VIE or the right to receive
its economic benefits, Borqs International would no longer be able to consolidate the VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_28" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In addition, if the VIE or the Nominee
Shareholders fail to perform their obligations under the VIE Agreements, the Group may have to incur substantial costs and expend resources
to enforce the primary beneficiary&#8217; rights under the contracts. The Group may have to rely on legal remedies under PRC laws, including
seeking specific performance or injunctive relief and claiming damages, which may not be effective. All of these VIE Agreements are governed
by PRC laws and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted
in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in PRC is not
as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the
Group&#8217;s ability to enforce these contractual arrangements. Under PRC laws, rulings by arbitrators are final, parties cannot appeal
the arbitration results in courts, and prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award
recognition proceedings, which would incur additional expenses and delay. In the event the Group is unable to enforce these VIE Agreements,
the primary beneficiary may not be able to exert effective control over its VIE, and the Group&#8217;s ability to conduct its business
may be negatively affected.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 133; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION
(CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_29" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(c) COVID-19 Pandemic</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_30" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Since February 2020, the Group has
experienced reductions and cancellations of orders due to effects of the COVID-19 pandemic has on the demand from certain of the Group&#8217;s
customers. The Group expects this negative effect on global business activities will continue to have pressure on the Group&#8217;s sales
as the pandemic environment persists and perhaps even post the pandemic. In addition, since the Group&#8217;s operations span over the
countries of the United States, India, China and South Korea, international and intra-country travel restrictions will continue to hamper
our operations and have negative effects including delays and uncertainties on the Group&#8217;s supply chain delivery schedules and the
Group&#8217;s abilities to secure financing for the Group&#8217;s working capital needs. The Group expects the impacts of COVID-19 to
have an adverse effect on the business, financial condition and results of operations. As the assessable risks due to COVID-19 change
in the countries of India and China, our operations can be affected, including the restrictions from accessing office facilities and limitations
on domestic travels which can hamper the Group&#8217;s ability to efficiently manage the manufacturing of products since the Group&#8217;s
contracted factories are located over various cities in China.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_31" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As the Group&#8217;s sales have been
negatively impacted by the pandemic in 2020, the Group cut back the operational costs by reduction of approximately <ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="brqs:OperationalCostsReductionPercentage" scale="-2" unitRef="pure">20</ix:nonFraction>% of the workforce
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business environment and depending on forecast of orders from customers in the near future, the Group may further reduce staffing as necessary.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_32" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Although the Group&#8217;s revenues
in 2022 improved to $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:Revenues" scale="6" unitRef="usd">52.5</ix:nonFraction> million as compared to $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:Revenues" scale="6" unitRef="usd">29.6</ix:nonFraction> million in 2021, the impact of the continuing COVID-19 pandemic on the year 2023
and beyond is still unknown as of the filing of this annual report and may cause our revenue in future periods to decline.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_33" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The extent to which COVID-19 impacts
the business and financial results of the Group in the longer term will depend on future developments, which are uncertain and cannot
be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus
or treat its impact, among others. The Group will continue to evaluate the impact on the results of operation, financial position and
cash flows of the Group and react actively as the situation evolves.&#160;&#160; The COVID-19 pandemic also presented and may continue
to present challenges to the Group&#8217;s business operations as well as the business operations of the Group&#8217;s customers, business
partners and other participants in the Group&#8217;s ecosystem, such as closure of offices and facilities, disruptions to or even suspensions
of normal business and logistics operations, as well as restrictions on travel. Moreover, due to the quick spread of Omicron new variant
across mainland China and Hong Kong, many cities in China had experienced lockdown or partial lockdown from time to time since the beginning
of 2022. Although the Group&#8217;s businesses have recovered or are starting to recover, it is not possible to determine the ultimate
impact of the COVID-19 pandemic on the Group&#8217;s business operations and financial results, which is highly dependent on numerous
factors, including the duration and spread of the pandemic and any resurgence of the COVID-19 pandemic in China or elsewhere, actions
taken by governments, domestically and in international relations, the response of businesses and individuals to the pandemic, the impact
of the pandemic on business and economic conditions in China and globally, consumer demand, the Group&#8217;s ability and the ability
of customers, logistics service providers and other participants in the Group&#8217;s ecosystem to continue operations in areas affected
by the pandemic and the Group&#8217;s efforts and expenditures to support customers and partners and ensure the safety of the Group&#8217;s
employees. The COVID-19 pandemic may continue to adversely affect the Group&#8217;s business and results of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_34" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(d) VIE and discontinued operation
disclosures</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_35" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group disposed Yuantel to a third-party
entity which also purchased the ownership of Yuantel that was sold to the first buyer in 2019. The disposal was completed On October 29,
2020 and as a result, the Group deconsolidated Yuantel on that date. <ix:nonNumeric contextRef="c0" name="brqs:VariableInterestEntityPercentageDescription">The Consolidated VIEs contributed 29% and 52% of the Group&#8217;s
consolidated revenues for the years ended December 31, 2019 and from January through October of 2020, respectively. As of December 31,
2020 and 2021, the Consolidated VIEs accounted for an aggregate of nil% and nil%, respectively, of the consolidated total assets, and
nil% and nil%, respectively, of the consolidated total liabilities.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_36" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group believes that there are no
assets held in the Consolidated VIEs that can be used only to settle obligations of the Consolidated VIEs, except for registered capital
and the PRC statutory reserves. Relevant PRC laws and regulations restrict the Consolidated VIEs from transferring a portion of their
net assets, equivalent to the balance of its statutory reserve and its share capital, to the Group in the form of loans and advances or
cash dividends. Please refer to Note 20 for disclosure of restricted net assets. As the Consolidated VIEs are incorporated as limited
liability companies under the PRC Company Law, creditors of the Consolidated VIEs do not have recourse to the general credit of the Group
for any of the liabilities of the Consolidated VIEs. There were no pledges or collateralization of the Consolidated VIEs&#8217; assets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_37" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In February 2018, the Company purchased
<ix:nonFraction contextRef="c69" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">21</ix:nonFraction>% of equity interest in Yuantel (Beijing) Investment Management Co., Ltd at a consideration of RMB<ix:nonFraction contextRef="c70" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:NotesPayable" scale="6" unitRef="cny">21.05</ix:nonFraction> million. In the same month,
the Company firstly sold to Jinan Yuantel <ix:nonFraction contextRef="c71" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">25</ix:nonFraction>% of equity interest in Yuantel (Beijing) Investment Management Co., Ltd at a consideration
of RMB<ix:nonFraction contextRef="c72" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:NotesPayable" scale="6" unitRef="cny">22</ix:nonFraction> million.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 134; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION
(CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_38" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_37"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In November 2018, the Company&#8217;s
board of director approved the plan to dispose all of its tangible and intangibles assets related to the Consolidated VIEs through a series
of agreements with Jinan Yuantel Communication Technology LLP (&#8220;Jinan Yuantel&#8221;), a Company controlled by a non-controlling
interest shareholder individual. The Company originally owned <ix:nonFraction contextRef="c73" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">79</ix:nonFraction>% of Yuantel (Beijing) Investment Management Co., Ltd which in turn owned
<ix:nonFraction contextRef="c74" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">95</ix:nonFraction>% of Yuantel Telecom, and therefore the Company effectively owned <ix:nonFraction contextRef="c75" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">75.05</ix:nonFraction>% of Yuantel Telecom prior to receiving any sales proceeds from
the disposal of Yuantel.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_39" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In April 2019, the Company secondly
sold to Jinan Yuantel <ix:nonFraction contextRef="c76" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">20</ix:nonFraction>% of equity interest in Yuantel (Beijing) Investment Management Co., Ltd at a consideration of RMB<ix:nonFraction contextRef="c77" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:NotesPayable" scale="6" unitRef="cny">25</ix:nonFraction> million.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c78" name="brqs:VariableInterestEntityPercentageDescription"><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_40" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_39"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In May 2019, the Company also authorized
Jinan Yuantel to actively seek for investors on behalf of the Company to sell 45% of the equity interest in Yuantel held by Big Cloud
Network at a consideration which is based on the expected share valuation no less than RMB180 million by June 30, 2019, for which, Jinan
Yuantel will be granted the option to purchase the remaining 10% of the equity interest in Yuantel held by Big Cloud Network at a consideration
of RMB10 upon achievement of the sale.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_41" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_40"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company only received partial proceeds
from the buyers in the year 2019 and as a result the Company owned <ix:nonFraction contextRef="c79" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">45</ix:nonFraction>% of Yuantel as of December 31, 2019, however still maintaining control
of the operations of Yuantel through influence on the board and operational management.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_42" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_41"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company has the right to not grant
the option for the remaining <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:VariableInterestEntityOwnershipPercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% of equity interest. The disposal of the Consolidated VIEs represents a strategic shift for the Company
and has a major effect on the Company&#8217;s results of operations. Accordingly, assets and liabilities related to the Consolidated VIEs
were reclassified as held for sale for the carrying amounts will be recovered principally through a sale and revenues and expenses related
to the Consolidated VIEs have been reclassified in the accompanying consolidated financial statements as discontinued operations prior
to October 29, 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_43" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_42"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company disposed Yuantel to a third-party
entity which also purchased the ownership of Yuantel that was sold to the first buyer in 2019. The disposal was completed On October 29,
2020 and as a result, the Group deconsolidated Yuantel on that date. The consolidated balance sheets as of December 31, 2019 and consolidated
statements of operations for the years ended December 31, 2019 have been adjusted to reflect this change. There was no discontinued operation
on the balance sheet as of December 31, 2020 as Yuantel had been disposed of in October 2020. Accordingly, revenues and expenses and cash
flows related to the Company&#8217;s MVNO BU during January 1, 2020 to October 29, 2020 presented as discontinued operation in the accompanying
consolidated financial statements. Afterwards, the Group did not have any continuing involvement with Yuantel and Yuantel was a third-party
company after the deconsolidation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_44" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_43"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Net cash consideration of approximate
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION
(CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

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</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_50" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_49"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(e)</td><td style="text-align: justify">HHE reclassified as discontinued operation disclosures</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_51" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_50"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In December 2022, the Group received letter from
Department of the Treasury/Committee on Foreign Investment in the United States (&#8220;CFIUS&#8221; or &#8220;the Committee&#8221;) regarding
the case of Borqs owned <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="brqs:OwnedPercentage" scale="-2" unitRef="pure">51</ix:nonFraction>% of HHE&#8217;s class A shares. The Committee identified risks to the national security of the United States
arising from the transaction relate to foreign proximity to US military personnel and installations through HHE&#8217;s physical access
to customers and facilities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_52" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_51"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">According to the Committee&#8217;s assessments
and evaluation, Borqs and HHE (&#8220;the parties&#8221;) may seek to abandon the transaction. Such action will require negotiation with
CFIUS to fully divest Borqs&#8217; ownership interests and rights in HHE, subject to terms that fully address all identified national
security risks to the satisfaction of CFIUS.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_53" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_52"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On March 16, 2023, the Company and
HHE entered into a National Security Agreement (&#8220;NSA&#8221;) with the Department of Defense and Department of Treasury. The NSA
provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill provisions
which provide that the Group shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any changes to
the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession of any assets
of HHE. Further, upon the completion of the Divestment, the Group shall terminate or irrevocably waive any information, consent, board
appointment, board observer, or other governance rights held by the Group, except for any and all rights that are determined by the U.S.
Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the Divestment:
engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes; assigning
and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs&#8217; administrative
and technical influence over HHE; and creating a plan to divest all of Borqs&#8217; investment interests and rights in HHE. Pursuant
to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment Trust Agreement
(&#8220;DTA&#8221;) dated March 20, 2023 entered into between Borqs, HHE and a trustee.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></ix:continuation><div>

</div><div>

</div><!-- Field: Page; Sequence: 137; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_54" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_53"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2021, the Group classified
the HHE as held for sale and reported in discontinued operation (see Note 4(c) for details).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_55" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_54"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following tables represent the financial information
of HHE classified as discontinued operations as of December 31, 2021, and as of December 31, 2022 before the deconsolidation of HHE, and
for the years ended December 31, 2021 and 2022 before eliminating the intercompany balances and transactions between HHE and other entities
within the Group:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_56" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_55"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfFinancialInformationOfClassifiedAsDiscontinuedOperationsTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; ">
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Carrying amounts of major classes of liabilities included as part of liabilities held for sale</b></span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="width: 1%">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt; text-indent: -9pt">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Current liabilities held for sale</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c97" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LiabilitiesOfDisposalGroupIncludingDiscontinuedOperationCurrent" scale="3" unitRef="usd">3,070</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt; text-indent: -9pt">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred tax liabilities</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c97" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DisposalGroupIncludingDiscontinuedOperationDeferredTaxLiabilities" scale="3" unitRef="usd">1,143</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr>
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: right">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: right">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-current liabilities held for sale</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c97" decimals="-3" format="ixt:num-dot-decimal" name="brqs:NoncurrentLiabilitiesHeldForSale" scale="3" unitRef="usd">1,804</ix:nonFraction></span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c98" decimals="-3" format="ixt:num-dot-decimal" name="brqs:NoncurrentLiabilitiesHeldForSale" scale="3" unitRef="usd">1,615</ix:nonFraction></span></td>
    <td style="vertical-align: bottom">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Total liabilities of HHE classified as held for sale</b></span></td>
    <td>&#160;</td>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 138; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_57" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_56"><ix:continuation id="_ScheduleOfAmountsRecognizedInOtherComprehensiveIncomeLossTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  </table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 139; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_2" id="_SignificantAccountingPoliciesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:BasisOfPresentationAndSignificantAccountingPoliciesTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(a) Basis of presentation</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_3" id="_SignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_2" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The accompanying consolidated financial
statements have been prepared in accordance with U.S. generally accepted accounting principles (&#8220;U.S. GAAP&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_4" id="_SignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_3" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In December 2022, the Group received
a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States (&#8220;CFIUS&#8221;)
stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests and rights in HHE due to HHE&#8217;s
solar energy storage system and EnergyShare technology for Multi-Dwelling Residential Units being deemed a potential national security
risk.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_5" id="_SignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:continuation id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On March 16, 2023, the Group entered
into the National Security Agreement by and among (i) Borqs; (ii) HHE; and (iii) Department of Defense and Department of Treasury, represents
the U.S. Government. According to the agreement, the Group shall complete the Divestment within six months unless extended by the U.S.
Government. The Group&#8217;s solar energy business met the criteria to be reported as a discontinued operation and, as a result, HHE&#8217;s
historical financial results are reflected in the Group&#8217;s consolidated financial statements as a discontinued operation, and assets and
liabilities were retrospectively reclassified as assets and liabilities held for sale for all periods presented. Refer to Note 1 (d) for
detailed information.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_6" id="_SignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" continuedAt="brqs_LiquidityPolicyTextBlock-c0_cont_1" escape="true" name="brqs:LiquidityPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(b) Liquidity and going concern</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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then ended.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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31, 2022 was not adequate for operations in the 2022 fiscal year and financing was needed; and the due to the COVID-19 pandemic, negative
effects from slow collection from receivables and significant cancellation of otherwise signed purchase orders from customers were observed
as early as January 2020. The Group&#8217;s operations in the fiscal year 2020 was reduced to minimal levels due to lock down of cities
in India and in China, and our contracted manufacturing with third parties was also reduced to about one third of the previous year&#8217;s
volume. The Group had to rely on customer advances and short-term supply chain related load to sustain such minimal operation during the
months affected most severely affected by the COVID-19 pandemic. Except for one significant customer in the U.S., all other purchase order
from different countries of the world have been reduced or cancelled. &#160;Although the Group&#8217;s businesses have recovered or are
starting to recover in the fiscal 2022, it is not possible to determine the ultimate impact of the COVID-19 pandemic on the Group&#8217;s
business operations and financial results as the quick spread of Omicron new variant across mainland China and Hong Kong, many cities
in China had experienced lockdown or partial lockdown from time to time since the beginning of 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_9" id="_SignificantAccountingPoliciesTextBlock-c0_cont_8"><ix:continuation continuedAt="brqs_LiquidityPolicyTextBlock-c0_cont_4" id="brqs_LiquidityPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31,
2022, the Group executed a settlement agreement with Samsung regarding the arbitration compensation. According to the settlement agreement,
the payment period of eighteen months beginning on July 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_10" id="_SignificantAccountingPoliciesTextBlock-c0_cont_9"><ix:continuation id="brqs_LiquidityPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">These factors raise substantial doubt
about the Group&#8217;s ability to continue as a going concern for the next twelve months from the date of issuance of these consolidated
financial statements. Management&#8217;s plan to alleviate the substantial doubt about the Group&#8217;s ability to continue as a going
concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to
meet its operating needs on a timely basis. The management plan cannot alleviate the substantial doubt of the Group&#8217;s ability to
continue as a going concern. There can be no assurance that the Group will be successful in achieving its strategic plans, that the Group&#8217;s
future capital raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely
manner or with acceptable terms, if at all. If the Group is unable to raise sufficient financing or events or circumstances occur such
that the Group does not meet its strategic plans, it would have a material adverse effect on the Group&#8217;s financial position, results
of operations, cash flows, and ability to achieve its intended business objectives. The consolidated financial statements have been prepared
assuming that the Group will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome
of this uncertainty.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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include the financial statements of the Company, its subsidiaries and Consolidated VIEs, for which, the Company is the primary beneficiary.
All significant inter-company transactions and balances between the Company, its subsidiaries and the Consolidated VIEs are eliminated
upon consolidation. Results of its subsidiaries and its Consolidated VIEs are consolidated from the date on which control is transferred
to the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 140; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_14" id="_SignificantAccountingPoliciesTextBlock-c0_cont_13"><ix:continuation continuedAt="_DiscontinuedOperationsPolicyTextBlock-c0_cont_2" id="_DiscontinuedOperationsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">A component of a reporting entity or
a 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,
having the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued operations
if the disposal represents a strategic shift that has (or will have) a major effect on an entity&#8217;s operations and financial results.
Discontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed
of, if the component either (1) represents a strategic shift or (2) have a major impact on an entity&#8217;s financial results and operations.
In the consolidated statement of operations, result from discontinued operations is reported separately from the income and expenses from
continuing operations and prior periods are presented on a comparative basis. Cash flows for discontinued operations are presented separately
in Note 1 (c) and 1 (d).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_15" id="_SignificantAccountingPoliciesTextBlock-c0_cont_14"><ix:continuation id="_DiscontinuedOperationsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Assets and liabilities of the discontinued
operations are classified as held for sale when the carrying amounts will be recovered principally through a sale transaction.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_16" id="_SignificantAccountingPoliciesTextBlock-c0_cont_15"><ix:nonNumeric contextRef="c0" continuedAt="_UseOfEstimates-c0_cont_1" escape="true" name="us-gaap:UseOfEstimates"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(e) Use of estimates </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_17" id="_SignificantAccountingPoliciesTextBlock-c0_cont_16"><ix:continuation id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the year. Areas where management uses subjective judgment include, but are not limited
to, estimating the useful lives of long-lived assets and intangible assets and the subsequent impairment assessment of long-lived assets,
intangible assets and goodwill, determining the provisions for accounts receivable, prepaid expenses and other current assets and inventories,
determining the valuation allowance for deferred tax assets and accounting for deferred income taxes, uncertain tax benefits, determining
the valuation for share-based compensation arrangements, warrants for Series D convertible redeemable preferred shares and beneficiary
conversion feature on the Series E Preferred Shares, convertible notes and warrants associated with convertible notes, fair value of identifiable
intangible assets, contingent consideration liabilities and goodwill in a business combination,. Changes in facts and circumstances may
result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated
financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_18" id="_SignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:nonNumeric contextRef="c0" continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(f) Foreign currency </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_19" id="_SignificantAccountingPoliciesTextBlock-c0_cont_18"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The functional currency of the Group
and its non-PRC subsidiaries, excluding Borqs India, is the United States dollar (&#8220;$&#8221;). The functional currency of Borqs India
is Rupee (&#8220;INR&#8221;), whereas the functional currency of the Group&#8217;s PRC subsidiaries and its Consolidated VIEs is the Chinese
Renminbi (&#8220;RMB&#8221;) as determined based on the criteria of ASC Topic 830, <i>Foreign Currency Matters</i>, (&#8220;ASC 830&#8221;).
The Group uses the $ as its reporting currency. Transactions denominated in foreign currencies are re-measured into the functional currency
at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured
at the balance sheet date exchange rate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated
statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_20" id="_SignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:continuation id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Assets and liabilities of the Group&#8217;s
PRC subsidiaries are translated into $ at fiscal year-end exchange rates. Equity amounts are translated at historical exchange rates.
Income and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments arising from
translation of foreign currency financial statements are reported as cumulative translation adjustments and are shown as a separate component
of other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_21" id="_SignificantAccountingPoliciesTextBlock-c0_cont_20"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(g) Cash and cash equivalents
</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_22" id="_SignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:continuation id="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Cash and cash equivalents consist of
cash on hand and demand bank deposits which are unrestricted as to withdrawal and use have original maturities less than three months.
All highly liquid investments with a stated maturity of 90 days or less from the date of purchase are classified as cash equivalents.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 141; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_23" id="_SignificantAccountingPoliciesTextBlock-c0_cont_22"><ix:nonNumeric contextRef="c0" continuedAt="brqs_RestrictedCashPolicyTextBlock-c0_cont_1" escape="true" name="brqs:RestrictedCashPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(h) Restricted cash and time
deposits</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_24" id="_SignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation continuedAt="brqs_RestrictedCashPolicyTextBlock-c0_cont_2" id="brqs_RestrictedCashPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Cash and time deposits that are restricted
as to withdrawal or use for current operations are classified as restricted cash and restricted term deposits, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_25" id="_SignificantAccountingPoliciesTextBlock-c0_cont_24"><ix:continuation continuedAt="brqs_RestrictedCashPolicyTextBlock-c0_cont_3" id="brqs_RestrictedCashPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Restricted cash as of December 31,
2021 mainly represents the cash frozen by the authority related to a lawsuit in PRC (Note 12). Restricted cash as of December 31, 2022
mainly represents the cash frozen by a bank as credit card deposit.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_26" id="_SignificantAccountingPoliciesTextBlock-c0_cont_25"><ix:continuation id="brqs_RestrictedCashPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Time deposits as of December 31, 2022
represents a bank deposit has original maturity with six months in one of the Group&#8217;s subsidiaries. As of December 31, 2021, the
Group has no time deposit.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_27" id="_SignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:nonNumeric contextRef="c0" continuedAt="_ReceivablesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ReceivablesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(i) Accounts Receivable</i></b>
&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_28" id="_SignificantAccountingPoliciesTextBlock-c0_cont_27"><ix:continuation id="_ReceivablesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Accounts receivable are carried at
net realizable value. An allowance of doubtful accounts is recorded in the period when the collection of full amount is no longer probable.
The Group reviews the accounts receivable for expected credit loss on a periodic basis and makes specific allowances when there is doubt
as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Group considers
many factors, including the age of the balance, the customer&#8217;s payment history, its current credit-worthiness and current economic
trends. The Group adopt Accounting Standard Update (ASU) 2016-13, Financial Instruments-Credit Losses (codified as Accounting Standard
Codification Topic 326) on January 1, 2020, which requires measurement and recognition of current expected credit losses for financial
instruments held at amortized cost. See Note 2 (o) below for current expected credit loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_29" id="_SignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:nonNumeric contextRef="c0" continuedAt="_InventoryPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(j) Inventories</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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of cost or market. Cost is determined using the first-in, first-out method. Adjustments to reduce the cost of inventories to its net market
value are made, if required, for decreases in sales prices, obsolescence or similar reductions in the estimated net realizable value.
Inventories provision of $<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="brqs:InventoryProvision" scale="3" unitRef="usd">2,255</ix:nonFraction> and $<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="brqs:InventoryProvision" scale="3" unitRef="usd">1,924</ix:nonFraction> were recorded as of December 31, 2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_31" id="_SignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(k) Property and equipment</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_32" id="_SignificantAccountingPoliciesTextBlock-c0_cont_31"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Property and equipment are stated at
cost and are depreciated using the straight-line method over the estimated useful lives of the assets, as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_33" id="_SignificantAccountingPoliciesTextBlock-c0_cont_32"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfPropertyAndEquipmentStraightLineMethodOverEstimatedUsefulLivesOfAssetsTableTextBlock"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
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  <tr style="vertical-align: top; background-color: #CCEEFF">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_34" id="_SignificantAccountingPoliciesTextBlock-c0_cont_33"><ix:continuation id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Repair and maintenance costs are charged
to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment are capitalized as additions
to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any
resulting gain or loss reflected in the consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 142; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_35" id="_SignificantAccountingPoliciesTextBlock-c0_cont_34"><ix:nonNumeric contextRef="c0" continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_1" escape="true" name="us-gaap:GoodwillAndIntangibleAssetsIntangibleAssetsPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(l) Intangible assets</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_36" id="_SignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_2" id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Intangible assets are carried at cost
less accumulated amortization and any recorded impairment. Intangible assets acquired in a business combination are recognized initially
at fair value at the date of acquisition. Intangible assets with finite useful lives are amortized using the straight-line method. These
amortization methods reflect the estimated pattern in which the economic benefits of the respective intangible assets are to be consumed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_37" id="_SignificantAccountingPoliciesTextBlock-c0_cont_36"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_3" id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Development costs of software to be
sold, leased, or otherwise marketed are subject to capitalization beginning when technological feasibility is reached and ending when
the software is available for general release to customers, in accordance with ASC 350-20, <i>Costs of Software to be Sold, Leased, or
Marketed</i>, (&#8220;ASC 350-20&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_38" id="_SignificantAccountingPoliciesTextBlock-c0_cont_37"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_4" id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Intangible assets have weighted average
useful lives from the date of purchase as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_39" id="_SignificantAccountingPoliciesTextBlock-c0_cont_38"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfImpairedIntangibleAssetsTextBlock"><ix:continuation id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_4"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left; text-indent: -9pt; padding-left: 9pt">Purchased software</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: right"><ix:nonNumeric contextRef="c106" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">4.5</ix:nonNumeric> years</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">MVNO license</td><td>&#160;</td>
    <td style="text-align: right"><ix:nonNumeric contextRef="c107" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">10</ix:nonNumeric> years</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Capitalized software development costs</td><td>&#160;</td>
    <td style="text-align: right"><ix:nonNumeric contextRef="c108" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">3</ix:nonNumeric> years</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Internal-use software</td><td>&#160;</td>
    <td style="text-align: right"><ix:nonNumeric contextRef="c109" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">5</ix:nonNumeric> years</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Developed technology</td><td>&#160;</td>
    <td style="text-align: right"><ix:nonNumeric contextRef="c110" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">10</ix:nonNumeric> years</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_40" id="_SignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:nonNumeric contextRef="c0" continuedAt="_BusinessCombinationsPolicy-c0_cont_1" escape="true" name="us-gaap:BusinessCombinationsPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(m) Business combination&#160;&#160;&#160;&#160;</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_41" id="_SignificantAccountingPoliciesTextBlock-c0_cont_40"><ix:continuation continuedAt="_BusinessCombinationsPolicy-c0_cont_2" id="_BusinessCombinationsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Business combinations are accounted
for using the acquisition method. The Group recognizes separately from goodwill the assets acquired, the liabilities assumed and the noncontrolling
interest at their acquisition date fair values. Goodwill represents the excess of the purchase price over the amounts assigned to the
fair value of the assets acquired and the liabilities assumed of an acquired business. In accordance with ASC Topic 350, <i>Goodwill and
Other Intangible Assets</i>, (&#8220;ASC 350&#8221;), recorded goodwill amounts are not amortized, but rather are tested for impairment
annually or more frequently if there are indicators of impairment present.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_42" id="_SignificantAccountingPoliciesTextBlock-c0_cont_41"><ix:continuation continuedAt="_BusinessCombinationsPolicy-c0_cont_3" id="_BusinessCombinationsPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In addition, the share purchase agreements
entered into may contain contingent consideration provisions obligating the Group to pay additional purchase consideration, upon the acquired
business&#8217;s achievement of certain agreed upon operating performance-based milestones. Under ASC 805, these contingent consideration
arrangements are required to be recognized and measured at fair value at the acquisition date as either a liability or as an equity instrument,
with liability instruments being required to be remeasured at each reporting period through the Company&#8217;s statements of comprehensive
income (loss) until such time as to when the contingency is resolved.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_43" id="_SignificantAccountingPoliciesTextBlock-c0_cont_42"><ix:continuation continuedAt="_BusinessCombinationsPolicy-c0_cont_4" id="_BusinessCombinationsPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The fair value of the contingent consideration
is valued by external valuers. The valuations are presented to the Group&#8217;s management. &#160;&#160;The fair value of the earn-out
payments was measured using a Monte Carlo simulation analysis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_44" id="_SignificantAccountingPoliciesTextBlock-c0_cont_43"><ix:continuation continuedAt="_BusinessCombinationsPolicy-c0_cont_5" id="_BusinessCombinationsPolicy-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with ASC 350, the Group
assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below
the operating segment. The Group has determined that it has two operating segments as its reporting units, namely Solar Energy Business
and Connected Solution. Goodwill is recorded at the Solar Energy reporting unit. The Group performed impairment analysis on goodwill as
of December 31 every year beginning with a qualitative assessment, or starting with the quantitative assessment instead. The quantitative
goodwill impairment test compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit
constitutes a business for which discrete profit and loss financial information is available. The fair value of each reporting unit is
established using a combination of expected present value of future cash flows&#160;&#160; and income approach valuation methodologies.
If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount
of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total
amount of goodwill allocated to that reporting unit.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_45" id="_SignificantAccountingPoliciesTextBlock-c0_cont_44"><ix:continuation continuedAt="_BusinessCombinationsPolicy-c0_cont_6" id="_BusinessCombinationsPolicy-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Determining when to test for impairment,
the Group&#8217;s reporting units, the fair value of a reporting unit and the fair value of assets and liabilities within a reporting
unit, requires judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue
growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market
conditions and determination of appropriate market comparable. The Group bases fair value estimates on assumptions it believes to be reasonable
but that are unpredictable and inherently uncertain.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 143; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_46" id="_SignificantAccountingPoliciesTextBlock-c0_cont_45"><ix:continuation continuedAt="_BusinessCombinationsPolicy-c0_cont_7" id="_BusinessCombinationsPolicy-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Significant changes in the economic
characteristics of components or reorganization of an entity&#8217;s reporting structure can sometimes result in a re-assessment of the
affected operating segment and its components to determine whether reporting units need to be redefined where the components are no longer
economically similar.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_47" id="_SignificantAccountingPoliciesTextBlock-c0_cont_46"><ix:continuation id="_BusinessCombinationsPolicy-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Future changes in the judgments and
estimates underlying the Group&#8217;s analysis of goodwill for possible impairment, including expected future cash flows and discount
rate, could result in a significantly different estimate of the fair value of the reporting units and could result in additional impairment
of goodwill.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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is impaired at each reporting date, applying judgment in considering various factors and events including a) adverse performance of investees;
b) adverse industry developments affecting investees; and c) adverse regulatory social, economic or other developments affecting investees.
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</div><div>

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</div><div>

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Topic 326&#8221;), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment
model that is based on expected losses rather than incurred losses. The Group no longer qualified as an emerging growth company in the
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</div><div>

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risk characteristics of its customers and the related receivables, and other receivables which include type of the products the Group
provides, nature of the customers or a combination of these characteristics. Receivables with similar risk characteristics have been grouped
into pools. For each pool, the Group considers the historical credit loss experience, current economic conditions, reasonable and supportable&#160;&#160;
forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence
the expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers,
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_53" id="_SignificantAccountingPoliciesTextBlock-c0_cont_52"><ix:continuation continuedAt="brqs_CurrentExpectedCreditLossPolicyTextBlock-c0_cont_4" id="brqs_CurrentExpectedCreditLossPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Movement of the allowance for doubtful
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_55" id="_SignificantAccountingPoliciesTextBlock-c0_cont_54"><ix:continuation continuedAt="brqs_CurrentExpectedCreditLossPolicyTextBlock-c0_cont_6" id="brqs_CurrentExpectedCreditLossPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Movement of the allowance for other
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_56" id="_SignificantAccountingPoliciesTextBlock-c0_cont_55"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfOtherreceivablesPrepaidExpensesAndOtherCurrentAssetsTableTextBlock"><ix:continuation id="brqs_CurrentExpectedCreditLossPolicyTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 144; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_57" id="_SignificantAccountingPoliciesTextBlock-c0_cont_56"><ix:nonNumeric contextRef="c0" continuedAt="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(p) Impairment of long-lived
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</div><div>

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lives that are not subject to amortization are tested for impairment at least annually or more frequently if events or changes in circumstances
indicate that the assets might be impaired in accordance with ASC 350. Such impairment test compares the fair values of assets with their
carrying values with an impairment loss recognized when the carrying values exceed fair values.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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assets with finite lives that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances
(such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount
of an asset or a Group of long-lived assets may not be recoverable. When these events occur, the Group evaluates impairment by comparing
the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual
disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize
an impairment loss based on the excess of the carrying amount of the asset group over its fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_60" id="_SignificantAccountingPoliciesTextBlock-c0_cont_59"><ix:continuation id="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The impairment loss of long-lived assets
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_62" id="_SignificantAccountingPoliciesTextBlock-c0_cont_61"><ix:continuation continuedAt="_DerivativesPolicyTextBlock-c0_cont_2" id="_DerivativesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In August 2020, the FASB issued ASU
No. 2020-06, Debt&#8212;Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging&#8212;Contracts in Entity&#8217;s
Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made
certain disclosure amendments to improve the information provided to users. For public business entities that meet the definition of an
SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than
fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Group has elected to adopt the
amendments in these ASUs on January 1, 2021.&#160;&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_63" id="_SignificantAccountingPoliciesTextBlock-c0_cont_62"><ix:continuation id="_DerivativesPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group determines the appropriate
accounting treatment of its convertible notes in accordance with the terms in relation to the conversion feature, call and put options,
and any other embedded features. After considering the impact of such features, the Group may account for such instrument as a liability
in its entirety, or separate the instrument into debt and equity components following the respective guidance described under ASC 815
&#8220;Derivatives and Hedging&#8221; and ASC 470 &#8220;Debt&#8221;. The debt discount, if any, together with the related issuance cost
are subsequently amortized as interest expense, using the effective interest method, from the issuance date to the earliest maturity date.
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_64" id="_SignificantAccountingPoliciesTextBlock-c0_cont_63"><ix:nonNumeric contextRef="c0" continuedAt="_DebtPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:DebtPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(r) Debt Issuance Costs and Debt
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</div><div>

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costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash,
or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying
debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features
that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity and whether embedded derivative shall be bifurcated from the host instrument
and separately accounted for as a derivative, is reassessed at the end of each reporting period. Derivative assets and liabilities are
recorded at fair value at inception and re-valued at each reporting date, with changes in the fair value reported in the consolidated
statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_68" id="_SignificantAccountingPoliciesTextBlock-c0_cont_67"><ix:nonNumeric contextRef="c0" continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueMeasurementPolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(t) Fair value of financial instruments</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_69" id="_SignificantAccountingPoliciesTextBlock-c0_cont_68"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group&#8217;s financial instruments
include cash and cash equivalents, restricted cash, accounts receivable and payable, accounts receivable from related parties, short-term
bank and other borrowings and long-term bank borrowings. Other than the long-term bank borrowings, the carrying values of these financial
instruments approximate their fair values due to their short-term maturities. The carrying amounts of long-term bank borrowings approximated
their fair values since they bear interest rates which approximate market interest rates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_70" id="_SignificantAccountingPoliciesTextBlock-c0_cont_69"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group applies ASC Topic 820, <i>Fair
Value Measurements and Disclosures</i>, (&#8220;ASC 820&#8221;). ASC 820 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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value hierarchy, which prioritizes the inputs used in measuring fair value as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_72" id="_SignificantAccountingPoliciesTextBlock-c0_cont_71"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Level 1 &#8212; Observable inputs that
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_73" id="_SignificantAccountingPoliciesTextBlock-c0_cont_72"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Level 2 &#8212; Other inputs that are
directly or indirectly observable in the marketplace.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_74" id="_SignificantAccountingPoliciesTextBlock-c0_cont_73"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Level 3 &#8212; Unobservable inputs
which are supported by little or no market activity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_75" id="_SignificantAccountingPoliciesTextBlock-c0_cont_74"><ix:continuation id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">ASC 820 describes three main approaches
to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach
uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on
the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently
be required to replace an asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_76" id="_SignificantAccountingPoliciesTextBlock-c0_cont_75"><ix:nonNumeric contextRef="c0" continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:RevenueRecognitionPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(u) Revenue recognition</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_77" id="_SignificantAccountingPoliciesTextBlock-c0_cont_76"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_2" id="_RevenueRecognitionPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group is mainly engaged in the
business of providing 1) Android+ platform solutions and services, 2) hardware product sales, 3) MVNO services and 4) Solar. The Group
adopted the new revenue recognition standards, or ASC 606, effective January 1, 2019 using the modified retrospective method for contracts
which were not completed at the date of initial adoption. In accordance with ASC Topic 606, revenues are recognized when control of the
promised goods or services is transferred to the Group&#8217;s customers, in an amount that reflects the consideration the Group expects
to be entitled to in exchange for those goods or services. In determining when and how much revenue is recognized from contracts with
customers, the Group performs the following five-step analysis: (1) identify the contract(s) with a customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in
the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_78" id="_SignificantAccountingPoliciesTextBlock-c0_cont_77"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_3" id="_RevenueRecognitionPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">When either party to a contract has
performed, the Group presents the contract in the consolidated balance sheet as a contract asset or a contract liability, depending on
the relationship between the entity&#8217;s performance and the customer&#8217;s payment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_79" id="_SignificantAccountingPoliciesTextBlock-c0_cont_78"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_4" id="_RevenueRecognitionPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">A contract asset is the Group&#8217;s
right to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when
the Group has an unconditional right to consideration, and it is probable that substantially all of the consideration will be collected.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_80" id="_SignificantAccountingPoliciesTextBlock-c0_cont_79"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_5" id="_RevenueRecognitionPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">If a customer pays consideration or
the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer,
the Group presents the contract liability when the payment is made or a receivable is recorded (whichever is earlier). A contract liability
is the Group&#8217;s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount
of consideration is due) from the customer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_81" id="_SignificantAccountingPoliciesTextBlock-c0_cont_80"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_6" id="_RevenueRecognitionPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group&#8217;s contract with customers
do not include significant financing component and material variable consideration.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_82" id="_SignificantAccountingPoliciesTextBlock-c0_cont_81"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_7" id="_RevenueRecognitionPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Generally, the Group recognizes revenue
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_83" id="_SignificantAccountingPoliciesTextBlock-c0_cont_82"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_8" id="_RevenueRecognitionPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">1. Android+ platform solutions and
services</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_84" id="_SignificantAccountingPoliciesTextBlock-c0_cont_83"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_9" id="_RevenueRecognitionPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Android+ platform solutions</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_85" id="_SignificantAccountingPoliciesTextBlock-c0_cont_84"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_10" id="_RevenueRecognitionPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group provides customized Android+
software platform solutions that are developed to maximize the commercial grade quality or performance of open source Android+ software
for integration with particular chipsets. The Group also provides customized Android+ service platform solutions that are end-to-end software
developed for mobile operators to allow data synchronization between their platform and mobile devices. The Group charges its customers,
mainly including mobile device manufacturers and mobile operators, fixed fees for project-based software contracts, as well as per chip
or per mobile device royalty fees.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_86" id="_SignificantAccountingPoliciesTextBlock-c0_cont_85"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_11" id="_RevenueRecognitionPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">There are executed contracts and purchase
orders between the Group and each customer, and each party&#8217;s rights regarding the service to be rendered are written on the contracts.
For this type of customers, the Group enters contract with them, which has the commercial substance to identify each party&#8217;s rights
and obligations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 146; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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The allocation of the transaction price between the two major performance obligations is based on the estimated standalone selling prices.
The selling price for the performance obligation of PCS is estimated as the reasonable cost budget plus a margin or industrial standard.
The rest of the transaction price other than the reasonable cost budget plus a margin for PCS will be allocated to the performance obligation
of the delivery of the software product.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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revenue in accordance with the satisfaction of each performance obligation. For the performance obligation of the delivery of the software
product, the Group recognizes the revenue at the point of time, upon the customers sign off the final acceptance. For the performance
obligation of the completion of PCS Period, the Group recognizes the revenue over the period of the PCS Period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_89" id="_SignificantAccountingPoliciesTextBlock-c0_cont_88"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_14" id="_RevenueRecognitionPolicyTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Service contracts</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_90" id="_SignificantAccountingPoliciesTextBlock-c0_cont_89"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_15" id="_RevenueRecognitionPolicyTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group provides research and development
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and the Group is not responsible for the outcome of such development projects. The revenue is recognized proportionately over the time.
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_91" id="_SignificantAccountingPoliciesTextBlock-c0_cont_90"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_16" id="_RevenueRecognitionPolicyTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The revenue arising from contracts
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_92" id="_SignificantAccountingPoliciesTextBlock-c0_cont_91"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_17" id="_RevenueRecognitionPolicyTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">2. Hardware product sales</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_93" id="_SignificantAccountingPoliciesTextBlock-c0_cont_92"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_18" id="_RevenueRecognitionPolicyTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group provides total solutions
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time, upon the delivery of products to customers, which is when the goods delivered to the designated address and it is probable that
substantially all of the consideration will be collected. Warranty is provided to all customers, which is not considered an additional
service; rather, an integral part of the product sales. ASC Topic 450, Contingencies, specifically addresses the accounting for standard
warranties. The Group believes that accounting for its standard warranty pursuant to ASC 450 does not impact revenue recognition because
the cost of honoring the warranty can be reliably estimated. The Group has determined the likelihood of claims arising from warranties
to be remote based on strong quality control procedures in the production process and historical experience with regard to claims being
made by customers. The basis for the warranty accrual will be reviewed periodically based on actual experience. The Group does not sell
extended warranty coverage.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_95" id="_SignificantAccountingPoliciesTextBlock-c0_cont_94"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_20" id="_RevenueRecognitionPolicyTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">3. MVNO</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_96" id="_SignificantAccountingPoliciesTextBlock-c0_cont_95"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_21" id="_RevenueRecognitionPolicyTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On July 11, 2014, the Group, through
the VIE, acquired and obtained control of Yuantel, which mainly operates the MVNO business. The license to operate such MVNO business
is issued by the Chinese Ministry of Industry and Information Technology and the core mobile network is provided by the PRC government
owned China Unicom. Yuantel receives wholesale rates for mobile voice and data services from China Unicom and repackages the voice and
data services into competitive bundles for Chinese consumers.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_97" id="_SignificantAccountingPoliciesTextBlock-c0_cont_96"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_22" id="_RevenueRecognitionPolicyTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with ASC Subtopic 606-10-55,
the Group is the principal in providing the bundled voice and data services to Chinese consumers, thus revenue is recognized on a gross
basis. As sales of bundled services are mostly pre-paid by the consumers, cash received in advance of voice and data consumption are recognized
as advances from customers. Revenue is recognized over the time by measuring the consumption of the time of voice and the amount of data.
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_98" id="_SignificantAccountingPoliciesTextBlock-c0_cont_97"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_23" id="_RevenueRecognitionPolicyTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">4. Solar</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_99" id="_SignificantAccountingPoliciesTextBlock-c0_cont_98"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_24" id="_RevenueRecognitionPolicyTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Solar, Holu Hou Energy LLC (&#8220;HHE&#8221;)
provides services under three business models, which are residential projects, commercial projects and wholesale equipment sales. For
residential projects and commercial projects, HHE complete solar + battery systems to residential homeowners and commercial customers.
There are several milestones in both projects. The Group recognizes the revenue at the point of time, upon the satisfaction of the performance
obligation (upon all of the contract milestones complete). For wholesale equipment sale, customers either purchases equipment from HHE
inventory, or purchase a large order of equipment from HHE with payment terms. Revenue is recognized upon the satisfaction of the performance
obligation (upon equipment delivery).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 147; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_101" id="_SignificantAccountingPoliciesTextBlock-c0_cont_100"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_26" id="_RevenueRecognitionPolicyTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Practical expedients and exemptions</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_102" id="_SignificantAccountingPoliciesTextBlock-c0_cont_101"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_27" id="_RevenueRecognitionPolicyTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Besides the right to invoice expedients,
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_103" id="_SignificantAccountingPoliciesTextBlock-c0_cont_102"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_28" id="_RevenueRecognitionPolicyTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Remaining performance obligations</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_104" id="_SignificantAccountingPoliciesTextBlock-c0_cont_103"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_29" id="_RevenueRecognitionPolicyTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following table includes estimated
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_105" id="_SignificantAccountingPoliciesTextBlock-c0_cont_104"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfFutureRelatedToPerformanceObligationsTabletextblock"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_29"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_106" id="_SignificantAccountingPoliciesTextBlock-c0_cont_105"><ix:nonNumeric contextRef="c0" continuedAt="brqs_ContractAssetsPolicyTextBlock-c0_cont_1" escape="true" name="brqs:ContractAssetsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(v) Contract assets</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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</div><div>

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</div><div>

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recognized as an asset if those costs meet all the following criteria: (1) the costs relate directly to a contract that the Group can
specifically identify; (2) the costs generate or enhance resources of the Group that will be used in satisfying performance obligations
in the future; (b) the costs are expected to be recovered. The Group chooses to use consistent method to amortize such contract costs,
with the timing of the transfer of goods and services to customers. Over time, the carrying amount of the contract costs may become impaired.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_112" id="_SignificantAccountingPoliciesTextBlock-c0_cont_111"><ix:nonNumeric contextRef="c0" continuedAt="brqs_ContractLiabilitiesPolicyTextBlock-c0_cont_1" escape="true" name="brqs:ContractLiabilitiesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(y) Contract Liabilities</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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to multiple element arrangements for which billing has occurred but transfer of control of all elements to the customer has either partially
or not occurred at the balance sheet date. This includes cash received from customers for services or products in advance of the transfer
of control. For the year ended December 31, 2022, the Group recognized revenue of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromCustomers" scale="3" unitRef="usd">5,738</ix:nonFraction> that was included in the advances from customers
and deferred revenue at January 1, 2022. For the year ended December 31, 2021, the Group recognized revenue of $<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ContractWithCustomerLiability" scale="3" unitRef="usd">4,949</ix:nonFraction> that was included
in the advances from customers and deferred revenue at January 1, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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of telecommunication costs, depreciation of long-lived assets, amortization of acquired intangible asset, payroll and other related costs
of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_116" id="_SignificantAccountingPoliciesTextBlock-c0_cont_115"><ix:nonNumeric contextRef="c0" continuedAt="_AdvertisingCostsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:AdvertisingCostsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(aa) Advertising expenditures</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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as incurred and are included in sales and marketing expenses, which amounted to $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:MarketingAndAdvertisingExpense" scale="3" unitRef="usd">1</ix:nonFraction>, <span style="-sec-ix-hidden: hidden-fact-279">nil</span> and <span style="-sec-ix-hidden: hidden-fact-280">nil</span> for the years ended December 31, 2020,
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_118" id="_SignificantAccountingPoliciesTextBlock-c0_cont_117"><ix:nonNumeric contextRef="c0" continuedAt="_ResearchAndDevelopmentExpensePolicy-c0_cont_1" escape="true" name="us-gaap:ResearchAndDevelopmentExpensePolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(bb) Research and development
expenses </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_119" id="_SignificantAccountingPoliciesTextBlock-c0_cont_118"><ix:continuation id="_ResearchAndDevelopmentExpensePolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Research and development expenses include
payroll, employee benefits, and other headcount-related expenses associated with research and platform development. Research and development
expenses also include rent, depreciation and other related expenses. Research and development expenses are expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 148; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_120" id="_SignificantAccountingPoliciesTextBlock-c0_cont_119"><ix:nonNumeric contextRef="c0" continuedAt="brqs_GovernmentGrantsPolicyTextBlock-c0_cont_1" escape="true" name="brqs:GovernmentGrantsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(cc) Government grants</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_121" id="_SignificantAccountingPoliciesTextBlock-c0_cont_120"><ix:continuation id="brqs_GovernmentGrantsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Government grants are provided by the
relevant PRC municipal government authorities to subsidize the cost of certain technology development projects. The amount of such government
grants are determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will continue
to receive these government grants in the future. Government grants are recognized when it is probable that the Group will comply with
the conditions attached to them, and the grants are received. When the grant relates to an expense item, it is recognized in the consolidated
statement of operations over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate,
as a reduction of the related operating expense. When the grant relates to an asset, it is recognized as deferred government grants and
released to the consolidated statement of operations in equal amounts over the expected useful life of the related asset, when operational,
as a reduction of the related depreciation expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_122" id="_SignificantAccountingPoliciesTextBlock-c0_cont_121"><ix:nonNumeric contextRef="c0" continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeLeasesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(dd) Leases</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_123" id="_SignificantAccountingPoliciesTextBlock-c0_cont_122"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_2" id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On January 1, 2019, the Group adopted
ASU No. 2016-02, Leases (Topic 842), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires
lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide
enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_124" id="_SignificantAccountingPoliciesTextBlock-c0_cont_123"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_3" id="_LesseeLeasesPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group elected to apply practical
expedients permitted under the transition method that allow the Group to use the beginning of the period of adoption as the date of initial
application, to not recognize lease assets and lease liabilities for leases with a term of twelve months or less, to not separate non-lease
components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing
or expired contract contains a lease. The Group used modified retrospective method and did not adjust the prior comparative periods. Under
the new lease standard, the Group determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities
are recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. The Group considers
only payments that are fixed and determinable at the time of lease commencement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_125" id="_SignificantAccountingPoliciesTextBlock-c0_cont_124"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_4" id="_LesseeLeasesPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">ASC 842 requires a lessee to discount
its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental
borrowing rate. As most of the Group&#8217;s leases do not provide an implicit rate, the Group uses its incremental borrowing rate as
the discount rate for the lease. The Group&#8217;s incremental borrowing rate is estimated to approximate the interest rate on a collateralized
basis with similar terms and payments. The right-of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less
any lease incentives received. The Group&#8217;s lease terms may include options to extend or terminate the lease. Renewal options are
considered within the right-of-use assets and lease liability when it is reasonably certain that the Group will exercise that option.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_126" id="_SignificantAccountingPoliciesTextBlock-c0_cont_125"><ix:continuation id="_LesseeLeasesPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Lease expense for lease payments is
recognized on a straight-line basis over the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_127" id="_SignificantAccountingPoliciesTextBlock-c0_cont_126"><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(ee) Income taxes</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_128" id="_SignificantAccountingPoliciesTextBlock-c0_cont_127"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_2" id="_IncomeTaxPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group accounts for income taxes
using the liability method. Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets
and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group
records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that
some 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
in income in the period that includes the enactment date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_129" id="_SignificantAccountingPoliciesTextBlock-c0_cont_128"><ix:continuation id="_IncomeTaxPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group applies ASC Topic 740, <i>Accounting
for Income Taxes</i>, (&#8220;ASC 740&#8221;), to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold
a tax position is required to meet before being recognized in the financial statements. The Group has elected to classify interest related
to unrecognized tax benefits, if and when required, as part of &#8220;income tax expense&#8221; in the consolidated statements of operations
and to classify all deferred income tax assets and liabilities as non-current on the consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 149; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_130" id="_SignificantAccountingPoliciesTextBlock-c0_cont_129"><ix:nonNumeric contextRef="c0" continuedAt="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_1" escape="true" name="brqs:ReverseStockSplitPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(ff) Reverse stock split</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_131" id="_SignificantAccountingPoliciesTextBlock-c0_cont_130"><ix:continuation continuedAt="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_2" id="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Board of Directors of the Group
approved a reverse stock split of the Group&#8217;s issued and outstanding shares at a ratio of 1-for-16 (the &#8220;Reverse Stock Split&#8221;)
on June 08, 2022. The Reverse Stock Split became effective on June 27, 2022. As a result, the Group&#8217;s issued and outstanding shares
was decreased in inverse proportion to the ratio.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_132" id="_SignificantAccountingPoliciesTextBlock-c0_cont_131"><ix:continuation continuedAt="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_3" id="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">When the Reverse Stock Split became
effective, each sixteen shares of issued and outstanding shares were converted into one newly issued and outstanding share. No fractional
shares were issued in connection with the Reverse Stock Split. Any fractional shares of common stock that would have otherwise resulted
from the Reverse Stock Split were rounded up to the nearest full share. No cash or other consideration was paid in connection with any
fractional shares that would otherwise have resulted from the Reverse Stock Split.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_133" id="_SignificantAccountingPoliciesTextBlock-c0_cont_132"><ix:continuation continuedAt="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_4" id="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As a result of the Reverse Stock Split,
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(taking into account the rounding of fractional shares).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_134" id="_SignificantAccountingPoliciesTextBlock-c0_cont_133"><ix:continuation id="brqs_ReverseStockSplitPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Except where otherwise specified, all
number of shares, share prices and per share data in the consolidated financial statements and the notes to the consolidated financial
statements have been retroactively restated as if the Reverse Stock Split occurred at the beginning of the periods presented.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_135" id="_SignificantAccountingPoliciesTextBlock-c0_cont_134"><ix:nonNumeric contextRef="c0" continuedAt="brqs_SubscriptionsReceivablePolicyTextBlock-c0_cont_1" escape="true" name="brqs:SubscriptionsReceivablePolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(gg) Subscriptions receivable</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_136" id="_SignificantAccountingPoliciesTextBlock-c0_cont_135"><ix:continuation id="brqs_SubscriptionsReceivablePolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2022, subscriptions
receivable included investment amounts in the form of (i) ownership of KADI that has been contemplated to be sold to the Group in exchange
for shares of the Group, and (ii) escrow shares to Samsung in the year 2019 and 2022 as security for arbitration compensation. Since the
shares in all these cases have already been issued, these items were recorded as subscriptions receivable on the equity section of the
Group&#8217;s consolidated balance sheet as of December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_137" id="_SignificantAccountingPoliciesTextBlock-c0_cont_136"><ix:nonNumeric contextRef="c0" continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_1" escape="true" name="us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(hh) Share-based compensation</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_138" id="_SignificantAccountingPoliciesTextBlock-c0_cont_137"><ix:continuation continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_2" id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group accounts for share-based
compensation in accordance with ASC Topic 718, <i>Compensation-Stock Compensation: Overall</i>, (&#8220;ASC 718&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_139" id="_SignificantAccountingPoliciesTextBlock-c0_cont_138"><ix:continuation continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_3" id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with ASC 718, the Group
determines whether an award should be classified and accounted for as a liability award or equity award. All grants of share-based awards
to employees classified as equity awards are measured based on their grant date fair values and recognized as compensation expense over
the requisite service period and/or performance period in the consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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using the accelerated method for share-based awards granted with service and performance conditions. According to ASC 718, the amount
of compensation cost recognized (or attributed) when achievement of a performance condition is probable depends on the relative satisfaction
of the performance condition based on performance to date. According to ASC 718, probable means the future event or events are likely
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to account for forfeitures as they occur.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 150; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_142" id="_SignificantAccountingPoliciesTextBlock-c0_cont_141"><ix:continuation id="_ComprehensiveIncomePolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Comprehensive income (loss) is defined
as the increase (decrease) in equity of the Group during a period from transactions and other events and circumstances excluding transactions
resulting from investments by owners and distributions to owners. Accumulated other comprehensive loss of the Group includes foreign currency
translation adjustments related to the Group and its PRC subsidiaries, whose functional currency is RMB.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_143" id="_SignificantAccountingPoliciesTextBlock-c0_cont_142"><ix:nonNumeric contextRef="c0" continuedAt="_SegmentReportingPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:SegmentReportingPolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(jj) Segment reporting</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_144" id="_SignificantAccountingPoliciesTextBlock-c0_cont_143"><ix:continuation continuedAt="_SegmentReportingPolicyPolicyTextBlock-c0_cont_2" id="_SegmentReportingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with ASC Topic 280, <i>Segment
Reporting</i>, (&#8220;ASC 280&#8221;), the Group historically had two operating segments, namely Yuantel and Connected Solution as the
Group&#8217;s chief executive officer, who has been identified as the Group&#8217;s chief operating decision maker (&#8220;CODM&#8221;)
reviews the operating results of the two difference service lines in order to allocate resources and assess performance for the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_145" id="_SignificantAccountingPoliciesTextBlock-c0_cont_144"><ix:continuation continuedAt="_SegmentReportingPolicyPolicyTextBlock-c0_cont_3" id="_SegmentReportingPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As discussed in Note 1(c), in November
2018, assets and liabilities related to Yuantel were reclassified as held for sale and revenues and expenses related to Yuantel segment
were reclassified in the accompanying consolidated financial statements as discontinued operations for all periods presented.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_146" id="_SignificantAccountingPoliciesTextBlock-c0_cont_145"><ix:continuation id="_SegmentReportingPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As discussed in Note 1(c), assets and
liabilities related to HHE, which the Group acquired in October 2021 were reclassified as held for sale and revenues and expenses related
to Solar segment were reclassified in the accompanying consolidated financial statements as discontinued operations for all periods presented.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_147" id="_SignificantAccountingPoliciesTextBlock-c0_cont_146"><ix:nonNumeric contextRef="c0" continuedAt="brqs_EmployeeBenefitPolicyTextBlock-c0_cont_1" escape="true" name="brqs:EmployeeBenefitPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(kk) Employee benefits</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_148" id="_SignificantAccountingPoliciesTextBlock-c0_cont_147"><ix:continuation id="brqs_EmployeeBenefitPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The full-time employees of the Group&#8217;s
PRC subsidiaries are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance,
which are governmental mandated defined contribution plans. These entities are required to accrue for these benefits based on certain
percentages of the employees&#8217; respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations,
and make cash contributions to the state-sponsored plans out of the amounts accrued.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_149" id="_SignificantAccountingPoliciesTextBlock-c0_cont_148"><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerSharePolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerSharePolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(ll) Loss per share</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_150" id="_SignificantAccountingPoliciesTextBlock-c0_cont_149"><ix:continuation id="_EarningsPerSharePolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Loss per share is computed by dividing
net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period using the
two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based
on their participating rights. The Group&#8217;s Convertible Redeemable Preferred Shares (Note 24) were participating securities. As the
participating securities do not share the losses of the Group, the computation of basic earnings per share using two-class method is not
applicable when the Group is at a net loss position. Diluted (loss) earnings per share is calculated by dividing net loss attributable
to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period.
Ordinary equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method and shares issuable
upon the exercise of the Group&#8217;s warrant using the if-converted method. Ordinary equivalent shares are not included in the denominator
of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 151; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_151" id="_SignificantAccountingPoliciesTextBlock-c0_cont_150"><ix:nonNumeric contextRef="c0" continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(mm) Recent accounting pronouncements</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_152" id="_SignificantAccountingPoliciesTextBlock-c0_cont_151"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>Recently issued accounting pronouncements
not yet adopted</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_153" id="_SignificantAccountingPoliciesTextBlock-c0_cont_152"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In October 2021, the FASB issued ASU
2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which
provides guidance on the acquirer&#8217;s accounting for acquired revenue contracts with customers in a business combination. The amendments
require an acquirer to recognize and measures contract assets and contract liabilities acquired in a business combination at the acquisition
date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers
when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The
new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance
is effective for the Group for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early
adoption is permitted. The Group does not expect that the adoption of this guidance will have a material impact on its financial position,
results of operations and cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_154" id="_SignificantAccountingPoliciesTextBlock-c0_cont_153"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_4" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>Recently adopted accounting pronouncements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_155" id="_SignificantAccountingPoliciesTextBlock-c0_cont_154"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_5" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In June 2016, the FASB issued ASU No.
2016-13, Measurement of Credit Losses on Financial Instruments, to require financial assets carried at amortized cost to be presented
at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the FASB issued
ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope
of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU 2019-10 and ASU 2019- 11 to provide additional
guidance on the credit losses standard. The ASUs are effective for interim and annual periods beginning after December 15, 2019, with
early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. The Group has adopted the amendments in these ASUs
on January 1, 2020, and the adoption of the amendments did not have a material impact on the consolidated financial position and results
of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_156" id="_SignificantAccountingPoliciesTextBlock-c0_cont_155"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_6" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In August 2018, the FASB issued ASU
No. 2018-13, &#8220;Fair Value Measurement (Topic 820): Disclosure Framework&#8212;Changes to the Disclosure Requirements for Fair Value
Measurement&#8221;. The amendments in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements.
The amendments in this ASU, among other things, require public companies to disclose the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements. The amendments in this ASU are effective for all entities for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2019, and entities are permitted to early adopt either the entire
standard or only the provisions that eliminate or modify the requirements. The Group has adopted the amendments in these ASUs on January
1, 2020, and the adoption of these amendments did not have a material impact on the consolidated financial position and results of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_SignificantAccountingPoliciesTextBlock-c0_cont_156"><ix:continuation id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In August 2020, the FASB issued ASU
No. 2020-06, Debt&#8212;Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging&#8212;Contracts in Entity&#8217;s
Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made
certain disclosure amendments to improve the information provided to users. For public business entities that meet the definition of an
SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than
fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Group has elected to adopt the
amendments in these ASUs on January 1, 2021, and the adoption of these amendments did not have a material impact on the consolidated financial
position and results of operations.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 152; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:ConcentrationRiskDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.</b></span></td>
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_3" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Financial instruments that potentially
subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts
receivable and accounts receivable from related parties. As of December 31, 2021 and 2022, the aggregate amount of cash and cash equivalents
and restricted cash from continuing operations were $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:TotalCashAndCashEquivalentsAndRestrictedCashOfContinuingOperations" scale="3" unitRef="usd">6,328</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:TotalCashAndCashEquivalentsAndRestrictedCashOfContinuingOperations" scale="3" unitRef="usd">11,337</ix:nonFraction>, respectively. As of December 31, 2021 and 2022, the aggregate
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believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial
institutions. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors&#8217; interests. However,
China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly
stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law.
Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China&#8217;s concession to the World Trade Organization,
foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects,
especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese
banks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds the Group&#8217;s deposits,
the 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
laws.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_4" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group has cash held by Silicon
Valley Bank as of December 31, 2022. On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon
Valley Bank and appointed the Federal Deposit Insurance Corporation (&#8220;FDIC&#8221;) as receiver. On March 12, 2023, the U.S. Department
of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of Silicon Valley Bank would
have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. The Group
received full access to the funds in its deposit and money market accounts on March 13, 2023. In light of actions by the federal government
to fully protect deposit accounts, the Group has not experienced any credit losses on its deposits of cash.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_5" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Accounts receivable, and accounts receivable
from related parties are both typically unsecured and are derived from revenues earned from customers. The risk is mitigated by credit
evaluations the Group performs on its ongoing credit evaluations of its customers&#8217; financial conditions and ongoing monitoring process
of outstanding balances.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_6" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(b) Business supplier, customer,
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_7" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group participates in a dynamic
and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect
on the Group&#8217;s future financial position, results of operations or cash flows: changes in the overall demand for services; competitive
pressures due to new entrants; advances and new trends in new technology; control of telecommunication infrastructures by local regulators
and industry standards; strategic relationships or customer relationships; regulatory considerations; and risks associated with the Group&#8217;s
ability to attract and retain employees necessary to support its growth.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_8" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(i) Customer concentration risk &#8211;
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net revenues in the 2022 fiscal year. It is always considered at least reasonably possible that any customer can 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 volume of business to the
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_9" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The accounts receivable from the largest
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_10" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(ii) Product concentration and geography
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no guarantee that this product type will continue to have demand in the fast-changing telecom industry or that the Group can continue
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</div><div>

</div><!-- Field: Page; Sequence: 153; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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OF RISKS (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_11" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(iii) Business supplier risk &#8211;
the Group&#8217;s MVNO operations are dependent upon telecommunication resources provided by China Unicom. There is no guarantee that
the supply of telecommunication resources provided by China Unicom will be renewed annually. Further, there is no guarantee around the
continuance of the MVNO license granted by the PRC government Ministry of Industry and Information Technology which may be amended or
discontinued in light of changes to political, economic and social reforms. In November 2018, the Company&#8217;s board of directors approved
the plan to dispose all of its reporting units operating the MVNO business (Note 1 (c)).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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operations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government
has been pursuing economic reform policies for more than 40 years, no assurance can be given that the PRC government will continue to
pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social
or political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee
that the PRC government&#8217;s pursuit of economic reforms will be consistent or effective.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_15" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For financial reporting purposes, the
financial statements of the Group&#8217;s PRC operating subsidiaries and VIE, which are prepared using the functional currency of the
PRC, Renminbi (&#8220;RMB&#8221;), are translated into the Company&#8217;s reporting currency, the United States Dollar (&#8220;U.S. dollar&#8221;).
Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average
rates prevailing during each reporting period, and shareholders&#8217; equity is translated at historical exchange rates. Adjustments
resulting from the translation are recorded as a separate component of accumulated other comprehensive income in shareholders&#8217; equity.
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</div><div>

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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_19" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(d) Interest rate risk</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_ConcentrationRiskDisclosureTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group is exposed to interest rate
risk on its interest-bearing liabilities. As part of its liability risk management, the Group reviews and takes appropriate steps to manage
its interest rate exposures on its interest-bearing liabilities. The Group has not been exposed to material risks due to changes in market
interest rates, and not used any derivative financial instruments to manage the interest risk exposure during the years presented.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 154; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:BusinessCombinationDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BUSINESS
ACQUISITIONS AND DISPOSAL</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p></ix:nonNumeric><div>
</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_2" id="_BusinessCombinationDisclosureTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><b><i>(a)</i></b></td><td style="text-align: justify"><b><i>Acquisition of HHE during fiscal 2021</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_3" id="_BusinessCombinationDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On October 19, 2021, the Group signed
definitive agreements to acquire <ix:nonFraction contextRef="c124" decimals="2" format="ixt:num-dot-decimal" name="brqs:AgreementsPercentage" scale="-2" unitRef="pure">51</ix:nonFraction>% equity interests in Holu Hou Energy LLC (&#8220;HHE&#8221;). The total consideration for the acquisition
of HHE amounted to $<ix:nonFraction contextRef="c125" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:BusinessCombinationIndemnificationAssetsAmountAsOfAcquisitionDate" scale="6" unitRef="usd">10.0</ix:nonFraction> million in cash as capital contribution, and <ix:nonFraction contextRef="c124" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesAcquisitions" scale="0" unitRef="shares">877,183</ix:nonFraction> of the Group&#8217;s ordinary shares. Of this consideration,
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be held in escrow and released as earn-out payments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_4" id="_BusinessCombinationDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The earn-out payment is based on the
performance of the acquiree to achieve certain earn-out requirements from July 2022 to January 2024. The fair value of the earn-out payments
was measured using a Monte Carlo simulation analysis. As of the acquisition date, the total contingent consideration recognized with the
amount of $<ix:nonFraction contextRef="c128" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessCombinationIndemnificationAssetsAmountAsOfAcquisitionDate" scale="3" unitRef="usd">1,669</ix:nonFraction>. The Group and HHE entered into agreement to postpone the original earn-out to be measured in July 2022 to July 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_5" id="_BusinessCombinationDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">HHE is an innovative solar energy and
storage provider for the residential, multi-family residential and commercial building markets. With operations in California, Hawaii,
Wisconsin and Shanghai, HHE engineers proprietary storage system and software and control platform solutions. The HHE team is made up
of renewable energy industry veterans, engineering and deploying energy storage systems that enable greater energy independence.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_6" id="_BusinessCombinationDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">After the completion of the acquisition,
HHE became a subsidiary of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_7" id="_BusinessCombinationDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31,
2022, the Group issued additional <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="brqs:AdditionalSharesIssued" scale="0" unitRef="shares">5,000,000</ix:nonFraction> shares to HHE as an additional acquisition cost, which held in escrow and will be released
as earn-out payments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><!-- Field: Page; Sequence: 155; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BUSINESS
ACQUISITIONS AND DISPOSAL (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_8" id="_BusinessCombinationDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">This transaction was considered a business
acquisition and therefore was recorded using the acquisition method of accounting. The acquired assets and liabilities were recorded at
their fair values at the date of acquisition. The purchase price for the acquisition was allocated as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_9" id="_BusinessCombinationDisclosureTextBlock-c0_cont_8"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfBusinessAcquisitionsByAcquisitionTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-281">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Deferred tax liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedDeferredTaxLiabilities" scale="3" unitRef="usd">1,143</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessCombinationAcquisitionOfLessThan100PercentNoncontrollingInterestFairValue" scale="3" unitRef="usd">6,513</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td>Total purchase price consisted of:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">- cash consideration (paid in fiscal 2021)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireBusinessesNetOfCashAcquired" scale="3" sign="-" unitRef="usd">3,250</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">- share-based consideration (<ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesIssued" scale="0" unitRef="shares">219,296</ix:nonFraction> of the Group&#8217;s ordinary shares)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_10" id="_BusinessCombinationDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The goodwill is attributable to intangible
assets that cannot be recognized separately as identifiable assets under U.S. GAAP, and comprise of (a) the assembled work force and (b)
the expected but unidentifiable business growth as a result of the economy of scale, increase in cross-selling opportunities as well as
synergy resulting from the acquisition.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_11" id="_BusinessCombinationDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The amortizable intangible assets represent
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_12" id="_BusinessCombinationDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The non-controlling interest with the
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_13" id="_BusinessCombinationDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The key input and assumptions included
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_14" id="_BusinessCombinationDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Transaction Expenses</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_15" id="_BusinessCombinationDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Transaction costs directly related
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_16" id="_BusinessCombinationDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">See Note 4(c) below for the deconsolidation
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_17" id="_BusinessCombinationDisclosureTextBlock-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><b><i>(b)</i></b></td><td style="text-align: justify"><b><i>Disposal of Borqs Wireless Ltd. (&#8220;BWL&#8221;) during the year ended December 31, 2021</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_18" id="_BusinessCombinationDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In July 2021, the Group entered into
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 156; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BUSINESS
ACQUISITIONS AND DISPOSAL (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_19" id="_BusinessCombinationDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The loss on the disposal of BWL was
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_20" id="_BusinessCombinationDisclosureTextBlock-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_24" id="_BusinessCombinationDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Below are the assets and liabilities
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</div><div>

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    <td colspan="2" style="text-align: center"><b>$ &#8217;000</b></td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_26" id="_BusinessCombinationDisclosureTextBlock-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><b><i>(c)</i></b></td><td style="text-align: justify"><b><i>Deconsolidation of HHE during the year ended December 31, 2022</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_27" id="_BusinessCombinationDisclosureTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In December 2022, the Group received
a letter (the &#8220;CFIUS Letter&#8221;) from the Department of the Treasury on behalf of the Committee on Foreign Investment in the
United States (&#8220;CFIUS&#8221;) stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests
and rights in HHE due to HHE&#8217;s solar energy storage system and EnergyShare technology for Multi-Dwelling Residential Units being
deemed a potential national security risk.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_28" id="_BusinessCombinationDisclosureTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On December 31, 2022, the Group resolved
that in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Group must adhere to, including:
(i) Entering into a National Security Agreement with various departments of the US government with a plan that is effective, monitorable
and verifiable to divest Borqs&#8217; investment interests and rights in HHE; (ii) Selection of a trustee and entering into a Divestment
Trust Agreement, and assigning the Group&#8217;s interest in HHE to the trustee; and, (iii) Selection of a nationally recognized investment
bank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of December 31, 2022, terminate its control
of HHE by (i) removal of all of the Group&#8217;s representatives from HHE&#8217;s Board of Directors, (ii) relinquishment of Class A
Membership Unit voting rights, and (iii) reduction of the Group&#8217;s ownership of HHE from <ix:nonFraction contextRef="c131" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentOwnershipPercentage" scale="-2" unitRef="pure">51</ix:nonFraction>% down to <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="brqs:EquityMethodInvestmentOwnershipPercentages" scale="-2" unitRef="pure">49</ix:nonFraction>% by allowing HHE to increase
the total number of Class B membership units for employees of HHE such that the Group&#8217;s ownership is proportionally reduced. And
the Group resolved to comply fully with the requirements of the CFIUS Letter and terminate its control of HHE on December 31, 2022. By
taking above actions, the Group no longer has a controlling interest in HHE and result in deconsolidation of HHE as of December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 157; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BUSINESS
ACQUISITIONS AND DISPOSAL (CONTINUED)</b></span></td>
</tr></table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_29" id="_BusinessCombinationDisclosureTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On March 16, 2023, the Group and HHE
entered into a National Security Agreement (&#8220;NSA&#8221;) with the Department of Defense and Department of Treasury. The NSA provides
that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill provisions
which provide that the Group shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any changes to
the rights held by the Group, except as necessary to effect its obligations under the NSA, or acquire or take possession of any assets
of HHE. Further, upon the completion of the Divestment, the Group shall terminate or irrevocably waive any information, consent, board
appointment, board observer, or other governance rights held by the Group, except for any and all rights that are determined by the U.S.
Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the Divestment:
engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes; assigning and
hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs&#8217; administrative
and technical influence over HHE; and creating a plan to divest all of Borqs&#8217; investment interests and rights in HHE. Pursuant to
the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment Trust Agreement
(&#8220;DTA&#8221;) dated March 20, 2023 entered into between Borqs, HHE and a trustee. According to the DTA, when Borqs&#8217; interests
in HHE are being placed in a Voting Trust Agreement as a security measure designed to insulate HHE from any foreign control or influence
that may arise from Borqs&#8217; ownership of the investment interest. Also, it shall not accept direction from the Group on any matter
before 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
management of HHE</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_30" id="_BusinessCombinationDisclosureTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As above, HHE, which identified the
innovative clean energy business, a separate segment was deconsolidated on December 31, 2022, and reclassified as held for sale as of
December 31, 2021, for the carrying amounts will be recovered principally through a sale and revenues and expenses related to HHE have
been reclassified in the accompanying consolidated financial statements as discontinued operations for fiscal 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_31" id="_BusinessCombinationDisclosureTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The loss on the deconsolidation of
HHE was calculated as below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation id="_BusinessCombinationDisclosureTextBlock-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The key input and assumptions included
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 158; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_InventoryDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_InventoryDisclosureTextBlock-c0_cont_2" id="_InventoryDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Inventories consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InventoryGross" scale="3" unitRef="usd">9,015</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InventoryGross" scale="3" unitRef="usd">6,159</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Less: provision</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation id="_InventoryDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Provisions were $<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InventoryValuationReserves" scale="3" unitRef="usd">2,255</ix:nonFraction> and $<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InventoryValuationReserves" scale="3" unitRef="usd">1,924</ix:nonFraction> as
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 159; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PREPAID
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</div><ix:continuation continuedAt="_OtherCurrentAssetsTextBlock-c0_cont_2" id="_OtherCurrentAssetsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Prepaid expenses and other current
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</div><div>

</div><ix:continuation continuedAt="_OtherCurrentAssetsTextBlock-c0_cont_3" id="_OtherCurrentAssetsTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:DeferredCostsCapitalizedPrepaidAndOtherAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation id="_OtherCurrentAssetsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Provisions were $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProvisionForOtherLosses" scale="3" unitRef="usd">11,327</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProvisionForOtherLosses" scale="3" unitRef="usd">11,383</ix:nonFraction> as of December
31, 2021 and 2022, respectively. The Group reviews staff advances, rental and other deposits, receivable from an agent and other for expected
credit loss. The Group determined the allowance based on known troubled accounts, historical experience, and other currently available
evidence.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeOperatingLeasesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>LEASE</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_2" id="_LesseeOperatingLeasesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group leases office space under
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_3" id="_LesseeOperatingLeasesTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfFutureLeasePaymentsUnderOperatingLeasesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">2024</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="brqs:TotalLeasePayments" scale="3" unitRef="usd">643</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="brqs:LessImputedInterest" scale="3" unitRef="usd">68</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Present value of lease liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="brqs:OperatingLeaseLiabilities" scale="3" unitRef="usd">575</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_4" id="_LesseeOperatingLeasesTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Operating lease cost for the year ended
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</div><div>

</div><ix:continuation id="_LesseeOperatingLeasesTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Cash paid for amounts included in the
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><!-- Field: Page; Sequence: 160; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>8.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PROPERTY
AND EQUIPMENT, NET</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Property and equipment consisted of
the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 161; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTANGIBLE
ASSETS, NET</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_2" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following table presents the intangible
assets as of the respective balance sheet dates:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_4" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The intangible assets are amortized
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</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_5" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">There was no capitalization of intangible
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</div><div>

</div><ix:continuation id="_IntangibleAssetsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For the year ended December 31, 2021
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>LONG-TERM
INVESTMENTS</b></span></td>
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</div><div>

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into an agreement with Colmei Technology International Ltd (&#8220;Colmei&#8221;) and its affiliate Shenzhen Crave Communication Co.,
Ltd (&#8220;Crave&#8221;), along with the shareholders of Crave and Colmei (the &#8220;Selling Shareholders&#8221;), pursuant to which
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</div><div>

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consisted of the fair value of the ordinary shares on the dates of issuance and the present value of the cash consideration determined
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 163; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>11.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BANK
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</div><div>

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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
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    <td>&#160;</td>
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    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-320; font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
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    <td>&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
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    <td>&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c5_cont_4" id="_DebtDisclosureTextBlock-c5_cont_3"><ix:continuation continuedAt="_ScheduleOfSubordinatedBorrowingTextBlock-c5_cont_2" id="_ScheduleOfSubordinatedBorrowingTextBlock-c5_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px; text-align: justify">&#160;</td> <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td> <td style="text-align: justify"><ix:footnote id="ix_15_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The short-term bank and other borrowings outstanding as of December 31, 2021 and 2022 bore a weighted average interest rate of <ix:nonFraction contextRef="c3" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtWeightedAverageInterestRate" scale="-2" unitRef="pure">103.20</ix:nonFraction>% and <ix:nonFraction contextRef="c2" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtWeightedAverageInterestRate" scale="-2" unitRef="pure">21.09</ix:nonFraction>% per annum, respectively, and were denominated in RMB. The borrowings was obtained from financial institution.</span></ix:footnote></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 164; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Payable related to a lawsuit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="brqs:PayableRelatedToALawsuit" scale="3" unitRef="usd">2,108</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 1.5pt">Others</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_4" id="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Payable related to a lawsuit represented an amount
due to a third-party company. The original debtor claimed that the Group has breached the previously agreed settlement agreement, and
transferred the debt to the third-party company during the year ended December 31, 2021. On April 20, 2023, the Group entered into a settlement
agreement with the third-party company regarding the payments. According to the agreement, the Group will settle the balance in several
payments until March 2024, and part of the balance has been classified to other payables &#8211; noncurrent.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31, 2022, the Group
executed a settlement agreement with Samsung regarding the payments with a payment period of eighteen months beginning on July 2022.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><!-- Field: Page; Sequence: 165; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_1" escape="true" name="brqs:ConvertibleNotesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONVERTIBLE
NOTES</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_2" id="brqs_ConvertibleNotesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>Prior Private Placement Notes and Warrants</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_3" id="brqs_ConvertibleNotesTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On February 25, 2021 and April 14, 2021 the Group
entered into securities purchase agreements with institutional and individual investors, pursuant to which the Group sold approximately
$<ix:nonFraction contextRef="c173" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentOfWarrantsGrantedForServices" scale="6" unitRef="usd">6.67</ix:nonFraction> million of notes (the &#8220;February 25 Notes&#8221;) and <ix:nonFraction contextRef="c174" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares">730,994</ix:nonFraction> warrants at an exercise price of $<ix:nonFraction contextRef="c175" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:WarrantExercisePriceIncrease" scale="0" unitRef="usdPershares">35.55</ix:nonFraction> per share (the &#8220;February
25 Warrants), $<ix:nonFraction contextRef="c176" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentOfWarrantsGrantedForServices" scale="6" unitRef="usd">1</ix:nonFraction> million of notes (the &#8220;April 14 Notes&#8221;) and <ix:nonFraction contextRef="c177" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares">157,563</ix:nonFraction> warrants at an exercise price of $<ix:nonFraction contextRef="c178" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:WarrantExercisePriceIncrease" scale="0" unitRef="usdPershares">24.64</ix:nonFraction> per share (the
&#8220;April 14 Warrants&#8221; and, together with the February 25 Warrants, the &#8220;Prior Private Placement Warrants&#8221;) and $<ix:nonFraction contextRef="c179" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentOfWarrantsGrantedForServices" scale="6" unitRef="usd">15.3</ix:nonFraction>
million of notes (the &#8220;May 5 Notes&#8221; and, together with the February 25 Notes and the April 14 Notes, the &#8220;Prior Private
Placement Notes.&#8221;) The Prior Private Placement Notes have a two-year term with a conversion price of $<ix:nonFraction contextRef="c180" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleConversionPrice1" scale="0" unitRef="usdPershares">15.55</ix:nonFraction> per share. The Prior
Private Placement Notes have certain anti-dilution protections in the event of a lower priced issuance. Interest shall accrue on the notes
at <ix:nonFraction contextRef="c180" decimals="2" format="ixt:num-dot-decimal" name="brqs:AccruedInterestPercentage" scale="-2" unitRef="pure">8</ix:nonFraction>% annually, payable on a quarterly basis, in either cash or, in the event the registration statement registering such shares has been
declared effective, ordinary shares. The Prior Private Placement Notes held by a particular holder will not be convertible to the extent
such conversion would result in such holder owning more than <ix:nonFraction contextRef="c180" decimals="3" format="ixt:num-dot-decimal" name="brqs:PercentageOfNumberOfOrdinaryShares" scale="-2" unitRef="pure">9.9</ix:nonFraction>% of the number of ordinary shares outstanding after giving effect to
the issuance of ordinary shares issuable upon conversion of such note calculated in accordance with Section 13(d) of the Exchange Act.
On May 5, 2021, the Company issued additional $<ix:nonFraction contextRef="c181" decimals="-5" format="ixt:num-dot-decimal" name="brqs:AdjustmentsToAdditionalPaidInCapitalWarrantsIssued" scale="6" unitRef="usd">15.3</ix:nonFraction> million Prior Private Placement Notes to investors in the February and April transactions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_4" id="brqs_ConvertibleNotesTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Prior Private Placement Warrants are exercisable
immediately for a period of five years for cash, at an exercise price of $<ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares">35.55</ix:nonFraction> per ordinary share for the February 25 Warrants and $<ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="brqs:WarrantsPricePerShare" scale="0" unitRef="usdPershares">24.64</ix:nonFraction>
per ordinary share for the April 14 Warrants, subject to adjustment in the event of stock dividends and splits, or sales or grants of
ordinary shares or ordinary share equivalents in certain transactions at less than the then current exercise price, or where the exercise
price is higher than the then-current market price of the ordinary shares, on a cashless exercise basis, using the Black Scholes Value.
The Prior Private Placement Warrants held by a particular holder will not be exercisable to the extent such conversion would result in
such holder owning more than <ix:nonFraction contextRef="c2" decimals="3" format="ixt:num-dot-decimal" name="brqs:PercentageOfNumberOfOrdinaryShares" scale="-2" unitRef="pure">9.9</ix:nonFraction>% of the number of ordinary shares outstanding after giving effect to the issuance of ordinary shares
issuable upon exercise of such warrants calculated in accordance with Section 13(d) of the Exchange Act.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_5" id="brqs_ConvertibleNotesTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31, 2021, all of
the February 25 Notes, April 14 Notes and May 5 Notes (except for $<ix:nonFraction contextRef="c180" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:ConvertibleNotesPayable" scale="6" unitRef="usd">1.57</ix:nonFraction> million), and the Prior Private Placement Warrants have been converted
into <ix:nonFraction contextRef="c182" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">1,496,271</ix:nonFraction> ordinary shares, and all the <ix:nonFraction contextRef="c183" decimals="0" format="ixt:num-dot-decimal" name="brqs:OrdinaryShares" scale="0" unitRef="shares">888,083</ix:nonFraction> warrants exercised to <ix:nonFraction contextRef="c184" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares">1,770,838</ix:nonFraction> ordinary shares. During the year ended December 31,
2022, all of the February 25 Notes, April 14 Notes, May 5 Notes and the Prior Private Placement Warrants have been converted into <ix:nonFraction contextRef="c185" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares"><ix:nonFraction contextRef="c186" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares"><ix:nonFraction contextRef="c187" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares">421,339</ix:nonFraction></ix:nonFraction></ix:nonFraction>
ordinary shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_6" id="brqs_ConvertibleNotesTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>September 2021 Private Placement Notes and
Warrants</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_7" id="brqs_ConvertibleNotesTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On September 14, 2021 the Group entered into securities
purchase agreements with institutional and individual investors, pursuant to which the Group sold $<ix:nonFraction contextRef="c188" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentOfWarrantsGrantedForServices" scale="3" unitRef="usd">13,575,000</ix:nonFraction> of notes (the &#8220;September
2021 Notes&#8221;) and <ix:nonFraction contextRef="c189" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares">2,337,293</ix:nonFraction> Warrants (the &#8220;September 14 Warrants&#8221;). <ix:nonNumeric contextRef="c190" name="brqs:September2021PrivatePlacementNotesAndWarrantsDecription">The September 2021 Notes have a two year term and
are convertible into ordinary shares at the lower of (i) $10.45 per share, (ii) 90% of the closing price of the ordinary shares on the
date that the registration statement registering the underlying shares is declared effective, or (iii) in the event that the registration
statement registering the underlying shares is not declared effective by the date that the shares underlying the September 2021 Notes
are eligible to be sold, assigned or transferred under Rule 144, 90% of the closing price of the ordinary shares on such date.</ix:nonNumeric> The September
2021 Notes have certain anti-dilution protections in the event of a lower priced issuance. Interest shall accrue on the notes at <ix:nonFraction contextRef="c191" decimals="2" format="ixt:num-dot-decimal" name="brqs:AccruedInterestPercentage" scale="-2" unitRef="pure">8</ix:nonFraction>% annually,
payable on a quarterly basis, in either cash or, in the event the registration statement registering the underlying shares has been declared
effective, ordinary shares. The September 2021 Notes held by a particular holder will not be convertible to the extent such conversion
would result in such holder owning more than <ix:nonFraction contextRef="c191" decimals="3" format="ixt:num-dot-decimal" name="brqs:PercentageOfNumberOfOrdinaryShares" scale="-2" unitRef="pure">9.9</ix:nonFraction>% of the number of ordinary shares outstanding after giving effect to the issuance of
ordinary shares issuable upon conversion of such note calculated in accordance with Section 13(d) of the Exchange Act. An additional $<ix:nonFraction contextRef="c188" decimals="-3" format="ixt:num-dot-decimal" name="brqs:AdjustmentsToAdditionalPaidInCapitalWarrantsIssued" scale="3" unitRef="usd">13,575,000</ix:nonFraction>
of notes with the same terms will be issued upon the satisfaction of certain conditions, including the effectiveness of the registration
statement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONVERTIBLE
NOTES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c5" name="brqs:WarrantsDescription"><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_8" id="brqs_ConvertibleNotesTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Warrants are exercisable immediately for a
period of five years for cash, at an exercise price of $13.89 per ordinary share, subject to adjustment in the event of stock dividends
and splits, or sales or grants of ordinary shares or ordinary share equivalents in certain transactions at less than the then current
exercise price, or where the exercise price is higher than the then-current market price of the ordinary shares, on a cashless exercise
basis, using the Black Scholes Value. The Warrants held by a particular holder will not be exercisable to the extent such conversion would
result in such holder owning more than 9.9% of the number of ordinary shares outstanding after giving effect to the issuance of ordinary
shares issuable upon exercise of such warrants calculated in accordance with Section 13(d) of the Exchange Act.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_9" id="brqs_ConvertibleNotesTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31, 2021, <ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardNonOptionEquityInstrumentsExercised" scale="0" unitRef="shares">88,240</ix:nonFraction>
warrants were exercised into <ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="brqs:OrdinarySharesExercised" scale="0" unitRef="shares">128,418</ix:nonFraction> ordinary shares on a cashless basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_10" id="brqs_ConvertibleNotesTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2022, all of the September
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to <ix:nonFraction contextRef="c194" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares">2,782,471</ix:nonFraction> ordinary shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_11" id="brqs_ConvertibleNotesTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>May 2022 Private Placement Notes and Warrants</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_12" id="brqs_ConvertibleNotesTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On May 25, 2022, the Group signed agreements
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have 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
90% of the closing bid price of the ordinary shares on the date that such shares are first eligible to be sold, assigned or transferred
under Rule 144 or Regulation S, as applicable, whichever is lower but in no event at less than $0.1 per ordinary share, which was $1.476
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subject to adjustment in certain conditions. The Group issued the notes and warrants on May 25, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">

</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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are considered to be indexed to the Company&#8217;s own stock and classified in stockholders&#8217; equity and therefore they meet the
scope exception prescribed in ASC 815-10-15.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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discounts and debt issuance costs if any. At the time of issuance, the Group allocated the proceeds to the Convertible Notes and the Warrants
based on their relative fair values. During the year ended December 31, 2021, in connection with the issuance of the Convertible Notes
and the Warrants, the Group recorded debt discount of $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfDebtDiscountPremium" scale="3" unitRef="usd">15,097</ix:nonFraction> that will be amortized over the term of the Convertible Notes. During the
year ended December 31, 2022, in connection with the issuance of the Convertible Notes and the Warrants, the Group recorded debt discount
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_17" id="brqs_ConvertibleNotesTextBlock-c0_cont_16"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfFairValueOfTheWarrantsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 167; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONVERTIBLE
NOTES (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_20" id="brqs_ConvertibleNotesTextBlock-c0_cont_19"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDebtInstrumentsTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_21" id="brqs_ConvertibleNotesTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Balance as of December 31, 2021:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_22" id="brqs_ConvertibleNotesTextBlock-c0_cont_21"><ix:nonNumeric contextRef="c0" continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ConvertibleDebtTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Principal</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="brqs_ConvertibleNotesTextBlock-c0_cont_24" id="brqs_ConvertibleNotesTextBlock-c0_cont_23"><ix:continuation id="_ConvertibleDebtTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="brqs_ConvertibleNotesTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31, 2021 and 2022,
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Interest expense related to the amortization of the debt discount of $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseDebt" scale="3" unitRef="usd">9,945</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseDebt" scale="3" unitRef="usd">11,387</ix:nonFraction> recorded for the year ended December 31, 2021
and 2022, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 168; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>14.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ACCUMULATED
OTHER COMPREHENSIVE LOSS</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_ComprehensiveIncomeNoteTextBlock-c0_cont_2" id="_ComprehensiveIncomeNoteTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The changes in accumulated other comprehensive
loss, net of tax of nil, were as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_ComprehensiveIncomeNoteTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccumulatedOtherComprehensiveIncomeLossTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="brqs:AccumulatedOtherComprehensiveIncomeLossesNetOfTax" scale="3" sign="-" unitRef="usd">1,091</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Balance as of December&#160;31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c239" decimals="-3" format="ixt:num-dot-decimal" name="brqs:AccumulatedOtherComprehensiveIncomeLossesNetOfTax" scale="3" sign="-" unitRef="usd">3,512</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>15.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>MAINLAND
CHINA EMPLOYEE CONTRIBUTION PLAN</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation id="_PensionAndOtherPostretirementBenefitsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As stipulated by the regulations of
the PRC, full-time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan organized
by municipal and provincial governments. Under the plan, certain pension benefits, medical care, unemployment insurance, employee housing
fund and other welfare benefits are provided to employees. The Group is required to make contributions to the plan based on certain percentages
of employees&#8217; salaries. The total expenses for the plan from continuing operations were $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanCostRecognized" scale="3" unitRef="usd">803</ix:nonFraction>, $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanCostRecognized" scale="3" unitRef="usd">1,026</ix:nonFraction> and $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanCostRecognized" scale="3" unitRef="usd">721</ix:nonFraction> and from discontinued
operations were $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="brqs:DefinedContributionPlanDiscontinuedOperationsExpense" scale="3" unitRef="usd">172</ix:nonFraction>, <span style="-sec-ix-hidden: hidden-fact-330">nil</span> and <span style="-sec-ix-hidden: hidden-fact-331">nil</span> for the years ended December 31, 2020, 2021 and 2022, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 169; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

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  <tr style="vertical-align: top">
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_3" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group granted <ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" scale="0" unitRef="shares">140,625</ix:nonFraction> shares of
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</div><div>

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</div><div>

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</div><div>

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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><!-- Field: Page; Sequence: 170; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>16.</b></span></td>
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  </table><div>
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</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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fair value of the options on the respective grant dates using the binomial-lattice option valuation model with the following assumptions
for each applicable period which takes into account variables such as volatility, dividend yield, and risk-free interest rate, contractual
term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_9" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_8"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfShareBasedPaymentAwardStockOptionsValuationAssumptionsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_10" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">No compensation expenses relating to
share options granted to employees recognized for the years ended December 31, 2020, 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_11" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>(b) Ordinary shares issued in 2020</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_12" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In December 2020, the Group issued
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as selling and marketing expenses and $<ix:nonFraction contextRef="c245" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ResearchAndDevelopmentInProcess" scale="3" unitRef="usd">1,687</ix:nonFraction> recorded as research and development expenses. The ordinary shares were fully vested as of
December 31, 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_13" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>(c) Ordinary shares issued in 2021</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_14" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During fiscal 2021, the Group issued
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as of December 31, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_15" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>(d) Ordinary shares issued in 2022</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During fiscal 2022, the Group issued
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as of December 31, 2022.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>17.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAXATION</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_2" id="_IncomeTaxDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Enterprise income tax (&#8220;EIT&#8221;)</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_3" id="_IncomeTaxDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>British Virgin Islands</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company is incorporated in the
British Virgin Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC, India and Hong Kong.
Under the current laws of the British Virgin Islands, the Company is not subject to tax on income or capital gains. Additionally, upon
payments of dividends by the Company to its shareholders, no BVI withholding tax will be imposed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 171; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>17.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAXATION (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_5" id="_IncomeTaxDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Cayman Islands</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Hong Kong</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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financial statements as the entity had losses in the years ended December 31, 2020, 2021 and 2022. Additionally, upon payments of dividends
by the Company to its shareholders, no HK withholding tax will be imposed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_9" id="_IncomeTaxDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>India</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>The PRC</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_12" id="_IncomeTaxDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company&#8217;s subsidiaries and
VIE in the PRC are subject to the statutory rate of <ix:nonFraction contextRef="c264" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction>%, in accordance with the Enterprise Income Tax law (the &#8220;EIT Law&#8221;),
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Dividends, interests, rent or royalties
payable by the Company&#8217;s PRC subsidiaries, to non-PRC resident enterprises, and proceeds from any such non-resident enterprise investor&#8217;s
disposition of assets (after deducting the net value of such assets) shall be subject to <ix:nonFraction contextRef="c265" decimals="2" format="ixt:num-dot-decimal" name="brqs:WithholdingTax" scale="-2" unitRef="pure">10</ix:nonFraction>% withholding tax, unless the respective non-PRC
resident enterprise&#8217;s jurisdiction of incorporation has a tax treaty or arrangements with China that provides for a reduced withholding
tax rate or an exemption from withholding tax.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><ix:nonNumeric contextRef="c266" continuedAt="brqs_IncomeTaxPreferentialRateDescription-c266_cont_1" name="brqs:IncomeTaxPreferentialRateDescription"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">BORQS Beijing was qualified for a High
and New Technology Enterprises (&#8220;HNTE&#8221;) since 2012 and was eligible for a 15% preferential tax rate from 2012 to 2014. In
July 2015, BORQS Beijing obtained a new HNTE certificate. BORQS Beijing has successfully renewed the HNTE certificate in December 2021
with effective term of three years until 2023. In accordance with the PRC Income Tax Laws, an enterprise awarded with the HNTE status
may enjoy a reduced EIT rate of 15%. For the years ended December 31, 2020, 2021 and 2022, BORQS Beijing enjoyed a preferential tax rate
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</div><div>

</div><ix:nonNumeric contextRef="c267" name="brqs:IncomeTaxPreferentialRateDescription"><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><ix:continuation id="brqs_IncomeTaxPreferentialRateDescription-c266_cont_1">Yuantel Telecom was qualified for a
High and New Technology Enterprises (&#8220;HNTE&#8221;) since 2011 and is eligible for a 15% preferential tax rate from 2011 to 2013.
In October 2014, Yuantel Telecom obtained a new HNTE certificate, which expired in October 2017. Yuantel Telecom has successfully renewed
the HNTE certificate in December 2017 with effective term of three years until 2019. In accordance with the PRC Income Tax Laws, an enterprise
awarded with the HNTE status may enjoy a reduced EIT rate of 15%.</ix:continuation> For the period from January 1 through October 29, 2020, Yuantel Telecom
enjoyed a preferential tax rate of 15%.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

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enterprises established under the laws of foreign countries or regions and whose &#8220;place of effective management&#8221; is located
within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of <ix:nonFraction contextRef="c268" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction>% on worldwide income. The definition
of &#8220;place of effective management&#8221; refers to an establishment that exercises, in substance, overall management and control
over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2022, no detailed interpretation
or guidance has been issued to define &#8220;place of effective management&#8221;. Furthermore, as of December 31, 2022, the administrative
practice associated with interpreting and applying the concept of &#8220;place of effective management&#8221; is unclear. If 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 changes in the
interpretation or guidance of this law.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 172; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAXATION (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Profit (loss) from continuing operations
before income taxes consisted of:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_18" id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_19" id="_IncomeTaxDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Income tax benefit (expense) comprised
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_21" id="_IncomeTaxDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The reconciliation of tax computed
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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 173; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->58<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAXATION (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_23" id="_IncomeTaxDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Deferred Taxes</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_24" id="_IncomeTaxDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The significant components of deferred
taxes were as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_26" id="_IncomeTaxDisclosureTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group operates through several
subsidiaries and its Consolidated VIEs. Valuation allowance is considered for each of the entities where it was determined it was more
likely than not that the benefits of the deferred tax assets will not be realized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_27" id="_IncomeTaxDisclosureTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Realization of the net deferred tax
assets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income,
exclusive of reversing deductible temporary differences and tax loss or credit carry forwards.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_28" id="_IncomeTaxDisclosureTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2022, the Group
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_29" id="_IncomeTaxDisclosureTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>Unrecognized Tax Benefits</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_30" id="_IncomeTaxDisclosureTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2021 and 2022, the
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on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balance sheets. The unrecognized
tax benefits and its related interest are primarily related to under-reported intercompany profit. The amount of unrecognized tax benefits
will change in the next 12 months, pending clarification of current tax law or audit by the tax authorities, however, an estimate of the
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 174; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAXATION (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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benefits is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
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</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In the years ended December 31, 2021
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respectively. As of December 31, 2022, the tax years ended December 31, 2016 through 2021 for the PRC subsidiaries remain open for statutory
examination by the PRC tax authorities.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>18.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>RELATED
PARTY TRANSACTIONS</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">(a) Related parties</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfShareholdersGroupRelatedPartiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bluecap</span></td>
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  <tr>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRelatedPartyTransactionsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 175; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>RELATED PARTY TRANSACTIONS (CONTINUED)</b></span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfRelatedPartyBalancesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">All balances with related parties as
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</div><div>

</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On July 31, 2018, the Group entered
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parties.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_2" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company&#8217;s ability to pay
dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries and VIE. Relevant PRC statutory
laws and regulations permit payments of dividends by the Company&#8217;s PRC subsidiaries only out of their retained earnings, if any,
as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the consolidated financial
statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company&#8217;s
PRC subsidiaries and VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_3" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with the PRC Regulations
on Enterprises with Foreign Investment and the articles of association of the Company&#8217;s PRC subsidiaries, a foreign-invested enterprise
established in the PRC is required to provide certain statutory reserves, namely the general reserve fund, the enterprise expansion fund
and the staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise&#8217;s PRC statutory accounts.
<ix:nonNumeric contextRef="c0" name="us-gaap:IncomeTaxExaminationDescription">A foreign-invested enterprise is required to allocate at least 10% of its annual net profit to the general reserve until such reserve
has reached 50% of its respective registered capital based on the enterprise&#8217;s PRC statutory accounts.</ix:nonNumeric> Appropriations to the enterprise
expansion fund and the staff welfare and bonus fund are at the discretion of the board of directors for all foreign-invested enterprises.
The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The PRC subsidiaries were
established as foreign-invested enterprises and therefore, are subject to the above mandated restrictions on distributable profits. As
of December 31, 2021 and 2022 the Group&#8217;s PRC subsidiaries had appropriated $<ix:nonFraction contextRef="c286" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StatutoryAccountingPracticesStatutoryCapitalAndSurplusRequired" scale="3" unitRef="usd">1,901</ix:nonFraction> and $<ix:nonFraction contextRef="c287" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StatutoryAccountingPracticesStatutoryCapitalAndSurplusRequired" scale="3" unitRef="usd">1,901</ix:nonFraction>, respectively, in its statutory reserves.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_RestrictedAssetsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Foreign exchange and other regulations
in the PRC may further restrict the Company&#8217;s VIE from transferring funds to the Company in the form of dividends, loans and advances.
Amounts restricted include paid-in capital and statutory reserves of the Company&#8217;s PRC subsidiaries and the equity of the Consolidated
VIEs, as determined pursuant to PRC generally accepted accounting principles. As of December 31, 2022, restricted net assets of the Company&#8217;s
PRC subsidiaries were $<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AmountOfRestrictedNetAssetsForConsolidatedAndUnconsolidatedSubsidiaries" scale="3" unitRef="usd">82,072</ix:nonFraction>.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>20.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>Equity</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(a)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Disposal of MVNO BU (Note 1(c))</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">See Note 1(c) for details for equity
transactions related to disposal of Yuantel.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 176; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>20.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>Equity (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(b)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Investment with KADI </i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_5" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On December 15, 2018, <ix:nonNumeric contextRef="c288" name="brqs:CapitalCommitmentsAndCapitalContingenciesDescription">the Group entered
into a Share Purchase Agreement (&#8220;Purchase Agreement&#8221;) with Shanghai KADI Machinery Technology Co., Ltd. (&#8220;KADI SH&#8221;),
KADI Technologies Limited (&#8220;KADI HK&#8221;) (collectively, &#8220;KADI&#8221;) and Lin Hu and Shou Huajun, the sole shareholders
of KADI SH and KADI HK (the &#8220;KADI&#8217;s Selling Shareholders&#8221;), for the purchase of 60% of the issued and outstanding ordinary
shares of KADI SH (&#8220;KADI SH Shares&#8221;) and 60% of the issued and outstanding ordinary shares of KADI HK (&#8220;KADI HK Shares&#8221;,
together with the KADI SH Shares, the &#8220;KADI Shares&#8221;). The transaction with KADI consists of total cash consideration of $4,600
in installments and share consideration equivalent to $9,750 in installments upon achievement of earn-outs by KADI SH from 2018 to 2021.
As of December 31, 2018, $600 was prepaid to KADI SH. The transaction did not close as of December 31, 2019 due to KADI not able to present
audited financial statements as required by the earn-out provisions of the agreement and that KADI has not performed the ownership change
registration at the local jurisdiction. Although KADI was not able to present audited financial statements as required by the earn-out
provisions of the agreement and has not performed the ownership change registration, 102,035 of Borqs&#8217; ordinary shares were issued
to KADI on January 9, 2019, for which the Group recorded the fair value of these shares in an aggregate of $5,217 in additional paid-in
capital, with a corresponding amount included in subscription receivable. As a result, future capital commitments for KADI has been voided
due to KADI&#8217;s breach of provisions of the agreements. As of the filing of this annual report, the Group has cancelled all the ordinary
shares of 36,813 shares, which were issued into escrow account with KADI. Also, the Group is in negotiation with KADI for a reduced ownership
of KADI or a recission of the acquisition.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_6" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group has initiated arbitration
proceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from
KADI of <ix:nonNumeric contextRef="c289" name="brqs:CapitalCommitmentsAndCapitalContingenciesDescription">i) a payment of $600 in cash previously paid to KADI, ii) the return of 65,222 ordinary shares of Borqs previously issued to the
owners of KADI, and iii) payment in cash for loss of profit from KADI&#8217;s projected business in the amount of $5.3 million. As of
the filing of this annual report, the arbitration is in its initial stages and there is no assurance that the outcome of the proceedings
will be in favor of Borqs.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_7" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(c)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Equity financing from Chongqing City Youtong Equity Investment Fund (&#8220;Chongqing Youtong&#8221;)</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_8" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On April 18, 2019, <ix:nonNumeric contextRef="c290" continuedAt="brqs_EquityFinancingAgreementDescription-c290_cont_1" name="brqs:EquityFinancingAgreementDescription">the Group entered
into an equity financing agreement with Chongqing Youtong owned by the Chongqing Government in the PRC. According to the agreement, Chongqing
Youtong purchased 9.9 % equity interest of the Company equivalent to 233,392 ordinary shares with a total purchase consideration of $13,865
on May 16, 2019, for which 75% of the total purchase consideration amounting to $10,399 in cash was received. The remaining 25% of the
total purchase consideration amounting to $3,466 will be contributed in the form of real property and equipment (the &#8220;Property Investment&#8221;)
by Chongqing Youtong within six months from May 16, 2019 the date that the cash investment portion was completed. However, the Property
Investment has not yet been completed.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">

</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_9" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_8"><ix:continuation continuedAt="brqs_EquityFinancingAgreementDescription-c290_cont_2" id="brqs_EquityFinancingAgreementDescription-c290_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In February 2023, the Group entered
into a settlement agreement with Chongqing Youtong on the settlement of the equity financing. For the cash consideration with the amount
of $10,399, the Group agreed to repay Chongqing Youtong the principal plus 8% annually interest with its ordinary shares. Besides, both
parties agreed to not proceed with the remainder 25% investment and the related previous issued 58,348 shares will not withdraw. Also,
to compensate Youtong&#8217;s investment loss from the share price decline, the Group issued additional 56,024,444 ordinary shares in
February 2023 equal to approximately $13.46 million including interest expense from May 2019 to February 2023, with annual interest rate
of 8%.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">

</p></ix:continuation></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_10" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_9"><ix:continuation id="brqs_EquityFinancingAgreementDescription-c290_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">By entering into the agreement not
to proceed with the remainder 25% investment in the form of real property and equipment, the amount was released from subscriptions receivable,
and a loss related to equity financing recognized during the year ended December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 177; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>20.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>Equity (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_11" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(d)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Repurchase of Shares from Zhengqi International Holding Limited (&#8220;Zhengqi&#8221;)</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_12" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On January 10, 2018, we entered into
a stock repurchase agreement (&#8220;Stock Repurchase Agreement&#8221;) with Zhengqi International Holding Limited (&#8220;Zhengqi&#8221;),
pursuant to which we agreed to repurchase <ix:nonFraction contextRef="c291" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodShares" scale="0" unitRef="shares">60,384</ix:nonFraction> of our ordinary shares that were originally issued and sold to Zhengqi on August 18,
2017, at an aggregate purchase price of approximately $<ix:nonFraction contextRef="c291" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SupplementalDeferredPurchasePrice" scale="3" unitRef="usd">10,070</ix:nonFraction> or $<ix:nonFraction contextRef="c292" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardPerShareWeightedAveragePriceOfSharesPurchased" scale="0" unitRef="usdPershares">166.40</ix:nonFraction> per share. The $<ix:nonFraction contextRef="c293" decimals="-3" format="ixt:num-dot-decimal" name="brqs:PaidPurchase" scale="3" unitRef="usd">10,048</ix:nonFraction> was paid on February 28, 2018 and recorded
as prepayment. On May 20, 2019, the <ix:nonFraction contextRef="c294" decimals="0" format="ixt:num-dot-decimal" name="brqs:CancelledOrdinaryShares" scale="0" unitRef="shares">60,384</ix:nonFraction> repurchased shares were cancelled. (Note 6)</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_13" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(e)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Settlement of arbitration with Claimant Samsung Electronics Co., Ltd. (&#8220;Samsung&#8221;)</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_14" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On November 27, 2018, <ix:nonNumeric contextRef="c295" continuedAt="brqs_SettlementOfArbitrationRelatedDescription-c295_cont_1" name="brqs:SettlementOfArbitrationRelatedDescription">the Secretariat
of the International Court of Arbitration for the International Chamber of Commerce issued a final award to Samsung Electronics Co., Ltd.
(&#8220;Samsung&#8221;) that constituted the final decision on the Group&#8217;s dispute with Samsung over a sales contract. The court
order required the Group to pay to Samsung total payments of $4,650 including: i) $4,280 as the &#8220;Principal Amount&#8221;, plus (ii)
accrued interest of $370 computed from March 31, 2019 on the outstanding balance of the Principal Amount at a simple interest rate of
9% per annum (together with the Principal Amount, collectively referred to as the &#8220;Settlement Payment&#8221;). On April 26, 2019,
the Group entered into a settlement agreement with Samsung according to which, the Group shall pay the full and total amount of the Settlement
Payment in equal monthly installments over a period of twenty-four months beginning on March 31, 2019. In addition, a total of 138,108
ordinary shares were issued to Samsung as escrow shares in the year 2019 as security for the payments. The Group recorded the fair value
of the shares issued in an aggregate of $6,401 in additional paid-in capital, with a corresponding amount included in subscription receivable.
Due to cash constraints, particularly due to the COVID-19 pandemic, the Group has not made monthly installments to Samsung since the fourth
quarter of 2019, and Samsung has not pursued alternative means of repayment from the Group.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_15" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_14"><ix:continuation id="brqs_SettlementOfArbitrationRelatedDescription-c295_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In April 2022, the Group executed a
settlement agreement with Samsung regarding the payments. The total amount of principal and accrued interest as of the end of May 2022
is 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
to the agreement, the Group shall pay the full and total amount of the payments in equal monthly installments over a period of eighteen
months beginning on July 2022. In addition, a total of 1,003,593 ordinary shares were issued to Samsung as escrow shares as security for
the payments. The Group recorded the fair value of the shares issued in an aggregate of $2,760 in additional paid-in capital, with a corresponding
amount included in subscription receivable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_16" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(f)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Investment in Shenzhen Crave Communication Co., Ltd. (&#8220;Crave&#8221;) and </i>Colmei Technology International Ltd. (&#8220;Colmei&#8221;)</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_17" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Refer to Note 10 for <ix:nonFraction contextRef="c296" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares">11,459</ix:nonFraction> shares
on January 10, 2019 related to long-term investments.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>20.</b></span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_18" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_19" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_18"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px">&#160;</td> <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td> <td> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2020, we issued ordinary shares to settle debt due to Coming Technologies Ltd valued per agreement at a total amount of $<ix:nonFraction contextRef="c297" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="3" unitRef="usd">1,998</ix:nonFraction> which comprised of:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">a. $<ix:nonFraction contextRef="c297" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableFairValueDisclosure" scale="3" unitRef="usd">880</ix:nonFraction> in payables for products Borqs ordered from TianFu in the amount of $<ix:nonFraction contextRef="c298" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentRepurchaseAmount" scale="3" unitRef="usd">658</ix:nonFraction> and EPIC in the amount of $<ix:nonFraction contextRef="c299" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentRepurchaseAmount" scale="3" unitRef="usd">222</ix:nonFraction>. 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</div><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_23" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 24px">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_24" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Due to stringent operational cash flows
caused by the COVID-19 pandemic, the CFO voluntarily forfeited his salary for the year 2020 as a contribution to the Group.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_25" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px; text-align: justify">&#160;</td> <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(i)</i></b></span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Collateral of <ix:nonFraction contextRef="c320" decimals="0" format="ixt:num-dot-decimal" name="brqs:CollateralRestrictedOrdinaryShares" scale="0" unitRef="shares">250,000</ix:nonFraction> restricted ordinary shares to AWP</i></b></span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_26" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In December 2020, the Group entered
into an agreement with AWP. <ix:nonNumeric contextRef="c321" name="brqs:CollateralRestrictedOrdinarySharesDescription">The Group has been offered a term loan for 6 months with interest at 12% per annum. According to the agreement,
the Group issued 250,000 restricted ordinary shares to be held in escrow at Continental Stock Transfer &amp; Trust Company as collateral.
The Group recorded the fair value of the shares issued in an aggregate of $4,080 in additional paid-in capital, with a corresponding amount
included in subscription receivable.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_27" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On June 15, 2021, the Group has released
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of a future project with <ix:nonFraction contextRef="c317" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredCompensationArrangementWithIndividualSharesIssued" scale="0" unitRef="shares">150,794</ix:nonFraction> shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_28" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Shares conversion from the holders of the convertible notes</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_29" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31,
2021, all of the February 25 Notes, April 14 Notes and May 5 Notes (except for $<ix:nonFraction contextRef="c3" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:ConvertibleNotesPayable" scale="6" unitRef="usd">1.57</ix:nonFraction> million) have been converted into the Group&#8217;s
ordinary shares of <ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">1,496,271</ix:nonFraction> shares. None of the September 2021 Notes have been converted. During the year ended December 31, 2022, total
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</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_30" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Warrants exercised from the holders of the convertible notes</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_31" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31,
2021, all of the February 25, 2021, April 14, 2021 and May 5, 2021 Warrants have been exercised by the holders into <ix:nonFraction contextRef="c322" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares">1,770,838</ix:nonFraction> of the Group&#8217;s
ordinary shares. <ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="brqs:OrdinaryShares" scale="0" unitRef="shares">88,240</ix:nonFraction> warrants of the September 14, 2021 Warrants have been exercised into <ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares">128,418</ix:nonFraction> of the Group&#8217;s ordinary shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_32" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31,
2022, <ix:nonFraction contextRef="c180" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares">1,080,406</ix:nonFraction> warrants of the September 14, 2021 Warrants have been exercised into <ix:nonFraction contextRef="c55" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtConversionConvertedInstrumentSharesIssued1" scale="0" unitRef="shares">2,782,471</ix:nonFraction> of the Group&#8217;s ordinary shares. And
<ix:nonFraction contextRef="c194" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares">3,829,109</ix:nonFraction> warrants of the May 25, 2022 Warrants have been exercised into <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares">14,578,181</ix:nonFraction> of the Group&#8217;s ordinary shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_33" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">All of these warrants were exercised
on a cashless basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_34" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_33"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(l)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Acquisition of HHE</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_35" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Refer to Note 4 for <ix:nonFraction contextRef="c323" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares">877,183</ix:nonFraction> shares
issued on October 20, 2021 related to the acquisition of HHE.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 181; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->66<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>20.</b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>Equity (CONTINUED)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_36" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_35"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(m)</i></b></span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Capital injection from non-controlling shareholders of a subsidiary</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The non-controlling shareholders of
HHE have capital injection to HHE with the amount of $<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PartnersCapital" scale="3" unitRef="usd">297</ix:nonFraction> after the Group&#8217;s acquisition of HHE in 2021 and capital injection with
the amount of $<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PartnersCapital" scale="3" unitRef="usd">438</ix:nonFraction> during the year ended December 31, 2022.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_FairValueDisclosuresTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueDisclosuresTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>FAIR VALUE MEASUREMENTS</b>&#160;&#160;</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_2" id="_FairValueDisclosuresTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group applies ASC 820, Fair Value
Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about
fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement. The Group has adopted the ASU 2018-13
Disclosure Framework &#8212; Changes to the Disclosure Requirements for Fair Value Measurement on January 1, 2020. It requires public
companies to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_3" id="_FairValueDisclosuresTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">ASC 820 establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_4" id="_FairValueDisclosuresTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Level 1 &#8212; Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_5" id="_FairValueDisclosuresTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Level 2 &#8212; Include other inputs
that are directly or indirectly observable in the marketplace.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_6" id="_FairValueDisclosuresTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Level 3 &#8212; Unobservable inputs
which are supported by little or no market activity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_7" id="_FairValueDisclosuresTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">ASC 820 describes three main approaches
to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach
uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on
the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently
be required to replace an asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_8" id="_FairValueDisclosuresTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group differentiate between those
assets and liabilities required to be carried at fair value at every reporting period (&#8220;recurring&#8221;) and those assets and liabilities
that are only required to be adjusted to fair value under certain circumstances (&#8220;nonrecurring&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_9" id="_FairValueDisclosuresTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The key input and assumptions included
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</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_10" id="_FairValueDisclosuresTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following tables present recorded
amounts of major financial assets and liabilities measured at Level 3 fair value on a recurring basis as of December 31, 2021:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_11" id="_FairValueDisclosuresTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="brqs:ScheduleOfFinancialAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left">Contingent consideration - current</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation id="_FairValueDisclosuresTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The contingent consideration was recognized
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fair value from the acquisition date to December 31, 2021 was recorded as change in fair value of contingent consideration. As of December
31, 2022, HHE was deconsolidated and the contingent consideration was derecognized.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 182; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="brqs_DebtForgivenessTextBlock-c0_cont_1" escape="true" name="brqs:DebtForgivenessTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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2021, the Group entered into an account payable forgiveness agreement with a supplier in December 2021. The Group has long cooperation
relationship with the supplier, and there was long-aging balance of account payable due to the supplier. The supplier agreed to waive
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_3" id="_EarningsPerShareTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Net loss per share attributable to Borqs Technologies, Inc.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares">12.76</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 0.25in">Loss per share&#8212;Diluted:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">12.76</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">7.58</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">1.48</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation id="_EarningsPerShareTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18pt; text-align: justify">For the years ended December 31, 2020,
2021 and 2022, share options and warrants associated with private placements were anti-dilutive and excluded from the calculation of diluted
net loss per share. See Note 20(c) for the <ix:nonFraction contextRef="c324" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TreasuryStockShares" scale="0" unitRef="shares">56,024,444</ix:nonFraction> ordinary shares issued subsequently in February 2023.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 183; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->68<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>24.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>COMMITMENTS
AND CONTINGENCIES</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(a) Capital commitments and contingencies</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Refer to Note 21 (b) for details related
to investments with KADI. As of the filing of this annual report, the Group is in negotiation with KADI for a reduced ownership of KADI
or a rescission of the acquisition.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(b) Income taxes</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_5" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2021 and 2022, the
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of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes
of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits
by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties.
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</div><div>

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</div><div>

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Yuantel. Although there were agreements between the Group and the nominee shareholder, there was no direct evidence to show the entrustment
relationship between both parties, which may not be supported by the existing PRC laws and regulation. As a result, the Group assessed
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</div><div>

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to one of the Group&#8217;s subsidiaries. By transferring all the shareholder&#8217;s rights and obligations under the agreement, the
nominee shareholder no longer has any rights in Big Cloud Network or rights and interests in the proceeds of disposal of Yuantel. As a
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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_9" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(d) Contingency in business disposal
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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_10" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">During the year ended December 31 2021,
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not a party to any claims related to the disposal of this subsidiary. However, according to the disposal agreement, after the completion
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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_11" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_12" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_13" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Also, if losses are caused to the transferee,
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</div><div>

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is or could become involved.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 184; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>25.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PARENT
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center; padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 185; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->70<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>25.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PARENT
COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_4" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Condensed statements of operations</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_5" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="srt:ScheduleOfCondensedIncomeStatementTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the years ended December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">$</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
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</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_6" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Condensed statements of comprehensive
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</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_7" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="srt:CondensedStatementOfComprehensiveIncomeTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_15" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>(b) Intercompany transactions</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 187; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BORQS TECHNOLOGIES, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Amounts in thousands of $, unless otherwise
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>26.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUBSEQUENT
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Valley Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit
accounts. The Group received full access to the funds in its deposit and money market accounts on March 13, 2023. On March 14, 2023, the
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and transferred the debt to the third-party company during the year ended December 31, 2021. On April 20, 2023, the Group entered into
a settlement agreement with the third-party company regarding the payments. According to the agreement, the Group will settle the balance
in several payments until March 2024.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

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received written notification from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (&#8220;Nasdaq&#8221;) indicating
that the Group has not regained compliance with the minimum bid price of $1 required for continued listing on The Nasdaq Capital
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to request a hearing which will stay the suspension or delisting action pending the hearing and the expiration of any extension period
granted by the Panel following the hearing. Consequently, the Group&#8217;s ordinary shares are expected to remain listed on The Nasdaq
Capital Market at least until the Panel renders a decision following the hearing. There can be no assurance that the Panel will determine
to continue the Company&#8217;s listing on the Nasdaq Capital Market or that the Group will timely evidence compliance with the terms
of any extension that may be granted by the Panel following the hearing.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">F-73</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>





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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
20-F
(Mark
One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31
,
2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of event requiring this shell company report: Not applicable
For
the transition period from _______ to _______
Commission
file number:
001-37593
BORQS
TECHNOLOGIES, INC.
(Exact
name of Registrant as specified in its charter)
(Translation
of Registrant's name into English)
British
Virgin Islands
(Jurisdiction
of incorporation or organization)
Office
B, 21/F, Legend Tower
,
7 Shing Yip Street
Kwun
Tong,
Kowloon
,
Hong Kong
(Address
of principal executive offices)
Pat
Sek Yuen Chan
, Chairman & Chief Executive Officer
Borqs
Technologies, Inc.
Office
B, 21/F, Legend Tower,
7 Shing Yip Street
Kwun
Tong,
Kowloon
,
Hong Kong
Telephone:
+852
5188 1864
, Fax:
+852 2114 0183
(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities
registered or to be registered pursuant to Section 12(b) of the Act:
Title of class
Trading Symbol
Name of exchange on which registered
Ordinary shares, no par value
BRQS
Nasdaq
Capital Market
Securities
registered or to be registered pursuant to Section 12(g) of the Act: None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate
the number of outstanding shares of each of the issuer's classes of capital or ordinary shares as of the close of the period covered
by the annual report: As of December 31, 2022, there were
57,182,633
shares of the registrant's ordinary shares, no par value,
issued and outstanding.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
No
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒
No
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Yes
☐ No
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Yes
☐ No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of "large accelerated filer", "accelerated filer" and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Emerging growth company
☐
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided
pursuant to Section 13(a) of the Exchange Act. ☐
†
The
term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board
to its Accounting Standards Codification after April 5, 2012.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
☒
International Financial Reporting Standards as issued by the International
Accounting Standards Board ☐
Other ☐
If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.
☐
Item 17     ☐ Item 18
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
☐
Yes
☒
No
Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐
Yes     ☐ No
TABLE
OF CONTENTS
Page
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3.
KEY INFORMATION
1
ITEM 4.
INFORMATION ON THE COMPANY
44
ITEM 4A.
UNRESOLVED STAFF COMMENTS
54
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
55
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
80
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
92
ITEM 8.
FINANCIAL INFORMATION
93
ITEM 9.
THE OFFER AND LISTING
94
ITEM 10.
ADDITIONAL INFORMATION
95
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
98
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
99
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
100
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OR PROCEEDS
100
ITEM 15.
CONTROLS AND PROCEDURES
100
ITEM 16.
RESERVED
102
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
102
ITEM 16B.
CODE OF ETHICS
102
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
102
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
103
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
103
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
103
ITEM 16G.
CORPORATE GOVERNANCE
103
ITEM 16H.
MINE SAFETY DISCLOSURE
104
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
104
PART III
ITEM 17.
FINANCIAL STATEMENTS
105
ITEM 18.
FINANCIAL STATEMENTS
105
ITEM 19.
EXHIBITS
105
i
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
annual report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995, and such forward-looking statements may appear in the sections captioned "
Business
," "
Risk Factors
,"
"
Management's Discussion and Analysis of Financial Condition and Plan of Operations
" and elsewhere. Any and
all statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Terms such
as "may," "might," "would," "should," "could," "project," "estimate,"
"pro-forma," "predict," "potential," "strategy," "anticipate," "attempt,"
"develop," "plan," "help," "believe," "continue," "intend," "expect,"
"future," and terms of similar import (including the negative of any of these terms) may identify forward-looking statements.
However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this report
may include, without limitation, statements regarding the plans, forecasts and objectives of management for future operations, earnings
or loss per share, capital expenditures, dividends, capital structure or other financial items, our future financial performance, including
any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included
pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), and the assumptions underlying or
relating to any such statement.
The
forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be
realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and
are subject to a number of risks and uncertainties and other influences, many of which we have no control over and are described more
fully in the sections discussing "Risk Factors". Actual results and the timing of certain events and circumstances may differ
materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence
or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired
results may include, without limitation:
●
Market acceptance of our
    products and services;
●
Competition from existing
    products or new products that may emerge;
●
The implementation of our
    business model and strategic plans for our business and our products;
●
Estimates of our future
    revenue, expenses, capital requirements and our need for financing;
●
The timing of recognition
    of revenues under US GAAP;
●
Our financial performance;
●
Current and future government
    regulations;
●
Developments relating to
    our competitors;
●
The impact of the Holu
    Hou Energy divestiture on our business and operations;
●
The impact of COVID-19
    on our business and operations; and
●
Other risks and uncertainties,
    including those listed under the section titled "
Risk Factors
."
Readers
are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to
the risk factors. We disclaim any obligation to update the forward-looking statements contained in this report to reflect any new information
or future events or circumstances or otherwise, except as required by law. Readers should read this report in conjunction with the discussion
under the caption "
Risk Factors
," our financial statements and the related notes thereto in this report, and other
documents which we may file from time to time with the SEC.
ii
PART
I
Unless
the context otherwise requires, as used in this annual report, the terms "Company", "Borqs", "we",
"us", and "our" refer to Borqs Technologies, Inc. and any or all of its subsidiaries. Unless otherwise noted,
all industry and market data in this annual report is presented in U.S. dollars. Unless otherwise noted, all financial and other data
related to the Company in this annual report is presented in U.S. dollars. All references to "$" or "US" in this
annual report refer to U.S. dollars. All references to "RMB" in this annual report refer to Chinese Renminbi Yuan.
ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not
applicable.
ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not
applicable.
ITEM
3. KEY INFORMATION
A.
Selected Financial Data
The
following selected consolidated financial data should be read in conjunction with "Item 5. Operating and Financial Review and Prospects"
and our consolidated financial statements and notes thereto included elsewhere in this Annual Report. The selected consolidated statements
of operations data for each of the years in the three-year period ended December 31, 2022, and the consolidated balance sheet data as
of December 31, 2021 and 2022, are derived from our audited consolidated financial statements and notes which have been prepared
in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.
The
Company completed its sale of the Mobile Virtual Network Operator Business Unit ("MVNO BU") as of October 29, 2020. Due to
this transaction, the Company's financial statements for the year ended December 31, 2020 for comparison purposes, are presented
with the MVNO BU as discontinued operations. The Company opted for the rule that only three years of operating results are required to
be presented in accordance with the applicable regulations of the British Virgin Islands.
Holu
Hou Energy LLC ("HHE"), which identified the innovative clean energy business, a separate segment was reclassified as held
for sale as of December 31, 2021 and 2022, for the carrying amounts will be recovered principally through a sale, and revenues and expenses
related to HHE have been reclassified as discontinued operations from October 19, 2021 to December 31, 2021, and for the year ended December
31, 2022 until it has been deconsolidated.
1
Fiscal Years Ended December 31,
Consolidated Statements of Income and Comprehensive Income Data:
2020
2021
2022
($'000)
Net revenues
26,751
29,561
52,537
Gross profit
1,596
2,606
11,116
Operating expenses*
(42,216
)
(29,003
)
(12,051
)
Other operating income
-
247
148
Operating loss
(40,620
)
(26,150
)
(787
)
Loss from continuing operations, before income taxes
(35,683
)
(55,655
)
(28,886
)
Income tax (expense) benefit
(406
)
445
(59
)
Net loss from continuing operations
(36,089
)
(55,210
)
(28,945
)
Discontinued operations
Income (loss) from discontinued operations, before income taxes
1,302
(1,392
)
(9,916
)
Income tax benefit (expense)
-
-
-
(Loss) income from operations of discontinued entities
1,302
(1,392
)
(9,916
)
-
-
Net loss
(34,787
)
(56,602
)
(38,861
)
*
(
Operating expenses for
    2020 included stock-based compensation of $20.0 million and non-recurring penalties of $1.1 million)
*
(
Operating expenses for
    2021 included stock-based compensation of $17.5 million and inventory impairment loss of $1.3 million)
*
(Operating expenses for
    2022 included stock-based compensation of $3.4 million and reversal of allowance for doubtful accounts of $0.02 million)
Fiscal Years Ended December 31,
Consolidated Balance Sheets Data:
2021
2022
($'000)
Cash and cash equivalents
6,117
11,305
Restricted cash
211
32
Accounts receivable, net
2,262
3,482
Inventories
6,760
4,235
Property, plant and equipment, net
724
1,024
Assets held for sale
20,321
-
Total assets
53,252
30,143
Total liabilities
70,538
41,295
Total shareholders' deficit
(17,286
)
(11,152
)
B.
Capitalization and Indebtedness
Not
applicable.
C.
Reasons for the Offer
    and Use of Proceeds
Not
applicable.
2
D.
Risk Factors
Summary
Risk Factors
The
principal factors and uncertainties that make investing in our ordinary shares risky, include, among others:
Risks
Related to the COVID-19 pandemic
●
We have experienced and
    expect to continue to experience unpredictable reductions in demand for certain of our products and services, and adverse effects
    on our operations, supply chains and financing possibilities
Risks
Related to our Business and Industry
●
We incurred losses and
    total cash outflows from operations, and we had a deteriorated net current assets position. There is substantial doubt about our
    ability to continue as a going concern.
●
Although our previously
    defaulted loans were completely paid off as of February 17, 2021, we may become in default with loans in the future and the following
    risks will reappear.
●
We have more current liabilities
    than current assets as of December 31, 2022.
●
If alternative mobile operating
    system platforms become more widely used or accepted, or mobile chipset manufacturers, mobile device Original Equipment Manufacturers
    ("OEMs" and each an "OEM") and mobile operators do not continue to make product and service offerings compatible
    with the Android platform, our business could be materially harmed.
●
We generate a significant
    portion of our net revenues from a small number of major customers and key projects and any loss of business from these customers
    or key projects could reduce our net revenues and significantly harm our business.
●
We have limited experience
    with our current product offerings, which makes it difficult to predict our future operating results.
●
We operate in multiple
    rapidly evolving industries. If we fail to keep up with technological developments and changing requirements of our customers, business,
    financial condition and results of operations may be materially and adversely affected.
●
We face intense competition
    from onshore and offshore third party software providers in the Android platform and software market, and, if we are unable to compete
    effectively, we may lose customers and our revenues may decline.
●
We may undertake acquisitions,
    investments, joint ventures or other alliances in the future, which could expose us to new operational, regulatory and market risks.
    Such future and past undertakings may not be successful, which may adversely affect our business, results of operations, financial
    condition and prospects.
●
We are dependent upon the
    Android platform and, if Google determines to no longer develop the Android platform and our further development is not taken up
    by reliable alternative sources, our business could be materially harmed.
3
●
If our customers move more
    research and development work in-house, lower demand for our solutions could reduce our net revenues and harm our business.
●
Our yearly results may
    fluctuate significantly and may not fully reflect the underlying performance of our business.
●
If we fail to effectively
    manage our technical operations infrastructure, our customers may experience service outages and delays in the further deployment
    of our services, which may adversely affect our business.
●
Most of our engagements
    with customers are for a specific project only and do not provide for subsequent engagements. If we are unable to generate a substantial
    number of new engagements for projects on a continuing basis, our business and results of operations will be adversely affected
●
Because of the characteristics
    of open source software, there may be fewer technology barriers to entry in the Android platform and software market in which we
    compete, and it may be relatively easy for competitors, some of which may have greater resources than we have, to enter our markets
    and compete with us.
●
Security and privacy breaches
    may expose us to liability and harm our reputation and business.
●
We are vulnerable to technology
    infrastructure failures, which could harm our reputation and business.
●
We may not be able to continue
    to use or adequately protect our intellectual property rights, which could harm our business reputation and competitive position.
●
The international nature
    of our business exposes it to risks that could adversely affect our financial condition and results of operations.
●
We may not be able to manage
    our anticipated growth and our current and planned resources may not be adequate to support our expanding operations; consequently,
    our business, results of operations and prospects may be materially and adversely affected.
●
Due to intense competition
    for highly skilled personnel, we may fail to attract and retain qualified personnel to support our research and development operations;
    as a result, our ability to bid for and obtain new projects may be adversely affected and our net revenues could decline.
●
As mandated by the Committee
    on Foreign Investment in the United States ("CFIUS"), we must terminate our ownership in Holu Hou Energy LLC.
●
Our success depends substantially
    on the continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose
    their services.
●
We are subject to various
    anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and PRC and Indian
    anti-corruption and anti-bribery laws; any determination that we have violated such laws could damage our business and reputation,
    limit our ability to bid for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation
    (such as shareholder derivative suits), and commercial liabilities.
●
There can be no assurance
    that our securities, including our ordinary shares, will continue to be listed on Nasdaq or, if listed, that we will be able to comply
    with the continued listing standards of Nasdaq, which could limit investors' ability to make transactions in our securities
    and subject us to additional trading restrictions.
4
●
Global economic and political
    conditions may adversely impact our business, operating results and financial condition.
●
We may, from time to time,
    be involved in future litigation in which substantial monetary damages are sought.
●
We are in arbitration with
    Shanghai Kadi Technologies Limited ("KADI") and its owners due to KADI's breach of contract according to the Share
    Purchase Agreement dated December 15, 2018 (the "KADI Agreement") signed between Borqs and KADI.
●
If we fail to implement
    and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations,
    meet our reporting obligations or prevent fraud, and investor confidence and the market price of our ordinary shares may be adversely
    impacted.
Risks
Related to Our Business Operations and Doing Business in China
●
The Chinese government
    exerts substantial influence over the manner in which we may conduct our business activities, and if we are unable to substantially
    comply with any PRC rules and regulations, our financial condition and results of operations may be materially adversely affected.
●
The recent PRC government
    intervention into business activities by U.S.-listed Chinese companies may indicate an expansion of the PRC's authority that
    could negatively impact our existing and future operations in Hong Kong and China.
●
Changes in China's
    economic, political or social conditions or government policies could have a material adverse effect on our business and results
    of operations.
●
Uncertainties and quick
    change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material
    and negative impact our business operation, decrease the value of our ordinary shares and limit the legal protections available to
    us.
●
Substantial uncertainties
    exist with respect to the interpretation and implementation of any new PRC laws, rules and regulations relating to foreign investment
    and how it may impact the viability of our current corporate structure, corporate governance and our business operations.
●
If the Chinese government
    were to impose new requirements for permission or approval from the PRC Authorities including China Securities Regulatory Commission
    ("CSRC") or CAC, or any other entity that is required to approve the listing of our shares on Nasdaq, to issue our ordinary
    shares to foreign investors or list on a foreign exchange, such action could significantly limit or completely hinder our ability
    to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
●
Risks related to a future
    determination that the Public Company Accounting Oversight Board (the "PCAOB") is unable to inspect or investigate our
    auditor completely.
●
There are significant legal
    and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with
    respect to foreign entities.
●
China's economic,
    political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse
    effect on our business.
●
Uncertainties with respect
    to the PRC legal system could harm us.
5
●
Recent trade policy initiatives
    announced by the United States administration against the PRC may adversely affect our business.
●
Our subsidiaries in China
    are subject to restrictions on making dividends and other payments to it or any other affiliated company.
●
The discontinuation of
    any of the preferential tax treatments currently available to our PRC subsidiaries could materially increase our tax liabilities.
●
We face uncertainty with
    respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
●
We may not be able to obtain
    certain treaty benefits on dividends paid by our PRC subsidiary to us through our Hong Kong Subsidiary.
●
Restrictions on foreign
    currency may limit our ability to receive and use our revenue effectively.
●
Fluctuations in the value
    of the RMB may have a material adverse effect on your investment.
●
PRC regulations relating
    to the establishment of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries
    to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability
    to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
●
Failure to comply with
    PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants
    or us to fines and other legal or administrative sanctions.
●
PRC regulations establish
    complex procedures for some acquisitions conducted by foreign investors, which could make it more difficult for us to pursue growth
    through acquisitions in China.
●
Substantial uncertainties
    exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may
    impact the viability of our current corporate structure, corporate governance and business operations.
●
The enforcement of the
    labor laws and other labor-related regulations in the PRC may adversely affect our results of operations.
●
Our failure to make adequate
    contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
●
If the custodians or authorized
    users of our controlling non-tangible assets, including corporate chops and seals, fail to fulfill their responsibilities or misappropriate
    or misuse those assets, our business and operations could be materially and adversely affected.
6
Risks
Related to Our Securities
●
If equity research analysts
    publish unfavorable commentary or downgrade our ordinary shares, the price and trading volume of our ordinary shares could decline.
●
Future equity issuances
    could result in dilution, which could cause our ordinary shares price to decline.
●
Future sales of our ordinary
    shares by existing shareholders may cause our ordinary shares price to decline.
●
Global economic uncertainty
    and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such
    as the conflict between Russia and Ukraine, could make it more difficult for us to access financing and could adversely affect our
    business and operations.
●
We may be classified as
    a passive foreign investment company, which could result in adverse U.S. federal income tax consequence to U.S. holders of our ordinary
    shares.
Investing
in our ordinary shares involves a high degree of risk. You should carefully consider the risks described below, as well as the other
information in this report, including our consolidated financial statements and the related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," before deciding whether to invest in our ordinary shares. The occurrence
of any of the events or developments described below could materially and adversely affect our business, financial condition, results
of operations and growth prospects. In such an event, the market price of our ordinary shares could decline, and you may lose all or
part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may
also impair our business, financial condition, results of operations and growth prospects.
Risks
due to the COVID-19 pandemic.
We
have experienced and expect to continue to experience unpredictable reductions in demand for certain of our products and services, and
adverse effects on our operations, supply chains and financing possibilities.
Since
February 2020, we have experienced reductions and cancellations of orders due to effects of the COVID-19 pandemic on the demand from
certain of our customers. COVID-19 has had an adverse effect on our business, financial condition and results of operations. Our revenue
for the year 2020 was negatively impacted by the pandemic by as much as a reduction of 73.0% as compared to 2019; and our ability to
obtain debt financing or raise equity-based capital may not be adequate for the Company's current operations. As the assessable
risks due to COVID-19 change in India and China, our operations can be affected, including due to the restrictions from accessing office
facilities and limitations on domestic travels which can hamper our ability to efficiently manage the manufacturing of products since
our contracted factories are located over various cities in China.
As
our sales were negatively impacted by the pandemic in 2020, we cut back our operational costs by reduction of approximately 20% of our
workforce in India and 40% of our headcount in China. We constantly evaluate our financial position according to changes in the international
business environment and depending on forecast of orders from our customers in the near future, we may further reduce staffing as necessary.
Even
though the COVID-19 pandemic has since abated, the extent to which COVID-19 may continue to negatively impact our business is highly
uncertain and cannot be accurately predicted. Although our revenues in 2022 improved to $52.5 million as compared to $26.8 million in
2020 and $29.6 million in 2021, the impact of the COVID-19 or any other possible pandemic in the future may cause our revenues in future
periods to decline.
7
Risks
Related to our Business and Industry
Summary
of Risks Associated with Our Business Due to Changing PRC Rules and Regulations
Our
business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely
affect our business, financial condition, results of operations, cash flows and prospects that you should consider before making a decision
to invest in our ordinary share and warrants, including risks and uncertainties, among others, the following:
●
The Chinese government
    exerts substantial influence over the manner in which we may conduct our business activities, and if we are unable to substantially
    comply with any PRC rules and regulations, our financial condition and results of operations may be materially adversely affected.
    See "
Risk Factors -- Risks Related to Our Business Operations and Doing Business in China"
for additional information
.
●
Changes in China's
    economic, political or social conditions or government policies could have a material adverse effect on our business and results
    of operations. See "
Risk Factors -- Risks Related to Our Business Operations and Doing Business in China"
for
    additional information
.
●
Uncertainties and quick
    change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material
    and negative impact on our business operation, decrease the value of our ordinary shares and warrants and limit the legal protections
    available to us. See "
Risk Factors -- Risks Related to Our Business Operations and Doing Business in China"
for
    additional information
.
●
Any change of regulations
    and rules by Chinese government may intervene or influence our operations at any time and any additional control over offerings conducted
    overseas and/or foreign investment in China- based issuers could result in a material change in our operations and/or the value of
    our ordinary shares and could significantly limit or completely hinder our ability to offer our ordinary shares to investors and
    cause the value of such securities to significantly decline or be worthless. See "
Risk Factors -- Risks Related to Our Business
    Operations and Doing Business in China" for additional information.
●
Our ordinary shares may
    be delisted or prohibited from being traded under the Holding Foreign Companies Accountable Act ("HFCAA") if the Public
    Company Accounting Oversight Board ("PCAOB") were unable to fully inspect our auditor. The delisting or the cessation
    of trading of our ordinary shares, or the threat of them being delisted or prohibited from being traded on a national securities
    exchange or in the over-the-counter market, may materially and adversely affect the value and/or liquidity of your investment. Additionally,
    if the PCAOB were unable to conduct full inspections of our auditor, it would deprive our investors of the benefits of such inspections.
    Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect
    or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC, and (2) Hong Kong.
    In addition, the PCAOB's report identified the specific registered public accounting firms which are subject to these determinations.
    Our auditor, Yu Certified Public Accountant PC, is headquartered in New York, New York, and has been inspected by the PCAOB on a
    regular basis. Our auditor is not headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject
    to the PCAOB's determination. Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor's
    work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our
    access to the U.S. capital markets and trading of our securities may be prohibited under the HFCA Act. See "
Risk Factors
    -- Risks Related to Our Business Operations and Doing Business in China
" for additional information.
8
●
Any failure to comply with
    PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants
    or us to fines and other legal or administrative sanctions. See "
Risk Factors -- Risks Related to Our Business Operations
    and Doing Business in China"
for additional information
.
●
If we are classified as
    a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and
    our non-PRC shareholders. See "
Risk Factors -- Risks Related to Our Business Operations and Doing Business in China"
for additional information
.
●
Regulatory bodies of the
    United States may be limited in their ability to conduct investigations or inspections of our operations in China. See "
Risk
    Factors -- Risks Related to Our Business Operations and Doing Business in China"
for additional information
.
●
Substantial uncertainties
    exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact
    the viability of our current corporate structure, corporate governance, business operations and financial results. See "
Risk
    Factors -- Risks Related to Our Business Operations and Doing Business in China"
for additional information
.
●
It will be difficult to
    acquire jurisdiction and enforce liabilities against our officers, directors and assets based in Hong Kong. See "
Risk Factors
    -- Risks Related to Our Business Operations and Doing Business in China"
for additional information.
●
The Hong Kong legal system
    embodies uncertainties which could negatively affect our listing on Nasdaq and limit the legal protections available to you and us.
    See "
Risk Factors -- Risks Related to Our Business Operations and Doing Business in China"
for additional information
.
●
Since 2020 and continuing
    into 2023, the Chinese government has been implementing increasingly stringent rules and regulations on its domestic business activities,
    particularly for companies whose shares are listed on U.S. exchanges. Such policy changes have caused profound impact on the value
    of the affected companies' equities and resulted in significant drop in market valuation for their shareholders. The recent
    regulatory changes in China have focused on the following industries:
1)
Cryptocurrency mining and coin offerings
2)
Social media and cyber security
3)
Online gaming
4)
Ride-hailing
5)
Extra-curriculum education and tutoring
6)
Variable interest entity structures
The
Company does not participate in any of the above six categories, and particularly our division that operated a MVNO business under a
variable interest entity structure in China was sold as of October 29, 2020. Also, as indicated in this 2022 Annual Report filed on Form
20-F, our revenues recognized from activities in China represent 30.1%, 21.8% and 1.6% of our total net revenues for the years 2022,
2021 and 2020, respectively. However, as the rules and regulations in China continue to evolve, the Company may become affected in future
periods causing the public market valuation of our shares to decline.
9
●
We are incorporated under
    the laws of the British Virgin Islands. Our principal executive offices are located in Hong Kong. We are a global leader in software,
    development services and products providing customizable, differentiated and scalable Android-based smart connected devices and cloud
    service solutions. We are also a leading provider of commercial grade Android platform software for mobile chipset manufacturers,
    mobile device OEMs and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer
    applications We are not a Critical Information Infrastructure Operator ("CIIO") or a Data Processing Operator ("DPO")
    as defined in Cybersecurity Review Measures (Revised Draft for Public Comments) published by Cyberspace Administration of China or
    the CAC on July 10, 2021. The subsidiary Beijing Big Cloud Century Technology Ltd ("BC-Tech") used to operate a mobile
    virtual network operator ("MVNO") business in China with a VIE structure. The VIE entity was a holding company known
    as Beijing Big Cloud Network Technology Co. Ltd ("BC-NW") which owned the operating company known as Yuantel (Beijing)
    Telecommunications Technology Co., Ltd ("Yuantel"). Yuantel was sold as of October 29, 2020. BC-NW was re-organized with
    the VIE structure dismantled and became directly owned by BC-Tech, and therefore BC-NW remains on the Company's organization
    chart. Therefore, we are not covered by the permission and requirements from the China Securities Regulatory Commission ("CSRC"),
    CAC or any other entity that is required to approve of the VIE's operations, and we have received all requisite permissions
    to operate our business in China and no permission has been denied.
●
We do not believe we are
    required to obtain any permission from any PRC governmental authorities to offer securities to foreign investors. We have been closely
    monitoring regulatory developments in China regarding any necessary approvals from the CSRC and other PRC governmental authorities
    required for overseas listings, on the U.S. exchanges or on a foreign exchange other than the U.S., including the listing of our
    shares on Nasdaq. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory
    objection to our listing on Nasdaq from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty
    as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other
    capital markets activities. If we inadvertently conclude that the approvals of the CSRC, or any other regulatory authority are not
    required for our listing on Nasdaq, or applicable laws, regulations, or interpretations change and we are required to obtain approvals
    in the future, obtaining such approvals could significantly limit or completely hinder our ability to offer or continue to offer
    securities to investors and cause the value of our securities, including the ordinary shares, to significantly decline or be worthless.
    Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading
    price of our securities. In addition, these regulatory agencies may impose fines and penalties on our operations in China, limit
    our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds
    from any overseas securities offering into China or take other actions that could have a material adverse effect on our business,
    financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, or other PRC
    regulatory agencies also may take actions requiring us, or making it advisable for us, to halt any of our securities offerings before
    settlement and delivery of our ordinary shares. Consequently, if you engage in market trading or other activities in anticipation
    of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur.
See "Risk Factors
    –Risks Related to Our Business Operations and Doing Business in China".
We
incurred losses and total cash outflows from operations, and we had a deteriorated net current assets position. There is substantial
doubt about our ability to continue as a going concern.
As of December 31, 2022, we
had cash and cash equivalents of approximately $11.3 million and generated a net loss from continuing operations of approximately $29.0
million and cash inflows of approximately $3.4 million for the year then ended. We cannot anticipate when, if ever, we will become profitable.
Although we have improved the efficiency of our networks and operations and adopted related cost reduction measures, we cannot assure
you that we will continue to achieve such efficiency or sustain such cost reductions. If we are unable to generate revenues that significantly
exceed our costs and expenses, we will continue to incur losses in the future.
10
Our
ability to continue as a going concern is dependent upon our continued operations, which in turn is dependent upon our ability to meet
our financial requirements. Our ability to meet the working capital requirements is subject to the risks relating to the demand for and
prices of our services in the market, the economic conditions in our target markets, the successful operation of our connected solution,
timely collection of payment from our customers and the availability of additional funding. In the next 12 months, we will use the cash
inflows including short-term supply chain financing, advances from customers and financing possibilities from financial institutions.
However, there is no guarantee such financing mechanism will be available at terms acceptable to us.
The
audited consolidated financial statements included in this annual report on Form 20-F were prepared on the basis of our continuing
as a going concern. Facts and circumstances including recurring losses, net cash outflows and deteriorated net current assets position
raise substantial doubt about our ability to continue as a going concern. If we become unable to continue as a going concern, we may
have to liquidate our assets, and the value we receive for our assets in liquidation or dissolution could be significantly
lower than the values reflected in our audited consolidated financial statements. Our lack of cash resources and our potential inability
to continue as a going concern may materially and adversely affect the price of our shares and our ability to raise new capital or to
continue our operations.
Although
our previously defaulted loans were completely paid off as of February 17, 2021, we may become in default with loans in the future and
the following risks will reappear.
Covenants
governing our loan facilities restrict, among other things, our ability to:
●
pay dividends or distributions,
    repurchase or redeem equity;
●
incur or permit to exist
    any additional indebtedness or liens;
●
guarantee or otherwise
    become liable with respect to the obligations of another party or entity;
●
acquire any assets, except
    in the ordinary course of business, or make any investments; and
●
sell all or substantially
    all of our assets.
Our
ability to comply with these provisions may be affected by events beyond our control. Any defaults under our future loan agreements could
adversely affect our growth, our financial condition, our results of operations and our ability to make payments on our debt. The ability
to make payments of principal and interest on indebtedness will depend on our financial condition, which is subject to general economic
conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control.
If sufficient cash flow is not generated from operations to service such debt, we may be required, among other things, to:
●
seek additional financing
    in the debt or equity markets;
●
delay, curtail or abandon
    altogether our research & development or investment plans;
●
refinance or restructure
    all or a portion of our indebtedness; or
●
sell selected assets.
Such
measures might be insufficient to service the indebtedness. In addition, any such financing, refinancing or sale of assets may not be
available on commercially reasonable terms, or at all. If funds are not available when needed, or available on acceptable terms, we may
be required to delay, scale back or eliminate some of our obligations, including reduction of operations and deliveries of products to
our customers. In addition, we may not be able to grow market share, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, which could negatively impact our business, operating results and financial condition.
The
Company entered into agreements on December 14, 2020 with PFG and LMFA Financing LLC ("LMFA"), a Florida limited liability
company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA will purchase approximately $18 million
of debt in tranches. As of February 10, 2021, LMFA completed the purchase of $17.87 million of principal, accrued interest and applicable
fees (the "Debt"), converted into and sold all 22.73 million shares of the Company's ordinary shares by February 10,
2021. With the Company settling another $1.27 million of Debt directly with the senior lender by the issuance of 1.51 million shares
on February 17, 2021 which the senior lender subsequently sold, the Company's defaulted Debts with the senior lender totaling $19.14
million have been eliminated since then.
11
We
have more current liabilities than current assets as of December 31, 2022.
On our balance sheet as of
December 31, 2022, there were current assets of $28.0 million and current liabilities of $37.9 million. Although profit margin improvements
coupled with better financing facilities in future periods may reverse this situation, there is no assurance of how long this situation
may remain or if we can ever achieve healthier liquidity ratios. If this situation persists for too long, it will hamper the Company's
ability to operate effectively and will likely create pressure on the market price of our ordinary shares.
If
alternative mobile operating system platforms become more widely used or accepted, or mobile chipset manufacturers, mobile device Original
Equipment Manufacturers ("OEMs" and each an "OEM") and mobile operators do not continue to make product and service
offerings compatible with the Android platform, our business could be materially harmed.
The
mobile operating system platform industry is intensely competitive and characterized by rapid technological changes, which often result
in shifts in market share among the industry's participants as one operating system may become more widely used than others. For
example, in the past the Symbian mobile operating system platform, or Symbian, from Nokia Corporation, or Nokia, dominated market share
for consumer products and the BlackBerry mobile operating system platform, or BlackBerry, from Research in Motion Limited, or RIM, dominated
market share for enterprise products. In the past five years, with the rise of the iOS mobile operating system platform, or iOS, from
Apple Inc., or Apple, and the Android platform, both the Symbian and Blackberry platforms have experienced a substantial decline. There
can be no assurance that the Android platform will continue to compete effectively with alternative mobile operating system platforms,
such as the iOS platform or Windows Mobile operating system platform, or Windows Mobile, from Microsoft Corporation. If these or other
mobile operating system platforms become more widely used or accepted, such as operating system platforms being developed by Baidu, Inc.,
or Baidu, and Alibaba.com Ltd., or Alibaba, in China, the market appeal of the Android platform and our Android+ software and service
platform solutions could be diminished, which could materially adversely affect our business and financial performance.
Furthermore,
the competitiveness of our Android+ software and service platform solutions is dependent upon the continued compatibility of the Android
platform with the offerings of our customers. If these customers choose not to continue to adopt the Android platform or they are unable
to retain or increase their market share, the demand for our Android+ software and service platform solutions may be diminished, which
could materially adversely affect our business and financial performance.
We
generate a significant portion of our net revenues from a small number of major customers and key projects and any loss of business from
these customers or key projects could reduce our net revenues and significantly harm our business.
We have derived and believe
that in the foreseeable future we will continue to derive, a significant portion of our net revenues from a small number of major customers
and key projects. Our top five customers accounted for 88.2%, 87.8% and 86.4% of our net revenues in 2020, 2021 and 2022, respectively.
Our
ability to maintain close relationships with our major customers is essential to the growth and profitability of our business. However,
the volume of work performed for a specific customer is likely to vary from year-to-year and project-to-project, especially since we
are generally not the exclusive Android platform software and service solutions provider for our customers, some of our customers have
in-house research and development capabilities and we do not have long-term purchase commitments from any of our customers. A major customer
in one year may not provide the same level of net revenues for us in any subsequent year. The products we provide to our customers, and
the net revenues and income from those products may decline or vary as the type and quantity of products changes over time. In addition,
reliance on any individual customer for a significant portion of our net revenues may give that customer a degree of pricing leverage
when negotiating contracts and terms of service with us. In addition, a number of factors not within our control could cause the loss
of, or reduction in, business or revenues from any customer, and these factors are not predictable. These factors include, among others,
a customer's decision to re-negotiate the royalty payment of a contract if the volume of unit sales exceeds original expectations,
pricing pressure from competitors, a change in a customer's business strategy, or failure of a mobile chipset manufacturer or mobile
device OEM to develop competitive products. Our customers may also choose to pursue alternative technologies and develop alternative
products in addition to, or in lieu of, our products, either on their own or in collaboration with others, including our competitors.
The loss of any major customer or key project, or a significant decrease in the volume of customer demand or the price, at which we sell
our products to customers, could materially adversely affect our financial condition and results of operations.
We
have limited experience with our current product offerings, which makes it difficult to predict our future operating results.
From
our inception in 2007 through 2014, we focused primarily on providing our Android+ software platform solutions to mobile chipset manufacturers,
mobile device OEMs and mobile operators as well as complete product solutions of mobile connected devices for enterprise and consumer
applications. In 2014, after acquiring Yuantel, we entered into the MVNO business. However, the success of these businesses depends on
many factors, including timely and successful research and development, pricing, market and consumer acceptance of such new products
and the product offerings of our competitors. If new product offerings are not successful, our revenue growth will suffer and our results
of operations may be harmed. In November 2018, our board of directors approved the sale of the MVNO business unit, and we entered into
agreements with buyers in February 2019 to sell all of the Consolidated VIEs that hold the MVNO operation. Due to an investigation into
several individuals employed by the MVNO business unit as described in "Item 4. Information on the Company" below, only partial
sales proceeds were received in 2019. The Company executed a new agreement with the buyers of the MVNO business unit as of September
1, 2020 and the balance of the sales proceeds was received by October 29, 2020 and the sale was deemed completed on the same date.
12
We
operate in multiple rapidly evolving industries. If we fail to keep up with technological developments and changing requirements of our
customers, business, financial condition and results of operations may be materially and adversely affected.
The
mobile industry is rapidly evolving and subject to continuous technological developments. Our success depends on our ability to keep
up with these technological developments and the resulting changes in customers' demands. There may also be changes in the industry
landscape as different types of platforms compete with one another for market share. If we do not adapt our Android+ software and service
platform solutions to such changes in an effective and timely manner as more mobile operating system platforms become available in the
future, we may suffer a loss in market share. Given that we operate in a rapidly evolving industry, we also need to continuously invest
significant resources in research and development in order to enhance our existing products and to respond to changes in customer preference,
new challenges and industry changes in a timely and effective manner. If we fail to keep up with technological developments and continue
to innovate to meet the needs of our customers, our Android+ software and service platform solutions may become less attractive to customers,
which in turn may adversely affect our reputation, competitiveness, results of operations and prospects.
We
face intense competition from onshore and offshore third party software providers in the Android platform and software market, and, if
we are unable to compete effectively, we may lose customers and our revenues may decline.
The
Android platform and software market is highly fragmented and competitive, and we expect competition to persist and intensify from both
existing competitors and new market entrants. We believe that the principal competitive factors in our industry are reliability and efficiency,
performance, product features and functionality, development complexity and time-to-market, price, support for multiple architectures
and processors, interoperability with other systems, support for emerging industry and customer standards and protocols and levels of
training, technical services and customer support.
Our
business model is to provide a full suite of Android+ software and service platform solutions to a broad range of customers, including
mobile chipset manufacturers, mobile device OEMs and mobile operators. As of the date of this report, we are not aware of any significant
independent competitor that provides a full range of Android platform software and service solutions as we do to the range of customers
it has, although we have a number of competitors that provide one or several Android platform software and/or service solutions to one
or more of our range of customers. See "Business — Competition."
In
addition, we face competition from companies seeking to compete with the Android platform by developing their own operating systems,
such as Baidu and Alibaba in China, and major mobile device OEMs, such as Foxconn Technology Group and BYD Electronic (International)
Company Limited, which are able to develop low-level software for mobile chipsets, as well as Huawei, GTE and Xiaomi.
We
believe that we presently compete favorably with respect to each segment identified above. However, the market for Android platform software
and service solutions is still rapidly evolving, and we may not be able to compete successfully against current and potential competitors
in the future. In addition, some of our independent competitors are more focused on one or several particular segments of the value chain
and may deliver better services in those segments than we do. Furthermore, some of our competitors may have significantly greater financial,
technical, marketing, sales and other resources and significantly greater name recognition than we have. If we are unable to compete
successfully on the principal competitive factors described above or otherwise, our business could be harmed.
We
may undertake acquisitions, investments, joint ventures or other strategic alliances in the future, which could expose us to new operational,
regulatory and market risks. In addition, such future and past undertakings may not be successful, which may adversely affect our business,
results of operations, financial condition and prospects.
We
intend to grow both organically by expanding our current business lines and geographic coverage and through acquisitions, investments,
joint ventures or other strategic alliances if the appropriate opportunities arise. These potential business plans, acquisitions, investments,
joint ventures and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with
additional capital requirements. In addition, we may not be able to identify suitable future acquisition or investment candidates or
joint venture or alliance partners. Even if we identify suitable candidates or partners, we may be unable to complete an acquisition,
investment or alliance on terms commercially acceptable to us.
In
addition, our ability to successfully integrate acquired companies and their operations may be adversely affected by a number of factors,
including, among others, the ability to capitalize on anticipated synergies, diversion of resources and management's attention,
difficulties in retaining personnel of the acquired companies, unanticipated problems or legal liabilities and tax and accounting issues.
If we fail to integrate any acquired company efficiently, our earnings, revenues, gross margins, operating margins and business operations
could be adversely affected. The integration of acquired companies is a complex, time-consuming and expensive process.
13
We
are dependent upon the Android platform and, if Google determines to no longer develop the Android platform and our further development
is not taken up by reliable alternative sources, our business could be materially harmed.
Our
business model is dependent upon the Android platform, which is a free and fully open source mobile software platform developed by Google.
The Android platform has been updated frequently since our original release and the development of the Android platform is an ongoing
process which we do not control. If Google determines to no longer develop the Android platform or our further development is not taken
up by reliable alternative sources, such as another third party or the open source community, demand for our Android+ software and service
platform solutions could decline significantly and our revenue and financial condition could be materially harmed.
If
our customers move more research and development work in-house, lower demand for our solutions could reduce our net revenues and harm
our business.
Collaboration
with customers is essential to the growth and profitability of our business. However, our customers may elect to move more research and
development work in-house, and reduce collaboration with us for Android platform projects. There are many factors beyond our control
that could cause our customers to move their work in-house, such as spending reductions due to a challenging economic environment, corporate
restructuring, cost control, pricing pressure and concerns regarding the protection of technology know-how, trade secrets and other intellectual
property rights. If our customers decide to change their strategy by moving more research and development work in-house, our net revenues
may decline, and our business, financial condition and results of operations may be adversely affected.
Our
yearly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our
yearly operating results, including the levels of our revenue, gross margin, profitability, cash flow and deferred revenue, may vary
significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results
of any one year should not be relied upon as an indication of future performance. Our yearly financial results may fluctuate as a result
of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance
of our business. Fluctuations in yearly results may negatively impact the value of our ordinary shares. Factors that may cause fluctuations
in our yearly financial results include, but are not limited to:
●
our ability to attract
    new customers;
●
our ability to convert
    users of our limited free versions to paying customers;
●
the addition or loss of
    large customers, including through acquisitions or consolidations;
●
our customer retention
    rate;
●
the timing of recognition
    of revenue;
●
the amount and timing of
    operating expenses related to the maintenance and expansion of our business, operations and infrastructure;
●
network outages or security
    breaches;
●
general economic, industry
    and market conditions;
●
increases or decreases
    in the number of features in our services or pricing changes upon any renewals of customer agreements;
14
●
changes in our pricing policies or those of our competitors;
●
the timing and success of new services and service introductions by us and our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners; and
●
the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
If we fail to effectively manage our technical
operations infrastructure, our customers may experience service outages and delays in the further deployment of our services, which may
adversely affect our business.
We have experienced significant
growth in the number of users and the amount of data that our operations infrastructure supports. We seek to maintain sufficient excess
capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate
the rapid provisioning of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly
manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and
the evolution of our services. However, the provision of new hosting infrastructure requires significant lead-time. We have experienced,
and may in the future experience, website disruptions, outages and other performance problems. These problems may be caused by a variety
of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and
denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an
acceptable period of time, which may harm our reputation and operating results. Furthermore, if we do not accurately predict our infrastructure
requirements, our existing customers may experience service outages that may subject us to financial penalties, financial liabilities
and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek
to obtain additional capacity, which could adversely affect our reputation and our revenue.
Most of our engagements with customers are
for a specific project only and do not provide for subsequent engagements. If we are unable to generate a substantial number of new engagements
for projects on a continuing basis, our business and results of operations will be adversely affected.
Our customers generally retain
us on a project-by-project basis in connection with specific projects rather than on a recurring basis under long-term contracts. Historically,
a significant portion of our net revenues has been comprised of software fees, relating to one-time research and engineering work performed
for customers. For 2020, 2021 and 2022, our net revenues from software fees were $10.6 million, $10.7 million and $13.1 million, respectively,
representing 39.5%, 36.3% and 24.9% of total net revenues, respectively. Although a significant amount of our net revenues are generated
from repeat business, which we define as revenues from a customer who also contributed to our revenues during the prior fiscal year, our
engagements with our customers are typically for individual projects that are often on a non-exclusive, project-by-project basis. In addition,
a majority of our customer contracts from which we generate product fees can be terminated by customers with or without cause. There are
many factors outside of our control that might lead customers to terminate a contract or project with us, including, among others:
●
financial difficulties for our customers;
●
business going to our competitors or remaining in-house;
●
unsuccessful launch of a product;
●
disclosure of core technology by a third party; and
●
mergers and acquisitions or significant corporate restructurings by our customers.
15
Furthermore, some of our customer
contracts specify that if a change of control occurs during the term of the contract, the customer has the right to terminate the contract
upon advance notice. If our customers terminate our contracts before completion or choose not to renew their contracts, our business,
financial condition and results of operations may be materially and adversely affected.
Therefore, we have to continuously
seek new engagements while our current engagements are being performed or are completed or terminated, and we are constantly seeking to
expand our business with existing customers and secure new customers. If we are unable to generate a substantial number of new engagements
on a continuing basis, our business and results of operations will be adversely affected.
Because of the characteristics of open source
software, there may be fewer technology barriers to entry in the Android platform and software market in which we compete, and it may
be relatively easy for competitors, some of which may have greater resources than we have, to enter our markets and compete with us.
One of the characteristics
of open source software is that anyone can modify and redistribute the existing open source software and use it to compete against us.
Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies. It is
possible for new competitors with greater resources than us to develop their own Android platform software and service solutions, potentially
reducing the demand for, and putting pricing pressure on, our Android+ software and service platform solutions. In addition, some competitors
make their open source software available for free download and use on an
ad hoc
basis, or may position their open source software
as a loss leader in order to win customers. There can be no assurance that we will be able to compete successfully against current and
future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced
operating margins and loss of market share, any of which could seriously harm our business.
Security and privacy breaches may expose
us to liability and harm our reputation and business.
As part of our business we
receive and process information about our employees, customers and partners, and we may store (or contract with third parties to store)
our customers' data. There are numerous laws governing privacy and the storage, sharing, use, disclosure and protection of personally
identifiable information and user data. Specifically, personally identifiable and other confidential information is increasingly subject
to legislation and regulations in numerous domestic and international jurisdictions. The regulatory framework for privacy protection in
China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. We could be adversely affected
if legislation or regulations in China and elsewhere on the world where we have business operations are expanded to require changes in
business practices or privacy policies, or if the relevant governmental authorities in China and elsewhere on the world where we have
business operations interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition
and results of operations. For example, in November 2016, China released the Cybersecurity Law, which took effect in June 2017. The Cybersecurity
Law requires network operators to perform certain functions related to cybersecurity protection and the strengthening of network information
management. For instance, under the Cybersecurity Law, network operators of key information infrastructure, including network operators
of key information infrastructures in public communications and information industry, generally shall, during their operations in the
PRC, store the personal information and important data collected and produced within the territory of the PRC and their purchase of network
products and services that may affect national securities shall be subject to national cybersecurity review. While we take security measures
relating to our Android+ software and service platform solutions, specifically, and our operations (including MVNO business unit), generally,
those measures may not prevent security breaches that could harm our business and we cannot assure you that the measures we have taken
or will take are adequate under the Cybersecurity Law and other relevant laws and regulations. Advances in computer capabilities, inadequate
technology or facility security measures or other factors may result in a compromise or breach of our systems and the data we store and
process. Our security measures may be breached as a result of actions by third parties or employee error or malfeasance. A party who is
able to circumvent our security measures or exploit inadequacies in our security measures, could, among other things, misappropriate proprietary
information (including information about our employees, customers and partners and our customers' information), cause the loss or
disclosure of some or all of this information, cause interruptions in our operations or our customers' or expose our customers to
computer viruses or other disruptions or vulnerabilities.
16
Any compromise of our systems
or the data it stores or processes could result in a loss of confidence in the security of our Android+ software and service platform
solutions, damage our reputation, disrupt our business, lead to legal liability and adversely affect our financial condition and results
of operations. Moreover, a compromise of our systems could remain undetected for an extended period of time, exacerbating the impact of
that compromise. Actual or perceived vulnerabilities may lead to claims against us by our customers, partners or other third parties,
which could be material. While our customer agreements typically contain provisions that seek to limit our liability, there is no assurance
these provisions will be enforceable and effective under applicable law. In addition, the cost and operational consequences of implementing
further data protection measures could be significant.
We are vulnerable to technology infrastructure
failures, which could harm our reputation and business.
We rely on our technology
infrastructure for many functions, including selling our Android+ software and service platform solutions, supporting our customers and
billing, collecting and making payments. We also rely on our own technology infrastructure, which is located on a third-party site, as
well as the technology infrastructure of third parties, to provide some of our back-end services. This technology infrastructure may be
vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer intrusions
and viruses, software errors, computer denial-of-service attacks and other events. A significant number of the systems making up this
infrastructure are not redundant, and our disaster recovery planning is not sufficient for every eventuality. This technology infrastructure
is also subject to break-ins, sabotage and intentional acts of vandalism by internal employees, contractors and third parties. Despite
any precautions we or our third-party partners may take, such problems could result in, among other consequences, interruptions in our
services and loss of data, which could harm our reputation, business and financial condition. We do not carry business interruption insurance
sufficient to protect us from all losses that may result from interruptions in our services as a result of technology infrastructure failures
or to cover all contingencies. Any interruption in the availability of our websites and on-line interactions with customers and partners
would create a large volume of questions and complaints that would need to be addressed by our support personnel. If our support personnel
cannot meet this demand, customer and partner satisfaction levels may fall, which in turn could cause additional claims, reduced revenue,
reputation damage or loss of customers.
We may not be able to continue to use or
adequately protect our intellectual property rights, which could harm our business reputation and competitive position.
Although Android is an open
source mobile software platform for mobile devices, we are not required to share the source code for our Android software, which we have
invested significant resources to develop. Accordingly, we believe that patents, trademarks, trade secrets, copyright, software registration
and other intellectual property we use are important to our business. We rely on a combination of patent, trademark, copyright, software
registration and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual
provisions to protect our intellectual property and brand name. Any failure by us to maintain or protect our intellectual property rights,
including any unauthorized use of our intellectual property by third parties or use of "Borqs" as a company name to conduct
software or services business, may adversely affect our current and future revenues and our reputation.
In addition, the validity,
enforceability and scope of protection available under intellectual property laws with respect to the mobile and Internet industries in
China, where a significant part of our business and operations are located, are uncertain and still evolving. Implementation and enforcement
of PRC intellectual property-related laws have historically been deficient, ineffective and hampered by corruption and local protectionism.
Accordingly, protection of intellectual property rights in China may not be as effective as in the United States or other countries. Furthermore,
policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or
defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such
litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and
management attention, which could harm our business and competitive position.
17
We also may be required to
enter into license agreements with certain third parties to use their intellectual property for our business operations. If such third
parties fail to perform under these license agreements or if the agreements are terminated for any reason, our business and results of
operations may be negatively impacted. Furthermore, if we are deemed to be using third parties' intellectual property without due
authorization, we may become subject to legal proceedings or sanctions, which may be time-consuming and costly to defend, divert management
attention and resources or require us to enter into licensing agreements, which may not be available on commercial terms, or at all.
The international nature of our business
exposes it to risks that could adversely affect our financial condition and results of operations.
We conduct our business throughout
the world in multiple locations. Our corporate structure also spans multiple jurisdictions, with our parent holding company incorporated
in the British Virgin Islands and intermediate and operating subsidiaries incorporated in China, Hong Kong, India and Brazil, with branch
offices in Japan and South Korea. In addition, one of our growth strategies is to further expand our business in Europe and into the United
States. As a result, we are exposed to risks typically associated with conducting business internationally, many of which are beyond our
control. These risks include, among others:
●
significant currency fluctuations between the Renminbi and the U.S. dollar and other currencies in which we transact business;
●
difficulty in identifying appropriate mobile chipset manufacturers, mobile device OEMs, mobile operators and/or joint venture partners, and establishing and maintaining good relationships with them;
●
legal uncertainty owing to the overlap and inconsistencies of different legal regimes, problems in asserting contractual or other rights across international borders and the burden and expense of complying with the laws and regulations of various jurisdictions;
●
potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which we operate;
●
adverse effect of inflation and increase in labor costs;
●
current and future tariffs and other trade barriers, including restrictions on technology and data transfers;
●
general global economic downturn;
●
for 2022, our revenues were 19.8% concentrated with one customer in United States, and the financial status of this customer together with the state of the U.S. economy can greatly affect our business;
●
unexpected changes in political environment and regulatory requirements; and
●
terrorist attacks and other acts of violence or war.
The occurrence of any of
these events could have a material adverse effect on our results of operations and financial condition.
18
Furthermore, we are in the
process of implementing policies and procedures designed to facilitate compliance with laws and regulations in various jurisdictions applicable
to us, but there can be no assurance that our employees, contractors or agents will not violate such laws and regulations or our policies.
Any such violations could, individually or in the aggregate, materially and adversely affect our financial condition and operating results.
We may not be able to manage our anticipated
growth and our current and planned resources may not be adequate to support our expanding operations; consequently, our business, results
of operations and prospects may be materially and adversely affected.
We have experienced rapid
growth since we commenced operations. Our rapid expansion may expose us to new challenges and risks. To manage the further expansion of
our business and the growth of our operations and personnel, we need to continuously expand and enhance our infrastructure and technology,
and improve our operational and financial systems and procedures and controls, and enlarge our financing resources. For example, we currently
manage all of our human resources functions manually and expect that we will need to upgrade our current system as we continue to increase
our headcount. We also need to expand, train and manage our growing employee base. In addition, our management will be required to obtain,
maintain or expand relationships with mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as other third-party
business partners. We cannot assure you that our current and planned personnel, infrastructure, systems, procedures and controls will
be adequate to support our expanding operations. If we fail to manage our expansion effectively, our business, results of operations and
prospects may be materially and adversely affected.
Due to intense competition for highly skilled
personnel, we may fail to attract and retain qualified personnel to support our research and development operations; as a result, our
ability to bid for and obtain new projects may be adversely affected and our net revenues could decline.
The mobile industry relies
on the talents and efforts of highly skilled personnel, and our success depends to a significant extent on our ability to recruit, train,
develop, retain and motivate qualified personnel for all areas of our organization. Competition in our industry for qualified employees,
especially technical employees, is intense, and our competitors directly target our employees from time to time. We have also experienced
employees leaving us to start competing businesses or to join the in-house research and development teams of our customers. The loss of
the technical knowledge and industry expertise of any of these individuals could seriously impede our success. Moreover, the loss of these
individuals, particularly to a competitor, some of which are in a position to offer greater compensation, and any resulting loss of customers
or trade secrets and technological expertise could further lead to a reduction in our market share and adversely affect our business.
If we are required to increase the compensation payable to our qualified employees to compete with certain competitors with greater resources
than we have or to discourage employees from leaving us to start competing businesses, our operating expenses will increase which, in
turn, will adversely affect our results or operations.
19
As mandated by the Committee on Foreign
Investment in the United States ("CFIUS"), we must terminate our ownership in Holu Hou Energy LLC.
On December 13, 2022, Borqs
Technologies received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
(CFIUS) stating that the Company is required to fully divest its ownership interests and rights in HHE due to HHE's solar energy
storage system and EnergyShare technology for Multi-Dwelling Residential Units being deemed a potential national security risk.
On December 31, 2022, the
Company resolved that in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Company
must adhere to, including: (i) Entering into a National Security Agreement with various departments of the US government with a plan that
is effective, monitorable and verifiable to divest Borqs' investment interests and rights in HHE; (ii) Selection of a trustee and
entering into a Divestment Trust Agreement, and assigning the Company's interest in HHE to the trustee; and, (iii) Selection of
a nationally recognized investment bank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of
December 31, 2022, terminate its control of HHE by (i) removal of all of the Group's representatives from HHE's Board of Directors,
(ii) relinquishment of Class A Membership Unit voting rights, and (iii) reduction of the Group's ownership of HHE from 51% down
to 49% by assigning 2% of the ownership back to HHE. By taking above actions, the Company no longer has a controlling interest in HHE
and result in deconsolidation of HHE as of December 31, 2022.
On March 16, 2023, the Company
and HHE entered into a National Security Agreement ("NSA") with the Department of Defense and Department of Treasury. The
NSA provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill
provisions which provide that the Company shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any
changes to the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession
of any assets of HHE. Further, upon the completion of the Divestment, the Company shall terminate or irrevocably waive any information,
consent, board appointment, board observer, or other governance rights held by the Company, except for any and all rights that are determined
by the U.S. Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the
Divestment: engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes;
assigning and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs'
administrative and technical influence over HHE; and creating a plan to divest all of Borqs' investment interests and rights in
HHE. Pursuant to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment
Trust Agreement ("DTA") dated March 20, 2023 entered into between Borqs, HHE and a trustee.
In May 2023, the Company engaged
Cantor Fitzgerald & Co. ("Cantor Fitzgerald") as its exclusive financial advisor with respect to the divestment of the
Company's ownership in HHE. In the event that a transaction is not consummated within the timeframe mandated by CFIUS, the Company's
ownership in HHE will continue to remain in the trust.
Our success depends substantially on the
continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose their services.
Our future success heavily
depends upon the continued services of our senior executives and other key employees. In particular, we rely on the expertise, experience,
customer relationships and reputation of Pat Chan, our founder, chairman and chief executive officer. We currently do not maintain key
man life insurance for any of the senior members of our management team or other key employees. If one or more of our senior executives
or key employees are unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may
not be able to replace them easily or at all. In addition, competition for senior executives and key employees in our industry is intense,
and we may be unable to retain our senior executives and key employees or attract and retain new senior executive and key employees in
the future, in which case our business may be severely disrupted, and our financial condition and results of operations may be materially
and adversely affected.
20
If any of our senior executives
or key employees joins a competitor or forms a competing company, it may lose customers, know-how and other key employees and staff members
to them. Also, if any of our business development managers, who generally keep a close relationship with our customers, joins a competitor
or forms a competing company, we may lose customers, and our net revenues may be materially and adversely affected. Additionally, there
could be unauthorized disclosure or use of our technical knowledge, practices or procedures by such employees. All of our executives and
key employees have entered into employment agreements with us that contain non-competition provisions, non-solicitation and nondisclosure
covenants. However, if any dispute arises between our executive officers or key employees and us, such non-competition, non-solicitation
and nondisclosure provisions might not provide effective protection to us, especially in China, where most of these executive officers
and key employees reside, in light of the uncertainties with China's legal system. See "Risk Factors — Risks Related
to Doing Business in China — Uncertainties with respect to the PRC legal system could harm us."
We are subject to various anti-corruption
and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and PRC and Indian anti-corruption and
anti-bribery laws; any determination that we have violated such laws could damage our business and reputation, limit our ability to bid
for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation (such as shareholder
derivative suits), and commercial liabilities.
We are subject to anti-corruption
and anti-bribery laws in the United States, United Kingdom, China, and India that prohibit certain improper payments made directly or
indirectly to government departments, agencies, and instrumentalities; officials of those government departments, agencies, and instrumentalities;
political parties and their officials; candidates for political office; officials of public international organizations; persons acting
on behalf of the foregoing; and commercial counterparties. These laws include the U.S. Foreign Corrupt Practices Act, the U.K. Bribery
Act 2010, the PRC Criminal Law, the PRC Anti-Unfair Competition Law, the Indian Prevention of Corruption Act 1988, the Indian Penal Code
and anti-corruption laws in various Indian states.
We are engaged in business
in a number of countries that are regarded as posing significant risks of corruption. Of particular note, we conduct operations, have
agreements with state-controlled enterprises and other third parties and make sales in the PRC, and we have research and development activities
in India, each of which may be exposed to corruption risk. It is our policy to implement safeguards and procedures to prohibit these practices
by our employees, officers, directors, or by third parties acting on our behalf. However, we cannot rule out the risk that any of our
employees, officers, directors, or third parties acting on our behalf may engage in breaches of our policies or anti-corruption laws,
for which we might be held responsible.
Allegations of violations
of these anti-corruption and anti-bribery laws, and investigation into such allegations, could negatively affect our reputation, business,
operating results, and financial condition. The violation of these laws may result in substantial monetary and even criminal sanctions,
follow-on civil litigation (such as shareholder derivative suits), and monitoring of our compliance program by the United States or other
governments, each of which could negatively affect our reputation, business, operating results, and financial condition. In addition,
the United States or other governments may seek to hold us liable for violations of these laws committed by companies in which we invest
or acquire.
21
There can be no assurance that our securities,
including our ordinary shares, will continue to be listed on Nasdaq or, if listed, that we will be able to comply with the continued listing
standards of Nasdaq, which could limit investors' ability to make transactions in our securities and subject us to additional trading
restrictions.
To continue listing our ordinary
shares on Nasdaq, we are required to demonstrate compliance with Nasdaq's continued listing requirements, particularly the requirement
to maintain a minimum $1.00 bid price per share. On August 18, 2021, we received a letter from the Nasdaq Listing Qualifications Staff
("Nasdaq") notifying us that we were not in compliance with the minimum bid price requirement set forth in Nasdaq's
rules for continued listing on the Nasdaq. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of
US$1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency
continues for a period of 30 consecutive business days. Based on the closing bid price of our ordinary shares for the 30 consecutive business
days from July 7, 2021 to August 17, 2021, we did not meet the minimum bid price requirement. The letter did not impact our listing on
the Nasdaq Capital Market and, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided 180 calendar days, or until February
14, 2022, to regain compliance with Nasdaq Listing Rule 5550(a)(2). On February 15, 2022, we received a letter from the Staff informing
us that we are eligible for another 180-day period, or until August 15, 2022 to regain compliance with the minimum $1 bid price requirement.
We provided written notice, as required by Nasdaq, of our intention to cure the deficiency during the second compliance period by effecting
a reverse stock split, if necessary. Compliance can be attained during this additional time period if the closing bid price of our ordinary
shares is at least $1 per share for a minimum of 10 consecutive business days. If during the compliance period the ordinary shares have
a closing bid price of $0.10 or less for 10 consecutive trading days, Nasdaq's Listing Qualifications Department shall issue a Staff
Delisting Determination. On June 27, 2022, the Company completed a reverse stock split of the Company's common shares at the ratio
of one-for-sixteen to enable the Company to regain compliance with Nasdaq Marketplace Rule 5550(a)(2) and maintain its listing on Nasdaq.
On
October 28, 2022, the Company received written notification from the Nasdaq Stock Market LLC, notifying the Company that it is not in
compliance with the minimum bid price requirement set forth in Nasdaq's rules for continued listing on the Nasdaq and that the Company's
listed securities did not maintain a minimum market value of listed securities of $35 million ("MVLS") for a period of 30
consecutive business days and that the Company did not meet the MVLS requirement set forth in Nasdaq Listing Rule 5550(b)(2) for continued
listing on the Nasdaq. Based on the closing bid price of the Company's ordinary shares for the 30 consecutive business days from September
16, 2022 to October 27, 2022, the Company no longer meets the minimum bid price requirement. To regain compliance under Nasdaq Listing
Rule 5550(a)(2), the Company's ordinary shares must have a closing bid price of at least US$1.00 for a minimum of 10 consecutive trading
days. In the event the Company does not regain compliance by April 26, 2023, the Company may be eligible for additional time to regain
compliance with the minimum bid price requirement and MLVS requirement or may face delisting. If during any compliance period the ordinary
shares have a closing bid price of $0.10 or less for 10 consecutive trading days, Nasdaq's Listing Qualifications Department shall
issue a Staff Delisting Determination regarding the minimum bid price requirement.
To
regain compliance under Nasdaq Listing Rule 5550(b)(2), the Company's MVLS had to close at $35 million or more for a minimum of
10 consecutive trading days for Nasdaq to provide the Company a written confirmation of compliance and deem the matter closed. The Company
had until April 26, 2023 to regain compliance with the MLVS requirement. On March 14, 2023, the Company received written notification
from Nasdaq notifying the Company that Nasdaq had determined that for the 10 consecutive trading days, from February 28 through March
13, 2023, the Company's MVLS had been $35 million or greater. Accordingly, the Company has regained compliance with the Rule.
22
On May 3, 2023, the Company
received written notification from the Listing Qualifications Staff of Nasdaq indicating that the Company has not regained compliance
with the minimum bid price of $1 required for continued listing on The Nasdaq Capital Market. The Company has engaged the firm of Donohoe
Advisory Associates LLC to request a hearing which will stay the suspension or delisting action pending the hearing and the expiration
of any extension period granted by the Panel following the hearing. Consequently, the Company's ordinary shares are expected to
remain listed on The Nasdaq Capital Market at least until the Panel renders a decision following the hearing. There can be no assurance
that the Panel will determine to continue the Company's listing on The Nasdaq Capital Market or that the Company will timely evidence
compliance with the terms of any extension that may be granted by the Panel following the hearing.
Our business operations are
not affected by the receipt of these notices. We intend to monitor the closing bid price of our ordinary shares and may, if appropriate,
consider implementing available options, including, but not limited to, implementing a reverse share split of its outstanding ordinary
shares, financing and issuing additional ordinary shares, to regain compliance with the minimum bid price and maintain compliance with
the minimum market value requirement under the Nasdaq Listing Rules.
Additionally, we cannot assure
you that we will be able to meet Nasdaq's other continued listing standards. If our ordinary shares are delisted by Nasdaq, and
we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter
market. If this were to occur, then, as with our public warrants, which have been delisted from Nasdaq and are trading on the OTC Markets,
we could face significant material adverse consequences, including:
●
less liquid trading market for our securities;
●
more limited market quotations for our securities;
●
determination that our ordinary shares and/or warrants are a "penny stock" that requires brokers to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;
●
more limited research coverage by stock analysts;
●
loss of reputation; and
●
more difficult and more expensive equity financings in the future.
The National Securities Markets
Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which
are referred to as "covered securities." If our ordinary shares remain listed on Nasdaq, our ordinary shares will be covered
securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to
investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate
or bar the sale of covered securities in a particular case. If our securities were no longer listed on Nasdaq and therefore not "covered
securities", we would be subject to regulation in each state in which we offer our securities.
23
Global economic and political conditions
may adversely impact our business, operating results and financial condition.
Economic conditions, market
and political instability, trade disputes among the United State, China, India and European countries and political conflicts, such as
between Russia and Ukraine, could adversely affect our business relationships with customers and suppliers. Any adverse financial or economic
impact to our customers may impact their ability to pay timely or result in their inability to pay. It may also impact their ability to
fund future purchases or increase the sales cycles which could lead to a reduction in revenue and accounts receivable. Our suppliers may
increase their prices or may be unable to supply needed raw materials on a timely basis due to global supply change interruptions which
could result in our inability to meet customers' demand or affect our gross margins. Our suppliers may also impose more stringent
payment terms on us. The timing and nature of any recovery from the effects of adverse economic conditions or market and political instability
on credit and financial markets is uncertain, and there can be no assurance that market conditions will improve in the near future or
that our results will not be materially and adversely affected.
We may, from time to time, be involved in
future litigation in which substantial monetary damages are sought.
We may from time to time be
involved in future litigation in which substantial monetary damages are sought. Litigation claims may relate to intellectual property,
contracts, employment, securities and other matters arising out of the conduct of our current and past business activities. Any claims,
whether with or without merit, could be time consuming, expensive to defend, and could divert management's attention and resources.
We maintain insurance against some, but not all, of these potential claims, and the levels of insurance we do maintain may not be adequate
to fully cover any and all losses. Nonetheless, the results of any future litigation or claims are inherently unpredictable, and such
outcomes could have a material adverse effect on our results of operations, cash from operating activities or financial condition.
We were in arbitration before
the International Chamber of Commerce with Samsung Electronics Co., Ltd. ("Samsung") to resolve a dispute regarding royalties
payable to the Company under a software license agreement the Company had with Samsung. Samsung alleged that, for the period starting
the fourth quarter of 2010 through mid-2012, the Company was overpaid royalties in the amount of approximately $1.67 million due to a
clerical error in Samsung's accounting department that enabled the Company to receive royalties on sales of Samsung handsets that
did not contain its software. Samsung was seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as
reimbursements of reasonable fees including attorney fees and arbitration costs.
After arbitration hearings
held in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an
arbitration award (the "Award"), which the Company received on November 29, 2018. Pursuant to the Award, the Company was obligated
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. Samsung was
also awarded its attorney's fees and expenses in the aggregate amount of approximately $1.73 million. The Company has reached an
agreement with Samsung for settling the payments due to Samsung by making 24 monthly payments beginning in April 2019. The Company has
pledged $5 million worth of ordinary shares in escrow as security for the payments and in the event that the Company is in default of
the scheduled payments, Samsung has the right to seize the escrow shares. If we fail to make timely payments to Samsung, we may be subject
to additional potential litigation damages resulting in a material adverse impact to the Company. Due to cash flow constraints resulting
from the COVID-19 pandemic, we have not made payments to Samsung in the years 2020 and 2021. Beginning in June 2022, the Company has been
making monthly payments to Samsung with the anticipation that all of the Award including accrued interests will be completely paid off
by December 2023.
24
We are in arbitration with Shanghai Kadi
Technologies Limited ("KADI") and its owners due to KADI's breach of contract according to the Share Purchase Agreement
dated December 15, 2018 (the "KADI Agreement") signed between Borqs and KADI.
We have initiated arbitration
proceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from
KADI 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
to the owners of KADI, and iii) payment in cash for loss of profit from KADI's projected business in the amount of $5.3 million.
As of the filing of this annual report, the arbitration is still on-going and there is no assurance that the outcome of the proceedings
will be in favor of Borqs.
If we fail to implement and maintain effective
internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations
or prevent fraud, and investor confidence and the market price of our ordinary shares may be adversely impacted.
We are required to evaluate
the effectiveness of disclosure controls and procedures and internal control over financial reporting. As defined in standards established
by the United States Public Company Accounting Oversight Board, or the PCAOB, a "material weakness" is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis; and a
"significant deficiency" is less severe than a material weakness in that it is unlikely to have a material impact on financial
statements but is important enough to merit attention by those responsible for oversight of the company's financial reporting. Based
on that evaluation, our management concluded that these controls were ineffective as of December 31, 2022. In the years ended December
31, 2022 and 2021, we did not maintain sufficient controls over financial reporting processes due to an insufficient number of financial
reporting personnel with an appropriate level of knowledge and experience in U.S. GAAP and SEC reporting requirements and financial reporting
programs to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related
disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. This deficiency constitutes as a material weakness of our internal
control over financial reporting.
In 2019 the Company identified
a qualified external professional consultant for a senior financial and reporting role and the individual officially joined the Company
as a financial director in January 2019. We have taken multiple steps to implement measures designed to improve our internal control over
financial reporting to remediate the material weakness and hence our management concluded that the material weakness was being mitigated
as of December 31, 2019 by multiple factors including: (a) hiring of a financial director with over 15 years of US GAAP audit experience
in 2019 to help set up workflows for the strengthening of internal controls and preserving accuracy in preparing consolidated financial
statements, (b) since December 2018, our Chairperson of the Audit Committee, a member of the Washington State board of Accountancy since
the year 1989, has been regularly providing the Company with advice on procedures and interpretation of US GAAP rules and regulations.
In addition, we plan to take a number of other measures to strengthen our internal control over financial reporting, including (i) continuing
to hire additional qualified professionals with experience in U.S. GAAP accounting and SEC reporting to lead accounting and financial
reporting matters; (ii) organizing regular training for our accounting staffs, especially the trainings related to U.S. GAAP and SEC reporting
requirements; and (iii) establishing effective oversight and clarifying reporting requirements for non-recurring and complex transactions
to ensure consolidated financial statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting
requirements. In October 2021, the Company hired a seasoned Chief Financial Officer with significant U.S. financial reporting experiences
handling all periodic financial reporting and filing requirements with the SEC.
25
We are a public company in
the United States subject to the Sarbanes Oxley Act of 2002. Section 404 of the Sarbanes Oxley Act, or Section 404, requires us to include
a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F. Our
management concluded that our internal control over financial reporting is not effective. In addition, once we cease to be an "emerging
growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report
on the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over
financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may
issue an adverse opinion if it is not satisfied with our internal controls or the level at which our controls are documented, designed,
operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place
a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to
timely complete our evaluation testing and any required remediation.
During the course of documenting
and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and
deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control
over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on
an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Moreover, our internal
control over financial reporting may not prevent or detect all errors and -fraud. A control system, no matter how well it is designed
and operated cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and
instances of fraud will be detected.
We believe that the Company's
financial reporting persons possess significant US GAAP experience to be a valuable resource for us with respect to financial reporting
work. We believe we have adequate personnel with knowledge and experience with US GAAP for the preparation of our annual report for the
year 2022. Since December 2018, our Chairperson of the Audit Committee has been regularly providing the Company with advice on procedures
and interpretation of US GAAP rules and regulations. The Chairperson of the Audit Committee has been a member of the Washington State
Board of Accountancy since the year 1989. However, if we fail to achieve and maintain an effective internal control environment, we could
suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors
to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of
operations, and lead to a decline in the market price of our ordinary shares. Additionally, ineffective internal control over financial
reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock
exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial
statements from prior periods.
Risks
Related to Our Business Operations and Doing Business
in China
The Chinese government exerts substantial
influence over the manner in which we may conduct our business activities, and if we are unable to substantially comply with any PRC rules
and regulations, our financial condition and results of operations may be materially adversely affected.
The Chinese government has
exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state
ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation,
environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose
new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part
to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision
not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in
the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof,
and could require us to divest ourselves of any interest we then hold in Chinese properties.
26
As such, our business operations
and the industries we operate in may be subject to various government and regulatory interference in the provinces in which they operate.
We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government
sub-divisions. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for
any failure to comply. In the event that we are not able to substantially comply with any existing or newly adopted laws and regulations,
our business operations may be materially adversely affected and the value of our ordinary shares may significantly decrease.
The recent PRC government intervention into
business activities by U.S.-listed Chinese companies may indicate an expansion of the PRC's authority that could negatively impact
our existing and future operations in Hong Kong and China.
Recently, the Chinese government
announced that it would exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based
issuers. Under the new measures, China will improve regulation of cross-border data flows and security, police illegal activity in the
securities market and punish fraudulent securities issuances, market manipulation and insider trading. China will also monitor sources
of funding for securities investment and control leverage ratios. The Cyberspace Administration of China ("CAC") has also
opened a cybersecurity probe into several large U.S.-listed technology companies focusing on anti-monopoly and financial technology regulation
and, more recently with the passage of the Data Security Law, how companies collect, store, process and transfer data. If we are subject
to such a probe or if we are required to comply with stepped-up supervisory requirements, valuable time from our management and money
may be expended in complying and/or responding to the probe and requirements, thus diverting valuable resources and attention away from
our operations. This may, in turn, negatively impact our operations.
Borqs is incorporated under
the laws of the British Virgin Islands with our principal headquarters in Hong Kong. We are not a mainland Chinese firm, and we are not
required to obtain permission from the government of the PRC to issue our ordinary shares to foreign investors. However, as a company
with limited operations in Hong Kong and the PRC, and given the Chinese government's significant oversight authority over the conduct
of business in Hong Kong and the PRC, there is always a risk that the Chinese government may seek to affect operations of any company
with any level of operations in mainland China or Hong Kong, including its ability to offer or continue to offer securities to investors,
list its securities on a U.S. or other foreign exchange, conduct its business or accept foreign investment. In light of China's
recent expansion of authority in Hong Kong, there are risks and uncertainties which we cannot foresee for the time being, and rules and
regulations in China can change quickly with little or no advance notice. The Chinese government may intervene or influence our current
and future operations in Hong Kong and China at any time, or may exert more control over offerings conducted overseas and/or foreign investment
in issuers likes ourselves.
If any or all of the foregoing
were to occur, this could result in a material change in our Company's operations and/or the value of our ordinary shares and/or
significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such
securities to significantly decline or be worthless.
Changes in China's economic, political
or social conditions or government policies could have a material adverse effect on our business and results of operations.
All of our manufacturing operations
are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant
degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.
27
The Chinese economy differs
from the economies of most developed countries in many respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing
the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved
corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In
addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies
and change of enforcement practice of such rules and policies can change quickly with little advance notice. The Chinese government also
exercises significant control over China's economic growth through allocating resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
While the Chinese economy
has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the
economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some
of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial condition and
results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any prolonged
slowdown in the Chinese economy may reduce the demand for our products and materially and adversely affect our business and results of
operations.
Uncertainties and quick change in the interpretation
and enforcement of Chinese laws and regulations with little advance notice could result in a material and negative impact our business
operation, decrease the value of our ordinary shares and limit the legal protections available to us.
The PRC legal system is based
on written statutes, and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and
the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement
of these laws, regulations and rules involves uncertainties. The enforcement of laws and that rules and regulations in China can change
quickly with little advance notice and the risk that the Chinese government may intervene or influence our operations at any time, or
may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, could result in a material
change in our operations and/or the value of our ordinary shares.
We cannot rule out the possibility
that the PRC government will institute a licensing regime or pre-approval requirement covering our industry at some point in the future.
If such a licensing regime or approval requirement were introduced, we cannot assure you that we would be able to obtain any newly required
license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our
operations.
From time to time, we may
have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities
have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the
outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore,
the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or
at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime
after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual
property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.
28
Substantial uncertainties exist with respect
to the interpretation and implementation of any new PRC laws, rules and regulations relating to foreign investment and how it may impact
the viability of our current corporate structure, corporate governance and our business operations.
On March 15, 2019, the
National People's Congress promulgated the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the
three existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary
regulations. The existing foreign-invested enterprises, or FIEs, established prior to the effectiveness of the Foreign Investment
Law may keep their corporate forms within five years. The Foreign Investment Law stipulates that China implements the management system
of pre-establishment national treatment plus a negative list to foreign investment, and the government generally will not expropriate
foreign investment, except under certain special circumstances, in which case it will provide fair and reasonable compensation to foreign
investors. Foreign investors are barred from investing in prohibited industries on the negative list and must comply with the specified
requirements when investing in restricted industries on such list. On December 26, 2019, the State Council promulgated the Implementing
Regulations of the Foreign Investment Law, which came into effect on January 1, 2020 and further requires that FIEs and domestic
enterprises be treated equally with respect to policy making and implementation.
Pursuant to the Foreign Investment
Law, "foreign investment" means any foreign investor's direct or indirect investment in the PRC, including: (i) establishing
FIEs in the PRC either individually or jointly with other investors; (ii) obtaining stock shares, stock equity, property shares, other
similar interests in Chinese domestic enterprises; (iii) investing in new project in the PRC either individually or jointly with
other investors; and (iv) making investment through other means provided by laws, administrative regulations or State Council provisions.
Although the Foreign Investment Law does not explicitly classify the contractual arrangements, as a form of foreign investment, it contains
a catch-all provision under the definition of "foreign investment," which includes investments made by foreign investors
in China through other means stipulated by laws or administrative regulations or other methods prescribed by the State Council without
elaboration on the meaning of "other means." However, the Implementing Regulations of the Foreign Investment Law still does
not specify whether foreign investment includes contractual arrangements.
If the Chinese government were to impose
new requirements for permission or approval from the PRC Authorities including China Securities Regulatory Commission ("CSRC")
or CAC, or any other entity that is required to approve the listing of our shares on Nasdaq, to issue our ordinary shares to foreign investors
or list on a foreign exchange, such action could significantly limit or completely hinder our ability to offer or continue to offer securities
to investors and cause the value of such securities to significantly decline or be worthless.
As of the date of annual report,
we and our PRC subsidiaries, (1) are not required to obtain permissions from any PRC authorities to operate or issue our Ordinary Shares
to foreign investors, (2) are not subject to permission requirements from the CSRC, CAC or any other entity that is required to approve
of our PRC subsidiaries' operations, and (3) have not received or were denied such permissions by any PRC authorities. Nevertheless,
the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued
the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions, which were made
available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities,
and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment,
it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to list on
U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded.
29
Further, since these statements
and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and
what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and
the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign
investments and list on an U.S. exchange. If, (i) we inadvertently conclude that such approvals or permissions are not required, or (ii)
applicable laws, regulations, or interpretations change and we are required to obtain such approvals and permissions in the future, and
we are unable to obtain such approvals and permissions, Borqs will not be able to perform R&D and manufacturing in China, our revenues
will be adversely affected and we will have to expand our R&D activities in India and relocate our manufacturing activities outside
China to India or other Asian countries. Also, if applicable laws, regulations, or interpretations change, and we are required to obtain
permission or approval from the PRC authority for the offering and listing of our Ordinary Shares in the U.S. in the future, and if any
of such permission or approval were not received maintained, or subsequently rescinded, it may significantly limit or completely hinder
our ability to list our shares or cause the value of our Ordinary Shares to significantly decline or become worthless.
Risks related to a future determination
that the Public Company Accounting Oversight Board (the "PCAOB") is unable to inspect or investigate our auditor completely.
The Holding Foreign Companies
Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed
audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years
beginning in 2021, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over-the-counter
trading market in the U.S.
On March 24, 2021, the SEC
adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. A company
will be required to comply with these rules if the SEC identifies it as having a "non-inspection" year under a process to
be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing
and trading prohibition requirements described above. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding
Foreign Companies Accountable Act ("AHFCAA"), which has since been signed into law, amending the HFCA Act and requiring the
SEC to prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections
for two consecutive years instead of three consecutive years.
On September 22, 2021, the
PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under
the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign
jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On December 2, 2021, the SEC
announced the adoption of amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules
apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (Commission-Identified Issuers).
The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned
or controlled by a governmental entity in the public accounting firm's foreign jurisdiction. The amendments also require that a
Commission-Identified Issuer that is a "foreign issuer," as defined in Exchange Act Rule 3b-4, provide certain additional
disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the adopting release provides
notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain
Commission-Identified Issuers, as required by the HFCAA. A Commission-Identified Issuer will be required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended Dec. 31, 2021, the registrant will be required to comply with the submission
or disclosure requirements in its annual report filing covering the fiscal year ended Dec. 31, 2022. On December 16, 2021, the PCAOB issued
a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered
in: (1) mainland China, and (2) Hong Kong.
30
The audit report included
in our Form 20-F for the years ended December 31, 2020, 2021 and 2022, were issued by Yu Certified Public Accountant P.C. ("Yu CPA"),
an independent registered public accounting firm with the PCAOB, and as an auditor of publicly traded companies in the U.S., is subject
to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional
standards. Our auditor is headquartered in New York, NY, and has been inspected by the PCAOB on a regular basis. The PCAOB currently has
access to inspect the working papers of our auditor.
However, the recent developments
would add uncertainties to our listing and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more
stringent criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy
of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
The SEC may propose additional
rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President's
Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from
Chinese Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address
companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts
of these recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations were more stringent
than the HFCA Act. For example, if a company's auditor was not subject to PCAOB inspection, the report recommended that the transition
period before a company would be delisted would end on January 1, 2022.
The SEC has announced that
the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations
in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any,
of the PWG recommendations will be adopted. The implications of this possible regulation in addition to the requirements of the HFCA Act
are uncertain. Such uncertainty could cause the market price of our ordinary shares to be materially and adversely affected, and our securities
could be delisted or prohibited from being traded on the national securities exchange earlier than would be required by the HFCA Act.
If our Ordinary Shares are unable to be listed on another securities exchange by then, such a delisting would substantially impair your
ability to sell or purchase our Ordinary Shares when you wish to do so, and the risk and uncertainty associated with a potential delisting
would have a negative impact on the price of our Ordinary Shares.
There are significant legal and other obstacles
to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.
We conduct a significant part
of our business operations in China, and some of our directors and senior management are based in China, which is an emerging market.
The SEC, U.S. Department of Justice and other authorities often have substantial difficulties in bringing and enforcing actions against
non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China. Additionally,
our public shareholders may have limited rights and few practical remedies in emerging markets where we operate, as shareholder claims
that are common in the United States, including class action securities law and fraud claims, generally are difficult to pursue as a matter
of law or practicality in many emerging markets, including China. For example, in China, there are significant legal and other obstacles
to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.
Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of
another country or region to implement cross-border supervision and administration, the regulatory cooperation with the securities regulatory
authorities in the Unities States has not been efficient in the absence of a mutual and practical cooperation mechanism. According to
Article 177 of the PRC Securities Law which became effective in March 2020, no foreign securities regulator is allowed to directly conduct
investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC
securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities
business activities to foreign securities regulators.
31
As a result, our public shareholders
may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or
controlling shareholders than they would as public shareholders of a company incorporated in the United States.
China's economic, political and social
conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business.
A substantial portion of our
operations are conducted in China, and a significant portion of our net revenues are derived from customers where the contracting entity
is located in China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may
undertake are subject, to a significant extent, to economic, political and legal developments in China.
China's economy differs
from the economies of most developed countries in many respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the
past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our services
and products depend, in large part, on economic conditions in China. Any slowdown in China's economic growth may cause our potential
customers to delay or cancel their plans to purchase our services and products, which in turn could reduce our net revenues.
Although China's economy
has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to
play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant
control over China's economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these
policies, laws and regulations could adversely affect the economy in China and could have a material adverse effect on our business.
The PRC government has implemented
various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources,
which have for the most part had a positive effect on our business growth. However, we cannot assure you that the PRC government will
not repeal or alter these measures or introduce new measures that will have a negative effect on us. China's social and political
conditions may also not be as stable as those of the United States and other developed countries. Any sudden changes to China's
political system or the occurrence of widespread social unrest could have a material adverse effect on our business and results of operations.
In the year ended December
31, 2020, we derived about 20.3% of our revenues from customers located in India. In recent years, skirmishes occurred over the Sino-Indian
border and the relationship between the two countries has been in distress. Although there had been no official statements from either
governments that directly affected commercial activities between the two countries, tension may escalate in the future to have a negative
impact on our businesses.
Due to social unrest in Hong
Kong SAR throughout 2019 which also extended into 2020, China passed a new national security law for Hong Kong which became effective
on June 30, 2020. In reaction, the United States has imposed sanctions against Hong Kong's chief executive and ten other senior
officials. Although the U.S. sanctions so far do not implicate any commercial activities involving Hong Kong, it is an area of concern
if more sanctions from the U.S. may impact our Company's ability to maintain a sound business relationship with our customers in
the U.S.
32
Uncertainties with respect to the PRC legal
system could harm us.
Our operations in China are
governed by PRC government laws and regulations. The PRC legal system is a civil law system based on written statutes. Unlike common law
systems, prior court decisions have limited precedential value. Borqs Beijing is generally subject to laws and regulations applicable
to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises, and our other wholly-owned subsidiaries
in China may be subject to certain laws and regulations in connection with investments made by foreign-invested enterprises.
Since 1979, PRC legislation
and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China
has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume
of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.
In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely
basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until
sometime after the violation. Moreover, some regulatory requirements issued by certain PRC government authorities may not be consistently
applied by other government authorities, including local government authorities, thus making strict compliance with all regulatory requirements
impractical, or in some circumstances, impossible. Any litigation in China may be protracted and result in substantial costs and diversion
of resources and management attention.
Additionally, some of the
PRC laws and regulations governing our business operations in China are vague and their official interpretation and enforcement may involve
substantial uncertainty. These include, but are not limited to, laws and regulations governing our business and the enforcement and performance
of our contractual arrangements in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. Despite
their uncertainty, we will be required to comply.
Recent trade policy initiatives announced
by the United States administration against the PRC may adversely affect our business.
On January 15, 2020, the United
States and China executed an enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China's
economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and
foreign exchange. The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S.
goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt
and effective implementation and enforcement. The United States agreed to modify its Section 301 tariff actions in a significant way.
The United States first imposed tariffs on imports from China based on the findings of the Section 301 investigation on China's
acts, policies, and practices related to technology transfer, intellectual property, and innovation. The United States will be maintaining
25 percent tariffs on approximately $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of Chinese
imports.
In addition, political tensions
between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, tensions over Taiwan
sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the PRC central
government, the executive orders issued by former U.S. President Donald J. Trump in August 2020 that prohibit certain transactions with
certain Chinese companies, and various restrictions related to the Chinese semiconductor industry imposed by the U.S. government. Against
this backdrop, China has implemented, and may further implement, measures in response to the changing trade policies, treaties, tariffs
and sanctions and restrictions against Chinese companies initiated by the U.S. government.
33
Our subsidiaries in China are subject to
restrictions on making dividends and other payments to it or any other affiliated company.
We are a holding company and
may rely on dividends paid by our PRC subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions
to 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
regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance
with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries are required to set aside at least 10% of
our after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of our registered capital. Appropriations
to the employee welfare funds are at the discretion of the board of directors of Borqs Beijing. These reserves are not distributable as
cash dividends.
In addition, under the PRC
Enterprise Income Tax Law, or the EIT Law, which became effective on January 1, 2008, dividends paid to us by our PRC subsidiaries are
subject to withholding tax. Currently, the withholding tax rate is 10.0% (subject to reductions by the relevant tax treaties, if applicable).
Furthermore, if our PRC subsidiaries
incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other
payments to us.
To date, our PRC subsidiaries
have not paid dividends to us out of their accumulated profits. In the future, we do not expect to receive dividends from our PRC subsidiaries
because the accumulated profits of these PRC subsidiaries are expected to be used for their own business or expansions. Any limitation
on the ability of our PRC subsidiaries to distribute dividends or other payments to us could materially and adversely limit our ability
to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our
business.
The discontinuation of any of the preferential
tax treatments currently available to our PRC subsidiaries could materially increase our tax liabilities.
Preferential tax treatments
and incentives granted to our PRC subsidiaries by PRC governmental authorities are subject to review and may be adjusted or revoked at
any time in the future. The discontinuation or revocation of any preferential tax treatments and incentives currently available to them
will cause their effective tax rate to materially increase, which will decrease our net income and may adversely affect our financial
condition and results of operations.
We face uncertainty with respect to indirect
transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
On February 3, 2015, the State
Administration of Taxation (the "SAT") issued a Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect
Transfer of Properties by Non-Tax Resident Enterprises, or Public Notice 7, where a non-resident enterprise transfers taxable assets,
through the offshore transfer of a foreign intermediate holding company, the non-resident enterprise, being the transferor, maybe subject
to PRC enterprise income tax, if the indirect transfer is considered to be an arrangement which does not have a reasonable commercial
purpose to circumvent enterprise income tax payment obligations. In addition, Public Notice 7 further provides certain criteria on how
to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of
equity through a public securities market. Public Notice 7 also brings challenges to both the foreign transferor and transferee (or other
person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an "indirect transfer"
by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise
being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a "substance over form" principle, the PRC tax authority may re-characterize such indirect transfer
as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result, gains derived
from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for
the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10% for the transfer of equity interests in a
PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails
to withhold the taxes and the transferor fails to pay the taxes.
34
On October 17, 2017, the SAT
issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-Resident Enterprises, or Announcement 37, which
became effective on December 1, 2017. The Announcement 37 further clarifies the practice and procedure of the withholding of non-resident
enterprise income tax.
We face uncertainties with
respect to the reporting and consequences of private equity financing transactions, share exchange or other transactions involving the
transfer of our ordinary shares by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident
companies or other taxable assets by us. We and other non-resident enterprises in our group may be subject to filing obligations or being
taxed if we and other non-resident enterprises affiliated with us are transferors in such transactions, and may be subject to withholding
obligations if we and other non-resident enterprises affiliated with us are transferees in such transactions, under Public Notice 7 and
Announcement 37. For the transfer of shares in us by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested
to assist in the filing under Public Notice 7 and Announcement 37. As a result, we may be required to expend valuable resources to comply
with Public Notice 7 and Announcement 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these
circulars, or to establish that we and other non-resident enterprises affiliated with us should not be taxed under these circulars. The
PRC tax authorities have the discretion under Public Notice 7 and Announcement 37 to make adjustments to the taxable capital gains based
on the difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make
adjustments to the taxable income of the transactions under Public Notice 7 and Announcement 37, our income tax costs associated with
such transactions will be increased in the event that we are a transferee of such transactions, which may have an adverse effect on our
financial condition and results of operations. Heightened scrutiny over acquisition transactions by the PRC tax authorities may also have
a negative impact on potential acquisitions we may pursue in the future.
We may not be able to obtain certain treaty benefits on dividends
paid by our PRC subsidiary to us through our Hong Kong Subsidiary.
Under the EIT Law, dividends
generated from retained earnings after January 1, 2008 from a PRC company to a foreign parent company are subject to a withholding tax
rate of 10.0% unless the foreign parent's jurisdiction of incorporation has a tax treaty with China that provides for a preferential
withholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance
of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income or the Hong Kong Tax Treaty, which became effective
on August 21, 2006, a company incorporated in Hong Kong, such as Borqs Hong Kong, will be subject to withholding income tax at a rate
of 5% on dividends it receives from our PRC subsidiary if it holds a 25.0% or more interest in that particular PRC subsidiary at all times
within the 12-month period immediately preceding the distribution of dividends and be a "beneficial owner" of the dividends.
In February 2018, the SAT issued the
Announcement on Issues Relating to Beneficial Owners under Tax Treaties
, or the SAT Announcement
9, which became effective from April 1, 2018 and supersedes the
Notice on Interpretation and Determination of Beneficial Owners under
Tax Treaties
issued by the SAT on October 27, 2009 (or the Circular 601) and the
Announcement Regarding Recognition of Beneficial
Owners under Tax Treaties
released by the SAT on June 29, 2012 (or the Announcement 30). Pursuant to Announcement 9, applicants who
intend to prove their status of the "beneficial owner" shall submit the relevant documents to the relevant tax bureau according
to the
Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers' Enjoyment of the Treatment under
Tax Agreements
and the SAT Announcement 9. "Beneficial Owners" are residents who have ownership and the right to dispose
of the income or the rights and properties giving rise to the income. These rules also set forth certain adverse factors against the recognition
of a "Beneficial Owner", such as not carrying out substantive business activities. Whether a non-resident enterprise may obtain
tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC tax authority and will be determined by the
PRC tax authority on a case-by-case basis. SAT Announcement 9 further provides that a comprehensive analysis should be made when determining
the beneficial owner status based on various factors that supported by various types of documents including the articles of association,
financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures,
functions and risk assumption as well as relevant contracts and other information.
35
In August 2015, the SAT promulgated
the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or SAT Circular 60, which became effective
on November 1, 2015. SAT Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant
tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises may, if they determine by self-assessment
that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply for the reduced withholding tax rate, and file necessary
forms and supporting documents when performing tax filings, which will be subject to post-filing examinations by the relevant tax authorities.
As a result, although our
PRC subsidiary, Borqs Beijing, is currently wholly owned by Borqs Hong Kong, we cannot assure you that we would be entitled to the tax
treaty benefits and enjoy the favorable 5.0% rate applicable under the Hong Kong Tax on dividends. If Borqs Hong Kong cannot be recognized
as the beneficial owner of the dividends to be paid by our PRC subsidiaries to us, such dividends will be subject to a normal withholding
tax of 10% as provided by the EIT Law.
Restrictions on foreign currency may limit
our ability to receive and use our revenue effectively.
The PRC government imposes
controls on the conversion of the Renminbi into foreign currencies and, in certain cases, the remittance of foreign currency out of China.
We receive part of our revenue in Renminbi. Under our current corporate structure, our British Virgin Islands holding company primarily
relies on dividend payments from our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have. Under existing
PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related
foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange
("SAFE"), by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without
prior approval of SAFE, accumulated after-tax profits generated from the operations of Borqs Beijing in China may be used to pay dividends
to us. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into
foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As
a result, we need to obtain approval from SAFE to use cash generated from the operations of our PRC subsidiaries to pay off any debt in
a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency
other than Renminbi. The PRC government may at our discretion restrict access to foreign currencies for current account transactions in
the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency
demands, we may not be able to pay dividends in foreign currencies to our shareholders.
Fluctuations in the value of the RMB may
have a material adverse effect on your investment.
The value of the RMB against
the U.S. Dollar and other currencies is affected by, among other things, changes in China's political and economic conditions and
China's foreign exchange policies. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi
to the U.S. Dollar, and the RMB appreciated more than 20.0% against the U.S. Dollar over the following three years. However, the People's
Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy
goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. Dollar had been stable and traded
within a narrow band. However, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem
with the U.S. Dollar. Since June 2010, the Renminbi has fluctuated against the U.S. Dollar, at times significantly and unpredictably,
and in recent months the RMB has depreciated significantly against the U.S. Dollar. It is difficult to predict how market forces or PRC
or U.S. government policy may impact the exchange rate between the RMB and the U.S. Dollar in the future.
36
Approximately half of our
revenues and costs are denominated in RMB. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenues,
earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars. For example, an
appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to
the extent that it needs to convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar would also
result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial
assets into RMB, as RMB is our reporting currency. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly
reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ordinary shares. Furthermore,
a significant depreciation of the RMB against the U.S. dollar may have a material adverse impact on our cash flow in the event we need
to convert our RMB into U.S. dollars to repay our U.S. dollar denominated payment obligations.
PRC regulations relating to the establishment
of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or
penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to increase their
registered capital or distribute profits to us, or may otherwise adversely affect us.
The SAFE issued the Notice
on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round-Trip Investment Activities of Domestic Residents
Conducted via Offshore Special Purpose Companies on October 26, 2005, or Circular 75, requiring PRC residents, including PRC resident
individuals and PRC companies, to register with the local SAFE branch before establishing or controlling any company outside of China
for the purpose of capital financing with assets or equities of PRC companies owned by such PRC residents, referred to in the notice as
an "offshore special purpose vehicle." The PRC resident individuals include not only PRC citizens, but also foreign natural
persons who habitually reside in China due to economic interests. SAFE promulgated the Circular on Relevant Issues Concerning Foreign
Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles,
or Circular 37, on July 4, 2014, which replaced the Circular 75. Circular 37 requires PRC residents to register with local branches of
SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and
financing, with such PRC residents' legally owned assets or equity interests in domestic enterprises or offshore assets or interests,
referred to in Circular 37 as a "special purpose vehicle." Under Circular 37, a PRC resident who is a foreign nature person
is not required to complete the registration if he/she uses assets outside China or equity interests in offshore entities to special purpose
vehicles. The term "control" under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making
rights acquired by the PRC residents in the offshore special purpose vehicles or PRC companies by such means as acquisition, trust, proxy,
voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the registration in the
event of any changes with respect to the basic information of the special purpose vehicle, such as changes in a PRC resident individual
shareholder, name or operation period; or any significant changes with respect to the special purpose vehicle, such as increase or decrease
of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. If the shareholders of
the offshore holding company who are PRC residents do not complete their registration with the local SAFE branches, the PRC subsidiaries
may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the offshore
company, and the offshore company may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover,
failure to comply with SAFE registration and amendment requirements described above could result in liability under PRC law for evasion
of applicable foreign exchange restrictions. On February 28, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign
Exchange Administration Policy on Direct Investment, or Circular 13, which became effective on June 1, 2015. In accordance with Circular
13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct
investment, including those required under the Circular 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision
of SAFE, directly examine the applications and conduct the registration.
37
We
requested all of our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners
fall within the ambit of Circular 37 and Circular 13 and to register with the local SAFE branch as required under Circular 37 and Circular
13 as applicable. As of the date of this report, we are aware that a few of our natural person shareholders who are not PRC citizens may
otherwise be deemed as PRC residents pursuant to the definitions under the SAFE regulations, but we are not aware that any of them uses
assets inside China or equity interest in PRC companies to invest in the Company. Before the issuance of Circular 37, we had attempted
to submit applications to the Beijing branch of SAFE for such individual shareholders in accordance with Circular 75, but those applications
were not accepted by the Beijing branch of SAFE because those individuals are not PRC citizens. After Circular 37 became effective, we
understand these individuals are not required to conduct the registrations since they do not use assets within China or equity interests
in PRC companies to invest in the Company. We cannot assure you, however, that the SAFE's opinion will be the same as our opinion
and all of these individuals can successfully complete required filings or updates on a timely manner, or at all in the event these individuals
required to conduct the filings. Besides, we have issued and may in future issue shares to certain PRC citizens for the purpose of acquisition
of other companies and we have or will request them to register with the local SAFE branch as required under Circular 37 and Circular
13. We cannot assure you, however, that the all of these individuals can successfully complete required filings or updates on a timely
manner, or at all. Furthermore, as there is uncertainty concerning the reconciliation of the new regulations with other approval requirements,
it is unclear how these regulations, and any further regulation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant government authorities. We can provide no assurance that we currently are, and we will in the
future continue to be, fully informed of identities of all our shareholders or beneficial owners who are PRC residents, and we cannot
provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain
or update any applicable registrations or comply with other requirements required by Circular 37 and Circular 13 or other related rules
in a timely manner. Any failure or inability by any of our shareholders or beneficial owners who are PRC residents to comply with SAFE
regulations may subject them to fines or other legal sanctions, such as potential liability for our PRC subsidiaries and, in some instances,
for their legal representatives and other liable individuals, as well as restrictions on our ability to contribute additional capital
into our PRC subsidiaries or our PRC subsidiaries' ability to distribute dividends to, or obtain foreign-exchange-denominated loans
from our offshore holding companies. As a result, our business operations and our ability to make distributions to you could be materially
and adversely affected.
Failure to comply with PRC regulations regarding
the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal
or administrative sanctions.
In December 2006, the People's
Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, which set forth the respective requirements
for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account.
In January 2007, SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among
other things, specified approval requirements for certain capital account transactions such as a PRC citizen's participation in
the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In February 2012, SAFE promulgated the
Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas
Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for
Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued
by SAFE in March 2007. Under these rules, PRC residents who participate in stock incentive plans in an overseas publicly-listed company
are required to register with SAFE or our local branches and complete certain other procedures. Participants of a stock incentive plan
who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another
qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock
incentive plan on behalf of our participants. Such participants must also retain an overseas entrusted institution to handle matters in
connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition,
the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the
stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes.
38
We and our PRC resident employees
who participate in our employee stock incentive plans are subject to these regulations. If we or our PRC option grantees fail to comply
with these regulations, we or our PRC option grantees may be subject to fines and other legal or administrative sanctions. We started
to process the SAFE application for our employee stock option plan during fiscal year 2021. The application is still pending as of December
31, 2022.
PRC regulations establish complex procedures
for some acquisitions conducted by foreign investors, which could make it more difficult for us to pursue growth through acquisitions
in China.
The Regulations on Mergers
and Acquisitions of Domestic Enterprises by Foreign Investors, adopted by six PRC regulatory agencies in August 2006 and amended in June
2009, among other things, established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time-consuming and complex. In addition, the Implementing Rules Concerning Security Review on the Mergers and Acquisitions
by Foreign Investors of Domestic Enterprises, issued by the Ministry of Commerce in August 2011, specify that mergers and acquisitions
by foreign investors involved in "an industry related to national security" are subject to strict review by the Ministry of
Commerce, and prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy
or contractual control arrangement. We believe that our business is not in an industry related to national security, but it cannot preclude
the possibility that the Ministry of Commerce or other government agencies may publish explanations contrary to our understanding or broaden
the scope of such security reviews in the future, in which case our future acquisitions in the PRC, including those by way of entering
into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Moreover, the Anti-Monopoly Law
requires that the Ministry of Commerce be notified in advance of any concentration of undertaking if certain filing thresholds are triggered.
We may grow our business in part by directly acquiring complementary businesses in China. Complying with the requirements of the laws
and regulations mentioned above and other PRC regulations to complete such transactions could be time-consuming, and any required approval
processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions,
which could affect our ability to expand our business or maintain our market share. Our ability to expand our business or maintain or
expand our market share through future acquisitions would as such be materially and adversely affected.
Substantial uncertainties exist with respect
to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability
of our current corporate structure, corporate governance and business operations.
The Ministry of Commerce ("MOFCOM")
published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of
existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.
The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in
line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and
domestic investments. A draft Foreign Investment Law drafted by the MOFCOM and the National Development and Reform Commission, or the
NDRC, has been included in the list of draft laws submitted to the Standing Committee of the National People's Congress for deliberation
under the 2018 Legislation Plan of the State Council. However, it is uncertain when the draft would be signed into law and whether the
draft version submitted for deliberation or the final version would have any substantial changes from the draft version published by the
MOFCOM. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure,
corporate governance and business operations in many aspects.
39
Among other things, the draft
Foreign Investment Law expands the definition of foreign investment and introduces the principle of "actual control" in determining
whether a company should be treated as a foreign-invested enterprise, or a FIE. According to the definition set forth in the draft Foreign
Investment Law, FIEs refer to enterprises established in China pursuant to PRC law that are solely or partially invested by foreign investors.
The draft Foreign Investment Law specifically provides that entities established in China (without direct foreign equity ownership) but
"controlled" by foreign investors, through contract or trust for example, will be treated as FIEs. Once an entity falls within
the definition of FIE, it may be subject to foreign investment "restrictions" or "prohibitions" set forth in a
"negative list" to be separately issued by the State Council later. If a FIE proposes to conduct business in an industry subject
to foreign investment "restrictions" in the "negative list," the FIE must go through a market entry clearance
by the Ministry of Commerce before being established. A FIE is prohibited from conducting business in an industry subject to foreign investment
"prohibitions" in the "negative list". However, a FIE, during the market entry clearance process, may apply in
writing to be treated as a PRC domestic enterprise if its foreign investor(s) is/are ultimately "controlled" by PRC government
authorities and its affiliates and/or PRC citizens. In this connection, "control" is broadly defined in the draft law to cover
the following summarized categories: (i) holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50%
of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision
making bodies, or having the voting power to exert material influence on the board, the shareholders' meeting or other equivalent
decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject
entity's operations, financial matters or other key aspects of business operations.
The "variable interest
entity" structure, or VIE structure, has been adopted by many PRC-based companies, including us with respect to our MVNO business,
to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under
the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs,
if they are ultimately "controlled" by foreign investors. Therefore, for any companies with a VIE structure in an industry
category that is included in the "negative list" as restricted industry, the VIE structure may be deemed legitimate only if
the ultimate controlling person(s) is/are of PRC nationality (either PRC government authorities and its affiliates or PRC citizens). Conversely,
if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any
operation in the industry category on the "negative list" without market entry clearance may be considered as illegal.
The draft Foreign Investment
Law has not taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, whether or not
these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point. Moreover, it is uncertain
whether the telecommunication business, in which our variable interest entity operates, will be subject to the foreign investment restrictions
or prohibitions set forth in the "negative list" to be issued. If the enacted version of the Foreign Investment Law and the
final "negative list" mandate further actions, such as Ministry of Commerce market entry clearance, to be completed by companies
with existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.
The draft Foreign Investment
Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance,
the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the
applicable FIEs.
Aside from investment implementation
report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is
mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant
with this information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the
persons directly responsible may be subject to criminal liabilities.
40
The enforcement of the labor laws and other
labor-related regulations in the PRC may adversely affect our results of operations.
On June 29, 2007, the Standing
Committee of the National People's Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008 and
was revised on December 28, 2012. The Labor Contract Law introduces specific provisions related to fixed-term employment contracts, part-time
employment, probation, consultation with labor union and employee assemblies, employment without a written contract, dismissal of employees,
severance, and collective bargaining, which together represent enhanced enforcement of labor laws and regulations. According to the Labor
Contract Law, an employer is obliged to sign an unlimited-term labor contract with any employee who has worked for the employer for ten
consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into
twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. The employer must pay severance to an
employee where a labor contract is terminated or expires, with certain exceptions. In addition, the government has continued to introduce
various new labor-related regulations after the effectiveness of the Labor Contract Law. Among other things, it is required that that
annual leave ranging from five to 15 days be made available to employees and that the employee be compensated for any untaken annual leave
days in the amount of three times of the employee's daily salary, subject to certain exceptions. As a result of these regulations
designed to enhance labor protection and increasing labor costs in China, our labor costs have increased. In addition, as the interpretation
and implementation of these new regulations are still evolving, we cannot assure you that our employment practice will at all times be
deemed in compliance with the new regulations. If we are subject to severe penalties or incur significant liabilities in connection with
labor disputes or investigations, our business and results of operations may be adversely affected.
Our failure to make adequate contributions
to various employee benefit plans as required by PRC regulations may subject us to penalties.
Companies operating in China
are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds
and other welfare-oriented payment obligations. Our failure to make contributions to various employee benefit plans and to comply with
applicable PRC labor-related laws may subject us to late payment penalties. If we are subject to such penalties in relation to the underpaid
employee benefits, our financial condition and results of operations may be adversely affected.
If the custodians or authorized users of
our controlling non-tangible assets, including corporate chops and seals, fail to fulfill their responsibilities or misappropriate or
misuse those assets, our business and operations could be materially and adversely affected.
In China, a company chop or
seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Under PRC law, legal
documents for corporate transactions, including contracts and leases that our business relies upon, are executed using "corporate
chops," which are instruments that contain either the official seal of the signing entity or the signature of a legal representative
whose designation is registered and filed with the State Administration for Industry and Commerce, or SAIC.
Our PRC subsidiaries generally
execute legal documents with corporate chops. One or more of our corporate chops may be used to, among other things, execute commercial
sales or purchase contracts, procurement contracts and office leases, open bank accounts, issue checks and to issue invoices. We believe
that it has sufficient controls in place over access to and use of the chops. Our chops, or chops, including the chops at headquarters
level and of each PRC subsidiary, are kept securely at our legal department under the direction of the executive officers at vice president
level or higher. Use of chops requires proper approvals in accordance with our internal control procedures. The custodian at our legal
department also maintains a log to keep a detailed record or each use of the chops.
41
However, we cannot assure
you that unauthorized access to or use of those chops can be prevented. Our designated employees who hold the corporate chops could abuse
their authority by, for example, binding us to contracts against our interests or intentions, which could result in economic harm, disruption
or our operations or other damages to them as a result of any contractual obligations, or resulting disputes, that might arise. If the
party contracting with us asserted that we did not act in good faith under such circumstances, then we could incur costs to nullify such
contracts. Such corporate or legal action could involve significant time and resources, while distracting management from our operations.
In addition, we may not be able to recover corporate assets that are sold or transferred out of our control in the event of such a misappropriation
if a transferee relies on the apparent authority of the representative and acts in good faith.
If a designated employee uses
a chop in an effort to obtain control over one or more of our PRC subsidiaries, we would need to take legal action to seek the return
of the applicable chop(s), apply for a new chop(s) with the relevant authorities or otherwise seek legal redress for the violation of
their duties. During any period where we lose effective control of the corporate activities of one or more of our PRC subsidiaries as
a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted and we could lose the economic
benefits of that aspect of our business. To the extent those chops are stolen or are used by unauthorized persons or for unauthorized
purposes, the corporate governance of these entities could be severely and adversely compromised and the operations of those entities
could be significantly and adversely impacted.
Risks Related to Our Securities
If equity research analysts publish unfavorable
commentary or downgrade our ordinary shares, the price and trading volume of our ordinary shares could decline.
The trading market for our
ordinary shares could be affected by whether equity research analysts publish research or reports about us and our business. We cannot
predict at this time whether any research analysts will publish research and reports on us and our ordinary shares. If one or more equity
analysts do cover us and our ordinary shares and publish research reports about us, the price of our stock could decline if one or more
securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or
our business.
If any of the analysts who
elect to cover us downgrades our stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could
lose visibility in the market, which in turn could cause our ordinary shares price or trading volume to decline and our ordinary shares
to be less liquid.
Future equity issuances could result in
dilution, which could cause our ordinary shares price to decline.
We are generally not restricted
from issuing additional ordinary shares, and there is no limit to the number of ordinary shares that we are authorized to issue by our
memorandum and articles of association. We may issue additional ordinary shares in the future pursuant to current or future equity compensation
plans, upon conversions of preferred shares or debt, upon exercise of warrants or in connection with future acquisitions or financings.
If we choose to raise capital by selling our ordinary shares for any reason, the issuance would have a dilutive effect on the holders
of our ordinary shares and could have a material negative effect on the market price of our ordinary shares.
Future sales of our ordinary shares by existing
shareholders may cause our ordinary shares price to decline.
If our existing shareholders
sell, or indicate an intent to sell, amounts of our ordinary shares in the public market after the contractual lock-up and other legal
restrictions on resale lapse, the trading price of our ordinary shares could decline.
We may issue additional preferred
shares in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our
ordinary shares, which could depress the price of our ordinary shares.
42
Our board also has the power,
without shareholder approval, to set the terms of any series of preferred shares that may be issued, including voting rights, dividend
rights and preferences over our ordinary shares with respect to dividends or in the event of a dissolution, liquidation or winding up
and other terms. In the event that we issue preferred shares in the future that have preference over our ordinary shares with respect
to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute
the voting power of our ordinary shares, the rights of the holders of our ordinary shares or the market price of our ordinary shares could
be adversely affected. In addition, the ability of our Board to issue preferred shares without any action on the part of our shareholders
may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.
Global
economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and
conflicts, such as the conflict between Russia and Ukraine, could make it more difficult for us to access financing and could adversely
affect our business and operations.
Our
abilities to raise capital and operate our business are subject to the risk of adverse changes in the market value of our securities.
Periods of macroeconomic weakness or recession and heightened market volatility caused by adverse geopolitical developments could increase
these risks, potentially resulting in adverse impacts on our ability to raise further capital on favorable terms. The impact of geopolitical
tension, such as a deterioration in the relationships among the US, China, India and European countries or an escalation in conflict between
Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the US and/or
other countries against governmental or other entities in, for example, Russia, also could lead to disruption, instability and volatility
in global trade patterns, which may in turn impact our ability to source necessary reagents, raw materials and other inputs for our operations.
We may be classified as a passive foreign
investment company, which could result in adverse U.S. federal income tax consequence to U.S. holders of our ordinary shares.
We have not made a determination
as to whether we would be classified as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes
for our preceding taxable year nor can we assure you that we will not be a PFIC for our current taxable year or any future taxable year.
A foreign (non-U.S) corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income is
passive income or (2) or least 50% of the value of its assets (generally based on an average of the quarterly values of the assets
during a taxable year) is attributable to assets that produce or are held for the production of passive income. PFIC status depends on
the composition of our assets and income and the value of our assets (including, among others, a pro rata portion of the income and assets
of each subsidiary in which we own, directly or indirectly, at least 25% (by value) of the equity interest) from time to time. Depending
on the amount of cash or cash equivalents we currently hold, which are generally treated as passive assets, and because the calculation
of the value of our assets may be based in part on the value of our ordinary shares, which is likely to fluctuate, we may be a PFIC for
any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. Holder (as defined in the section entitled "Taxation
– U.S. Federal Income Taxation – General") held an ordinary share or warrant, certain adverse U.S. federal income tax
consequences could apply to such U.S. Holder. For more information, see "Taxation – U.S. Federal Income Taxation – U.S.
Holders – Passive Foreign Investment Company Rules."
43
ITEM 4. INFORMATION ON THE COMPANY
Overview
Borqs Technologies, Inc. (formerly
known as "Pacific Special Acquisition Corp.", and hereinafter referred to as the "Company" "Borqs Technologies",
"Borqs" or "we") was incorporated in the British Virgin Islands on July 1, 2015. The Company was formed for the
purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the
assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or
entities.
On August 18, 2017, the Company
acquired 100% of the equity interest of BORQS International Holding Corp. ("Borqs International") and its subsidiaries (collectively
referred to as "Borqs Group" or together with the BVI parent company collectively referred to as the "Group")
in an all-stock merger transaction. Concurrent with the completion of the acquisition of Borqs International, the Company changed its
name from "Pacific Special Acquisition Corp.", to "Borqs Technologies, Inc."
We have employees i) with
the majority of them in Bangalore, India engaged in software engineering in the mobile communication industry, ii) in Beijing, China engaged
in hardware supply chain management and manufacturing, and iii) in Hawaii, Wisconsin and California of the U.S. engaged in design and
installation of solar power and storage solutions for the residential and commercial markets. Our parent company is in the British Virgin
Islands and our agent in the BVI is Kingston Chambers and their address is P.O. Box 173, Road Town, Tortola, British Virgin Islands.
We are a global leader in
software, development services and products providing customizable, differentiated and scalable Android-based smart connected devices
and cloud service solutions. We are a leading provider of commercial grade Android platform software for mobile chipset manufacturers,
mobile device OEMs and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer
applications. We acquired 51% ownership in HHE on October 19, 2021, which designs and commercializes solar power and energy storage solutions
to residential and commercial customers in the United States. As of December 31, 2022, we are in the process of divesting our interest
in HHE as mandated by CFIUS.
Our Connected Solutions business
unit (the "Connected Solutions BU") works closely with chipset partners to develop new connected devices. Borqs developed
the reference Android software platform and hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions
customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment
needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software
and BorqsWare Server Software. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things
("IoT") devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop
their own mobile end-to-end services for their devices.
Previously we operated a mobile
virtual network operator ("MVNO") business via a variable interest entity ("VIE") in China. This business was
sold on October 29, 2020; prior to its disposition we accounted for its activities as discontinued operations and its assets and liabilities
were listed as assets and liabilities held for sale. The sale of this business unit was final and completed as of October 29, 2020.
In the years ended December
31, 2020, 2021 and 2022, Borqs generated 98.4%, 78.2% and 69.9% of its Connected Solutions BU revenues from customers headquartered outside
of China and 1.6%, 21.8% and 30.1% from customers headquartered in China.
We have dedicated significant
resources to research and development, and have research and development centers in Beijing, China and Bangalore, India. As of December
31, 2022, 208 out of the 315 employees and contractors were technical professionals dedicated to platform research and development and
product specific customization in India and China.
44
The following customers accounted
for near 10% or more of our total revenues, for the years indicated:
2022
Metro
    (Suzhou) Technologies Co Ltd
30.1
%
GreatCall,
    Inc.
19.9
%
ECOM
    Instruments
14.1
%
2021
GreatCall,
    Inc.
25.1
%
ECOM
    Instruments
24.5
%
Qualcomm
    India Ltd.
16.4
%
2020
GreatCall,
    Inc.
41.9
%
ECOM
    Instruments
23.1
%
Qualcomm
    India Ltd.
14.4
%
History and Development of the Company
Corporate Organizational Chart
The following diagram illustrates
our current corporate structure and the place of formation, ownership interest and affiliation of each of our subsidiaries and un-consolidated
minority interests in certain entities as of the date of this report.
Borqs Entities Including Wholly-Owned Subsidiaries
and Consolidated Affiliated Entities
●
Borqs Technologies, Inc. (BRQS) – the BVI parent holding company and the listing company.
●
Borqs International Hold Corp (BHolding) – the Cayman Island holding company that was the parent company prior to our listing on NASDAQ in August 2017.
45
●
Borqs Technologies USA, Inc. (BTUSA) – a US entity responsible for commercial contracts with customers that require a US entity for contractual basis.
●
Borqs Technologies (HK) Limited (BTHK）– a Hong Kong entity responsible for signing commercial contracts that do not use Chinese RMB or Indian Rupee. This entity is currently idle.
●
Borqs Hong Kong Limited (BHK) – a Hong Kong entity that holds 60% of the shares of Borqs Technologies Ltd (BTCHN), holds 60% of the shares of Borqs KK (BKK), and holds 100% of Borqs Chongqing Ltd (BCQ) and 100% of Borqs Beijing Ltd (BBJ). This entity signs a majority of our commercial contracts with international customers.
●
Borqs Software Solutions Private Ltd (BIN) – an Indian entity responsible for our software engineering R&D and for signing commercial contracts that require the Indian Rupee currency.
●
Borqs Beijing Ltd. (BBJ) – a wholly foreign owned enterprise, a "WFOE" as it is called, in China. This entity is responsible for the general administration and hardware R&D purposes.
●
Borqs Chongqing Ltd. (BCQ) – a wholly owned foreign enterprise in China that is a holding company for Beijing Big Cloud Century Technology Ltd, and it is responsible for the purchasing and management of the component supplies for the manufacturing of our products.
●
Beijing Big Cloud Century Technology Ltd. (BC-Tech) – an entity in China and is a holding company for Beijing Big Cloud Network Technology Co. Ltd and Beijing Borqs Software Technology Co. Ltd.
●
Beijing Borqs Software Technology Co. Ltd. (BSW) – an entity in China and is responsible for our software R&D.
●
Beijing Big Cloud Network Technology Co. Ltd (BC-NW) – an entity in China that was formerly the holding company of our VIE entities engaged in the business of mobile virtual network operator ("MVNO"). The VIE entities and the MVNO business was sold as of October 2020.
●
Borqs Technologies Ltd. (BTCHN) – a Sino-foreign entity is in China for setting up a manufacturing facility in Huzhou, China, and is a holding company for Borqs Huzhou Ltd (BHZ).
●
Borqs Huzhou Ltd. (BHZ) – an entity is in China and is responsible for operations of our hardware manufacturing activities in Huzhou, China.
●
Borqs KK (BKK) – an entity is in Japan and is responsible for sales activities in Japan.
We have dedicated significant
resources to research and development, and have research and development centers in Bangalore, India and Beijing, China. As of December
31, 2022, out of our total employed headcount of 315 employees and contractors, 208 were technical professionals dedicated to platform
research and development and product specific customization.
For additional information,
see Note 1 in our consolidated financial statements.
Business Units
We had two business units
("BU"), Connected Solutions and Solar Power before the deconsolidation of HHE. And we have only one BU, Connected Solutions
as of December 31, 2022.
46
The Connected Solutions BU
develops wireless smart connected devices and cloud solutions. Borqs provides Connected Solutions' customers with customized, integrated,
commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare
software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The
BorqsWare Client Software platform consists of three major components: the latest commercial grade Android software that works with particular
mobile chipsets, functionality enhancements of the open source Android software and mobile operator required services. Based on the BorqsWare
Client Software platform, customers may require Borqs to provide further customization based on their specific market needs. The BorqsWare
Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things ("IoT") devices.
The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end
services for their devices. The BorqsWare Server Software provides software necessary for upgrades, charging and various APIs that enhance
the customers' services. Based on BorqsWare Server Software service platform, customers may require us to provide further customization
based on their specific needs.
The Solar Power BU, HHE of
which we acquired 51% ownership in October 2021, is a Delaware limited liability company that brings state-of-the-art energy storage systems
to both residential and commercial markets. With operations in Hawaii, Wisconsin and California, HHE designs and develops proprietary
storage system and software and control platform solutions. The HHE team is made up of renewable energy industry veterans, engineering
and deploying energy storage systems that enable greater energy independence.
On December 13, 2022, Borqs
Technologies received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
("CFIUS") stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests and rights
in Holu Hou Energy LLC ("HHE") due to HHE's solar energy storage system and EnergyShare technology for Multi-Dwelling
Residential Units being deemed a potential national security risk.
On March 16, 2023, the Company
and HHE entered into a National Security Agreement ("NSA") with the Department of Defense and Department of Treasury. The
NSA provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill
provisions which provide that the Company shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any
changes to the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession
of any assets of HHE. Further, upon the completion of the Divestment, the Company shall terminate or irrevocably waive any information,
consent, board appointment, board observer, or other governance rights held by the Company, except for any and all rights that are determined
by the U.S. Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the
Divestment: engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes;
assigning and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs'
administrative and technical influence over HHE; and creating a plan to divest all of Borqs' investment interests and rights in
HHE. Pursuant to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment
Trust Agreement ("DTA") dated March 20, 2023 entered into between Borqs, HHE and a trustee.
As above, the Solar Power
BU, a separate segment was deconsolidated on December 31, 2022, and reclassified as held for sale as of December 31, 2021 and 2022, for
the carrying amounts will be recovered principally through a sale and revenues and expenses related to HHE have been reclassified in the
accompanying consolidated financial statements as discontinued operations for fiscal 2022.
Connected Solutions BU
The Connected Solutions BU
helps customers design, develop and realize the commercialization of their connected devices.
47
Ideation & Design
—
Based on customer requirements on the type of connected device the customer want to have, we can help customers design
the product ID and user interface. We have the design engineering to provide 2D/3D rendering. The Company can provide physical mockup
with different color, material and finishes, so the customer can hold and "feel" the mockup before finalizing the product
ID.
Software IP Development
—
IoT devices are often highly customized and require special software to display the data (e.g. circular watch display
and user interface), to reduce the power consumption (e.g., a small battery in a wearable device), to perform specific functions (e.g.,
push-to-talk) and to connect to the mobile network. The Company has developed a large number of software libraries that can be reused
for various connected devices.
Product Realization
—
Some customers have limited hardware design capabilities. The Company has a strong hardware research and development
team to help customers to design the hardware, including the PCBA design and mechanical design. The Company can also provide turn-key
services to help customer to handle the manufacturing logistics (including supply chain and EMS management) in order to manufacture the
product. The Company has the experiences and resources to manage the factory supply chain, quality control and other manufacturing logistics.
Our Connected Solutions business
unit works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and
hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions customers with customized, integrated, commercial
grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software
platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare
Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things ("IoT") devices.
The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end
services for their devices.
The Connected Solutions BU
has a global customer base covering the core parts of the Android platform value chain, including mobile chipset manufacturers, mobile
device OEMs and mobile operators. As of December 2018, Borqs has collaborated with six mobile chipset manufacturers and 29 mobile device
OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software
platform solutions are embedded in more than 17 million units worldwide.
Solar Power BU
We acquired 51% controlling
interest in HHE as of October 19, 2021. HHE develops and commercializes solar power systems that consist of solar modules including solar
panels and electrical components, controllers, inverters and lithium based battery modules associated with the solar modules so as to
provide total independent energy solutions to our residential and commercial customers.
HHE designs, develops,
integrates and installs solar power systems to the residential and commercial customers. The financial results of HHE from the date of
acquisition up to December 31, 2021 were consolidated into Borqs' financial statements. HHE recognizes revenues when the solar power
projects are fully completed. During the period of consolidation, no solar power projects were completed, and consequently no revenues
from HHE was recognized. The cash receipts from customers from ongoing projects and newly started projects were booked as deferred revenue.
HHE was deconsolidated on
December 31, 2022. Assets and liabilities related to HHE, which the Group acquired in October 2021 were reclassified as held for sale
as of December 31, 2021 and 2022, and revenues and expenses related to Solar Energy segment were reclassified as discontinued operations
for all periods presented.
48
Customers
The Company's primary
customers are mobile chipset manufacturers, mobile device OEMs and mobile operators. For the year ended December 31, 2022, Metro (Suzhou)
Technologies Co Ltd, GreatCall, Inc., Qualcomm India Ltd and ECOM Instruments accounted for 30.1%, 19.9%, 16.5% and 14.1% of our net revenues,
respectively. For the year ended December 31, 2021, GreatCall, Inc., ECOM Instruments and Qualcomm India Ltd accounted for 25.1%, 24.5%
and 16.4% of our net revenues, respectively. For the year ended December 31, 2020, GreatCall, Inc., ECOM Instruments and Qualcomm India
Ltd accounted for 41.9%, 23.1% and 14.4% of our net revenues, respectively.
The Connected Solutions BU
designs chipsets and related software for mobile connected devices. The Company outsources manufacturing of connected devices to third-party
factories. The Company sources components and raw materials from suppliers mainly in Asia, and consigns such components and raw materials
to other factories to manufacture and assemble. The Company serves as an original design manufacturer (ODM) of the products for its customers.
The Company sells the final products to its commercial customers. The Company's commercial customers are responsible for marketing
and retail distribution.
Research and Development
The Company has dedicated
significant resources to research and development, with research and development centers in Bangalore, India, Beijing, China and Wisconsin,
the United States. As of December 31, 2022, 208 of our 315 employees and contractors were technical professionals dedicated to platform
research and development and product specific customization. Technical professionals have diverse backgrounds and experience gained through
employment with leading mobile chipset designers and manufacturers, mobile device OEMs, internet content providers and other software
and hardware enterprises, and also solar energy usage, storage, load balancing and system controlling software systems.
The Company's research
and development centers work together to develop core proprietary software, and each center focuses on project specific implementation
related to specific hardware platforms and customer specifications. The Company technical professionals are divided into two core groups,
one focused on our Android+ software platform solutions, and one focused on our Android+ service platform solutions. Each group is further
divided into sub-groups for platform development, system engineering and architecture, low-level software development, high-level application
development, program management, system testing and verification and software configuration management.
Our current research and development
efforts are focused on developing the BorqsWare software and service platform solutions to improve and enhance the following aspects of
the Android platform:
●
stability and reliability;
●
performance and power management;
●
Android platform integration with various kinds of chipsets;
●
usability, input mechanism and display mechanism;
●
security and anti-hacking of applications;
●
in-country localization;
●
automated cross applications software testing;
●
radio network specific functionality, such as FDD-LTE and TD-LTE; and
●
mobile operator end-to-end services; and integration of mobile Internet services with traditional telecommunication services, such as integration of instant messaging with short messaging.
49
A typical research and development
project is staffed with members of the sales team, a research and development team comprised of a project manager, a platform development
team, a customer development team and a system testing team, as well as finance personnel. At the beginning of a project, a member of
the sales team will work with a project manager to simultaneously track research and development and commercial milestones. The project
manager is responsible for ensuring the research and development milestones are achieved in a timely manner, including system testing,
and a member of the sales team is responsible for tracking sales milestones. Finance personnel review each invoice and determine the appropriate
accounting treatment under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). A typical research and development
project takes between six to nine months to complete. In general, a significant portion of each research and development project consists
of existing Android platform software and service solutions, while incorporating necessary customizations for a particular customer.
Intellectual Property
The Company regards patents,
copyrights, trademarks, software registrations, trade secrets and similar intellectual property as critical to its success. The Company
relies on a combination of trademark, copyright, patent, software registration and trade secret laws, and enters into confidentiality
agreements with employees and relevant third parties to protect our intellectual property rights. All employees enter into agreements
requiring them to keep confidential all proprietary and other information relating to customers, methods, technologies, business practices
and trade secrets.
The Company has been granted
133 patents in China and 8 patents in the United States as of December 31, 2022. The Company also has 83 software copyrights and 20 trademarks
registered in China. In addition, the Company has registered its domain name with various domain name registration services.
Competition
The Company believes that
the marketplace for connected devices is highly fragmented, but that few are capable of providing an end-to-end solution with software,
hardware, product realization. The solar industry is anchored with several large companies while many small companies across the U.S.
also provide customized installations.
The market for connected devices
and solar solutions is rapidly evolving, and in the future the Company may not be able to compete successfully against current and potential
competitors. The Company expects competition to intensify as new competitors enter the market, and as existing competitors attempt to
diversify and expand their software and service solutions offerings. The primary competitors for the Company include traditional hardware-centric
OEMs and software development companies.
●
The traditional OEMs are strong in hardware design and own factories, but they are very weak in software development as well as not familiar with operator and mobile chipset requirement;
●
The large software development companies have sizable software teams and global coverage, but they are very weak in hardware design and manufacturing expertise;
●
Some of the Company's competitors have significantly greater financial, technical, marketing, sales and other resources and significantly greater name recognition than we have.
50
Competitive Strengths
We believe the following factors
differentiate us from our competitors and contribute to our success:
Strategic relationships with leading
chipset vendors.
The Company works closely
with leading chipset vendors in their software development, including software for their latest state-of-the-art chipsets. The Company
develops connected device products and solutions based on these chipsets. These relationships enable the Company to develop a competitive
product portfolio.
Strong software capabilities
across core parts of the Android platform value chain drive a full suite of BorqsWare software and services platform solutions and a significant
time to market advantage for customers.
The Company has focused on
building its innovative technology platform to serve customers across the core parts of the Android platform value chain. We believe the
Company was first to develop commercial grade software to support video telephony for Android. In collaboration with China Mobile, the
Company developed the base chipset software to deploy Android-based mobile devices to support China Mobile's TD-SCDMA network.
Unique technologies in
our subsidiary's solar solution, particularly in the battery management system provides a comparative advantage for our solar energy
plus storage systems.
Our proprietary software and
battery management system enables reduction in hardware costs as compared to other systems with similar power output levels, especially
for multiple-unit residential applications.
Global customer base and extensive
industry relationships
.
The Company had more than
50 customers as of December 31, 2022, including some of the world's leading companies in the mobile industry. Its diversified customer
base includes mobile chipset manufacturers, mobile device original equipment manufacturers ("OEMs") and mobile operators.
Through 2021, the Company has collaborated with more than six mobile chipset manufacturers (including Intel, Qualcomm, Marvell) and 29
connected device OEMs (including LGE, Micromax, Acer, Motorola and Vizio) to commercially launch Android-based devices in 11 countries,
and more than 18 million mobile devices sold worldwide have BorqsWare software platform solutions embedded. Our products have been deployed
by more than 10 service providers (including AT&T, China Mobile, Claro, Orange, Reliance Jio, Sprint, Verizon) on four continents.
Significant resources dedicated to
research and development; Patents
.
The Company dedicated significant
financial and human resources to research and development needed to build a full suite of connected device software and service platform
solutions to address evolving customer needs across the core parts of the Android platform value chain.
Government Regulation
The Company's operations
are subject to extensive and complex state, provincial and local laws, rules and regulations. The PRC government restricts or imposes
conditions on foreign investment in telecommunication business. Borqs International Holding Corp and its PRC subsidiaries are considered
foreign persons or foreign-invested enterprises under PRC foreign investment related laws. As a result, they are subject to PRC legal
restrictions on or conditions for foreign ownership of telecommunication business.
51
Employees
As of December 31, 2022, we
had 315 employees and contractors worldwide including 194 in India, 80 in China and Hong Kong, and 41 international employees. None of
our employees are represented by a labor union. Out of our total headcount, 208 are engineers and technical staff engaged in R&D and
design work.
The Company pays most of its
employees a base salary and performance-based bonuses, including annual incentive bonuses and project-based bonuses. It pays commissions
to sales personnel. Employees are also eligible to participate in the Company's stock incentive program.
The Company is required under
PRC laws and regulations to participate in a government-mandated, defined benefit plan for its full-time employees, pursuant to which
we provide social welfare benefits, such as pension, medical care, unemployment insurance, work-related injury insurance, maternity insurance
and employee housing fund. The Company employees are not covered by any collective bargaining agreement. The Company believes it has good
relations with its employees.
The Company uses a variety
of methods to recruit technical professionals to ensure that it has sufficient research and development and other expertise on an ongoing
basis, including the company website, an external online recruiting website, targeted technical forums, campus recruitment at leading
technical universities and institutions, job fairs and internal referrals from current employees.
The Company offers training
programs to its employees covering professional training such as training related to customer service and product management and technical
training such as training related to telephony and project management. The Company holds periodic workshops to enhance the leadership
skills of management personnel.
Description of Properties
The Company's principal
executive offices are located in Hong Kong. The Company leased office and warehouse spaces pursuant to leases as described below.
Locations
Approximate Size
Primary Uses
Lease Expiration Date
Bangalore, India
4400 sq. meters
R&D
May 31, 2023
Beijing, China
738 sq. meters
Management office
March 31, 2024
Huzhou Zhejiang, China
5348 sq. meters
R&D, and manufacturing
February 18, 2024
The Company mostly subcontracts manufacturing
to other factories. At the Company's Huzhou facility, there is an assembly line with capacity for half a million units per year
for small orders.
Segments
As of December 31, 2022, we
operate in one reportable segment, which is the Connected Solutions. See Note 2, Segment Reporting, of our notes to consolidated financial
statements.
52
Geographic Concentration
The following table sets forth
the Company's connected solutions net revenues from customers, in absolute amount and as a percentage of net revenues, based on
location of the customer's headquarters.
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
($'000)
United States
13,495
50.5
%
9,138
30.9
%
15,430
29.4
%
India
5,437
20.3
%
6,500
22.0
%
13,559
25.8
%
China
428
1.6
%
6,446
21.8
%
15,819
30.1
%
Rest of the World
7,391
27.6
%
7,477
25.3
%
7,729
14.7
%
Net Revenues
26,751
100.0
%
29,561
100.0
%
52,537
100.0
%
The Company's connected
solutions net revenues from customers with headquarters in the United States are attributed to its ongoing collaboration with a prominent
mobile chipset vendor and other mobile device OEMs. From 2020 to 2022, we engaged with one significant customer in India who continued
to place significant orders with us in all three years.
Recent Developments
Senior Debt Purchased by LMFA Financing LLC
The Company entered into Agreements
dated December 14, 2020 with Partners For Growth which was its senior lender and LMFA Financing LLC ("LMFA"), a Florida limited
liability company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA was committed to purchase up to
be approximately $18 million of debt in tranches, which when completed would eliminate substantially all of the debt with the Company's
senior lender. LMFA would convert the purchased debt into common shares of the Company, pursuant to a court order that allows the conversion
shares to be issued as unrestricted securities in a transaction that is exempt from registration under Section 3(a)(10) of the Securities
Act of 1933, as amended.
As of February 10, 2021, LMFA
has completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted into and sold all 22.73 million
shares of the Company's ordinary shares. With the Company settling another $1.27 million of debt, accrued interest and applicable
fees directly with the senior lender by the issuance of 1.51 million shares on February 17, 2021 which the senior lender subsequently
sold, the Company's defaulted Debts with the senior lender totaling $19.14 million have been eliminated since.
Convertible Notes Sold
The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million (the "May 25 Notes"). The notes are due in
two years, have an annual interest rate of 10%, convertible into ordinary shares of Borqs at $0.44325 per share (post reverse split adjusted)
and has 100% warrant coverage with the warrants exercisable for cash or cashlessly at the closing bid price of 2 days prior to exercising
but not less than $0.41 per share.
The Company signed agreements
with institutional and individual investors for sale of convertible notes on February 25, 2021 for $20 million (the "Feb 25 Notes")
and on April 14, 2021 for $3 million (the "April 14 Notes"). The notes are due in two years, have an annual interest rate
of 8%, convertible into ordinary shares of Borqs at 10% discount from the market price and has 90% warrant coverage with the warrants
exercisable cashless or for cash at $2.222 per share for the Feb 25 Notes and $1.540 for the Apr 14 Notes. The conversion price is at
$1.539 per share for the Feb 25 Notes and $1.071 per share for the Apr 14 Notes, or at a one-time reset at 90% of the market price at
the time of effectiveness of the required registration statement, whichever is lower. One-third of the notes are sold at the execution
of definitive agreements and two-thirds of the notes were sold upon the effectiveness of a registration statement filed by the Company
and such effectiveness was declared by the SEC on May 3, 2021.
53
The Company sold convertible
notes on September 14, 2021 to institutional and individual investors for $13.575 million (the "Sep 14 Notes"). The notes
are due in two years, have an annual interest rate of 8%, convertible into ordinary shares of Borqs at 10% discount from the market price
and has 90% warrant coverage with the warrants exercisable cashless or for cash at $0.8682 per share. The conversion price is at $0.6534
per share, or at a one-time reset at 90% of the market price of the time of effectiveness of registration statement or when Rule 144 becomes
applicable, whichever is lower.
The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million. The notes are due in two years, have 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 90% of the closing bid
price of the ordinary shares on the date that such shares are first eligible to be sold, assigned or transferred under Rule 144 or Regulation
S, as applicable, whichever is lower but in no event at less than $0.10 per ordinary share.
Proceeds will be used for
the procurement of orders the Company expects to receive from its customers in 2023 and also for development of the next generation 5G
products.
Available Information
Our annual reports on Form 20-F,
current reports on Form 6-K, and other forms and periodic reports as a foreign private issuer, are available free of charge on our
website (
www.borqs.com
) as soon as reasonably practicable after we have electronically filed such materials with or furnished such
materials to the Securities and Exchange Commission. They are also available at
www.sec.gov
.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
54
ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS
The following discussion of
the results of our operations and our financial condition should be read in conjunction with the financial statements and the notes to
those statements included in "Item 18. Financial Statements". This discussion contains forward-looking statements that involve
risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements
as a result of many factors, including those set forth in "Item 3. Key Information–D. Risk Factors".
References in this Annual
Report to "we," "us" or the "Company" refer to Borqs Technologies, Inc. References to our "management"
or our "management team" refers to our officers and directors. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained
elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
This Annual Report includes
"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of historical fact included in this Annual Report including,
without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and the plans and objectives of management for future operations,
are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend,"
"estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs,
based on information currently available. A number of factors could cause actual events, performance or results to differ materially from
the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could
cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section
of this Annual Report. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov
.
Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise.
Overview
Borqs Technologies, Inc. ("we",
"the Company" or "Borqs") is a company focused on software, development services and products providing customizable,
differentiated and scalable Android-based smart connected devices and cloud service solutions. We are a leading provider of commercial
grade Android platform software for mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as complete product
solutions of mobile connected devices for enterprise and consumer applications. In recent years, we have been awarded significant business
contracts from Intel and Qualcomm, leading global chipset manufacturers. Particularly, significant contracts from Qualcomm were awarded
to us in 2019, 2020 and also in 2021.
Pursuant to the Company's
acquisition of Borqs International Holding Corp ("Borqs International") by way of merger, which completed on August 18, 2017,
Borqs International became a wholly-owned subsidiary of the Company, with the Company adopting the business of Borqs International and
its consolidated subsidiaries going forward and reporting the historical consolidated financial statements of Borqs International on future
SEC filings as those of the Company, which was renamed Borqs Technologies, Inc.
55
Our Connected Solutions business
unit works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and
hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions customers with customized, integrated, commercial
grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software
platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare
Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things ("IoT") devices.
The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end
services for their devices.
In the years ended December
31, 2020, 2021 and 2022, Borqs generated 98.4%, 78.2% and 69.9% of its connected solutions net revenues from customers headquartered outside
of China and 1.6%, 21.8% and 30.1% of its net revenues from customers headquartered within China.
We acquired 51% ownership
of HHE on October 19, 2021. HHE designs, develops, integrates and installs solar power systems to the residential and commercial customers
including solar panels and lithium battery based energy storage systems. HHE recognizes revenues when the solar power projects are fully
completed. The cash receipts from customers from ongoing projects and newly started projects were booked as deferred revenue. For the
year ended December 31, 2021, the financial results of HHE from the date of acquisition up to December 31, 2021 were consolidated into
Borqs' financial statements. During the period of consolidation in 2021, no solar power projects were completed, and consequently
no revenues from HHE was recognized. For the year ended December 2022, revenues from HHE were $4.0 million and classified in discontinued
operations.
We have dedicated significant
resources to research and development, and have research and development centers in Beijing, China and Bangalore, India. As of December
31, 2022, 208 of our 315 employees and contractors were technical professionals dedicated to platform research and development and product
specific customization.
We have achieved significant
growth since inception in 2007. Net revenues from continuing operations of the Connected Solutions BU increased for the years ended December
31, from $75.1 million in 2015 to $85.4 million in 2016, to $122.2 million in 2017, to $128.4 million in 2018, but scaled back to $98.9
million in 2019. Our operations were significantly affected by the COVID-19 pandemic in 2020, and recorded only $26.8 million in revenues
for the year 2020. We grew back to $29.6 million in revenues for the year 2021. We recorded a net loss of $12.8 million in 2017 which
included non-cash merger related costs of $14.5 million. In the year 2018 we incurred a net loss of $72.0 million which included $6.2
million in cost of goods for one transaction in which the related revenue was not recognized in 2018 due to uncertainty in collectability,
non-recurring charges of $5.3 million in arbitration loss, write-off and provision for doubtful accounts and current assets of $30.1 million,
write-down of historical inventory due to loss & obsolescence of $11.8 million, impairment of long-term investment of $13.0 million,
deferred income tax benefits of $1.7 million, impairment of intangible assets due to the pending sale of the MVNO business unit of $0.8
million, share based compensation of $1 million, and $3.0 million in stock offering expenses. In the year 2020, we incurred a net loss
of $34.8 million which included professional fees of $3.6 million, salaries and welfare of $2.6 million, non-recurring penalties of $1.1
million, share-based compensation expense of $20.0 million and contingency loss of $3.1 million and allowance for doubtful accounts of
$4.4 million, offset by gain on disposal of Yuantel of $10.1 million. In the year 2021, we incurred a net loss of $56.6 million which
included professional fees of $2.1 million, salaries and welfare of $6.1 million, interest expense related to debt discount of $9.9 million,
share-based compensation expense of $17.5 million and impairment loss of $1.3 million and loss on debt settlement of $17.2 million, offset
by reversal of contingency loss of $3.3 million and gain on debt forgiveness of $2.1 million. In the year 2022, we incurred a net loss
of $38.9 million, consisted of loss from continuing operation of $29.0 million and loss from discontinued operation of $9.9 million. For
the loss from continued operation, which included professional fees of $1.4 million, salaries and welfare of $6.1 million, interest expense
related to debt discount of $11.4 million, share-based compensation expense of $3.4 million.
56
Key Factors Affecting Results of Operations
Revenue mix impacts our overall
gross profit and gross margin. In particular:
Connected Solutions BU
. Revenue
from product sales is the largest component of Connected Solutions BU revenue. Product sales gross margin is primarily affected by competition,
cost of components and intellectual property royalties. Gross margin for engineering design fees and software royalties tends to be higher
because the associated cost of revenues is lower than that for hardware products and pricing is less subject to competitive pressure.
In addition, because product sales and software royalties are generally calculated on a per-unit basis, our revenue will vary depending
upon the volume of product sales. Engineering design fees are generally not related to volume of product sales.
Connected Solutions BU net
revenues and gross profits are affected by general factors in the highly competitive mobile industry, such as shifts in consumer preferences
and customer demands, technological innovations, competing mobile operating systems, and pricing trends. Results are also affected by
developments in the Android platform and software market specifically, such as Google's continued support of the Android platform,
continued availability of a free and open source software license for that platform, continued deployment of the Android platform, and
continued outsourcing of software development to third party providers. Unfavorable changes in any of these factors could affect market
demand for our solutions and materially adversely affect our revenues and results of operations. Revenues and gross profit in the Connected
Solutions BU are also affected by Company-specific factors, including:
●
We rely on a limited number of customers for a significant portion of our net revenues, particularly our relationship with a customer that is a prominent mobile chipset manufacturer. We also rely on this mobile chipset manufacturer from a strategic viewpoint, since products that we develop for this customer may also be scaled to other mobile device OEM customers. We devote a significant portion of our research and development resources to this effort. Our results of operations would be significantly harmed if our collaboration with this customer was to decline or its Android-related product development efforts were not successful.
●
Our ability to grow our net revenues depends on our ability to expand our customer base, both in terms of number of customers and geographic concentration, and also increase the number of projects we undertake for existing and new customers. Our ability to do so depends on the success of our products and services and those of our customers, and on our marketing and sales performance.
●
Our ability to maintain our position as one of the largest independent Android platform software company will require us to continue to strengthen our technology expertise and capabilities by focusing our research and development to maintain technology leadership and offer advanced Android platform software and service solutions on our customers' demanding timelines. In addition, our ability to grow our revenues will largely depend on how quickly we and our customers can roll out new products and services.
●
Competing successfully in the Android platform and software market requires us to maintain a competitive pricing structure, including labor costs and operating expenses. Competition for software engineers is intense, particularly in mainland China and in India.
Solar Power BU
. HHE
designs, develops, integrates and installs solar power systems to the residential and commercial customers. The financial results of HHE
from the date of acquisition up to December 31, 2021 were consolidated into Borqs' financial statements. HHE recognizes revenues
when the solar power projects are fully completed. During the period of consolidation, no solar power projects were completed, and consequently
no revenues from HHE was recognized.
57
On December 13, 2022, Borqs
Technologies received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
("CFIUS") stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests and rights
in Holu Hou Energy LLC ("HHE") due to HHE's solar energy storage system and EnergyShare technology for Multi-Dwelling
Residential Units being deemed a potential national security risk.
On December 31, 2022, the
Company resolved that in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Company
must adhere to, including: (i) Entering into a National Security Agreement with various departments of the US government with a plan that
is effective, monitorable and verifiable to divest Borqs' investment interests and rights in HHE; (ii) Selection of a trustee and
entering into a Divestment Trust Agreement, and assigning the Company's interest in HHE to the trustee; and, (iii) Selection of
a nationally recognized investment bank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of
December 31, 2022, terminate its control of HHE by (i) removal of all of the Company's representatives from HHE's Board of
Directors, (ii) relinquishment of Class A Membership Unit voting rights, and (iii) reduction of the Company's ownership of HHE from
51% down to 49% by assigning 2% of the ownership back to HHE. By taking above actions, the Company no longer has a controlling interest
in HHE and result in deconsolidation of HHE.
On March 16, 2023, the Company
and HHE entered into a National Security Agreement ("NSA") with the Department of Defense and Department of Treasury. The
NSA provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill
provisions which provide that the Company shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any
changes to the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession
of any assets of HHE. Further, upon the completion of the Divestment, the Company shall terminate or irrevocably waive any information,
consent, board appointment, board observer, or other governance rights held by the Company, except for any and all rights that are determined
by the U.S. Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the
Divestment: engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes;
assigning and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs'
administrative and technical influence over HHE; and creating a plan to divest all of Borqs' investment interests and rights in
HHE. Pursuant to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment
Trust Agreement ("DTA") dated March 20, 2023 entered into between Borqs, HHE and a trustee.
The Company's solar
power business met the criteria to be reported as a discontinued operation and, as a result, HHE's historical financial results
are reflected in the Company's consolidated financial statements as a discontinued operation, and assets and liabilities were retrospectively
reclassified as assets and liabilities held for sale for all periods presented.
The aggregate amount of cash
and cash equivalent and restricted cash are not materially affected by currency fluctuations because the majority of our revenues are
denominated in U.S. Dollars based on contracts made in Hong Kong. Financings from sales of equity and working capital loans are denominated
in U.S. Dollars and executed in Hong Kong and the Cayman Islands, and repayments have been made in U.S. Dollars outside of China, thus
not requiring approval from the PRC State Administration of Foreign Exchange. Personnel and personnel-related expenses are primarily paid
in the Indian and Chinese currencies, and costs of components used in the Connected Solutions and Solar Power Business Units and hardware
revenues are primarily paid in U.S. Dollars. As of December 31, 2022, we held cash and cash equivalents totaling $11.3 million on a consolidated
basis.
58
Results of Operations
The following table sets forth
a summary of the Company's consolidated results of operations for the periods indicated. The activities indicated herewith were
from our Connected Solutions BU, our continuing operations; they did not include activities from our MVNO BU which were classified as
discontinued operations. This information should be read in conjunction with our consolidated financial statements and related notes included
elsewhere or incorporated by reference in this Annual Report. The operating results in any period are not necessarily indicative of results
that may be expected for any future period.
Comparisons of Fiscal Years Ended December
31, 2020, 2021 and 2022
Fiscal Years Ended December 31,
Consolidated Statement of Operations Data:
2020
2021
2022
($'000)
Net revenues
26,751
29,561
52,537
Cost of revenues
(25,155
)
(26,955
)
(41,421
)
Gross profit
1,596
2,606
11,116
Operating expenses
(42,216
)
(29,003
)
(12,051
)
Other operating income
-
247
148
Operating loss
(40,620
)
(26,150
)
(787
)
Other income (expense)
4,937
(29,505
)
(28,099
)
Loss from continuing operations, before income taxes
(35,683
)
(55,655
)
(28,886
)
Income tax (expense) benefit
(409
)
445
(59
)
Net loss from continuing operations
(36,089
)
(55,210
)
(28,945
)
Discontinued operations
Income (loss) from operations of discontinued operations
1,302
(1,392
)
(9,916
)
Income tax benefit (expense)
-
-
-
Income (loss) on discontinued operations
1,302
(1,392
)
(9,916
)
Net loss
(34,787
)
(56,602
)
(38,861
)
Less: net income (loss) attributable to noncontrolling interests
715
(737
)
(4,829
)
Net loss attributable to Borqs Technologies, Inc.
(35,502
)
(55,865
)
(34,032
)
For year ended December 31,
2020, we incurred a net loss of $34.8 million which included professional fees of $3.6 million, salaries and welfare of $2.6 million,
non-recurring penalties of $1.1 million, share-based compensation expense of $20.0 million, impairment of intangible assets of $0.7 million
and contingency loss of $3.1 million   and allowance for doubtful accounts of $4.4 million, offset by gain on disposal of a
subsidiary of $10.1 million. For the year ended December 31, 2021, we incurred a net loss of $56.6 million which included professional
fees of $2.1 million, salaries and welfare of $6.1 million, interest expense related to debt discount of $9.9 million, share-based compensation
expense of $17.5 million and impairment loss of $1.3 million and loss on debt settlement of $17.2 million, offset by reversal of contingency
loss of $3.3 million and gain on debt forgiveness of $2.1 million. For the year ended December 31, 2022, we incurred a net loss of $38.9
million, consisted of loss from continuing operation of $29.0 million and loss from discontinued operation of $9.9 million. For the loss
from continued operation, which included professional fees of $1.4 million, salaries and welfare of $6.1 million, interest expense related
to debt discount of $11.4 million, share-based compensation expense of $3.4 million.
59
Net Revenue
Our net revenues represent
our gross revenues, less PRC value added taxes and other deductions. Connected Solutions BU net revenues consist of engineering design
fees, software royalties and product sales. MVNO BU net revenues, which business was sold as of October 29, 2020 were classified as discontinued
operations, consist primarily of monthly recurring revenue. Solar Power BU net revenues include solar panel and energy storage systems
sales and service fees, which were classified as discontinued operations for the year ended December 31, 2021 and 2022.
For the year ended December
31, 2022, net revenues from Connected Solutions BU were $52.5 million representing a 77.7% increase from the previous year. The increase
in business activities in 2022 was mainly attributable to the increase in both our hardware and software revenue. For the year ended December
31, 2021, all of our revenue of $29.6 million were generated from Connected Solutions BU. Although there was continuous impact of COVID-19
pandemic, our revenue increased $2.8 million or 10.5% when comparing with fiscal 2020.
As our Connected Solutions
BU did not engage in any retail activities in the countries where our customers were located and also not within China; and we concluded
the fluctuations in our revenues between the years were not indicative of market conditions. Instead, our hardware sales of our Connected
Solution BU comprised of all made-to-order products with quantities as stipulated by our customers, and also included consumer and industrial
use devices as well. As such, the orders we receive from our customers may not adhere to seasonality and therefore fluctuations in our
business activity levels may not conform to any particular trend.
As our Solar Power BU, HHE,
which was acquired on October 19, 2021, designs, develops, integrates and installs solar power systems including solar panels and energy
storage systems for residential and commercial customers, we recognize revenues when the solar power systems are delivered, installed
and connected through various phases, and are fully completed according to milestone-based contracts. The cash receipts from customers
from ongoing projects and newly started projects were booked as deferred revenue. During the period of consolidation in 2021, no solar
power projects were completed, and consequently no revenues from HHE was recognized. For the year ended December 31, 2022, the revenues
for our Solar Power BU was $4.0 million, and was classified in discontinued operations.
Net Revenues — Connected Solutions
BU
Connected Solutions BU net
revenues consist of engineering design fees, software royalties and product sales. It represents our continuing operation for the years
ended December 31, 2020, 2021 and 2022.
As discussed more fully under
"— Critical Accounting Policies and Estimates — Revenue Recognition — Project-Based Software Contracts,"
the Company's project-based software contracts include post-contract support, or PCS, where the customer has the right to receive
unspecified upgrades/enhancements on a when-and-if available basis. Since we are unable to establish vendor-specific objective evidence
of fair value of post contract services, or PCS, revenues from project-based software contracts are recognized on a straight-line basis
over the longest expected delivery period of undelivered elements of the arrangement, which is typically the PCS period. Project-based
software contracts that include PCS, which have a typical PCS period of 12 months. As a result of this revenue recognition method, some
portion of the net revenues we report in each period is recognition of deferred revenues from contracts entered into in prior periods
and for which the research and development and engineering work has already been completed. In addition, a majority of the project-based
software contracts provide for usage-based royalties. We recognize royalties upon the receipt of quarterly usage reports provided by customers.
60
The following table sets forth
our net revenues, as well as the components of such revenues, for the periods indicated, both in absolute amount and as a percentage of
total net revenues:
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
($'000)
Software
10,570
39.5
%
10,732
36.3
%
13,080
24.9
%
Hardware
16,181
60.5
%
18,829
63.7
%
39,457
75.1
%
Connected Solutions BU net revenues
26,751
100.0
%
29,561
100
%
52,537
100
%
Software
Software net revenues were
$10.6, $10.7 and $13.1 million in the years ended December 31, 2020, 2021 and 2022, respectively, representing 39.5%, 36.3% and 24.9%
of our continuing operations Connected Solutions BU net revenues. For the year ended December 31, 2020, our software net revenues were
$10.6 million which represented 39.5% of total net revenues, as our software activities were not affected as severely as our hardware
activities by the COVID-19 pandemic. For the year ended December 31, 2021, our software net revenues were $10.7 million which represented
36.3% of total net revenues. It was stable when comparing with our software net revenues for the year ended December 31, 2020. For the
year ended December 31, 2022, our software net revenues were $13.1 million which represented 24.9% of total net revenues. It increased
22% when comparing with our software net revenues for the year ended December 31, 2021. The software revenue increased mainly due to the
related service orders increased and new customers signed.
Hardware
Hardware net revenues were
$16.2 million, $18.8 million and $39.5 million in the years ended December 31, 2020, 2021 and 2022, respectively, representing 60.5%,
63.7% and 75.1% of our continuing operations Connected Solutions BU net revenues. Again, as discussed above, these fluctuations may not
be attributed to any particular market trend since our sales were all made to order for our industrial customers. Types of products include
wearables such as trackers and smart watches, ruggedized handsets, tablets and smart phones and mobile connectivity modules. As described
above, hardware sales comprised of all made-to-order products with quantities as stipulated by our customers and included consumer and
industrial use devices as well. As such, the orders we receive from our customers may not adhere to seasonality and therefore fluctuations
in our business activity levels may not conform to any particular trend.
All hardware sales were contracted
and made to order, and our sales were final without taking returns. Small percentages of replacement units and parts were provided to
customers and those costs were included in cost of revenues. We provide engineering design work as specified by our customers, and production
begins after the customer accepts the design. We are responsible for procurement of all components, materials and tooling, and for selection
of third-party factories for product assembly. Revenue is recognized when ownership of products is transferred to the customers. We are
not engaged in the marketing and distribution of the hardware products.
61
Customer Concentration
We were initially focused
on research and development efforts for providing BorqsWare software platform solutions to mobile device OEMs. We have since leveraged
our deep technology expertise to provide BorqsWare software platform solutions to mobile chipset manufacturers. The following table sets
forth net revenues by type of customer, both in absolute amount and as a percentage of net revenues for the periods presented:
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
($'000)
Mobile device OEMs
22,905
85.6
%
24,718
83.6
%
43,883
83.5
%
Mobile Chipset Vendors
3,846
14.4
%
4,843
16.4
%
8,654
16.5
%
Connected Solutions BU Net Revenues
26,751
100
%
29,561
100
%
52,537
100
%
We expect our net revenues
from mobile device OEMs to continue to grow as we develop more connected devices, especially IoT products.
Geographic Concentration
The following table sets forth
our net revenues from customers based on location of the customer's headquarters, both in absolute amount and as a percentage of
net revenues. These figures do not take into account the geographic location of end-users of customer products:
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
($'000)
United States
13,495
50.5
%
9,138
30.9
%
15,430
29.4
%
India
5,437
20.3
%
6,500
22.0
%
13,559
25.8
%
China
428
1.6
%
6,446
21.8
%
15,819
30.1
%
Rest of the world
7,391
27.6
%
7,477
25.3
%
7,729
14.7
%
Net revenues
26,751
100.0
%
29,561
100.0
%
52,537
100.0
%
The Company's net revenues
from customers with headquarters in the United States are attributed to its ongoing collaboration with a prominent mobile chipset vendor
and other mobile device OEMs. From 2020 to 2021, revenues from customers with headquarters in China declined, while our main customer
in India, Reliance Retail Limited, continued to place significant orders with us through 2021. From 2021 to 2022, revenues from customers
with headquarters in China increased mainly due to a customer, named Metro (Suzhou) Technologies Co Ltd placed more orders during the
year ended December 31, 2022. Our main customer in the United States for the years 2021 and 2022 was GreatCall, Inc.
62
Net Revenues from discontinued operations
— MVNO BU
The MVNO BU provides a full
range of 2G/3G/4G mobile communication services to consumers, as well as some traditional commercial telephony services. In 2014, the
MVNO BU entered into a business agreement with China Unicom, the incumbent mainland China mobile network operator to obtain bulk access
to network services at wholesale rates in 2014. The MVNO BU has its own brand in mainland China, "Yuantel." MVNO BU net revenues,
consisting of "MVNO" and "Other" revenues are entirely from mainland China. "Other" revenues are primarily
related to traditional commercial telephony services, such as conference call services. We intended to sell the MVNO BU in 2018 and as
of February 2019, we signed agreements with buyers for all of our interests in the MVNO BU. The sale was originally scheduled to be completed
by the end of 2019. Due to the on-going investigation by the Yunnan Public Security Bureau, we received only partial payment from the
sale in 2019. A new agreement was executed with the buyers as of September 1, 2020 and the sale was finally completed as of October 29,
2020.
Net Revenues from discontinued operations
— Solar Power BU
For our Solar Power BU, HHE
designs, develops, integrates and installs solar power systems to the residential and commercial customers including solar panels and
lithium battery based energy storage systems. HHE recognizes revenues when the solar power projects are fully completed. The financial
results of HHE from October 19, 2021 to December 31, 2021, and for the year ended December 31, 2022 were classified as discontinued operations.
During the period of from October 19, 2021 to December 31, 2021, no solar power projects were completed, and consequently no revenues
from HHE was recognized. During the year ended December 31, 2022, $4.0 million revenue recognized and recorded in the discontinued operations.
The cash receipts from customers from ongoing projects and newly started projects were booked as deferred revenue.
Cost of Revenues
Cost of our continuing operations
Connected Solutions BU revenues primarily consists of personnel and personnel-related costs associated with engineering projects paid
for by customers, and costs of hardware components used to manufacture products. Cost of our discontinued operations MVNO BU revenues
primarily consists of wholesale traffic fees, paid to the incumbent operator, based on traffic consumed by subscribers to the MVNO network.
The incumbent operator also charges us a minimum wholesale tariff based on the number of mobile phone numbers issued to the Company.
The following table sets forth
cost of revenues, both in absolute amount and as a percentage of total cost of revenues, for Connected Solutions BU revenue from our continuing
operation, and MVNO BU revenue and Solar Power BU revenue from our discontinued operations. Activities for the MVNO BU only included those
from January 1 through October 29, 2020.
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
($'000)
Continuing operation:
Connected Solutions BU
25,155
53.8
%
26,955
100.0
%
41,421
83.5
%
Discontinued operations:
MVNO BU
21,637
46.2
%
-
-
-
-
Solar Power BU
-
-
-
-
8,160
16.5
%
Total cost of revenues
46,792
100.0
%
26,955
100.0
%
49,581
100.0
%
63
Connected Solutions BU cost
of revenues varied from 2020 to 2021 in attribution to similar changes in our volume of hardware products sales during these years. Our
cost of revenue increased $1.8 million or 7% when comparing with that of fiscal 2020. It mainly attributes to the hardware cost increase
of $2.1 million, and offset by the software cost decreased of $0.3 million. Connected Solutions BU cost of revenues increase significantly
from 2021 to 2022 in line with our revenue increase in Connected Solutions BU.
Gross Profit and Gross Margin
Gross profit represents net
revenues less cost of revenues. Gross margin represents gross profit as a percentage of revenues.
Gross profits for our continuing
operations Connected Solutions BU in the years ended December 31, 2020, 2021 and 2022 were a gross profit of $1.6 million, $2.6 million,
and $11.1 million, respectively.
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
(Gross Profit in $'000, Gross Margin in %)
Continuing operations:
Connected Solutions BU
1,596
6.0
%
2,606
8.8
%
11,116
21.2
%
Connected Solutions BU gross
profits include gross profits from software projects and gross profits from hardware projects. As shown in the following table, software
and hardware gross margins in the year ended December 31, 2020 was 8.3% and 4.4% respectively, which were lower than the normal levels
due to the COVID-19 pandemic. For the year ended December 31, 2021, our gross margins increased in both software and hardware 12.1% and
6.9% respectively from the year ended December 31, 2020. For the year ended December 31, 2022, our gross margins increased in both software
and hardware 53.0% and 10.6% respectively.
For the years ended December 31,
2020
2021
2022
$
%
$
%
$
%
(Gross Profit in $'000, Gross Margin in %)
Software
879
8.3
%
1,303
12.1
%
6,931
53.0
%
Hardware
717
4.4
%
1,303
6.9
%
4,185
10.6
%
Total
1,596
6.0
%
2,606
8.8
%
11,116
21.2
%
Software projects are further
categorized as design, royalty and service projects, reflecting the nature of the work:
●
Design projects consist primarily of non-recurring engineering fees for which we provide customized work according to our clients' required functionalities and needs;
●
Royalty projects consist of per unit royalties based on customer usage of our previously completed software products; and
●
Service projects where our engineers perform engineering services following the instructions of the customers, charging them hourly fees on full time equivalent basis.
64
For our discontinued operations
MVNO BU gross profits were $7.4 million from January 1 through October 29, 2020 when the MVNO BU was sold. For our discontinued operations
Solar Power BU gross profits were nil and negative $4.0 million for the years ended December 31, 2021 and 2022, respectively. Gross margin
as a percentage of sales is presented in the following table.
For the years ended December 31,
2020 (up to Oct 29)
2021
2022
$
%
$
%
$
%
(Gross Profit in $'000, Gross Margin in %)
Discontinued operations:
MVNO BU
7,387
25.5
%
-
-
-
-
Solar Power BU
-
-
-
-
(4,126
)
(102.3)
%
Operating Expenses
For our continuing operations,
the operating expenses principally consist of sales and marketing expenses, general and administrative expenses, and research and development
expenses. The following table sets forth operating expenses for the periods indicated, both in absolute amount and as a percentage of
net revenues:
For the years ended December 31,
2020
2021
2022
$
As % of Revenue
$
As % of Revenue
$
As % of Revenue
($'000)
Sales and marketing expenses
(750
)
2.8
%
(151
)
0.5
%
(341
)
0.6
%
General and administrative expenses
(33,304
)
124.5
%
(23,558
)
79.7
%
(7,186
)
13.7
%
Research and development expenses
(8,162
)
30.5
%
(5,294
)
17.9
%
(4,524
)
8.6
%
Total
(42,216
)
157.8
%
(29,003
)
98.1
%
(12,051
)
22.9
%
For the year ended December
31, 2020, general and administrative expenses were $33.3 million which included professional fees of $3.6 million, salaries and welfare
of $2.6 million, impairment of intangible assets of $0.7 million, non-recurring penalties of $1.1 million, share-based compensation expense
of $18.1 million and allowance for doubtful accounts of $4.4 million. For the year ended December 31, 2021, general and administrative
expenses were $23.6 million which included professional fees of $2.1 million, salaries and welfare of $3.7 million, impairment loss of
$1.3 million, share-based compensation expense of $17.4 million, offset by reversal of allowance for doubtful accounts of $1.8 million.
For the year ended December 31, 2022, general and administrative expenses were $7.2 million which mainly included professional fees of
$1.4 million, salaries and welfare of $3.4 million, and share-based compensation of $2.2 million.
For our discontinued operations
MVNO BU, the operating expenses which consisted of selling, administrative and research expenses were $6.1 million or 20.9% of revenues
for the year 2020 up to October 29, 2020 when the MVNO BU was sold. For our discontinued operations Solar Power BU, the operating expenses
which consisted of selling and administrative expenses were $1.1 million and $4.0 million for the years ended December 31, 2021 and 2022,
respectively.
65
Research and Development Expenses
Research and development expenses
include payroll, employee benefits, share-based compensation and other headcount-related expenses associated with the development of the
BorqsWare software platform and solar power systems, as well as outsourcing and third party service expenses. Research and development
expenses also include rent, depreciation and other expenses for platform development and other projects that are not customer-specific.
Selling and Marketing Expenses
Selling and marketing expenses
include payroll, employee benefits and other expenses relating to our sales and marketing personnel, travel, rent and other expenses relating
to our marketing activities, including entertainment and advertising. For the discontinued operations MVNO BU, we paid our franchisees
commission to sell products, which are recognized as selling and marketing expenses. For the discontinued operations Solar Power BU, the
selling and marketing expenses mainly consisted of payroll and other staff costs relating to the sales and marketing personnel.
General and Administrative Expenses
Our general and administrative
expenses include payroll, employee benefits, professional fees, rent, travel and other administrative costs.
General and administrative
expenses comprised 124.5%, 79.7% and 13.7% of net revenues for the years ended December 31, 2020, 2021 and 2022, respectively.
For the year ended December
31, 2020, general and administrative expenses included professional fees of $3.6 million, salaries and welfare of $2.6 million, non-recurring
penalties of $1.1 million, share-based compensation expense of $18.1 million and allowance for doubtful accounts of $4.4 million included
a rebate receivable of $1.4 million written off due to the circumstance changed and lack of collectability for the year ended December
31, 2020.
For the year ended December
31, 2021, general and administrative expenses included professional fees of $2.1 million, salaries and welfare of $3.7 million, impairment
loss of $1.3 million, share-based compensation expense of $17.4 million, offset by reversal of allowance for doubtful accounts of $1.8
million.
For the year ended December
31, 2022, general and administrative expenses included professional fees of $1.4 million, salaries and welfare of $3.4 million, and share-based
compensation expense of $2.2 million.
Other Operating Income – or expenses
We received subsidies from
local government authorities in China as financial support for certain technology development projects. These subsidies are classified
as "Other operating income". We recognized $nil, $0.2 million and $0.1 million of other operating income in the years ended
December 31, 2020, 2021 and 2022, respectively. Subsidies are recorded as a liability when received and recognized as other operating
income when the related projects are completed and the subsidies are not subject to future return. Under the requirements of the government
subsidies, we are obligated to make progress on the related technology development projects, based on the timetable established by the
government authorities, and to appropriately allocate the government subsidies for various purposes.
66
Other Income/Expense
Fiscal Years Ended December 31,
Other income/expense
2020
2021
2022
Interest income
5
3
47
Interest expense
(3,795
)
(11,680
)
(11,732
)
Other income
231
2,376
240
Other expense
(210
)
(3,207
)
(2,123
)
Gain (loss) on disposal of subsidiary
10,096
(303
)
-
Contingency (loss) reversal
(3,065
)
3,277
-
Gain (loss) on debt settlement
26
(17,199
)
217
Change in fair value of contingent consideration for the acquisition of HHE
-
111
-
Loss on additional acquisition cost in shares to HHE
-
-
(5,950
)
Loss related to equity financing
-
-
(3,669
)
Loss on deconsolidation of a subsidiary
-
-
(3,610
)
Foreign exchange gain (loss)
1,649
(2,661
)
(1,519
)
Interest expense
During the year ended December
31, 2022, the interest expense of $11.7 million mainly consisted of interest expense related to our convertible notes discount of $11.4
million.
During the year ended December
31, 2021, the interest expense of $11.7 million mainly consisted of interest expense related to our convertible notes discount of $9.9
million. The debt discount, together with the related issuance cost are amortized as interest expense, using the effective interest method,
from the issuance date to the earliest maturity date.
Other income
During the year ended December
31, 2022, other income of $240 thousand mainly included reversal of over-accrued expenses.
During the year ended December
31, 2021, other income of $2.4 million mainly included gain on debt forgiveness of $2.1 million. We entered into an account payable forgiveness
agreement with a supplier in December 2021.We have long cooperation relationship with the supplier, and there was long-aging balance of
account payable due to the supplier. The supplier agreed to waive part of the long-aging account payable balance with the amount of $2.1
million, and retained the remaining part of the balance. According to the agreement, we wrote off $2.1 million of liability and recorded
as other income in the consolidated statement of operations.
Other expense
During the year ended December
31, 2022, other expense of $2.1 million mainly included an expense related to Samsung arbitration compensation. The Company executed a
settlement agreement with Samsung regarding the payments with a payment period of eighteen months beginning on July 2022.
During the year ended December
31, 2021, other expense of $3.2 million mainly included an expense related to a lawsuit. We had a balance due to a debtor. The original
debtor claimed that we have breached the previously agreed settlement agreement, and transferred the debt to the third-party company during
the year ended December 31, 2021. We recorded $2.1 million as other expense in the consolidated statement of operations.
67
Contingency (loss) reversal
During the year ended December
31, 2020, one of the nominee shareholders of Big Cloud Network denied his entrustment relationship with us and claimed his rights and
interests proceeds of the disposal of Yuantel. Although there were agreements between the Group and the nominee shareholder, there was
no direct evidence to show the entrustment relationship between both parties, which may not be supported by the existing PRC laws and
regulation. As a result, we assessed that a probable loss could be incurred. We estimated a loss ranged from $3.2 million to $3.6 million
based on the best estimate of the information available. Because of there was no amount within the range would be a better estimate than
any other amount, the minimum amount of $3.1 million was recorded as a contingent loss during the year ended December 31, 2020.
During the year ended December
31, 2021, the nominee shareholder of Big Cloud Network signed an agreement with us, to transfer his equity share in Big Cloud Network
to one of the Group's subsidiaries. By transferring all the shareholder's rights and obligations under the agreement, the
nominee shareholder no longer has any rights in Big Cloud Network or rights and interests in the proceeds of disposal of Yuantel. As a
result, the probable loss has been reversed with the amount of $3.3 million has been recorded as gain on reversal of contingent loss during
the year ended December 31, 2021.
Loss (gain) on debt settlement
We entered into Agreements
dated December 14, 2020 with PFG and LMFA Financing LLC ("LMFA"), a Florida limited liability company and wholly owned subsidiary
of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA was committed to purchase up to be approximately $18 million of debt in tranches,
which when completed would eliminate substantially all of the debt with the Company's senior lender. LMFA would convert the purchased
debt into common shares of the Company, pursuant to a court order that allows the conversion shares to be issued as unrestricted securities
in a transaction that is exempt from registration under Section 3(a)(10) of the Securities Act of 1933, as amended.
As of February 10, 2021, LMFA
completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted and sold all 1.42 million (post
reverse split adjusted) shares of the Company's ordinary shares. With the Company settling another $1.27 million of debt, accrued
interest and applicable fees directly with the senior lender by the issuance of 94,170 (post reverse split adjusted) shares on February
17, 2021 which the senior lender subsequently sold, the Company's defaulted Debts with the senior lender totaling $19.14 million
have been eliminated since. We recognized loss of $16.6 million in loss on debt settlement during fiscal year 2021.
We entered into a $1 million
short term loan agreement with American West Pacific International Investment Corporation ("AWP") in December 2020, to fund
the Company's working capital purposes. The loan had an original term of six months with interest of 12% per annum. And 250,000
(post reverse split adjusted) restricted ordinary shares to be held in escrow at Continental Stock Transfer & Trust Company as collateral.
On June 15, 2021, we have settled the $1 million loan principal with 99,206 (post reverse split adjusted) shares. We recognized loss of
$0.6 million in loss on debt settlement during fiscal year 2021.
We recorded total loss on
debt settlement of $17.2 million during the year ended December 31, 2021.
During the year ended December
31, 2022, we recorded $0.2 million gain on debt settlement, represented gain on a loan settlement with our ordinary shares issued.
Loss on additional acquisition cost in shares
to HHE
We recorded a loss on additional
acquisition cost in shares to HHE of $6.0 million during the year ended December 31, 2022. The Company issued additional 5 million
shares to HHE for the substantial loss in value for the share consideration during the acquisition of HHE in 2021.
68
Loss related to equity financing
We recorded a loss related
to equity financing of $3.7 million during the year ended December 31, 2022. The Company entered into an equity financing agreement
with a third-party company on May 16, 2019. According to the agreement, the counter-party purchased 9.9 % equity interest of the Company
equivalent to 233,392 (post reverse split adjusted) ordinary shares with a total purchase consideration of $13,865, for which 75% of the
total purchase consideration amounting to $10,399 in cash was received. The remaining 25% of the total purchase consideration will be
contributed in the form of real property and equipment. In February 2023, the Company entered into a settlement agreement with the
third-party on the settlement of the equity financing. Both parties agreed to not proceed with the remainder 25% investment in the form
of real property and equipment, and the related previous issued 58,348 (post reverse split adjusted) shares will not withdraw. As a result,
the amount was released from subscriptions receivable and recorded as loss related to equity financing during the year ended December
31, 2022.
Loss on deconsolidation of a subsidiary
We recorded a loss on deconsolidation
of HHE of $3.6 million during the year ended December 31, 2022. The Company no longer has a controlling interest in HHE as at December
31, 2022 and result in deconsolidation of HHE.
Income Tax Expense
Our effective tax rate was
1.1%, -0.8% and 0.2% for years ended December 31, 2020, 2021 and 2022, respectively. The fluctuation through these years was primarily
due to the fact that the loss experienced by certain of our subsidiaries could not be used to offset gains in other subsidiaries. The
Group recorded valuation allowance for the entities, which were considered more likely than not that a portion of the deferred tax assets
will not be realized through sufficient future earnings.
Liquidity and Capital Resources
Cash used in operating activities
for the year ended December 31, 2022 was $5.5 million, primarily consisted of net loss of $29.0 million, reversal of provisions on accounts
receivable and other current assets of $0.02 million, and adding back non-cash items including share-based compensation expenses to employees
and non-employees of $3.4 million, amortization of intangible assets of $1.4 million, depreciation of property and equipment of $0.4 million,
amortization of right of used assets of $0.5 million, interest expense related to the convertible notes discount of $11.4 million, gain
on loan conversion of $0.2 million, loss on shares compensation of $6.0 million, loss related to equity financing of $3.7 million and
loss on deconsolidation of a subsidiary of $3.6 million. Cash used in operating assets and liabilities included decrease in accrued expenses
of $3.7 million, decrease in amount due to related parties of $1.8 million, increase in account payable of $1.4 million and decrease in
account receivable of $1.1 million, while cash generated from changes in operating assets and liabilities included decrease in prepaid
expenses and other current assets of $6.3 million, increase in advance from customers and contract liabilities of $3.6 million, and increase
in inventory of $2.0 million.
Cash used in investing activities
for the year ended December 31, 2022 was $3.4 million, which mainly included purchase of time deposit of $1.4 million, Cash disposed of
from deconsolidation of a subsidiary of $1.1 million, purchase of property, plant and equipment of $0.7 million and investment in convertible
bond and cash loan of $0.1 million.
Cash generated by financing
activities for the year ended December 31, 2022 was $14.9 million which included proceeds from issuance of convertible notes of $15.1
million, and proceeds from capital injection from non-controlling shareholders of a subsidiary of $0.1 million, proceeds from short-term
and long-term loans of $0.3 million, offset by repayment of bank and other borrowings of $0.6 million.
We have in the past breached
certain financial covenants under our loan agreements with SPD Silicon Valley Bank Co., Ltd. ("SVB") and PFG4 during 2017
and the year ended December 31, 2018. No liabilities were generated by the breaches. Such breach could result in acceleration of the repayment
according to the contract term. For the year ended December 31, 2018, certain covenants were not met; but we had not been notified by
lenders that they intend to seek to accelerate the loan payments because of such breaches and neither lender had expressly waived such
breaches and any resulting defaults. As of April 18, 2019, all of the SSVB loans were replaced by PFG, which became our sole commercial
lender. Although all of the covenants obligated to SSVB no longer existed since the SSVB loans were paid off, the Company did not meet
certain financial covenants according to the loan agreements with PFG.
69
On June 28, 2019, PFG executed
an agreement with the Company effective in July 2019, which waived our covenant defaults up through the end of June 2019, and allowed
the Company to begin testing of newly agreed upon revenue and EBITDA covenants which are more reflective of the operations of the Company
without the MVNO BU, starting with the month of August 2019. Specifically, (i) quarterly revenue requirements were reduced to $27,500,000
commencing with the quarter ending September 30, 2019; provided that any failure to meet such requirement may be cured by evidencing at
least $120,000,000 in trailing 12-month revenue; and (ii) the three-month trailing EBITDA target was reduced to $1,350,000, commencing
with the month ended August 31, 2019. In connection with the execution of such waiver agreement, the Company paid a waiver and modification
fee of $30,000, subject to an additional $20,000 fee in the event that the above-referenced financial covenants are not met in future
periods.
On March 8, 2019, the Group
entered into a new revolving line of credit facility (the "RLOC") with PFG5 for $12,500,000. Under the agreement: (i) $9,500,000
may be drawn upon request at any time on or after the closing date and (ii) so long as there is no uncured default at the time of drawdown
and if the Company has received at least US$10,000 in cash proceeds from the sale of its equity securities to investors, then an additional
$3,000,000 may be drawn. Any outstanding amounts under the RLOC will accrue interest at a rate of 11% per annum with a maturity date of
March 8, 2021 (the "Maturity Date"). The Group shall pay interest only on principal outstanding on the RLOC until the Maturity
Date, on which date the entire unpaid principal balance on the RLOC plus any and all accrued and unpaid interest shall be repaid. In March
2019, the Company drew down $9,500,000 from the RLOC.
As of October 2019, due to
geographic changes in our business activities, significant amounts of our accounts receivable shifted from our Hong Kong subsidiary to
our Indian subsidiary. This reduction of accounts receivable from our Hong Kong entity has caused a covenant breach according to the PFG
loan agreements and caused the interest rate of the PFG loans to be increased to 18%.
Senior Debt Purchased by
LMFA Financing LLC
The Company entered into Agreements
dated December 14, 2020 with PFG and LMFA Financing LLC ("LMFA"), a Florida limited liability company and wholly owned subsidiary
of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA was committed to purchase up to be approximately $18 million of debt in tranches,
which when completed would eliminate substantially all of the debt with the Company's senior lender. LMFA would convert the purchased
debt into common shares of the Company, pursuant to a court order that allows the conversion shares to be issued as unrestricted securities
in a transaction that is exempt from registration under Section 3(a)(10) of the Securities Act of 1933, as amended.
As of February 10, 2021, LMFA
completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted and sold all 1.42 million (post
reverse split adjusted) shares of the Company's ordinary shares. With the Company settling another $1.27 million of debt, accrued
interest and applicable fees directly with the senior lender by the issuance of 94,170 (post reverse split adjusted) shares on February
17, 2021 which the senior lender subsequently sold, the Company's defaulted Debts with the senior lender totaling $19.14 million
have been eliminated since.
Convertible Notes Sold
The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million (the "May 25 Notes"). The notes are due in
two years, have an annual interest rate of 10%, convertible into ordinary shares of Borqs at $0.44325 per share (post reverse split adjusted)
and has 100% warrant coverage with the warrants exercisable for cash or cashlessly at the closing bid price of 2 days prior to exercising
but not less than $0.41 per share.
70
The Company signed agreements
with institutional and individual investors for sale of convertible notes on February 25, 2021 for $20 million (the "Feb 25 Notes")
and on April 14, 2021 for $3 million (the "Apr 14 Notes"). The notes are due in two years, have an annual interest rate of
8%, convertible into ordinary shares of Borqs at 10% discount from the market price and has 90% warrant coverage with the warrants exercisable
cashless or for cash at $2.222 per share for the Feb 25 Notes and $1.540 for the Apr 14 Notes. The conversion price is at $1.539 per share
for the Feb 25 Notes and $1.071 per share for the Apr 14 Notes, or at a one-time reset at 90% of the market price at the time of effectiveness
of the required registration statement, whichever is lower. One-third of the notes were sold at the execution of definitive agreements
and two-thirds of the notes were sold upon the effectiveness of a registration statement on May 4, 2021.
The Company signed agreement
with institutional and individual investors for sale of convertible notes on September 14, 2021 for $27.15 million (the Sep 14 Notes).
The notes are due in two years, have an annual interest rate of 8%, convertible into ordinary shares of Borqs at 10% discount from the
market price and has 90% warrant coverage with the warrants exercisable cashless or for cash at $0.8682 per share. The conversion price
is at $0.6534 per share or at a one-time reset at 90% of the market price at the time of effectiveness of the required registration statement
or availability to trade the converted shares under Rule 144, whichever is lower. Only half, or $13.575 million of the notes were sold.
Proceeds from the sale of
notes were used for the procurement of orders the Company expects to receive from its customers, for development of the next generation
5G products, and also for acquisition of 51% of HHE.
On May 25, 2022, the Company
signed agreements with institutional and individual investors, for the sale of $16 million in secured convertible notes. The notes are
due in two years, have 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 90% of the closing bid price of the ordinary shares on the date that such shares are first eligible to be sold, assigned
or transferred under Rule 144 or Regulation S, as applicable, whichever is lower but in no event at less than $0.10 per ordinary share.
The Company also issued warrants to purchase an aggregate of 96,793,708 ordinary shares at an exercise price of $0.2090 per share, subject
to adjustment in certain conditions. The Company issued the notes and warrants on May 25, 2022.
We were operating at a loss
for the years ended December 31, 2021 and 2022. Our ability to meet the working capital requirements is subject to the risks relating
to the demand for and prices of our services in the market, the economic conditions in our target markets, the successful operation of
our connected solution, timely collection of payment from our customers and the availability of additional funding. In the next 12 months,
we will rely on the sale of convertible notes of which one-third has been completed and the other two-third to be completed upon the effectiveness
of a registration statement to be filed by the Company.
The sale of equity and convertible
debt securities will result in dilution to our shareholders and certain of those securities may have rights senior to those of our shares
of capital stock. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing,
these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could
require us to relinquish valuable rights. Economic conditions may affect the availability of funds and activity in equity markets. We
do not know whether additional funding will be available on acceptable terms, or at all. If we are not able to secure additional funding
when needed, we may have to delay, reduce the scope of, or eliminate certain of our programs, or make changes to our operating plans.
71
Impact of the COVID-19
pandemic
As discussed earlier in the
Rick Factors section of this report, we have experienced since February 2020 reductions and cancellations of orders due to effects of
the COVID-19 pandemic has on the demand from certain of our customers. We expect this negative effect on global business activities will
continue to have pressure on the Company's sales as the pandemic environment persists and perhaps even post the pandemic. In addition,
since our operations span over the countries of the United States, India, China and South Korea, international and intra-country travel
restrictions will continue to hamper our operations and have negative effects including delays and uncertainties on our supply chain delivery
schedules and our abilities to secure financing for our working capital needs. We expect the impacts of COVID-19 to have an adverse effect
on our business, financial condition and results of operations. Our revenue for the year 2020 was negatively impacted by the pandemic
by a reduction of 73.0% as compared to 2019. Although our revenues in 2022 improved 77.7% as compared to 2021, the impact of the continuing
COVID-19 pandemic in the year 2023 and beyond is still unknown as of the filing of this annual report and may cause our revenues in future
periods to decline. As the assessable risks due to COVID-19 change in the countries of India and China, our operations can be affected,
including the restrictions from accessing office facilities and limitations on domestic travels which can hamper our ability to efficiently
manage the manufacturing of products since our contracted factories are located over various cities in China.
As our sales have been negatively
impacted by the pandemic in 2020, we cut back our operational costs by reduction of approximately 20% of our workforce in India and 40%
of our headcount in China. We constantly evaluate our financial position according to changes in the international business environment
and depending on forecast of orders from our customers in the near future, we may further reduce staffing as necessary.
Cash transfers from our subsidiaries
inside China to our subsidiaries outside of China are subject to PRC government control of foreign exchange. Restrictions on the availability
of foreign currency may affect the ability of our subsidiaries inside China to remit sufficient foreign currency to pay dividends or other
payments to us, or otherwise satisfy their obligations. See "Item 1A. Risk Factors — Risks Related to Doing Business in China
— Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company"
and "Item 1A. Risk Factors — Risks Related to Doing Business in China —Restrictions on foreign currency may limit our
ability to receive and use our revenue effectively."
Critical Accounting Policies
The Company prepares its financial
statements in accordance with U.S. GAAP, which requires it to make judgments, estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the end of each fiscal period and the reported amounts
of revenues and expenses during each fiscal period. The Company continually evaluates these judgments and estimates based on its own historical
experience, knowledge and assessment of current business and other conditions, and expectations regarding the future based on available
information and assumptions that it believes to be reasonable, which together form the basis for making judgments that are not readily
apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could
differ from those estimates. Some of the Company's accounting policies require a higher degree of judgment than others in their
application.
The selection of critical
accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results
to changes in conditions and assumptions are factors that should be considered when reviewing the Company's financial statements.
The Company believes the following accounting policies involve the most significant judgments and estimates used in the preparation of
its financial statements.
Revenue Recognition
The Company recognizes revenue
when persuasive evidence of an arrangement exists, as evidenced by signed contracts, delivery has occurred, the sales price is fixed or
determinable and collection is reasonably assured.
72
Project-based Contracts
The Company accounts for revenue
from project-based software contracts as "Software" revenue. The Company's project-based contracts are generally considered
multiple element arrangements since they include perpetual software licenses, development services, such as customization, modification,
implementation and integration, and post-contract support where customers have the right to receive unspecified upgrades and enhancements
on a when-and-if-available basis.
The Company provides customized
Android+ software platform solutions that are developed to maximize the commercial grade quality or performance of open source Android+
software for integration with particular chipsets. The Group also provides customized Android+ service platform solutions that are end-to-end
software developed for mobile operators to allow data synchronization between their platform and mobile devices. The Company charges its
customers, mainly including mobile device manufacturers and mobile operators, fixed fees for project-based software contracts, as well
as per chip or per mobile device royalty fees.
As of January 1, 2019, the
Company adopted ASC 606 for revenue recognition from contracts with customers. For the sales derived from software development project
in which the customer's contract specifies the technical requirements of the software product, the Company recognizes revenue upon
the customers sign off the final acceptance and it is probable that the Company will collect the payments. For the sales derived from
this type of software development project with a post-contract-service period ("PCS Period"), the Company recognizes revenue
upon the PCS period ends and it is probable that the Company will collect the payments. The Company recognizes non-recurring engineering
fees upon the customers sign off the final acceptance and it is probable that the Company will collect the payments (start of hardware
product delivery schedule).
Additional discussions on
ASC 606 are provided in below Note 2 of the Accompanying Notes to Financial Statements, under the heading (u) Revenue recognition.
Service Contracts
The Company provides research
and development services to certain customer to develop software where fees are charged on a time and material basis and the Company is
not responsible for the outcome of such development projects. The revenue is recognized as the "Software" revenue as the services
are delivered.
Connected Devices Sales Contracts
The Company accounts for revenue
from sales of connected devices as "Hardware" revenue. Revenue is recognized when sale of each final hardware product to the
customers are delivered.
Warranty is provided to all
connected device customers as an integral part of the product sales. The Company has determined that the likelihood of claims arising
from warranties is remote, based on historical experience. The basis for the warranty accrual is reviewed periodically based on actual
experience.
Solar Power Solutions
On October 19, 2021, the Company
purchased 51% controlling interest in Holu Hou Energy, LLC (HHE). HHE engages in the design and installation of solar power systems including
solar panels and energy storage systems for residential and commercial use. On December 13, 2022, Borqs Technologies received a letter
from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States (CFIUS) stating that the Company
is required to fully divest its ownership interests and rights in HHE due to HHE's solar energy storage system and EnergyShare technology
for Multi-Dwelling Residential Units being deemed a potential national security risk.
73
Due to the mandates from the
CFIUS, HHE was deconsolidated on December 31, 2022. Assets and liabilities related to HHE, which the Group acquired in October 2021 were
reclassified as held for sale as of December 31, 2021 and 2022, and revenues and expenses related to Solar Energy segment were reclassified
as discontinued operations for all periods presented. HHE was deconsolidated as of December 31, 2022.
MVNO Subscriber Usage Payment
The Company's MVNO subscribers
pay a fee based on the actual minutes of voice call made, megabytes of data consumed, number of SMS/MMS sent and supplementary services
(e.g. caller-ID display) subscribed. These are considered as "MVNO" revenue. The Company is the principal in providing the
bundled voice and data services to Chinese consumers, thus revenue is recognized on a gross basis. Revenue is recognized when the services
are actually used. Our MVNO business unit was sold as of October 29, 2020.
Traditional Telecom Services
The Company provides traditional
telecom services such as voice conferencing services and 400 toll free services. These are considered as "Others" revenue
and are recognized based on the actual consumption by customers. This activity also ended with the sale of the MVNO business unit.
Discontinued operations
A component of a reporting
entity or a 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, having the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued
operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial
results. Discontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed
of, if the component either (1) represents a strategic shift or (2) have a major impact on an entity's financial results and operations.
In the consolidated statement of operations, result from discontinued operations is reported separately from the income and expenses from
continuing operations and prior periods are presented on a comparative basis. Cash flows for discontinued operations are presented separately.
Assets and liabilities of the discontinued operations are classified as held for sale when the carrying amounts will be recovered principally
through a sale transaction.
Income Taxes
In preparing its consolidated
financial statements, the Company must estimate its income taxes in each of the jurisdictions in which it operates. The Company estimates
actual tax exposure and assess temporary differences resulting from different treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which is included in the consolidated balance sheet. The Company must then
assess the likelihood that it will recover its deferred tax assets from future taxable income. If the Company believes that recovery is
not likely, it must establish a valuation allowance. To the extent it establishes a valuation allowance or increases this allowance, the
Company must include an expense within the tax provision in its consolidated statement of operations. If actual results differ from these
estimates or the Company adjusts these estimates in future periods, it may need to establish an additional valuation allowance, which
could materially impact its financial position and results of operations.
U.S. GAAP requires that an
entity recognize the impact of an uncertain income tax position on the income tax return at the largest amount that is more likely than
not to be sustained upon audit by the relevant tax authority. If the Company ultimately determines that payment of these liabilities
will be unnecessary, it will reverse the liability and recognize a tax benefit during that period. Conversely, the Company records additional
tax charges in a period in which it determines that a recorded tax liability is less than the expected ultimate assessment. The Company
did not recognize any significant unrecognized tax benefits during the periods presented in this Annual Report.
74
Uncertainties exist with respect
to the application of the EIT Law and its implementation rules to the Company's operations, specifically with respect to tax residency
status. The EIT Law specifies that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes
if their "de facto management bodies" are located within the PRC. The EIT Law's implementation rules define the term
"de facto management bodies" as establishments that carry out substantial and overall management and control over the manufacturing
and business operations, personnel, accounting, properties, etc. of an enterprise. On April 22, 2009, the Notice Regarding the Determination
of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or
Circular 82, was issued. Circular 82 provides certain specific criteria for determining whether the "de facto management body"
of a Chinese-controlled offshore-incorporated enterprise is located in China. Further the Administrative Measures of Enterprise Income
Tax of Chinese controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin No. 45, took effect on September 1, 2011, and
provides more guidance on the implementation of Circular 82.
According to Circular 82,
a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC tax resident by virtue of having a "de facto management
body" in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions
set forth in Circular 82 are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating
to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the
PRC; (iii) the enterprise's primary assets, accounting books and records, company seals and board and shareholder resolutions are
located or maintained in the PRC; and (iv) at least 50.0% of voting board members or senior executives habitually reside in the PRC. In
addition, Bulletin No. 45 provides clarification in resident status determination, post-determination administration and competent tax
authorities. It also specifies that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese-controlled
offshore- incorporated enterprise, the payer should not withhold 10% income tax when paying certain Chinese-sourced income, such as dividends,
interest and royalties to the Chinese-controlled offshore-incorporated enterprise.
Although both the circular
and the bulletin only apply to offshore enterprises controlled by PRC enterprises and not those by PRC or foreign individuals, the determination
criteria set forth in the circular and administration clarification made in the bulletin may reflect the SAT's general position
on how the "de facto management body" test should be applied in determining the tax residency status of offshore enterprises
and the administration measures should be implemented, regardless of whether they are controlled by PRC enterprises or PRC individuals.
Despite the uncertainties
resulting from limited PRC tax guidance on the issue, the Company does not believe that its legal entities organized outside of the PRC
are tax residents under the EIT Law. If one or more of its legal entities organized outside of the PRC were characterized as PRC tax residents,
the Company's results of operations would be materially and adversely affected.
Recent Accounting Pronouncements
Refer to Note 2, Summary
of Significant Accounting Policies - Recent accounting pronouncements, of the notes to our consolidated financial statements included
in this Annual Report for information regarding the effect of newly adopted accounting pronouncements on our financial statements.
Off-Balance Sheet Arrangements
With the exception of items
discussed under "Contractual Obligations" below we do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources that are material
to investors.
75
Contractual Obligations
As of December 31, 2022, payment
obligations under short-term and long-term debt, operating leases, and other long-term liabilities were as following:
Amount
($'000)
Obligations less than one year
Operating facilities leases
$
604
Arbitration loss to a supplier
$
1,593
Arbitration loss to Samsung Electronics Co., Ltd.
1,958
Obligations from 1 to 3 years
Operating facilities leases
$
39
Arbitration loss to a supplier – non-current
$
417
Obligations from 3 to 5 years
Operating facilities leases
$
-
Related Party Transactions
(a) Related parties
Names of related parties
Relationship
Bluecap
A company controlled by a key management of the Group
Hareesh Ramanna
Executive Vice President and Co-General Manager of Connected Solutions Business Unit
Other than disclosed elsewhere, The Group had
the following significant related party transactions for the years ended December 31, 2020, 2021 and 2022:
For the years ended December 31,
2020
2021
2022
($'000)
($'000)
($'000)
Software services provided to Bluecap
507
-
-
(c) Other than disclosed elsewhere, the Group
had the following significant related party balances for the years ended December 31, 2020, 2021 and 2022:
For the years ended December 31,
2020
2021
2022
($'000)
($'000)
($'000)
Loan from:
Bluecap
2,695
1,834
-
Interest expense on loan from:
Bluecap
438
658
746
All balances with related
parties as of December 31, 2021 and 2022 were unsecured and had no fixed terms of repayment.
76
On July 31, 2018, the Group
entered into a $1.3 million short-term loan agreement with Bluecap Mobile Private Limited ("Bluecap"), a company controlled
by a key management of the Group (see Note 19 in our consolidated financial statements), bearing an interest rate of 8% per annum to fund
the Company's working capital (the "Bluecap Loan"). The loan does not carry a maturity date and the outstanding principal
balance as of December 31, 2021 and 2022 were $1.8 million and nil million, respectively, which were payable on demand.
Quantitative and Qualitative Disclosures
about Market Risk
Credit Risk
The Company is subject to
the risk of loss arising from the credit risk related to the possible inability of its customers to pay for the products and services
that it sells to them. The Company attempts to limit its credit risk by monitoring the creditworthiness of the Company's customers
to whom it extends credit and establishing credit limits in accordance with its credit policy. The Company performs credit evaluations
on substantially all customers requesting credit and will not extend credit to customers for whom it has substantial concerns and will
deal with those customers on a cash basis. The Company offers billing terms that allow certain customers to remit payment during a period
of time ranging from 3 to 6 months.
The Company normally has limited
risk from credit concentration as no individual customer represents greater than 20% of the outstanding accounts receivable balance.
The Company has cash held
by Silicon Valley Bank as of December 31, 2022. On March 10, 2023, the California Department of Financial Protection and Innovation closed
Silicon Valley Bank and appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver. On March 12, 2023, the U.S.
Department of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of Silicon Valley
Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts.
The Company received full access to the funds in its deposit and money market accounts on March 13, 2023. In light of actions by the federal
government to fully protect deposit accounts, the Company has not experienced any credit losses on its deposits of cash.
Our business activities in
the year ended December 31, 2022 experienced similar credit concentration as in 2021. Even though the worldwide economy has recovered
from the global Covid-19 pandemic, due to the rising inflation and interest rates, we expect our sales to increase in the year 2023 from
the lows of 2020 and 2021, but not fully reaching the pre-pandemic 2019 levels.
Liquidity Risk
The Company is also exposed
to liquidity risk, which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business
needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company
will turn to other financial institutions for supply chain financing which can be costly and negatively affect the gross margin. If adequate
working capital funding is not available, or not available at acceptable terms, we may have to decline the capital intensive hardware
projects.
Interest Rate Risk
The Company does not enter
into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate
risk exposure. The Company has not been exposed nor does it anticipate being exposed to material risks due to changes in interest rates.
A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on the Company's
consolidated financial statements.
77
Foreign Currency Risk
The majority of our revenues
are denominated in US Dollars while about half of our costs are denominated in Renminbi, which is not freely convertible into foreign
currencies. All foreign exchange transactions take place either through the People's Bank of China ("PBOC") or other
authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory
institutions requires submitting a payment application form together with suppliers' invoices and signed contracts. The value of
Renminbi is subject to changes in central government policies and to international economic and political developments affecting supply
and demand in the foreign exchange markets.
A hypothetical 10% change
in foreign exchange rates during any of the preceding periods presented would have had an insignificant effect on our consolidated financial
statements.
Certain Transactions for the Years Ended December
31, 2021 and 2022, and Subsequent Transactions
Equity financing from Chongqing City Youtong
Equity Investment Fund ("Chongqing Youtong")
On April 18, 2019, the Group
entered into an equity financing agreement with Chongqing Youtong owned by the Chongqing Government in the PRC. According to the agreement,
Chongqing Youtong purchased 9.9% equity interest of the Company at that time which was equivalent to 233,392 (post reverse split adjusted)
ordinary shares with a total purchase consideration of $13.87 million on May 16, 2019, for which 75% of the total purchase consideration
amounting to $10.40 million in cash was received. Both parties have agreed to not proceed with the remainder 25% investment.
In February 2023, the Company
entered into a settlement agreement with Chongqing Youtong on the settlement of the equity financing. For the cash consideration with
the amount of $10,399, the Company agreed to repay Chongqing Youtong the principal plus 8% annually interest with its ordinary shares.
Besides, both parties agreed to not proceed with the remainder 25% investment and the related previous issued 58,348 (post reverse split
adjusted) shares will not withdraw. Also, to compensate the loss from the share price decline, the Company issued additional 56,024,444
ordinary shares on February 28, 2023 to settle the deal.
Loan from HSBC
On May 30, 2019, the Group
entered into a banking facility agreement with HSBC for a credit facility of $5 million with an interest rate of London Interbank Offered
Rate (LIBOR) plus 1% and a maturity date of one year. $4.5 million were drawn in June 2019 and another $0.5 million were drawn in July
2019 for working capital purposes. This loan was completely re-paid in June 2020.
Loans from Shareholders
On November 27, 2020, the
Company entered into a loan agreement with an individual shareholder who loaned the Company $1.25 million in cash. The loan accrues interest
at the rate of 6% per annum, and the principal together with accrued interest are due in 15 months but was extended by agreement until
December 31, 2022.
An agreement was executed
between the Company and the lender on May 3, 2022 for the complete repayment of the loan principal and accrued interest by the issuance
to the lender 338,968 (post reverse split adjusted) ordinary shares of the Company.
78
Senior Debt Purchased by LMFA Financing
LLC
The Company entered into Agreements
dated December 14, 2020 with Partners For Growth which was its senior lender and LMFA Financing LLC ("LMFA"), a Florida limited
liability company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA is committed to purchase up to
be approximately $18 million of debt in tranches, which when completed will eliminate substantially all of the debt with the Company's
senior lender. LMFA will convert the purchased debt into common shares of the Company, pursuant to a court order that allows the conversion
shares to be issued as unrestricted securities in a transaction that is exempt from registration under Section 3(a)(10) of the Securities
Act of 1933, as amended.
As of February 10, 2021, LMFA
has completed the purchase of $17.87 million of principal, accrued interest and applicable fees, converted into and sold all 1.42 million
(post reverse split adjusted) shares of the Company's ordinary shares. With the Company settling another $1.27 million of debt,
accrued interest and applicable fees directly with the senior lender by the issuance of 94,170 (post reverse split adjusted) shares on
February 17, 2021 which the senior lender subsequently sold, the Company's defaulted Debts with the senior lender totaling $19.14
million have been eliminated.
Convertible Notes Sold
The Company sold convertible
notes on May 25, 2022 to institutional and individual investors for $16 million (the "May 25 Notes"). The notes are due in
two years, have an annual interest rate of 10%, convertible into ordinary shares of Borqs at $0.44325 per share (post reverse split adjusted)
and has 100% warrant coverage with the warrants exercisable for cash or cashlessly at the closing bid price of 2 days prior to exercising
but not less than $0.41 per share.
The Company signed agreements
with institutional and individual investors for sale of convertible notes on February 25, 2021 for $20 million (the "Feb 25 Notes")
and on April 14, 2021 for $3 million (the "Apr 14 Notes"). The notes are due in two years, have an annual interest rate of
8%, convertible into ordinary shares of Borqs at 10% discount from the market price and has 90% warrant coverage with the warrants exercisable
cashless or for cash at $2.222 per share for the Feb 25 Notes and $1.540 for the Apr 14 Notes. The conversion price is at $1.539 per share
for the Feb 25 Notes and $1.071 per share for the Apr 14 Notes, or at a one-time reset at 90% of the market price at the time of effectiveness
of the required registration statement, whichever is lower. One-third of the notes were sold at the execution of definitive agreements
and two-thirds of the notes were sold upon the effectiveness of a registration statement on May 4, 2021.
The Company signed agreement
with institutional and individual investors for sale of convertible notes on September 14, 2021 for $27.15 million (the Sep 14 Notes).
The notes are due in two years, have an annual interest rate of 8%, convertible into ordinary shares of Borqs at 10% discount from the
market price and has 90% warrant coverage with the warrants exercisable cashless or for cash at $0.8682 per share. The conversion price
is at $0.6534 per share or at a one-time reset at 90% of the market price at the time of effectiveness of the required registration statement
or availability to trade the converted shares under Rule 144, whichever is lower. Only half, or $13.575 million of the notes were sold.
Proceeds from the sale of
notes were used for the procurement of orders the Company expects to receive from its customers, for development of the next generation
5G products, and also for acquisition of 51% of HHE.
79
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Executive Officers
The following table provides
information regarding our executive officers and directors as of April 15, 2022:
Name
Age
Position
Term
expires at
annual stockholders
meeting in year
Board of Directors
Pat Sek Yuen Chan
58
Founder, Chairman of the Board (Class III Director), Chief Executive Officer and President
2024
Wan Yu (Lawrence) Chow, Ph.D.
60
Class I Director
2025
Heung Sang Addy (Dexter) Fong
63
Class II Director
2023
Ji (Richard) Li
63
Class I Director
2025
Shizhu (Steve) Long
61
Class II Director
2023
Executive Officers
Henry Sun
50
Chief Financial Officer
Anthony K. Chan
68
Executive Director of Finance and US Operations
Simon Sun
56
Executive Vice President and Co-General Manager of Connected Solutions Business Unit
Hareesh Ramanna
61
Executive Vice President and Co-General Manager of Connected Solutions Business Unit
The principal occupation and
business experience of our directors and executive officers is as follows:
Pat Sek Yuen Chan,
58,
is the Chairman of our board of directors, as well as our Chief Executive Officer and President. He was the founder and Chairman of the
board of directors of Borqs International, and since 2007 he served as Borqs International's Chief Executive Officer and President.
Mr. Chan has over 20 years of experience in the mobile network communications sector. Prior to founding Borqs, Mr. Chan served as Senior
Vice President and General Manager of the infrastructure business unit of UTStarcom Inc., a telecommunications equipment company, from
2000 to 2007. Earlier, Mr. Chan was an engineering manager in Motorola responsible for the development of the GPRS switching. Mr. Chan
is an established entrepreneur and has received many awards, including the "High-Caliber Talent from Overseas Award" from
the PRC government, and "2012 Beijing Entrepreneur of the Year" from Silicon Dragon. Mr. Chan received his bachelor's
degree in computer science from the University of Toronto and his master's degree in computer science from the University of British
Columbia.
80
Wan Yu (Lawrence) Chow,
Ph.D.,
60, was elected as an independent board member by our stockholders in December 2018. Dr. Chow has almost 30 years of experience
in the ICT industry, he has extensive working experience with large and complex global FinTech, Telco + Network Equipment Provider &
Education industries with successful track record of delivering outstanding commercial and technical results in Fortune 500 organizations
to small start-ups. He started his career in 1989 at various Silicon Valley tech companies including Xerox Corporation, Amdahl Corporation
and Sun Microsystems. At Sun Micro, Dr. Chow served as the Chief Technical Consultant from 1993 to 1999 for the Greater China region.
After serving as the Director of Strategic Alliance for PeopleSoft Inc., North Asia, from 2000 to 2001, he rejoined Sun Micro Greater
China as its CTO/NEP Technology Office from 2002 to 2008. He joined SAP China as Managing Partner from 2012 to 2015. Currently, he is
serving as Director and Strategic Partner for QLIK Greater China since 2017. Dr. Chow received two Bachelor's Degrees in Computer
Science and Information System from Oregon State University in 1988 and earned a Master's Degree in Computer Science from Pacific
W. University in 1993. He received another Master's Degree in Education Management from Tarlac State University in 2011. Dr. Chow
received his PhD in Education Management from HKMA/Tarlac State University in 2015.
Heung Sang Addy (Dexter)
Fong,
63, was elected as an independent board member by our stockholders in March 2020. He was also appointed as the Chairperson of
the Audit Committee, our Audit Committee "financial expert," as member of the Compensation Committee, and as a member of the
Enterprise Risk Oversight Committee. Mr. Fong has almost 36 years of experiences in cross border financial investments and business operations.
Since 2017, he has served as the chief financial officer of Adlai Nortye Biopharma Ltd. Mr. Fong also led the B-round fundraising of Adlai
Nortye Biopharma Ltd, but funding US$53 million. He was the managing director of Bonus Eventus Securities Ltd. from 2015 to 2017, and
was the chief financial officer of China Harmony Auto Holding Ltd. from 2012 to 2015 where he managed the company's initial public
offering process onto the Hong Kong Stock Exchange (ticker HK: 03826). From 2009 to 2011, he was the director and chief financial officer
of China Electric Motor, Inc. (NASDAQ: CELM) and Apollo Solar, Inc. (OTC: ASOE). Mr. Fong has held various financial executive positions
for companies with businesses between China and the U.S. and his experience as an independent board member includes: Universal Technology
(HK: 1026) from 2006 to 2013; China Housing and Land Development Inc. (NASDAQ: CHLN) from 2010 to 2014; independent director and audit
committee chair for Sisram Med (HK: 01696) since 2017; and Kandi Technologies Corp (NASDAQ: KNDI) from 2007 to 2011. He also worked as
a manager for KPMG from 1996 to 1997, and for Deloitte & Touché and Ernst & Young in the U.S. from 1993 to 1995. He was
an auditor for Deloitte & Touché from 1989 to 1992. Mr. Fong received his Bachelor's degree in History from the Hong
Kong Baptist University in 1982, an MBA in Accounting from the University of Nevada in 1988; he also earned a Master's Degree in
Accounting from the University of Illinois in 1993. Mr. Fong is a member of AICPA & HKICPA.
Ji (Richard) Li
, 63,
was elected as an independent board member by our stockholders in December 2018. Mr. Li has 23 years of experience in the telecom industry
and he worked in various multinational companies. He started his career in 1982 as a lecturer in Huazhong University of Science and Technology
in China. He was the General Manager of UTStarcom Inc. Shenzhen Office from 1995 to 2001, where he led a team to develop telecom switches
based on soft switch technology, and the product was launched in China with more than 50 million subscribers. Mr. Li was the Founder of
Fiberxon, Inc. from 2001 to 2004, where he led a team to develop fiber optics equipment, and this company was successful sold to MRV Communication.
He was the founder and served as the Chief Executive Officer of AngleCare Inc. from 2005 to 2006, and led a team to develop mobile health
care applications. Mr. Li was the CEO and General Manager of Wuhan HSC Technology Inc. from 2006 to 2007, he led a team to develop advertisement
systems used for public transit systems and were successfully used in the Wuhan Taxi network. He has been serving as General Manager of
Vinko Technology Inc. from 2010 to 2014, he led a team to develop telecom payment systems in China. He is currently an Angel Investor
since 2014. Mr. Li received his Master's Degree in Information Engineering from Huazhong University of Science and Technology.
81
Shizhu (Steve) Long
,
61, was elected as an independent board member by our stockholders in March 2020. Mr. Long is an experienced telecommunication executive
who has been working in the telecom industry for the last 25 years. Currently, he is the chief technology officer of Shenzhen Skyworth
Digital Technology Corporation, which focuses on research and development, manufacture and sale of STB and broadband devices. He has comprehensive
knowledge of the current telecommunications systems and equipment platforms. He recently had key research and development roles in the
development of carrier class IPTV systems working with China Mobile Communications Corporations ("CMCC") to develop mobile
phone backend service and information aggregation services. His latest research areas are broadband intellectual property-based advanced
content delivery services and pertinent terminals. His other major research and development achievements include the development of the
core network of personal handy-phone system ("PHS"), which was deployed in more than 150 systems all over China. Prior to
joining UTStarcom Corp to start his telecommunication industry career in 1998, Mr. Long was a professor at the HuaZhong University of
Science and Technology. He is also a rapporteur of the International Telecommunication Union ("ITU") of Geneva, Switzerland,
particularly for Study Group 9 – Broadband cable and TV. Mr. Long received his Bachelor and Master degrees in Engineering from the
HuaZhong University of Science and Technology.
Henry Sun,
50, is the
Chief Financial Officer since October 1, 2021. Mr. Sun founded Reach China LLC in 2016, a cross-border consulting firm helping both American
and Chinese companies with capital market introductions and international business development. From January 2011 to August 2016,
Mr. Sun served as the CFO of Highpower International, Inc., a lithium battery company listed on Nasdaq. From November 2009
to December 2010, Mr. Sun was the CFO of Zoomlion Concrete Machinery Company, a division of Zoomlion that was listed on both
the Shanghai and Hong Kong stock exchanges.  Mr. Sun also held financial management roles with various public and private
companies including Merrill Lynch from 2003 to 2005. Mr. Sun has extensive experiences in financial reporting and planning, corporate
finance and SEC compliance, investor relations, capital raising, as well as managing relationships with investment bankers.  Mr. Sun
holds a MBA degree from the Thunderbird School of Global Management at Arizona State University, and a Bachelor of Engineering degree
from the Beijing University of Posts and Telecommunications.
Anthony Chan,
68, is
the Executive Director of Finance and US Operations since October 1, 2021, prior to which he was the Chief Financial Officer and Executive
Vice President, Corporate Finance and joined the company in April 2015. Mr. Chan has over 30 years of experience in U.S. and China cross
border investments and business operations. From July 2013 until March 2015, Mr. Chan served as the President of Asia Sourcing for Portables
Unlimited in New York, a distributor of T-Mobile USA. From March 2009 until July 2013, he served as the CFO for Tianjin Tong Guang Digital
Broadcasting Co. Ltd, a mobile communications products company. For the 20 years prior to that, he was involved in multiple investment
and technology transfer projects between China, the U.S and Europe, in the areas of communication products, chemical fibers, textile machinery
and medical equipment. Mr. Chan received both his bachelor's and MBA degrees from the University of California at Berkeley.
Simon Sun,
56, is the
Executive Vice President, Co-General Manager of Borqs's Connected Solutions Business Unit and has served the company since November
2013. Mr. Sun has over 20 years of experience in research and development and product engineering in the mobile industry. He served as
the Co-Founder and Chief Executive Officer of Nollec Wireless, Ltd., a mobile handset design house, from July 2007 to October 2013. He
was the VP of engineering for CEC Wireless, another mobile handset design house in China from September 2006 to June 2007. Mr. Sun received
his bachelor's degree in Industrial Engineering from Tianjin University of China.
Hareesh Ramanna,
61,
is our Executive Vice President, Co-General Manager of Connected Solutions Business Unit, Managing Director of India Operations and Head
of Software Development, and has served our company since July 2009. Mr. Ramanna has over 20 years of experience in the mobile industry.
Prior to joining us, he served as a Senior Director and Head of Mobile Devices Software in Global Software Group, Motorola India Electronic
Limited from May 1992 to November 2008. Mr. Ramanna received his bachelor's degree in Electronics and Communication from National
Institute of Engineering in 1983, Post-Graduation Certification from Indian Institute of Science and an advanced leadership Certification
from McGill University in collaboration with Lancaster University of UK and Indian Institute of Management in Bangalore.
82
Executive Officers
Our executive officers are
designated by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or
executive officers. There are no arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which
any person referred to above was selected as a director or member of senior management.
Board of Directors and Corporate Governance
In accordance with our memorandum
and articles of association, our Board is divided into three classes, with the number of directors in each class to be as nearly equal
as possible. The Company held its last annual general meeting ("AGM") on October 28, 2022. Our existing Class III directors
will serve until our 2024 AGM, our existing Class II directors will serve until our 2023 AGM and our existing Class I directors will serve
until our 2025 AGM. At each annual general meeting, directors elected to succeed those directors whose terms expire shall be elected for
a term of office to expire at the third annual general meeting following their election.
Our board of directors, which
is elected by our shareholders, is responsible for directing and overseeing our business and affairs. In carrying out its responsibilities,
the board selects and monitors our top management, provides oversight of our financial reporting processes, and determines and implements
our corporate governance policies.
Our board of directors and
management are committed to good corporate governance to ensure that we are managed for the long-term benefit of our stockholders, and
we have a variety of policies and procedures to promote such goals. To that end, during the past year, our board and management periodically
reviewed our corporate governance policies and practices to ensure that they remain consistent with the requirements of the U.S. securities
laws, SEC rules, and the listing standards of The Nasdaq Stock Market ("Nasdaq").
Meetings of the Board of Directors
Our board of directors and
committees of the board held 2 regular meetings plus executed on 14 unanimous written consents for the review and decision making on Company
matters during the year 2022.
Stockholder Communications with the Board of
Directors
Stockholders and other parties
interested in communicating directly with the board of directors may do so by writing to: Board of Directors, c/o Borqs Technologies,
Inc., Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong, or by e-mail to sandra.dou@borqs.net. Stockholders
and others may direct their correspondence to our Secretary.
Independence of the Board of Directors
Nasdaq listing standards require
that a majority of our Board be independent directors. An "independent director" is a person, other than an officer or employee
of the Company or its subsidiaries, who has no relationship which in the opinion of the Company's board of directors would interfere
with the director's exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined
that Mr. Chow, Mr. Fong, Mr. Li and Mr. Long are "independent directors" as defined in the Nasdaq listing standards and applicable
SEC rules. Our independent directors will hold regularly scheduled meetings at which only independent directors are present.
Board Leadership Structure and Role in Risk
Oversight
The Board does not have a
lead independent director. Pat Chan is our Chief Executive Officer and Chairman of the Board.
83
Committees of the Board of Directors
Audit Committee
The members of our Audit Committee
are Mr. Fong (chairman of the committee), Mr. Chow and Mr. Li, each of whom is an independent director. Each member of the Audit Committee
is financially literate and our Board determined Mr. Fong qualifies as our "audit committee financial expert," as such term
is defined in Item 401(h) of Regulation S-K. Our Audit Committee charter details the responsibilities of the Audit Committee, including:
●
the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
●
pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
●
reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
●
setting clear hiring policies for employees or former employees of the independent auditors;
●
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
●
obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor's internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
●
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
●
reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Compensation Committee
The members of our Compensation
Committee are Mr. Fong (chairman of the committee), Mr. Chow and Mr. Long, each of whom is an independent director. Our Compensation Committee
charter details the principal functions of the Compensation Committee, including:
●
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer's compensation, evaluating our Chief Executive Officer's performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer's based on such evaluation in executive session at which the Chief Executive Officer is not present;
●
reviewing and approving the compensation of all of our other executive officers;
●
reviewing our executive compensation policies and plans;
84
●
implementing and administering our incentive compensation equity-based remuneration plans;
●
assisting management in complying with our proxy statement and annual report disclosure requirements;
●
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
●
producing a report on executive compensation to be included in our annual proxy statement; and
●
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
The charter also provides
that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or
other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However,
before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Compensation Committee
will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Nominating and Corporate Governance Committee
The members of our Nominating
and Corporate Governance Committee are Mr. Chow (chairman of the committee) and Mr. Fong, each of whom is an independent director. Our
Nominating and Corporate Governance Committee charter details the principal functions of the committee, including:
●
developing the criteria and qualifications for membership on the Board;
●
recruiting, reviewing, nominating and recommending candidates for election or –re-election to the Board or to fill vacancies on the Board;
●
reviewing candidates proposed by shareholders, and conducting appropriate inquiries into the background and qualifications of any such candidates;
●
establishing subcommittees for the purpose of evaluating special or unique matters;
●
monitoring and making recommendations regarding committee functions, contributions and composition;
●
evaluating, on an annual basis, the Board's and management's performance;
●
evaluating, on an annual basis, the Committee's performance and report to the Board on such performance;
●
developing and making recommendations to the Board regarding corporate governance guidelines for the Company;
●
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and
●
retaining and terminating any advisors, including search firms to identify director candidates, compensation consultants as to director compensation and legal counsel, including sole authority to approve all such advisors' or search firms' fees and other retention terms, as the case may be.
85
Enterprise Risk Oversight Committee
The members of our Enterprise
Risk Oversight Committee are Mr. Fong (chairman of the committee), Mr. Chow and Mr. Li, each of whom is an independent director. Our Enterprise
Risk Oversight Committee charter details the principal functions of the committee, including, carrying out the responsibility of overseeing
the effectiveness of risk management policies, procedures and practices implemented by management of the Company with respect to strategic,
operational, environmental, health and safety, human resources, legal and compliance and other risks faced by the Company.
Risk and Information Security Committee
The members of our Risk and
Security Committee are Mr. Chow (chairman of the committee) and Mr. Fong, each of whom is an independent director. Our Risk and Security
Committee charter details the principal functions of the committee, including, overseeing and reviewing the Company's internal controls
to protect the Company's information and proprietary assets. Mr. Pat Chan, CEO of the Company, also serves as the Chief Information
Officer for the committee; and Mr. Anthony Chan, Executive Director of Finance & US Operations, also serves as the Chief Risk Office
for the committee.
Involvement in Certain Legal Proceedings
No executive officer or director
of ours has been involved in the last ten years in any of the following:
●
Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
●
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
●
Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
●
Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
●
Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or
●
Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
86
Executive Compensation
Summary Compensation Table
Pat Chan, Henry Sun, and Anthony
Chan are referred to in this Annual Report as our named executive officers.
The following table provides
information regarding the compensation awarded to, or earned by, the named executive officers for the past two fiscal years.
Summary Compensation Table
Name and principal position
Fiscal
Year
Salary
($)
Bonus
($)
Stock
awards
($)
Option
awards
($)
Non-
equity
incentive
plan
($)
Non-
qualified
deferred
earnings
($)
All other
compen-
sation
($)
Total
($)
Pat Sek Yuen Chan
Chief Executive Officer
2022
382,200
68,700
590,000
-
-
-
-
1,040,900
Henry Sun
Chief Financial Officer
2022
240,000
-
157,000
-
-
-
-
397,000
Anthony K. Chan
Executive Director of Finance & US Operations
2022
-
-
565,739
-
-
-
-
565,739
On December 14, 2020, the
Company's board of directors approved the issuance of restricted ordinary shares to all staff with a number equal to 50% of the
vested options in exchange for the cancellation of the vested options previously awarded to the recipients. As a result, 185,230 shares
and 95,238 shares were awarded to the CEO and the CFO, respectively. Issued from the Company's 2017 Equity Incentive Plan, such
shares were valued at $1.05 per share which was the closing price on the trading day immediately preceded the day of the approval by the
board.
Due to stringent operational
cash flows caused by the COVID-19 pandemic, the Mr. Anthony Chan, voluntarily forfeited his salary for the period from April 1 to December
31 of the year 2020 in the amount of $189,000. Mr. Chan did not have a cash salary for the years ended December 31, 2022 and 2021.
Stock awards made to the executive
officers were approved by the Board of Directors and valued as of the date of grant.
Outstanding Equity Awards at 2022 Year-End
Due to the issuance of restricted
ordinary shares in exchange for all vested stock options as described in the previous section, there was no outstanding vested or unvested
stock options held by any executives as of December 31, 2022.
87
Borqs Technologies, Inc. Equity Incentive Plan
In connection with our acquisition
of Borqs International by way of merger, we assumed the obligations under outstanding stock options issued under the Borqs International
2007 Global Share Plan, as adjusted to give effect to the merger. Those outstanding options to purchase shares of Borqs International
were converted into options to purchase 2,825,273 of our ordinary shares, with exercise prices ranging from $2.12 to $9.10 per share.
Effective August 18, 2017,
we adopted the Borqs Technologies, Inc. 2017 Equity Incentive Plan ("Equity Incentive Plan"), with five million ordinary shares
issuable pursuant to equity awards under the plan. The number of ordinary shares reserved for issuance under the Equity Incentive Plan
will increase automatically on January 1 of each of 2018 through 2027 by a number of shares that is equal to 5% of the aggregate number
of outstanding ordinary shares as of the immediately preceding December 31. Our Board may reduce the size of this increase in any particular
year. Outstanding awards under the 2007 Global Share Plan were assumed under the Equity Incentive Plan as of our acquisition of Borqs
International by way of merger on August 18, 2017. Due to the issuance of restricted ordinary shares to our staff in exchange for all
vested stock options as described in the previous section, there was no outstanding vested held by our staff as of December 31, 2022.
In addition, the following
shares will be available for grant and issuance under our Equity Incentive Plan:
●
shares subject to options or share appreciation rights granted under our Equity Incentive Plan that cease to be subject to the option or stock appreciation right for any reason other than exercise of the option or share appreciation right;
●
shares subject to awards granted under our Equity Incentive Plan that are subsequently forfeited or repurchased by us at the original issue price;
●
shares subject to awards granted under our Equity Incentive Plan that otherwise terminate without shares being issued;
●
shares surrendered, cancelled or exchanged for cash or a different award (or combination thereof).
Shares that otherwise become
available for grant and issuance because of the provisions above will not include shares subject to awards that initially became available
due to our substitution of outstanding awards granted by another company in an acquisition of that company or otherwise.
Eligibility.
The Equity
Incentive Plan provides for the grant of incentive stock options to our employees and any parent and subsidiary corporations' employees
and for the grant of nonqualified share options, restricted shares, restricted share units, share appreciation rights, share bonuses and
performance awards to our employees, directors and consultants and our parent and subsidiary corporations employees and consultants. No
more than 5,000,000 shares may be issued as incentive stock options under the Equity Incentive Plan. In addition, no participant in the
plan may receive awards for more than 2,000,000 shares in any calendar year, except that new employees are eligible to be granted up to
a maximum of award of 4,000,000 shares. Authorized number of shares under the Plan automatically increases at the end of each year by
5% of the then outstanding ordinary shares.
Administration.
The
Equity Incentive Plan is administered by the Board or by our Compensation Committee; in this plan description we refer to the Board or
Compensation Committee as the plan administrator. The plan administrator determines the terms of all awards.
Types of Awards.
The
Equity Incentive Plan allows for the grant of options, restricted shares, restricted share units, share appreciation rights, share bonuses
and performance awards.
Award Agreements.
All
awards under the Equity Incentive Plan are evidenced by an award agreement which shall set forth the number of shares subject to the award
and the terms and conditions of the award, which shall be consistent with the Equity Incentive Plan.
88
Term of Awards.
The
term of awards granted under the Equity Incentive Plan is ten years.
Vesting Schedule and Price.
The plan administrator has the sole discretion in setting the vesting period and, if applicable, exercise schedule of an award, determining
that an award may not vest for a specified period after it is granted and accelerating the vesting period of an award. The plan administrator
determines the exercise or purchase price of each award, to the extent applicable.
Transferability.
Unless
the plan administrator provides otherwise, the Equity Incentive Plan does not allow for the transfer of awards other than by will or the
laws of descent and distribution. Unless otherwise permitted by the plan administrator, options may be exercised during the lifetime of
the optionee only by the optionee or the optionee's guardian or legal representative.
Changes in Capitalization.
In the event there is a specified type of change in our capital structure without our receipt of consideration, such as a share split,
or if required by applicable law, appropriate adjustments will be made to the share maximums and exercise prices, as applicable, of outstanding
awards under the Equity Incentive Plan.
Change in Control Transactions.
In the event of specified types of mergers or consolidations, a sale, lease, or other disposition of all or substantially all of our
assets or a corporate transaction, outstanding awards under our Equity Incentive Plan may be assumed or replaced by any surviving or acquiring
corporation; the surviving or acquiring corporation may substitute similar awards for those outstanding under our Equity Incentive Plan;
outstanding awards may be settled for the full value of such outstanding award (whether or not then vested or exercisable) in cash, cash
equivalents, or securities (or a combination thereof) of the successor entity with payment deferred until the date or dates the award
would have become exercisable or vested; or outstanding awards may be terminated for no consideration. The plan administrator, may, on
a discretionary basis, accelerate, in full or in part, the vesting and exercisability of the awards.
Governing Law and Compliance
with Law.
The Equity Incentive Plan and awards granted under it are governed by and construed in accordance with the laws of the British
Virgin Islands. Shares will not be issued under an award unless the issuance is permitted by applicable law.
Amendment and Termination.
The Equity Incentive Plan terminates ten years from the date it was approved by our shareholders, unless it is terminated earlier
by our Board. Our Board may amend or terminate our Equity Incentive Plan at any time. Our Board generally may amend the plan without shareholder
approval unless required by applicable law.
Employment Agreements and Other Arrangements
with Named Executive Officers
Under our employment agreement
with Pat Sek Yuen Chan, Mr. Chan serves as our President and Chief Executive Officer at a base salary of $382,200, In the event Mr. Chan's
employment would be terminated upon the occurrence of a merger with another company that has been in a loss position for three years or
declared in bankruptcy, dissolved or liquidated, or if changes in the law result in the company or Mr. Chan unable to legally perform
the contract, the Company will pay Mr. Chan an appropriate subsidy and compensation pursuant to the terms of the arrangement and in accordance
with the provisions of relevant Chinese laws and regulations. Mr. Chan also agreed not to hold any appointment for any other entity that
has a competitive relationship with the Company during, and for one year following the termination of, his employment arrangement with
us.
Under our employment agreement
with Henry Sun, Mr. Sun serves as our Chief Financial Officer beginning on October 1, 2021, and receives monthly compensation in the amount
of $20,000 per month, subject to periodic review and adjustment. The term of Mr. Sun's employment agreement is four years unless
both parties mutually agree to extend the term. We may terminate the agreement without any reason by giving Mr. Sun not less than one
month's prior notice in writing. We may also terminate this agreement without any notice period or termination payment under limited
circumstances set forth in Mr. Sun's employment agreement.
89
The employment agreement with
Anthony K. Chan has expired. Mr. Chan is currently serving as our Executive Director of Finance and US Operations without an agreement.
Director Compensation
During the year ended December
31, 2022, our non-employee directors were entitled to receive cash compensation and an option to purchase ordinary shares or restricted
stock awards. All nonemployee directors receive an annual fee of $30,000, and the chairperson of the Audit Committee receives an additional
$18,000 per year and the chairperson of the Compensation Committee receives an additional $5,000 per year. Directors are entitled to be
reimbursed for their reasonable expenses incurred in attending meetings of the Board and committees of the Board. The following table
sets forth the compensation paid to each person who served as a member of our Board in 2022 Pat Chan, our Chief Executive Officer and
Chairman of the Board, did not receive any additional compensation for his service as a director, and his compensation is detailed in
the Summary Compensation Table and related disclosures.
Director Compensation Table
The table below shows the
compensation received by each of our non-employee directors for their services during 2022. Our non-employee directors do not receive
fringe or other benefits.
Name
Fees
earned or
paid in
cash
($)
Stock
awards
($)
Option
awards
($)
Non-equity
incentive
plan
compensation
($)
Nonqualified
deferred
compensation
earnings
($)
All other
compensation
($)
Total
($)
Wan Yu (Lawrence) Chow
30,000
32,475
-
-
-
-
62,475
Heung Sang Addy (Dexter) Fong
48,000
38,625
-
-
-
-
86,625
Ji (Richard) Li
30,000
32,475
-
-
-
-
62,475
Shizhu (Steve) Long
30,000
32,475
-
-
-
-
62,475
Equity Awards for Directors
Due to the issuance of restricted
ordinary shares in exchange for all options as described in the previous section, there was no outstanding vested or unvested stock options
held by the directors as of December 31, 2022
Compensation Committee Interlocks and Insider
Participation
As of the date of this Annual
Report, no officer or employee serves as a member of the Compensation Committee. None of our executive officers serves as a member of
the Board or Compensation Committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.
Limitation of Liability and Indemnification
of Directors and Officers
Our memorandum and articles
of association, the BVI Business Companies Act, (as amended), and the common law of the British Virgin Islands allow us to indemnify our
officers and directors from certain liabilities. Our memorandum and articles of association provides that we may indemnify, hold harmless
and exonerate against all direct and indirect costs, fees and expenses of any type or nature whatsoever, any person who (a) is or was
a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was a director, officer, key
employee, adviser of our company; or (b) is or was, at the request of our company, serving as a director of, or in any other capacity
is or was acting for, another Enterprise.
90
We will only indemnify the
individual in question if the relevant indemnitee acted honestly and in good faith with a view to the best interests of our company and,
in the case of criminal proceedings, the indemnitee had no reasonable cause to believe that his conduct was unlawful. The decision of
our directors as to whether an indemnitee acted honestly and in good faith and with a view to the best interests of our company and as
to whether such indemnitee had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for
the purposes of our charter, unless a question of law is involved.
The termination of any proceedings
by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the
relevant indemnitee did not act honestly and in good faith and with a view to the best interests of our company or that such indemnitee
had reasonable cause to believe that his conduct was unlawful.
We may purchase and maintain
insurance, purchase or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter
of credit, or surety bond in relation to any indemnitee or who at our request is or was serving as a Director, officer or liquidator of,
or in any other capacity is or was acting for, another Enterprise, against any liability asserted against the person and incurred by him
in that capacity, whether or not we have or would have had the power to indemnify him against the liability as provided in our memorandum
and articles of association.
We have insurance policies
under which, subject to the limitations of the policies, coverage is provided to our directors and officers against loss arising from
claims made by reason of breach of fiduciary duty or other wrongful acts as a director or officer, including claims relating to public
securities matters, and to us with respect to payments that may be made by us to these officers and directors pursuant to our indemnification
obligations or otherwise as a matter of law.
We have entered into indemnification
agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained
in the BVI Companies Act, 2004 or our charter. These indemnification agreements require us, among other things, to indemnify our directors
and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also
require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit
or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive
officers.
At present, we are not aware
of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or
is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for
indemnification.
91
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
Major Shareholders
The following table presents
information as to the beneficial ownership of our ordinary shares as of March 31, 2023 by:
●
each shareholder known by us to be the beneficial owner of more than 5% of our ordinary shares;
●
each of our directors;
●
each of our named executive officers; and
●
all of our directors and executive officers as a group.
Beneficial ownership is determined
in accordance with the rules of the SEC and thus represents voting or investment power with respect to our securities. Unless otherwise
indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where applicable. Ordinary shares subject to options that are currently
exercisable or exercisable within 60 days of March 31, 2023 are deemed to be outstanding and to be beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.
Percentage ownership of our
ordinary shares in the following table is based on 175,383,130 ordinary shares outstanding on March 31, 2023.
Number of
Shares
%
Name and Address of Beneficial Owners of 5% or more
Chongqing City Youtong Equity Investment Fund LLP (1)
56,257,838
32.08
Holu Hou Energy LLC (2)
28,877,184
16.47
Directors and Executive Officers (3)
Pat Sek Yuen Chan
6,943,988
3.96
Wan Yu (Lawrence) Chow
239,375
*
Heung Sang Addy (Dexter) Fong
350,000
*
Ji (Richard) Li
239,375
*
Shizhu (Steve) Long
241,161
*
Henry Sun
1,143,750
*
Anthony K. Chan
4,719,379
2.69
Hareesh Ramanna
1,670,198
*
Simon Sun
1,100,340
*
All directors and officers as a group (9 persons)
16,647,566
9.49
*
Less than one percent
(1)
The business address for Chongqing City
    Youtong Equity Investment Fund LLP is Industrial Park, No.123 Jin Tong Avenue, Adm Com – Tongnan District, Chongqing, China.
(2)
The business address for Holu Hou Energy LLC is 919 N Market St, Ste 950, Wilmington, DE 19801, USA
(3)
Unless otherwise indicated, the business address of each of the individuals is Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.
92
Related Party Transactions
See above "Item 5. Operating
and Financial Review and Prospects – Related Party Transactions".
Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
The financial statements required
by this item can be found at the end of this report on Form 20-F, beginning on page F-1.
Legal Proceedings
We were in arbitration before
the International Chamber of Commerce with Samsung Electronics Co., Ltd. ("Samsung") to resolve a dispute regarding royalties
payable to the Company under a software license agreement the Company had with Samsung. Samsung alleged that, for the period starting
the fourth quarter of 2010 through mid-2012, the Company was overpaid royalties in the amount of approximately $1.67 million due to a
clerical error in Samsung's accounting department that enabled the Company to receive royalties on sales of Samsung handsets that
did not contain its software. Samsung was seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as
reimbursements of reasonable fees including attorney fees and arbitration costs.
After arbitration hearings
held in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an
arbitration award (the "Award"), which the Company received on November 29, 2018. Pursuant to the Award, the Company has the
obligation 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.
Samsung was also awarded its attorney's fees and expenses in the aggregate amount of approximately $1.73 million. The Company has
reached an agreement with Samsung for settling the payments due Samsung by making 24 monthly payments beginning with April 2019. The Company
has pledged $5 million worth of ordinary shares in escrow as security for the payments and in the event that the Company is in default
of the scheduled payments, Samsung has the right to seize the escrow shares. Due to cash flow constraints resulting from the COVID-19
pandemic, we have not made payments to Samsung in the years 2020 and 2021. Beginning in June 2022, the Company has been making monthly
payments to Samsung with the anticipation that all of the Award including accrued interests will be completely paid off by December 2023.
We have initiated arbitration
proceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from
KADI 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
to the owners of KADI, and iii) payment in cash for loss of profit from KADI's projected business in the amount of $5.3 million.
As of the filing of this annual report, the arbitration is still on-going and there is no assurance that the outcome of the proceedings
will be in favor of Borqs.
Other than the above-mentioned
cases and closed legal proceedings between the Group and our suppliers and previous employees, the Group has not been named in any litigation
where claims or counterclaims have been filed against us, as of the date of this annual report.
93
Dividend Policy
We are a holding company and
may rely on dividends paid by our PRC subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions
to 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
regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance
with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries are required to set aside at least 10% of
our after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of our registered capital. Appropriations
to the employee welfare funds are at the discretion of the board of directors of Borqs Beijing. These reserves are not distributable as
cash dividends.
Cash transfers from PRC subsidiaries
to our subsidiaries outside of China are subject to PRC government control of currency conversion. Restrictions on the availability of
foreign currency may affect the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments
to us, or otherwise satisfy their foreign currency obligation. See "Risk Factors — Risks Related to Doing Business in China",
"Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company"
and "Restrictions on foreign currency may limit our ability to receive and use our revenue effectively."
Significant Changes
There have been no significant
changes since the date of the consolidated financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTING
A.
Offering and Listing Details
See "—C. Markets."
B.
Plan of Distribution
Not applicable.
C.
Markets
Our ordinary shares are listed on the Nasdaq Capital
Market under the symbol, "BRQS".
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
94
ITEM 10. ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Incorporation
Our amended and restated memorandum
and articles of association has been filed with the SEC on Form 8-K on August 24, 2017. Those amended and restated articles of association
contained in such filing are incorporated by reference.
C.
Material contracts
Attached as exhibits to this
annual report are the contracts we consider to be both material and outside the ordinary course of business during the two-year period
immediately preceding the date of this annual report. We refer you to "Item 4. Information on the Company – A. History and
Development of the Company", "Item 4. Information on the Company –Overview", and "Item 5. Operating and
Financial Review and Prospects – B. Liquidity and Capital Resources – Related Party Transactions" for a discussion of
these contracts. Other than as discussed in this annual report, we have no material contracts, other than contracts entered into in the
ordinary course of business, to which we are a party.
D.
Exchange controls
Under British Virgin Islands
law, there are currently no restrictions on the export or import of capital, including foreign exchange controls, or restrictions that
affect the remittance of dividends, interest or other payments to non-resident holders of our ordinary shares.
E.
Taxation
The following discussion
of British Virgin Islands and United States federal income tax consequences of an investment in our ordinary shares is based upon laws
and relevant interpretations thereof in effect as of the date of this report, all of which are subject to change. This discussion does
not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state,
local and other tax laws.
British Virgin Islands Taxation
The Company and all dividends,
interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident in the BVI and any capital
gains realized with respect to any shares, debt obligations, or other securities of the Company by persons who are not resident in the
BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.
No estate, inheritance, succession
or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with respect to any shares, debt obligation
or other securities of the Company.
All instruments relating to
transfers of property to or by the Company and all instruments relating to transactions in respect of the shares, debt obligations or
other securities of the Company and all instruments relating to other transactions relating to the business of the Company are exempt
from payment of stamp duty in the BVI. This assumes that the Company does not hold an interest in real estate in the BVI.
There are currently no withholding
taxes or exchange control regulations in the BVI applicable to the Company or its members.
95
United States Federal Income Taxation
The following discussion is
a summary of U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the ownership and disposition
of our ordinary shares. This summary applies only to U.S. Holders that hold our ordinary shares as capital assets (generally, property
held for investment) and that have the U.S. dollar as their functional currency. This summary is based on U.S. tax laws in effect as of
the date of this report, on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this report, and judicial
and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which
could apply retroactively and could affect the tax consequences described below. Moreover, this summary does not address the U.S. federal
estate, gift, Medicare, backup withholding, and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations,
relating to the ownership and disposition of our ordinary shares. The following summary does not address all aspects of U.S. federal income
taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations
such as:
●
banks and other financial institutions;
●
insurance companies;
●
pension plans;
●
cooperatives;
●
regulated investment companies;
●
real estate investment trusts;
●
broker-dealers;
●
traders that elect to use a mark-to-market method of accounting;
●
certain former U.S. citizens or long-term residents;
●
tax-exempt entities (including private foundations);
●
persons liable for alternative minimum tax;
●
persons holding stock as part of a straddle, hedging, conversion or integrated transaction;
●
persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock; or
●
partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding common stock through such entities.
96
Investors are urged to consult their own tax
advisors regarding the application of U.S. federal taxation to their particular circumstances, and the state, local, non-U.S., or other
tax consequences of the ownership and disposition of our ordinary shares.
For purposes of this discussion,
a "U.S. Holder" is a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes:
●
an individual who is a citizen or resident of the United States;
●
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;
●
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
●
a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions, or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
If a partnership (or other
entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment
of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships
holding our ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ordinary shares.
Passive Foreign Investment Company Considerations
A non-U.S. corporation, such
as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more
of its gross income for such year consists of certain types of "passive" income or (ii) 50% or more of the value of its
assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production
of passive income (the "asset test"). For this purpose, cash and cash equivalents are categorized as passive assets and the
company's goodwill and other unbooked intangibles are taken into account as non-passive assets. Passive income generally includes,
among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning
a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly
or indirectly, more than 25% (by value) of the stock.
Although the law in this regard
is not clear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposes because we exercise effective control
over the consolidated VIEs and are entitled to substantially all of their economic benefits. As a result, we consolidate their results
of operations in our consolidated U.S. GAAP financial statements. If it were determined that we are not the owner of the consolidated
VIEs for U.S. federal income tax purposes, we would likely be treated as a PFIC for the current taxable year and any subsequent taxable
year. Assuming that we are the owner of the VIEs for U.S. federal income tax purposes, and based upon our current and expected income
and assets (including goodwill, other unbooked intangibles, and the cash proceeds following our initial public offering), we do not presently
expect to be a PFIC for the current taxable year or the foreseeable future.
97
While we do not expect to
be or become a PFIC in the current or foreseeable taxable years, no assurance can be given in this regard because the determination of
whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income
and assets. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets
and the cash raised in our initial public offering. Under circumstances where our revenue from activities that produce passive income
significantly increase relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant
amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. In addition, because there
are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification
of certain income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming
a PFIC for the current or subsequent taxable years. If we were classified as a PFIC for any year during which a U.S. Holder held our ordinary
shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held our ordinary shares
even if we cease to be a PFIC in subsequent years, unless certain elections are made.
F.
Dividends and paying agents
Not applicable.
G.
Statement by experts
Not applicable.
H.
Documents on display
We file annual reports and
other information with the SEC. You may inspect and copy any report or document we file, including this annual report and the accompanying
exhibits, at the website maintained by the SEC at http://www.sec.gov, as well as on our website at http://www.borqs.com. Information on
our website does not constitute a part of this annual report and is not incorporated by reference.
We will also provide without
charge to each person, including any beneficial owner of our ordinary shares, upon written or oral request of that person, a copy of any
and all of the information that has been incorporated by reference in this annual report. Please direct such requests to Investor Relations,
Borqs Technologies, Inc., Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong. Telephone number +852 5188
1864 or facsimile number +852 2114 0183.
I.
Subsidiary information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Credit Risk
See above "Item 5. Operating
and Financial Review and Prospects – Quantitative and Qualitative Disclosures about Market Risk – Credit Risk".
98
Liquidity Risk
See above "Item 5. Operating
and Financial Review and Prospects – Quantitative and Qualitative Disclosures about Market Risk – Liquidity Risk".
Interest Rate Risk
The Company currently does
not have any variable-rate borrowings, and has not entered into investments for trading or speculative purposes and have not used any
derivative financial instruments to manage our interest rate risk exposure.
Foreign Currency Exchange Rate Risk
We generate almost all of
our revenue from the Connected Solutions BU in U.S. Dollars and all of our revenue from the MVNO BU in Chinese Rmb Yuan. The majority
of our general and administrative expenses are in Chinese Rmb Yuan and Indian Rupees. We paid for our costs of good in either US Dollars
or Chinese Rmb Yuan depending on the source of the materials and components. For accounting purposes, non-US Dollars balance sheet items
are converted to US Dollars at the mean exchange rate as of the date of the balance sheet, and non-US Dollars income and expense items
are converted to US Dollars at the average exchange rate for the period of the reporting. We do not consider the risk from exchange rate
fluctuations to be material for our results of operations, as during the year ended December 31, 2022, these foreign exchange fluctuations
represented 2.7% of our revenues. However, the portion of our business conducted in other currencies could increase in the future, which
could expand our exposure to losses arising from exchange rate fluctuations. We have not hedged currency exchange risks associated with
our expenses.
Inflation Risk
We do business globally with
international customers and suppliers. Our gross margin and operations can be adversely affected by global inflationary situations such
as rising costs for raw materials, components, shipping and labor. The Company faces challenges in maintaining profitability of operations
in economies experiencing high inflation rates caused by global Covid pandemic and political tension between Russia and Ukraine. The inflation
rate in the U.S. has reached 40 year high in the beginning of 2022. It has affected the whole world economy, including our sourcing costs
and business operations.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES
Not applicable.
99
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
See section on risk factors.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OR PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
(a)
Disclosure Controls and Procedures
Our Chief Executive Officer
and our Chief Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 ("Exchange Act") Rules 13a-15(e) or 15d-15(e)) as of December 31, 2022 as required
by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, have concluded that, due to the outstanding material weakness described below,
our disclosure controls and procedures are ineffective in ensuring that the information required to be disclosed by us in the reports
that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in
the SEC's rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to
allow timely decisions regarding required disclosure.
(b)
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is
a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles.
Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the framework set
forth in the report Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i)
the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring.
Based on that evaluation,
our management concluded that these controls were ineffective as of December 31, 2022. In the years ended December 31, 2021 and 2020,
we did not maintain sufficient controls over financial reporting processes due to an insufficient number of financial reporting personnel
with an appropriate level of knowledge and experience in U.S. GAAP and SEC reporting requirements and financial reporting programs to
properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures
to fulfill U.S. GAAP and SEC financial reporting requirements. This deficiency constitutes as a material weakness of our internal control
over financial reporting.
100
Management identified the
following significant deficiencies relating to the IT controls in our MVNO business. However, the MVNO business was sold and disposed
of completely as of October 29, 2020.
1)
Large amounts of customer personal information, account balances and usage details were only provided by MVNO BU's incumbent operator, China Unicom, on a six-month basis; and through strenuous efforts MVNO BU were still not able to convince China Unicom to keep the data longer than a historical rolling 6-month interval; and
2)
Super system administrator access of key business information systems of MVNO BU can be obtained by out-sourced third-party developers. Such super system administrator access can be used to add, delete, or modify the business data in the key business information systems.
We have completed the sale
of Yuantel as of October 29, 2020 and shall not have the same IT system deficiencies for the future periods.
(c)
Changes in Internal Control over Financial Reporting
We identified one material
weaknesses in internal control over financial reporting during our preparation of the financial statements for the fiscal year ended December
31, 2019 which was due to an insufficient number of accounting and financial reporting personnel with the requisite knowledge and experience
in application of U.S. GAAP and SEC requirements for financial reporting programs. During 2019 and 2020, the Company sought after professionals
to join our accounting team for U.S. GAAP and SEC financial reporting related matters. The Company faced challenges in recruitment during
the COVID-19 pandemic and finally acquired adequate financial reporting staff late in 2020. We have taken multiple steps to implement
measures designed to improve our internal control over financial reporting to remediate the material weakness including hiring of a financial
manager with US GAAP and SEC reporting experiences to help set up workflows for the strengthening of internal controls and preserving
accuracy in preparing consolidated financial statements, and also since December 2018, our Chairperson of the Audit Committee, a member
of the Washington State board of Accountancy since the year 1989, has been regularly providing the Company with advice on procedures and
interpretation of US GAAP rules and regulations.
We plan to take measures to
further strengthen our internal control over financial reporting, including (i) continuing to hire additional qualified professionals
with experience in U.S. GAAP accounting and SEC reporting to lead accounting and financial reporting matters; (ii) organizing regular
training for our accounting staffs, especially the trainings related to U.S. GAAP and SEC reporting requirements; and (iii) establishing
effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure consolidated financial
statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting requirements. As of December
2019, we have adopted the following guidelines and established the following committees of the Board to implement measures to remediate
our internal control deficiencies in order to meet the requirements imposed by Section 404 of the Sarbanes Oxley Act.
●
Adopted an Anti-corruption Policy Supplement - The Company has adopted its Foreign Corrupt Practices Charter (the "FCPA Charter") on August 18, 2017, and in December 2019 adopted a Global Anti-Corruption Policy Supplement to augment the FCPA Charter for addressing how Company personnel are to conduct themselves when in direct or indirect contact with government officials, as well as provide additional specific information about the anti-corruption laws in the U.S. and general guidance to compliance with anti-corruption laws.
●
Adopted an Anti-Money Laundering and Identity Verification Policy (the "AML Policy") - It is the Audit Committee's responsibility to ensure that Company has appropriate procedures for the receipt, retention, and treatment regarding the Company's Anti-Money Laundering Policies and Identity Verification Process matters. The AML Policy is intended to fulfill these responsibilities and to ensure that any such AML concerns are promptly and effectively addressed.
●
Adopted a Related Party Transaction Policy - The Related Party Transaction Policy is to be used by the Company and all of its subsidiaries, to ensure that all related person transactions shall be subject to review and oversight in accordance with the procedures as set forth in the policy.
101
●
Established the Enterprise Risk Oversight Committee of the Board (the "Risk & Oversight Committee") - for carrying out the responsibility of overseeing the effectiveness of risk management policies, procedures and practices implemented by management of the Corporation with respect to strategic, operational, environmental, health and safety, human resources, legal and compliance and other risks faced by the Company.
●
Established the Risk and Information Security Committee of the Board (the "Risk & Security Committee") - to assist the Board in fulfilling its oversight responsibilities by overseeing and reviewing: the Company's internal controls to protect the Company's information and proprietary assets, and the Company's risk governance structure, including the Enterprise Risk Management framework, risk policies and risk tolerances.
Other than as described above,
there were no changes in our internal controls over financial reporting that occurred during the year ended December 31, 2022 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. RESERVED
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has
determined that Mr. Heung Sang Addy Fong (also known as Dexter Fong), an independent director and a member of our audit committee, is
an "Audit Committee Financial Expert" under Section 407(d)(5) of Regulation S-K promulgated under the Securities and Exchange
Act of 1934, as amended, and the corporate governance rules of the Nasdaq Stock Market. The previous Audit Committee Financial Expert,
Mr. Joseph Wai Leung Wong, resigned as of January 2, 2019 due to health reasons and the Board of Directors on March 4, 2019, elected Mr.
Fong as an independent director. The Board also determined that Mr. Fong qualifies as an "Audit Committee Financial Expert"
and appointed Mr. Fong as a member and the chairperson of the Audit Committee.
ITEM 16B. CODE OF ETHICS
Our Code of Business Conduct
and Ethics for Employees ("Code of Ethics") applies to all of our employees, including our chief executive officer, chief
financial officer and principal accounting officer. Our Code of Ethics is available on our corporate website,
www.borqs.com
. If
we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to file a current report on Form 6-K to disclose
amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, principal financial officer
and principal accounting officer by posting the required information on our website.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth
the aggregate fees for audit and other services provided by our independent registered public accounting firm, Yu Certified Public Accountant,
P.C. ("Yu CPA"), for the years ended December 31, 2021 and 2022:
$'000
2021
2022
Audit fees
$
505
$
600
Other audit service fees
$
-
-
Tax review fee
$
-
-
All other fees
-
-
Total fees
$
505
$
600
102
Audit fees for the years ended
December 31, 2021 and 2022 related to professional services rendered for the audit of our financial statements for the years ended December
31, 2021 and 2022, and the review of the financial statements included in our quarterly reports when we were a domestic filer, and review
of documents provided in connection with our regulatory filings.
In accordance with our charter,
the audit committee is required to pre-approve all audit and non-audit services to be performed by the independent auditors and the related
fees for such services other than prohibited non-auditing services as promulgated under rules and regulations of the SEC (subject to the
inadvertent de minimis exceptions set forth in the Sarbanes-Oxley Act of 2002 and the SEC rules). All services performed by Yu CPA for
our benefit were pre-approved by the audit committee in accordance with its charter and all applicable laws, rules and regulations.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING
ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a "foreign private
issuer," as defined by the SEC, we are permitted to follow home country corporate governance practices, instead of certain corporate
governance practices required by Nasdaq for domestic issuers, with certain exceptions. While we voluntarily follow most Nasdaq corporate
governance rules, we follow British Virgin Islands corporate governance practices in lieu of Nasdaq corporate governance rules as follows:
●
We do not intend to follow Nasdaq Rule 5635(a), which states that shareholder approval is required prior to the issuance of securities in connection with the acquisition of the stock or assets of another company in certain circumstances.
●
We do not intend to follow Nasdaq Rule 5635(b) which states that shareholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the Company.
●
We do not intend to follow Nasdaq Rule 5635(c), which requires shareholder approval for the establishment of or any material amendments to equity compensation or purchase plans or other equity compensation arrangements.
●
We do not intend to follow Nasdaq Rule 5635(d), which requires shareholder approval in order to enter into any transaction, other than a public offering, involving the sale, issuance or potential issuance by the Company of ordinary shares (or securities convertible into or exercisable for ordinary shares) equal to 20% or more of the outstanding share capital of the Company or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the ordinary shares. We will follow British Virgin Islands law with respect to any requirement to obtain shareholder approval in connection with any private placements of equity securities.
●
We do not intend to follow Nasdaq Rule 5640 which states that rights of existing shareholders cannot be disparately reduced or restricted through any corporate action or issuance.
103
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. Disclosure
Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
ITEM
16J. INSIDER TRADING POLICIES
The Company has an Insider
Trading Policy in place. Under this Insider Trading Policy, every Borqs employee, contractor, consultant and board member is prohibited
from trading in Borqs stock while in possession of material nonpublic information about Borqs, and are prohibited from giving material
nonpublic information about Borqs or others to anyone who might trade on the basis of that information.
This policy applies to all
transactions in Borqs securities, including ordinary shares of Borqs, restricted stock units and stock options, however acquired, and
any other type of securities that Borqs may issue, such as preferred stock, convertible notes, warrants and exchange-traded options or
other derivative securities.
All covered persons under
the policy are permitted to trade in Borqs securities only during the trading window period that begins after the close of trading on
the first full trading day following the widespread public release of our quarterly or year-end operating results, and ends at the close
of trading on the twentieth calendar day in the third month of the then-current quarter.
While in possession of material
nonpublic information, even if a trading window is in effect, no covered person possessing material nonpublic information about Borqs
may trade in Company securities. Persons possessing such information may trade during a trading window only after the close of trading
on the second full trading day following our widespread public release of such information.
104
PART III
ITEM 17. FINANCIAL STATEMENTS
See Item 18.
ITEM 18. FINANCIAL STATEMENTS
The financial information
required by this item, together with the reports of Yu Certified Public Account PC, is set forth on pages F-1 through F-73 and are filed
as part of this annual report.
ITEM 19. EXHIBITS
Incorporated
    by Reference
Exhibit
Number
Exhibit
    Title
Form
File
    No.
Exhibit
Filing
Date
Filed
Herewith
1.1
Amended and Restated Memorandum and Articles of Association
8-K
001-37593
3.1
8/24/17
2.1
Borqs Technologies, Inc. 2017 Equity Incentive Plan, as amended
8-K
001-37593
10.10
8/24/17
2.2
Form of Warrant, dated August 18, 2017, by and between the Company and each of Warrant Holders
8-K
001-37593
10.11
8/24/17
2.3
Form of Warrant issued to Partners For Growth V, L.P.
8-K
001-37593
10.4
12/20/18
2.4
Description of Securities
20-F
001-37593
2.4
2/4/2020
4.1
Loan and Security Agreement, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth V, L.P.
S-1/A
333-223034
10.20
7/2/18
4.2
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.
S-1/A
333-223034
10.21
7/2/18
4.3
Deed Of Guarantee and Indemnity, Effective as of April 30, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.
S-1/A
333-223034
10.22
7/2/18
4.4
Debenture, Effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners for Growth V, L.P.
S-1/A
333-223034
10.23
7/2/18
4.5
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.
S-1/A
333-223034
10.24
7/2/18
4.6
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.
S-1/A
333-223034
10.25
7/2/18
4.7
Debenture, Effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth V, L.P.
S-1/A
333-223034
10.26
7/2/18
4.8
Intellectual Property Security Agreement, Effective as of April 30, 2018, By and between Borqs Hong Kong and Partners for Growth V, L.P.
S-1/A
333-223034
10.27
7/2/18
4.9
Intellectual Property Security Agreement, Effective as of April 30, 2018, By and between Borqs Hong Kong and Partners for Growth V, L.P.
S-1/A
333-223034
10.28
7/2/18
4.10
Equitable Mortgage, Effective as of April 30, 2018, by and between Borqs Technologies, Inc. and Partners For Growth V, L.P
.
S-1/A
333-223034
10.29
7/2/18
105
4.11
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.
S-1/A
333-223034
10.30
7/2/18
4.12
Amended and Restated Registration Rights Agreement, dated August 18, 2017, by and among Pacific and certain shareholders of Pacific
8-K
001-37593
10.13
8/24/17
4.13
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.
8-K
001-37593
99.1
1/22/18
4.14
Form of Indemnification Agreement, dated August 18, 2017, by and Borqs Technologies, Inc. and each of its directors and executive officers
10-K
001-37593
10.19
4/2/18
4.15
Share Pledge Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and Beijing Big Cloud Century
S-1/A
333-223034
10.37
8/6/18
4.16
Share Pledge Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and Beijing Big Cloud Century Network Technology Ltd.
S-1/A
333-223034
10.38
8/6/18
4.17
Amendment Agreement, Effective August 31, 2018, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.42
9/14/18
4.18
Amendment Agreement, Effective August 31, 2018, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.43
9/14/18
4.19
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.
S-1/A
333-223034
10.44
9/14/18
4.20
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.
S-1/A
333-223034
10.45
9/14/18
4.21
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.
S-1/A
333-223034
10.46
9/14/18
4.22
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.
S-1/A
333-223034
10.47
9/14/18
4.23
Loan and Security Agreement, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth Iv, L.P.
S-1/A
333-223034
10.48
9/14/18
4.24
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.
S-1/A
333-223034
10.49
9/14/18
4.25
Debenture, Effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners for Growth Iv, L.P.
S-1/A
333-223034
10.50
9/14/18
106
4.26
Intellectual Property Security Agreement, Effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners for Growth Iv, L.P.
S-1/A
333-223034
10.51
9/14/18
4.27
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.
S-1/A
333-223034
10.52
9/14/18
4.28
Debenture, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth Iv, L.P.
S-1/A
333-223034
10.53
9/14/18
4.29
Intellectual Property Security Agreement, Effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners for Growth Iv, L.P.
S-1/A
333-223034
10.54
9/14/18
4.30
Subordination Agreement, Effective as of August 15, 2016, by and between Spd Silicon Valley Bank Co., Ltd. and Partners for Growth Iv, L.P.
S-1/A
333-223034
10.55
9/14/18
4.31
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.
S-1/A
333-223034
10.56
9/14/18
4.32
Guarantee Agreement for Corporate Guarantor, Effective as of August 31, 2015, Byand Between Borqs International Holding Corp. and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.57
9/14/18
4.33
Amendment Agreement, Effective July 20, 2016, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.58
9/14/18
4.34
Amendment Agreement, Effective August 31, 2017, by and between Borqs Hong Kong Limited and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.59
9/14/18
4.35
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.
S-1/A
333-223034
10.60
9/14/18
4.36
Pledge Agreement Of Accounts Receivable, Effective as of July 20, 2016, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.61
9/14/18
4.37
Amendment Agreement, Effective July 20, 2017, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.62
9/14/18
4.38
Amendment Agreement, Effective August 31, 2017, by and between Borqs Beijing Ltd. and Spd Silicon Valley Bank Co., Ltd.
S-1/A
333-223034
10.63
9/14/18
4.39
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.
8-K
001-37593
10.1
12/20/18
4.40
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.
8-K
001-37593
10.2
12/20/18
4.41
Promissory Note, dated December 17, 2018
8-K
001-37593
10.3
12/20/18
4.42
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
6-K
001-37593
10.1
03/14/19
107
4.43
Reaffirmations of Intellectual Property Security Agreement and Joinder, dated March 8, 2019, by and among PFG5, BORQS HK, BORQS Tech HK and BORQS International
6-K
001-37593
10.4
03/14/19
4.44
Share Pledge Agreement, dated March 8, 2019, by and among PFG5, BORQS HK and BORQS Tech HK
6-K
001-37593
10.5
03/14/19
4.45
Equity Mortgage, dated March 8, 2019, by and among PFG5, BORQS International and the Company
6-K
001-37593
10.6
03/14/19
4.46
Share Pledge Agreement, dated March 8, 2019, by and among PFG5, BORQS International, BORQS HK and BORQS Software Solutions Private Limited
6-K
001-37593
10.7
03/14/19
4.47
Custody and Control Agreement, dated March 8, 2019, by and among PFG5, BORQS International, BORQS HK and Borqs Software Solutions Private Limited
6-K
001-37593
10.8
03/14/19
4.48
Securities Purchase Agreement, dated April 29, 2019, by and between the Company and Chongqing City Youtong Equity Investment Fund, Limited Liability Partnership
6-K
001-37593
10.1
05/22/19
4.49
Partial Assignment and Amendment of Backstop and Subscription Agreement, dated August 18, 2017, by and between Zhengqi, EarlyBirdCapital, Pacific and Borqs International
8-K
001-37593
10.12
8/24/17
4.50
Letter of Intent, dated January 8, 2018, by and between Borqs Technologies, Inc. and Shanghai KADI Technologies Co., Ltd.
10-K
001-37593
10.14
4/2/18
4.51
Vendor Master Services Agreement, dated July 5, 2013, by and between Borqs Software Solutions Pvt. Ltd. and Qualcomm India Private Limited
S-1/A
333-223034
10.18
5/14/18
4.52
Vendor Master Services Agreement, dated July 5, 2013, by and Between Borqs Software Solutions Pvt. Ltd. and Qualcomm India Private Limited
S-1/A
333-223034
10.18
7/2/18
4.53
Colmei Technology International Limited Master Manufacturing Agreement and Form of Purchase Order, dated March 6, 2017.
10-K
001-37593
10.17
4/2/18
4.54
Reliance Retail Limited Form of Purchase Order, dated November 23, 2015
10-K
001-37593
10.18
4/2/18
4.55
Exclusive Business Cooperation Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd. and Beijing Big Cloud
S-1/A
333-223034
10.32
8/6/18
4.56
Loan Contract, Effective October 18, 2016, by and between Borqs Beijing Ltd. and Between Borqs Beijing Ltd. and Wang Lei
S-1/A
333-223034
10.33
8/6/18
4.57
Loan Contract, Effective October 18, 2016, by and between Borqs Beijing Ltd. and Wang Tun
S-1/A
333-223034
10.34
8/6/18
4.58
Exclusive Option Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Lei, and Beijing Big Cloud Century Network Technology Ltd.
S-1/A
333-223034
10.35
8/6/18
4.59
Exclusive Option Agreement, Effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and Beijing Big Cloud Century
S-1/A
333-223034
10.36
8/6/18
108
4.61
Master Services Agreement for Software Development, dated February 8, 2018, by and between Cloudminds (Hong Kong) Ltd. and Borqs Hong Kong Limited.
10-Q
001-37593
10.1
11/19/18
4.63
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
20-F
001-37593
4.63
2/4/2020
4.64
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
20-F
001-37593
4.64
2/4/2020
4.65
Ownership Transfer Agreement, dated February 14, 2019, between Beijing Big Cloud Century Network Technology Co., Ltd. and Jinggangshan Leiyi Venture Capital LLP
20-F
001-37593
4.65
2/4/2020
4.66
10% Equity Transfer Agreement, dated February 28, 2019, by and between Beijing Big Cloud Network Techonology Co., Ltd. And Jinan Yuantel Communications Technology Partnership
20-F
001-37593
4.66
2/4/2020
4.67
Mobile Communication Resale Business Cooperation Agreement, dated January 10, 2018, by and between Yuantel (Beijing) Investment Management Co., Ltd. and China Unicom
20-F
001-37593
4.67
2/4/2020
4.69
Waiver, Consent and Modification to Loan and Security Agreement, dated June 28, 2019, by and among PFG4, Borqs HK, Borqs International, and the Company.
20-F
001-37593
4.69
2/4/2020
4.70
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.
20-F
001-37593
4.70
2/4/2020
4.71
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
20-F
001-37593
4.71
2/4/2020
4.72
20% Equity Transfer Agreement, dated February 28, 2019, by and between Beijing Big Cloud Network Techonology Co., Ltd. And Jinan Yuantel Communications Technology Partnership
20-F
001-37593
4.72
2/4/2020
4.73
Engagement Letter, dated December 6, 2019, by and between the Company and American West Pacific International Investment Corp.
20-F
001-37593
4.74
2/4/2020
4.74
Amended Engagement Letter, dated January 17, 2020, by and between the Company and American West Pacific International Investment Corp.
20-F
001-37593
4.74
2/4/2020
4.75
Strategic Cooperation Agreement, dated January 2020, by and between China National Technical & Export Corp, Genertec America Inc., and the Company
20-F
001-37593
4.75
2/4/2020
4.76
Loan Agreement of November 27, 2020 with Run He
20-F
001-37593
4.76
4/26/2021
4.77
Settlement Agreement with LMFA Financing, LLC, Of December 14, 2020
20-F
001-37593
4.77
4/26/2021
109
4.78
Loan Agreement of December 30, 2020 with American West Pacific International Investment Corporation
20-F
001-37593
4.78
4/26/2021
4.79
Settlement Agreement with Growth V, L.P. of February 11, 2021
20-F
001-37593
4.79
4/26/2021
4.80
Form of Securities Purchase Agreement.
20-F
001-37593
4.80
4/26/2021
4.81
Form of Convertible Note.
20-F
001-37593
4.81
4/26/2021
4.82
Form of Warrant.
20-F
001-37593
4.82
4/26/2021
4.83
Form of Registration Rights Agreement.
20-F
001-37593
4.83
4/26/2021
4.84
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
20-F
001-37593
4.77
9/30/2020
4.85
Membership Interest Purchase Agreement
F-1
333-259856
10.32
11/04/2021
4.86
Limited Liability Company Agreement
F-1
333-259856
4.86
11/04/2021
8.1
List of Subsidiaries
20-F
X
11.1
Insider trading policy of the Company
20-F
X
12.1
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.
20-F
X
12.2
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.
20-F
X
13.1
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.
20-F
X
101.INS
Inline XBRL Instance Document.
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
X
110
SIGNATURES
The registrant hereby certifies
that 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
annual report on its behalf.
BORQS TECHNOLOGIES, INC.
By:
/s/ Pat Sek Yuen Chan
Name:
Pat Sek Yuen Chan
Title:
Chairman & Chief Executive Officer
Date: May 15, 2023
111
BORQS TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements for the Years Ended December 31, 2021 and 2022
Reports of Independent Registered Public Accounting Firms (PCAOB ID #
5910
)
F-2 – F-5
Consolidated Balance Sheets as of December 31, 2021 and 2022
F-6 – F-7
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2021 and 2022
F-8 – F-9
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020, 2021 and 2022
F-10
Consolidated Statements of Shareholders' (Deficit) Equity for the Years Ended December 31, 2020, 2021 and 2022
F-11 – F-13
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022
F-14 – F-15
Notes to the Consolidated Financial Statements
F-16 – F-73
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders and the Board of Directors
of
Borqs Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Borqs Technologies, Inc. (the "Company") and its subsidiaries, variable interest entities (the "VIE")
and the VIE's subsidiaries (collectively referred to as the "Group"), as of December 31, 2022 and 2021, the related
consolidated statements of operations, consolidated statements of comprehensive income (loss), consolidated statements of shareholders'
(deficit) equity, and consolidated statements of cash flows, for each of the three years ended December 31, 2022, and the related notes
(collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial positions of the Group as of December 31, 2022 and 2021, and the results of its
operations and its cash flows, for each of the three years ended December 31, 2022, in conformity with generally accepted accounting principles
in the United States of America.
Emphasis of Matter - Going Concern
The accompanying consolidated financial statements
have been prepared assuming the Group will continue as a going concern. As discussed in Note 2(b) to the consolidated financial statements,
the Group has continued to incur losses, and it has not yet to generate favorable working capital; in addition, the Group's operations
were still adversely impacted by COVID-19 pandemic. These conditions raise substantial doubt about its ability to continue as a going
concern. Management's plan regarding these matters is also described in Note 2(b). The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Group's management. Our responsibility is to express an opinion on the Group's consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group's internal
control over financial reporting. Accordingly, we express no such opinion.
F-
2
Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
is the matters, arising from the current audit of the consolidated financial statements, which was communicated or required to be communicated
to the audit committee, and that (i) related to accounts or disclosures which are material to the consolidated financial statements, and
(ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter,
in any way, our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Deconsolidation of Holu Hou Energy LLC
As described in Note 4(a) to the consolidated
financial statements, on October 19, 2021, the Group completed the acquisition of a 51% interest in Holu Hou Energy LLC (referred as "HHE"),
for an aggregate consideration of $6.78 million, in which the cash consideration was $3.25 million, contingent consideration liabilities
were $1.67 million. The acquisition was accounted for under the acquisition method of accounting which resulted in the recognition of
identifiable intangible assets, as developed technology, of $4.49 million and goodwill of $12.21 million as of December 31, 2021.
As described in Note 4(c), in December 2022, the
Group have received a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States
("CFIUS"), stating that the Group was required to fully divest its ownership interests and rights in HHE since HHE's
solar energy storage system and related technology for multi-dwelling residential units were deemed a potential national security risk.
Upon such a requirement from CFIUS and the Group's resolution to fully comply with the requirement in this letter from CFIUS and
terminate its control of HHE as of December 31, 2022, the Group no longer had a controlling interest in HHE resulting in deconsolidation
of HHE.
The Group accounted for the deconsolidation of
HHE by derecognizing the assets and liabilities of HHE and recognizing a loss in net loss attributable to the Company, which involved
the valuation of the fair value of the retained non-controlling interest in HHE at the date of deconsolidation. Upon the deconsolidation
of HHE, the Group recorded its non-controlling investment in HHE as equity investments without readily determinable fair value (referred
as "equity investment"). Based on the valuation of the retained non-controlling interest in HHE, as of December 31, 2022,
the fair value of such equity investment was zero and the Group recognized $3.61 million in net loss attributable to the Company from
the deconsolidation of HHE and $5.39 million as the loss on the retained non-controlling interest.
F-
3
Auditing the valuation of the retained non-controlling
interest in HHE upon the deconsolidation, required a high degree of auditor judgments and an increased extent of efforts, due to the estimates
uncertainty and the application of valuation techniques built in part, on assumptions around the future performance forecast of HHE, including
assumptions impacted by future events, such as revenue growth rates for both existing and any future pipeline contracts, discount rates,
expected volatility, forecasted results, such as revenue growth rates and EBITDA, and the comparable competitors selected in the market.
Changes in these assumptions can have a material effect on the valuation assessment of the retained non-controlling interest in HHE.
Addressing the matter involved performing procedures
and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures
included, (i) evaluating management's assumptions and methodology used to for estimate the fair value of HHE; (ii) evaluating the
appropriateness of the valuation models; (iii) testing the completeness, accuracy, and relevance of underlying data used in the models;
(iv) evaluating the reasonableness of significant assumptions and judgments made by management, including the revenue growth rate assumptions
for both existing and any future pipeline contracts, discount rates, expected volatility; (v) comparing the future operating results to
economic growth data, industry data, and growth rates utilized in the valuation analyses by the Group; (vi) evaluating the reasonableness
of the selection set of comparable competitors, and the reasonableness of parameters chosen by the valuation professionals, implemented
in the market approach; (vii) reviewing the documents related to the CFIUS' actions, such as the CFIUS letter, the Board resolution,
and the communication between the Group and CFIUS; (viii) reviewing the legal opinions from legal counsels on the timing of ceased control
from the Group over HHE; and (ix) evaluating the competence, capabilities and objectivity of the valuation professionals engaged by the
Group.
Going Concern Assessment
The consolidated financial statements of the Group
are prepared on the going concern basis of accounting as described in note 2(b) to the consolidated financial statements. The Group has
stated in the notes to its financial statements that material uncertainty exists about its ability to continue as a going concern. There
is a key judgement as to whether there is substantial doubt regarding the Group's ability to continue as a going concern.
The Group has prepared future cash flow forecasts
which involves judgement and estimation of key variables such as planned fund-raising activities, planned capital expenditures, future
production volumes and market conditions with future economic conditions, including the impact of the global COVID-19 pandemic, and effects
of key events including convertible note and debt restructure as described in Note 1(c), Note 13, and Note 20.
Auditing the Group's going concern assessment
described above is complex and involves a high degree of auditor judgment to assess the reasonableness of the cash flow forecasts, planned
financing actions and other assumptions used in the Groups going concern analysis. The Groups ability to execute the planned financing
actions are especially judgmental, provided the global financial markets and economic conditions have been, and continue to be, volatile
as a result of the COVID-19 pandemic and a series of unpredictable events.
F-
4
Addressing the matter involved performing procedures
and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures
included, among others, (i) evaluating management's assumptions and methodology used in the model to estimate the future cash flows
for the next 12 months from the date of our opinion, by comparing assumptions used by management against historical performance, economic
and industry indicators, and the publicly available information; (ii) assessing the key assumptions, including those pertaining to revenue
and the timing of significant payments in the cash flow forecast by comparing them to available purchase order, underlying agreements,
and market data; (iii) comparing the assumptions to those used in impairment assessments, such as long-lived assets; (iv) performing sensitivity
analysis on key assumptions, such as input prices and selling prices to determine their impact on the projections of future cash flows;
and (v) evaluating the sufficiency of the Group's disclosures with respect to going concern assessment.
/s/
Yu Certified Public Accountant, P.C.
(PCAOB ID: 5910)
We have served as the Company's auditor since 2019.
New York, New York
May 15, 2023
F-
5
BORQS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of US dollar ("$"),
unless otherwise stated)
As of December 31,
Note
2021
2022
$
$
ASSETS
Current assets:
Cash and cash equivalents
6,117
11,305
Restricted cash
211
32
Time deposits
-
1,436
Accounts receivable, net (net of allowance of $
13,049
and $
12,881
as of December 31, 2021 and 2022, respectively)
2,262
3,482
Inventories, net
(5)
6,760
4,235
Prepaid expenses and other current assets, net (net of allowance of $
11,327
and $
11,383
as of December 31, 2021 and 2022, respectively)
(6)
13,640
7,501
Current assets held for sale
(1)
2,220
-
Total current assets
31,210
27,991
Non-current assets:
Property and equipment, net
(8)
724
1,024
Construction in progress
94
-
Intangible assets, net
(9)
978
-
Right of use asset
(7)
1,674
704
Deferred tax assets
(17)
471
424
Non-current assets held for sale
(1)
18,101
-
Total non-current assets
22,042
2,152
Total assets
53,252
30,143
The accompanying notes are an integral part of
these consolidated financial statements.
F-
6
BORQS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in thousands of US dollar ("$"),
unless otherwise stated)
As of December 31,
Note
2021
2022
$
$
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
9,449
7,071
Accrued expenses and other payables
(12)
27,648
23,938
Contract liabilities - current
7,308
3,951
Lease liabilities - current
(7)
1,032
536
Amount due to related parties-current
2,492
746
Income tax payable
399
7
Short-term bank and other borrowings
(11)
361
-
Long-term bank borrowings - current portion
(11)
1,250
-
Contingent consideration –current
1,392
-
Convertible notes
(14)
9,990
1,691
Current liabilities held for sale
(1)
3,070
-
Total current liabilities
64,391
37,940
Non-current liabilities:
Unrecognized tax benefits
(17)
2,174
1,990
Deferred tax liabilities
(17)
1,011
909
Lease liabilities – non-current
(7)
754
39
Other payable – non-current
-
417
Contingent consideration – non-current
389
-
Other non-current liabilities
15
-
Non-current liabilities held for sale
(1)
1,804
-
Total non-current liabilities
6,147
3,355
Total liabilities
70,538
41,295
Commitments and contingencies
Shareholders' deficit:
Ordinary shares (
no
par value;
unlimited
shares authorized;
10,209,481
shares and
57,182,633
shares issued and outstanding as of December 31, 2021 and 2022, respectively *)
-
-
Additional paid-in capital
262,271
310,267
Subscriptions receivable
(
15,287
)
(
14,378
)
Statutory reserve
1,901
1,901
Accumulated deficit
(
271,040
)
(
305,072
)
Accumulated other comprehensive loss
(15)
(
1,091
)
(
3,512
)
Total Borqs Technologies, Inc. shareholders' deficit
(
23,246
)
(
10,794
)
Noncontrolling interest
5,960
(
358
)
Total shareholders' deficit
(
17,286
)
(
11,152
)
Total liabilities, noncontrolling interest and shareholders' deficit
53,252
30,143
*
Giving retroactive effect to the reverse split on June 27, 2022
The accompanying notes are an integral part of
these consolidated financial statements.
F-
7
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
For the years ended December 31,
Note
2020
2021
2022
$
$
$
Net Revenues:
Software
10,063
10,732
13,080
Software – related party
507
-
-
Hardware
16,181
18,829
39,457
Total net revenues
26,751
29,561
52,537
Software
(
9,691
)
(
9,429
)
(
6,149
)
Hardware
(
15,464
)
(
17,526
)
(
35,272
)
Total cost of revenues
(
25,155
)
(
26,955
)
(
41,421
)
Total gross profit
1,596
2,606
11,116
Operating expenses:
Sales and marketing expenses
(
750
)
(
151
)
(
341
)
General and administrative expenses
(
33,304
)
(
23,558
)
(
7,186
)
Research and development expenses
(
8,162
)
(
5,294
)
(
4,524
)
Total operating expenses
(
42,216
)
(
29,003
)
(
12,051
)
Other operating income
-
247
148
Operating loss
(
40,620
)
(
26,150
)
(
787
)
Interest income
5
3
47
Interest expense
(
3,795
)
(
11,680
)
(
11,732
)
Other income
231
2,376
240
Other expense
(
210
)
(
3,207
)
(
2,123
)
Gain (loss) on disposal of subsidiary
10,096
(
303
)
-
Contingency (loss) reversal
(
3,065
)
3,277
-
Gain (loss) on debt settlement
26
(
17,199
)
217
Loss related to equity financing
-
-
(
3,669
)
Change in fair value of contingent consideration for the acquisition of HHE
-
(
111
)
-
Loss on additional acquisition cost to HHE in shares
-
-
(
5,950
)
Loss on deconsolidation of a subsidiary
(4)
-
-
(
3,610
)
Foreign exchange gain (loss)
1,649
(
2,661
)
(
1,519
)
Loss from continuing operations, before income taxes
(
35,683
)
(
55,655
)
(
28,886
)
Income tax (expense) benefit
(17)
(
406
)
445
(
59
)
Net loss from continuing operations
(
36,089
)
(
55,210
)
(
28,945
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-
8
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
For the years ended December 31,
Note
2020
2021
2022
$
$
$
Discontinued operations
Income (loss) from operations of discontinued entities
1,302
(
1,392
)
(
9,916
)
Net income (loss) on discontinued operations
1,302
(
1,392
)
(
9,916
)
Net loss
(
34,787
)
(
56,602
)
(
38,861
)
Net loss attributable to noncontrolling interest – continuing operations
(
1
)
(
54
)
(
190
)
Net income (loss) attributable to noncontrolling interest – discontinued operations
716
(
683
)
(
4,639
)
Less: net income (loss) attributable to noncontrolling interest
715
(
737
)
(
4,829
)
Net loss attributable to Borqs Technologies, Inc.
(
35,502
)
(
55,865
)
(
34,032
)
Net loss attributable to ordinary shareholders
(
35,502
)
(
55,865
)
(
34,032
)
Net loss per share from continuing operations attributable to Borqs Technologies, Inc.
Loss per share—Basic *:
(
12.97
)
(
7.48
)
(
1.25
)
Loss per share—Diluted *:
(
12.97
)
(
7.48
)
(
1.25
)
Net (loss) earnings per share from discontinued operations attributable to Borqs Technologies, Inc.
Earnings (loss) per share—Basic *:
0.21
(
0.10
)
(
0.23
)
Earnings (loss) per share—Diluted *:
0.21
(
0.10
)
(
0.23
)
Net loss per share attributable to Borqs Technologies, Inc.
Loss per share—Basic *:
(
12.76
)
(
7.58
)
(
1.48
)
Loss per share—Diluted *:
(
12.76
)
(
7.58
)
(
1.48
)
Number of ordinary shares used in earnings per share computation:
Weighted-average number of ordinary shares used in calculating continuing operations—basic *
2,782,188
7,370,719
22,951,092
Weighted-average number of ordinary shares used in calculating continuing operations—diluted *
2,782,188
7,370,719
22,951,092
Weighted-average number of ordinary shares used in calculating discontinued operations—basic *
2,782,188
7,370,719
22,951,092
Weighted-average number of ordinary shares used in calculating discontinued operations—diluted *
2,782,188
7,370,719
22,951,092
*
Giving retroactive effect to the reverse split on June 27, 2022
The accompanying notes are an integral part of
these consolidated financial statements.
F-
9
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(LOSS)
(Amounts in thousands of $, unless otherwise
stated)
For the years ended December 31,
Note
2020
2021
2022
$
$
$
Net loss
(
34,787
)
(
56,602
)
(
38,861
)
Other comprehensive income (loss) , net of tax of nil:
Foreign currency translation adjustments, net of tax of nil
1,498
507
(
1,456
)
Other comprehensive income (loss) , net of tax of nil
1,498
507
(
1,456
)
Comprehensive loss
(
33,289
)
(
56,095
)
(
40,317
)
Less: comprehensive income (loss) attributable to noncontrolling interest
41
(
10
)
76
Comprehensive loss attributable to Borqs Technologies, Inc.
(
33,330
)
(
56,085
)
(
40,393
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-
10
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
(DEFICIT) EQUITY
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
Number of
ordinary
shares *
Ordinary
shares
Additional
paid-in
capital
Subscription
receivable
Statutory
reserves
Accumulated
Other
comprehensive
loss
Accumulated
deficit
Total Borqs
Technologies, Inc.
shareholders'
equity
Noncontrolling
interest
Total
shareholders'
(deficit)
equity
Balance as of January 1, 2020
2,429,820
-
150,455
(
15,287
)
2,097
(
1,904
)
(
179,672
)
(
44,311
)
(
4,394
)
(
48,705
)
Consolidated net loss
-
-
-
-
-
-
(
35,503
)
(
35,503
)
715
(
34,788
)
Foreign exchange difference
-
-
-
-
661
-
661
-
661
Debt equity conversion settlement (4)
192,430
-
3,594
-
-
3,594
-
3,594
Disposal of Yuantel(2)
(
6,959
)
-
(
6,959
)
3,566
(
3,393
)
Contribution by management (5)
-
-
396
-
-
-
396
-
396
Issuance of ordinary shares for collateral (6)
250,000
-
4,080
(
4,080
)
-
-
-
-
-
-
Share-based compensation (7)
873,946
-
19,994
-
-
-
-
19,994
-
19,994
Balance as of December 31, 2020
3,746,196
-
171,560
(
19,367
)
2,097
(
1,243
)
(
215,175
)
(
62,128
)
(
113
)
(
62,241
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-
11
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
(DEFICIT) EQUITY (CONTINUED)
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
Number
    of
ordinary
shares *
Ordinary
shares
Additional
paid-in
capital
Subscription
receivable
Statutory
reserves
Accumulated
Other
comprehensive
loss
Accumulated
deficit
Total
    Borqs
Technologies, Inc.
shareholders'
equity
Noncontrolling
interest
Total
shareholders'
(deficit)
equity
Balance as of January 1, 2021
3,746,196
-
171,560
(
19,367
)
2,097
(
1,243
)
(
215,175
)
(
62,128
)
(
113
)
(
62,241
)
Consolidated net loss
-
-
-
-
-
-
(
55,865
)
(
55,865
)
(
737
)
(
56,602
)
Foreign exchange difference
-
-
-
-
152
-
152
-
152
Debt equity conversion settlement
    (4)
1,514,646
-
36,092
-
-
-
-
36,092
-
36,092
Disposal of a subsidiary
-
-
-
(
196
)
-
-
(
196
)
-
(
196
)
Issuance of warrants associated with
    convertible notes (8)
-
-
12,950
-
-
-
-
12,950
-
12,950
Shares conversion of convertible notes (8)
1,496,271
-
21,433
-
-
-
-
21,433
-
21,433
Warrants exercised into shares (8)
1,931,729
-
55
-
-
-
-
55
-
55
Shares released from escrow (6)
-
-
-
4,080
-
-
-
4,080
-
4,080
Acquisition of a subsidiary (9)
925,398
-
5,516
-
-
-
-
5,516
6,513
12,029
Capital injection from non-controlling
    shareholders of a subsidiary (10)
-
-
-
-
-
-
-
-
297
297
Share-based
    compensation (7)
594,980
-
14,665
-
-
-
-
14,665
-
14,665
Balance as of December 31, 2021
10,209,220
-
262,271
(
15,287
)
1,901
(
1,091
)
(
271,040
)
(
23,246
)
5,960
(
17,286
)
*
Giving retroactive effect to the reverse split on June 27, 2022
The accompanying notes are an integral part of
these consolidated financial statements.
F-
12
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
(DEFICIT) EQUITY (CONTINUED)
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
Number
    of
ordinary
shares
Ordinary
shares
Additional
paid-in
capital
Subscription
receivable
Statutory
reserves
Accumulated
Other
comprehensive
loss
Accumulated
deficit
Total
    Borqs
Technologies, Inc.
shareholders'
equity
Noncontrolling
interest
Total
shareholders'
(deficit)
equity
Balance
    as of January 1, 2022
10,209,220
-
262,271
(
15,287
)
1,901
(
1,091
)
(
271,040
)
(
23,246
)
5,960
(
17,286
)
Consolidated
    net loss
-
-
-
-
-
-
(
34,032
)
(
34,032
)
(
4,829
)
(
38,861
)
Foreign
    exchange difference
-
-
-
-
(
2,421
)
-
(
2,421
)
-
(
2,421
)
Loan
    conversion with ordinary shares (4)
338,968
-
1,139
-
-
-
-
1,139
-
1,139
Issuance
    of ordinary shares as collateral
1,003,593
-
2,760
(
2,760
)
-
-
-
-
-
-
Shares
    conversion of convertible notes (8)
19,324,628
-
28,692
-
-
-
-
28,692
-
28,692
Warrants
    exercised into shares (8)
17,360,652
-
-
-
-
-
-
-
-
-
Issuance
    of warrants associated with convertible notes (8)
-
-
6,069
-
-
-
-
6,069
-
6,069
Shares
    issued for additional acquisition cost to HHE (9)
5,000,000
-
5,950
-
-
-
-
5,950
-
5,950
Capital
    injection from non-controlling shareholders of a subsidiary (10)
-
-
-
-
-
-
-
-
437
437
Deconsolidation
    of a subsidiary (11)
-
-
-
-
-
-
-
-
(
1,926
)
(
1,926
)
Settlement
                                 of equity financing (12)
-
-
-
3,669
-
-
-
3,669
-
3,669
Share-based
    compensation (7)
3,945,572
-
3,386
-
-
-
-
3,386
-
3,386
Balance
    as of December 31, 2022
57,182,633
-
310,267
(
14,378
)
1,901
(
3,512
)
(
305,072
)
(
10,794
)
(
358
)
(
11,152
)
(1)
Refer
to Note 2(gg) for information regarding subscription receivables.
(2)
Refer
to Note 1(c) for information regarding transactions related to equity interests in Yuantel.
(3)
Refer
to Note 20(d) for information regarding repurchase of ordinary shares.
(4)
Refer
to Note 20(g) for information regarding debt repayment settlement.
(5)
Refer
to Note 20(h) for information regarding contribution by management.
(6)
Refer
to Note 20(i) for information regarding issuance of shares for collateral.
(7)
Refer
to Note 16(a)(b) for information regarding share-based compensation.
(8)
Refer
to Note 14 for information regarding warrants granted associated with convertible notes.
(9)
Refer
to Note 4 for information regarding acquisition of HHE.
(10)
Refer
to Note 20(m) for information regarding capital injection from non-controlling shareholders.
(11)
Refer
to Note 4 for information regarding deconsolidation of a subsidiary.
(12)
Refer
to Note 20(c) for information regarding settlement of equity financing.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
13
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of $, unless otherwise
stated)
For the years ended December 31,
Note
2020
2021
2022
$
$
$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
(
34,787
)
(
56,602
)
(
38,861
)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision (reversal of provision) on accounts receivables & other current assets
4,371
(
1,757
)
(
20
)
Depreciation of property and equipment
149
123
376
Amortization of intangible assets
5,430
2,110
1,427
Amortization of right of use asset
815
829
537
Loss on disposal of property and equipment
10
-
-
Impairment of inventory
782
1,268
-
Impairment of intangible assets
724
-
-
Deferred income tax (benefits) expenses
(
1,003
)
680
(
55
)
Interest expense related to debt discount
-
9,945
11,387
Share-based compensation expenses
3,002
7,937
2,782
(Gain) loss on debt settlement
(
26
)
17,199
(
217
)
(Gain) loss on disposal of subsidiary
(
10,096
)
303
-
Non-employee share-based compensation expenses
16,992
9,596
604
Contingency loss
3,065
-
-
Reversal of contingency loss
-
(
3,277
)
-
Gain from debt forgiveness
-
(
2,094
)
-
Change in fair value of contingent consideration for the acquisition of HHE
-
111
-
Loss on additional acquisition cost to HHE in shares
-
-
5,950
Loss related to equity financing
-
-
3,669
Loss from deconsolidation of HHE
-
-
3,610
Changes in operating assets and liabilities, net of the effects of an acquisition:
Accounts receivable
1,560
(
1,379
)
(
1,052
)
Inventories
2,202
(
5,310
)
1,982
Contract assets
-
(
1,414
)
1,485
Prepaid expenses and other current assets
(
7,678
)
(
12,944
)
6,343
Other non-current assets
(
3,221
)
-
-
Accounts payable
(
2,984
)
(
1,261
)
(
1,379
)
Accrued expenses and other payables
13,032
9,753
(
3,673
)
Advances from customers and contract liabilities
493
(
92
)
2,107
Amounts due to related parties
(
351
)
(
1,288
)
(
1,766
)
Deferred revenues
(
28
)
1,040
9
Long-term payable
(
361
)
669
(
252
)
Income tax payable
974
(
1,454
)
(
392
)
Right of use asset
(
819
)
(
1,796
)
433
Lease liabilities
(
132
)
435
(
542
)
Other non-current liabilities
84
(
68
)
(
15
)
Net cash used in operating activities
(
8,059
)
(
28,738
)
(
5,523
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(
72
)
(
781
)
(
718
)
Purchases of intangible assets
(
141
)
-
-
Cash disposed of from deconsolidation of HHE
-
-
(
1,117
)
Proceeds from disposal of a subsidiary, net of cash balance at disposed entity
4,172
-
-
Investment in time deposit
-
-
(
1,436
)
Investment in convertible bond and cash loan
-
(
338
)
(
100
)
Proceeds from acquisition of a subsidiary, net of cash acquired
-
121
-
Net cash generated from (used in) investing activities
3,959
(
998
)
(
3,371
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-
14
BORQS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Amounts in thousands of $, unless otherwise
stated)
Note
2020
2021
2022
$
$
$
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term bank and other borrowings
5,300
3,507
155
Repayments of short-term bank and other borrowings
(
7,905
)
(
3,906
)
(
579
)
Proceeds from long-term bank and other borrowings
1,250
-
112
Repayments of long-term bank and other borrowings
-
(
111
)
(
1
)
Proceeds from issuance of convertible notes
-
34,427
15,075
Proceeds from exercising of warrants
-
55
-
Proceeds from non-controlling shareholders of a subsidiary
-
297
138
Net cash (used in) generated from financing activities
(
1,355
)
34,269
14,900
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash
228
311
(
2,594
)
Net (decrease) increase in cash and cash equivalents and restricted cash
(
5,227
)
4,844
3,412
Cash and cash equivalents and restricted cash at the beginning of year
8,308
3,081
7,925
Cash and cash equivalents and restricted cash at the end of year
3,081
7,925
11,337
Less: cash and cash equivalents and restricted cash of discontinued operations at the end of year
-
1,597
-
Cash and cash equivalents and restricted cash of continuing operations at the end of year
3,081
6,328
11,337
Reconciliation of cash and cash equivalents and restricted cash of the continuing operations
Cash and cash equivalents of continuing operations at the end of year
3,044
6,117
11,305
Restricted cash of continuing operations at the end of year
37
211
32
Total cash and cash equivalents and restricted cash of continuing operations
3,081
6,328
11,337
Reconciliation of cash and cash equivalents and restricted cash of the discontinued operations
Cash and cash equivalents of discontinued operations at the end of year
-
1,597
-
Restricted cash of discontinued operations at the end of year
-
-
-
Total cash and cash equivalents and restricted cash of discontinued operations
-
1,597
-
For the years ended December 31,
2020
2021
2022
$
$
$
Supplemental disclosures   of cash flow information:
Interest paid
(
3,614
)
(
1,707
)
(
232
)
Interest received
8
4
24
Income tax paid
(
544
)
(
375
)
(
254
)
Cash paid included in the measurement of lease liabilities
(
1,008
)
(
1,088
)
(
678
)
Supplemental schedule of non-cash activities:
Acquisition of a subsidiary
-
3,529
-
Loan conversion with ordinary shares
-
-
1,250
Conversion of convertible notes
-
21,433
28,692
Issuance of shares for an increase in subscription receivable
4,080
-
2,760
Shares released from escrow
-
4,080
-
Issuance of shares in exchange for advisory services
16,992
9,651
604
Debt settlements by issuance of ordinary shares
3,439
36,092
-
Settlement of equity financing
-
-
3,669
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities
797
1,780
575
The accompanying notes are an integral part of
these consolidated financial statements.
F-
15
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION
Borqs Technologies, Inc. (formerly
known as "Pacific Special Acquisition Corp.", the "Company" or "Borqs Technologies") was incorporated
in the British Virgin Islands on July 1, 2015. The Company was formed for the purpose of acquiring, engaging in a share exchange, share
reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging
in any other similar business combination with one or more businesses or entities.
On August 18, 2017, the Company acquired
100
% equity interest of BORQS International Holding Corp. ("Borqs International") and its subsidiaries, variable interest
entities (the "VIE") and the VIE's subsidiaries (collectively referred to as "Borqs Group" hereinafter)
(the Company and Borqs Group collectively referred to as the "Group") in an all-stock transaction (the "Merger").
Concurrent with the completion of the acquisition of Borqs International, the Company changed its name from Pacific Special Acquisition
Corp." to Borqs Technologies, Inc.
In November 2018, the Company's
board of directors approved the plan to dispose all of its tangible and intangible assets related to the VIE and the VIE's subsidiaries
through a series of agreements as discussed in Note 1 (c).
Borqs Group are principally engaged
in the provision of commercial grade Android+ platform solutions and hardware product manufactured in the People's Republic of China
(the "PRC") and sold almost entirely outside of the PRC.
The Group has disposed Yuantel on October
29, 2020. Refer to Note 1(c) for transitions related to disposal of Yuantel during the year ended December 31, 2020.
(a) As of the balance sheet date, the
VIE has been disposed and the details of the Company's major subsidiaries, are as follows:
Entity
Date of
incorporation/
Acquisition
Place of
incorporation
Percentage of
direct or
indirect
ownership by
the Company
Principal
activities
Direct
Subsidiaries
:
BORQS International
July 27, 2007
Cayman
100
%
Holding company
BORQS Hong Kong Limited ("Borqs HK")
July 19, 2007
Hong Kong
100
%
Provision of software and service solutions and hardware products sales
BORQS Beijing Ltd. ("Borqs Beijing")
September 4, 2007
PRC
100
%
Provision of software and service solutions and hardware products sales
BORQS Software Solutions Private Limited ("Borqs India")
July 17, 2009
India
100
%
Provision of software and service solutions
F-
16
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION
(CONTINUED)
(b) PRC laws and regulations prohibit
foreign ownership in certain telecommunication related businesses. To comply with these foreign ownership restrictions, the Group conducts
its businesses in the PRC through the VIE using contractual agreements (the "VIE Agreements").
The Group funds Big Cloud Network through
loans to the two Big Cloud Network's shareholders, (collectively the "Nominee Shareholders"). The effective control
of Big Cloud Network is held by the Group, through a series of contractual agreements between Borqs Beijing and Big Cloud Network whereby
Big Cloud Network became the Consolidated VIE of the Group. Through the contractual agreements, the Group receives substantially all of
the economic benefits of Big Cloud Network.
Big Cloud Network provides MVNO services
in China through its
79
% owned entity of Yuantel which owns
95
% of Yuantel Telecom; therefore Big Cloud Network effectively owns
75.05
%
of Yuantel Telecom which is the entity that operates the business and holds the MVNO license from the Chinese Ministry of Industry and
Information Technology as of December 31, 2018. Refer to Note 1(c) for transitions related to equity interests in Yuantel during the year
ended December 31, 2020.
The following is a summary of the key
terms of the latest VIE Agreements:
Loan agreements
Borqs Beijing and the Nominee Shareholders
entered into loan agreements for Borqs Beijing to provide interest free loans of RMB
50,000
to the Nominee Shareholders, respectively,
for the purpose of providing capital to Big Cloud Network to develop its MVNO business. There is no fixed term for the loans.
Power of attorney agreement
The Nominee Shareholders of Big Cloud
Network entered into the power of attorney agreement whereby they authorized Borqs Beijing or its designated party to act on behalf of
the Nominee Shareholders as exclusive agent and attorney with all respect to all matters concerning the shareholding including but not
limited to (1) attend shareholders' meetings of Big Cloud Network; (2) exercise all the shareholders' rights, including voting
rights; and (3) designate and appoint on behalf of each shareholder the senior management members of Big Cloud Network. The power of attorney
remains irrevocable and continuously valid from the date of execution so long as each Nominee Shareholder remains as a shareholder of
Big Cloud Network. The power of attorney agreement was subsequently reassigned to Borqs International.
Exclusive option agreement
Pursuant to the exclusive option agreement
entered into between the Nominee Shareholders and Borqs Beijing or its designated party, the Nominee Shareholders granted Borqs Beijing
or its designated party, an irrevocable and exclusive right to purchase all or part of the equity interests held by the Nominee Shareholders
in Big Cloud Network, to the extent permitted under the PRC laws, at an amount equal to RMB10 or the minimum consideration permitted under
the applicable PRC law. The purchase consideration in excess of RMB10 shall be refunded by the Nominee Shareholders to Borqs Beijing or
Borqs Beijing may deduct the excess amount upon payment of consideration. The Nominee Shareholders shall not declare dividend or any form
of distribution or grant loans in any form without the prior consent of Borqs Beijing or its designated party. The term of the agreement
is 10 years, expiring on June 22, 2024 which will be automatically renewed every three-year thereafter if Borqs Beijing or its designated
party does not provide notice of termination to the Nominee Shareholders fifteen days prior to expiration.
Exclusive technical & support
agreement
Pursuant to the agreement entered into
between Borqs Beijing and Big Cloud Network, Big Cloud Network engaged Borqs Beijing or its designated party as its exclusive provider
of technical, consulting and other services in relation to its major business during the contractual period in return for service fees
which will be determined at the sole discretion of Borqs Beijing or its designated party. The term of the agreement is 10 years, expiring
on June 22, 2024, which will be automatically renewed every three-year thereafter if Borqs Beijing or its designated party does not provide
notice of termination to the Nominee Shareholders fifteen days prior to expiration.
F-
17
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION
(CONTINUED)
Business cooperation agreement
Pursuant to the business cooperation
agreement entered into between Borqs Beijing and Big Cloud Network, Borqs Beijing or its designated party agreed to provide unlimited
financial support for the VIE's daily operating activities through entrusted loans and agree to forgo the right to seek repayment.
Share pledge agreements
Pursuant to the agreement, the Nominee
Shareholders pledged all of their equity interests in Big Cloud Network to Borqs Beijing as collateral to guarantee the repayment of the
loans and to secure their obligations under the above agreements. The Nominee Shareholders agreed not to transfer or otherwise create
any encumbrance on their equity interests in Big Cloud Network without prior consent of Borqs Beijing. The share pledge agreements will
remain effective until all the obligations under above agreements have been satisfied in full or all of the guarantee liabilities have
been repaid.
Despite the lack of technical majority
ownership, there exists a parent-subsidiary relationship between Borqs Beijing's designee, Borqs International, and Big Cloud Network
through the irrevocable power of attorney agreement, whereby the Nominee Shareholders effectively assigned all of the voting rights underlying
their equity interest in Big Cloud Network to Borqs International. Furthermore, pursuant to the exclusive option agreement and share pledge
agreements, Borqs International, via Borqs Beijing, obtained effective control over Big Cloud Network through the ability to exercise
all the rights of Nominee Shareholders and therefore the power to govern the activities that most significantly impact the economic performance
of Big Cloud Network. In addition, through the VIE Agreements, Borqs International demonstrates its ability and intention to continue
the ability to absorb substantially all the expected losses and the majority of the profit of the VIE, and therefore have the rights to
the economic benefits of the VIE. Thus, Borqs International consolidates Big Cloud Network and its subsidiaries under ASC Subtopic 810-10,
Consolidation Overall
, ("ASC 810-10").
In the opinion of the Group's
management and PRC counsel, (i) the ownership structure of the Consolidated VIEs is in compliance with all existing PRC laws and regulations
in any material respect, (ii) each of the VIE Agreements is valid, legally binding and enforceable to each party of such agreements and
will not result in any violation of PRC laws or regulations currently in effect; and (iii) each of the Group's PRC subsidiaries,
VIE and VIE's subsidiaries have the necessary corporate power and authority to conduct its business as described in its business
scope under its business license, which is in full force and effect, and the Group's business operation in PRC are in compliance
with existing PRC laws and regulations.
However, uncertainties in the PRC legal
system could cause the relevant regulatory authorities to find the current VIE Agreements and businesses to be in violation of any existing
or future PRC laws or regulations. If Borqs International, the primary beneficiary or any of its current or future VIEs are found in violation
of any existing or future laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC
regulatory authorities would have broad discretion in dealing with such violations, including levying fines, confiscating the income of
the primary beneficiary, and the VIE, revoking the business licenses or operating licenses of the primary beneficiary, and the VIE, shutting
down the Group's servers, discontinuing or placing restrictions or onerous conditions on the Group's operations, requiring
the Group to undergo a costly and disruptive restructuring or enforcing actions that could be harmful to the Group's business. Any
of these actions could cause significant disruption to the Group's business operations and severely damage the Group's reputation,
which would in turn materially and adversely affect the Group's business and results of operations. In addition, if the imposition
of any of these penalties causes the primary beneficiary to lose the rights to direct the activities of the VIE or the right to receive
its economic benefits, Borqs International would no longer be able to consolidate the VIE.
In addition, if the VIE or the Nominee
Shareholders fail to perform their obligations under the VIE Agreements, the Group may have to incur substantial costs and expend resources
to enforce the primary beneficiary' rights under the contracts. The Group may have to rely on legal remedies under PRC laws, including
seeking specific performance or injunctive relief and claiming damages, which may not be effective. All of these VIE Agreements are governed
by PRC laws and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted
in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in PRC is not
as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the
Group's ability to enforce these contractual arrangements. Under PRC laws, rulings by arbitrators are final, parties cannot appeal
the arbitration results in courts, and prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award
recognition proceedings, which would incur additional expenses and delay. In the event the Group is unable to enforce these VIE Agreements,
the primary beneficiary may not be able to exert effective control over its VIE, and the Group's ability to conduct its business
may be negatively affected.
F-
18
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION
(CONTINUED)
(c) COVID-19 Pandemic
Since February 2020, the Group has
experienced reductions and cancellations of orders due to effects of the COVID-19 pandemic has on the demand from certain of the Group's
customers. The Group expects this negative effect on global business activities will continue to have pressure on the Group's sales
as the pandemic environment persists and perhaps even post the pandemic. In addition, since the Group's operations span over the
countries of the United States, India, China and South Korea, international and intra-country travel restrictions will continue to hamper
our operations and have negative effects including delays and uncertainties on the Group's supply chain delivery schedules and the
Group's abilities to secure financing for the Group's working capital needs. The Group expects the impacts of COVID-19 to
have an adverse effect on the business, financial condition and results of operations. As the assessable risks due to COVID-19 change
in the countries of India and China, our operations can be affected, including the restrictions from accessing office facilities and limitations
on domestic travels which can hamper the Group's ability to efficiently manage the manufacturing of products since the Group's
contracted factories are located over various cities in China.
As the Group's sales have been
negatively impacted by the pandemic in 2020, the Group cut back the operational costs by reduction of approximately
20
% of the workforce
in India and
40
% of headcount in China. The Group constantly evaluates the financial position according to changes in the international
business environment and depending on forecast of orders from customers in the near future, the Group may further reduce staffing as necessary.
Although the Group's revenues
in 2022 improved to $
52.5
million as compared to $
29.6
million in 2021, the impact of the continuing COVID-19 pandemic on the year 2023
and beyond is still unknown as of the filing of this annual report and may cause our revenue in future periods to decline.
The extent to which COVID-19 impacts
the business and financial results of the Group in the longer term will depend on future developments, which are uncertain and cannot
be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus
or treat its impact, among others. The Group will continue to evaluate the impact on the results of operation, financial position and
cash flows of the Group and react actively as the situation evolves.   The COVID-19 pandemic also presented and may continue
to present challenges to the Group's business operations as well as the business operations of the Group's customers, business
partners and other participants in the Group's ecosystem, such as closure of offices and facilities, disruptions to or even suspensions
of normal business and logistics operations, as well as restrictions on travel. Moreover, due to the quick spread of Omicron new variant
across mainland China and Hong Kong, many cities in China had experienced lockdown or partial lockdown from time to time since the beginning
of 2022. Although the Group's businesses have recovered or are starting to recover, it is not possible to determine the ultimate
impact of the COVID-19 pandemic on the Group's business operations and financial results, which is highly dependent on numerous
factors, including the duration and spread of the pandemic and any resurgence of the COVID-19 pandemic in China or elsewhere, actions
taken by governments, domestically and in international relations, the response of businesses and individuals to the pandemic, the impact
of the pandemic on business and economic conditions in China and globally, consumer demand, the Group's ability and the ability
of customers, logistics service providers and other participants in the Group's ecosystem to continue operations in areas affected
by the pandemic and the Group's efforts and expenditures to support customers and partners and ensure the safety of the Group's
employees. The COVID-19 pandemic may continue to adversely affect the Group's business and results of operations.
(d) VIE and discontinued operation
disclosures
The Group disposed Yuantel to a third-party
entity which also purchased the ownership of Yuantel that was sold to the first buyer in 2019. The disposal was completed On October 29,
2020 and as a result, the Group deconsolidated Yuantel on that date.
The Consolidated VIEs contributed 29% and 52% of the Group's
consolidated revenues for the years ended December 31, 2019 and from January through October of 2020, respectively. As of December 31,
2020 and 2021, the Consolidated VIEs accounted for an aggregate of nil% and nil%, respectively, of the consolidated total assets, and
nil% and nil%, respectively, of the consolidated total liabilities.
The Group believes that there are no
assets held in the Consolidated VIEs that can be used only to settle obligations of the Consolidated VIEs, except for registered capital
and the PRC statutory reserves. Relevant PRC laws and regulations restrict the Consolidated VIEs from transferring a portion of their
net assets, equivalent to the balance of its statutory reserve and its share capital, to the Group in the form of loans and advances or
cash dividends. Please refer to Note 20 for disclosure of restricted net assets. As the Consolidated VIEs are incorporated as limited
liability companies under the PRC Company Law, creditors of the Consolidated VIEs do not have recourse to the general credit of the Group
for any of the liabilities of the Consolidated VIEs. There were no pledges or collateralization of the Consolidated VIEs' assets.
In February 2018, the Company purchased
21
% of equity interest in Yuantel (Beijing) Investment Management Co., Ltd at a consideration of RMB
21.05
million. In the same month,
the Company firstly sold to Jinan Yuantel
25
% of equity interest in Yuantel (Beijing) Investment Management Co., Ltd at a consideration
of RMB
22
million.
F-
19
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION
(CONTINUED)
In November 2018, the Company's
board of director approved the plan to dispose all of its tangible and intangibles assets related to the Consolidated VIEs through a series
of agreements with Jinan Yuantel Communication Technology LLP ("Jinan Yuantel"), a Company controlled by a non-controlling
interest shareholder individual. The Company originally owned
79
% of Yuantel (Beijing) Investment Management Co., Ltd which in turn owned
95
% of Yuantel Telecom, and therefore the Company effectively owned
75.05
% of Yuantel Telecom prior to receiving any sales proceeds from
the disposal of Yuantel.
In April 2019, the Company secondly
sold to Jinan Yuantel
20
% of equity interest in Yuantel (Beijing) Investment Management Co., Ltd at a consideration of RMB
25
million.
In May 2019, the Company also authorized
Jinan Yuantel to actively seek for investors on behalf of the Company to sell 45% of the equity interest in Yuantel held by Big Cloud
Network at a consideration which is based on the expected share valuation no less than RMB180 million by June 30, 2019, for which, Jinan
Yuantel will be granted the option to purchase the remaining 10% of the equity interest in Yuantel held by Big Cloud Network at a consideration
of RMB10 upon achievement of the sale.
The Company only received partial proceeds
from the buyers in the year 2019 and as a result the Company owned
45
% of Yuantel as of December 31, 2019, however still maintaining control
of the operations of Yuantel through influence on the board and operational management.
The Company has the right to not grant
the option for the remaining
10
% of equity interest. The disposal of the Consolidated VIEs represents a strategic shift for the Company
and has a major effect on the Company's results of operations. Accordingly, assets and liabilities related to the Consolidated VIEs
were reclassified as held for sale for the carrying amounts will be recovered principally through a sale and revenues and expenses related
to the Consolidated VIEs have been reclassified in the accompanying consolidated financial statements as discontinued operations prior
to October 29, 2020.
The Company disposed Yuantel to a third-party
entity which also purchased the ownership of Yuantel that was sold to the first buyer in 2019. The disposal was completed On October 29,
2020 and as a result, the Group deconsolidated Yuantel on that date. The consolidated balance sheets as of December 31, 2019 and consolidated
statements of operations for the years ended December 31, 2019 have been adjusted to reflect this change. There was no discontinued operation
on the balance sheet as of December 31, 2020 as Yuantel had been disposed of in October 2020. Accordingly, revenues and expenses and cash
flows related to the Company's MVNO BU during January 1, 2020 to October 29, 2020 presented as discontinued operation in the accompanying
consolidated financial statements. Afterwards, the Group did not have any continuing involvement with Yuantel and Yuantel was a third-party
company after the deconsolidation.
Net cash consideration of approximate
$
4,826
included assets and liabilities exemption to Yuantel related to the transaction. The Group recognized gain on disposal of Yuantel
with the amount of $
10,096
.
One of the nominee shareholders denied
his entrustment relationship with the Group and claimed his rights and interests proceeds of the disposal of Yuantel. Although there were
agreements between the Group and the nominee shareholder, there was no direct evidence to show the entrustment relationship between both
parties, which may not be supported by the existing PRC laws and regulation. As a result, the Group assessed that a probable loss could
be incurred. The Group estimated a loss ranged from $
3.2
million to $
3.6
million based on the best estimate of the information available.
Because of there was no amount within the range would be a better estimate than any other amount, the minimum amount of $
3.2
million was
recorded as a contingent liability as of December 31, 2020.
During the year ended December 31,
2021, the nominee shareholder of Big Cloud Network signed an agreement with the Group, to transfer his equity share in Big Cloud Network
to one of the Group's subsidiaries. By transferring all the shareholder's rights and obligations under the agreement, the
nominee shareholder no longer has any rights in Big Cloud Network or rights and interests in the proceeds of disposal of Yuantel. As a
result, the probable loss has been reversed and the contingent liability of $
3.2
million has been reversed.
F-
20
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION
(CONTINUED)
The following tables represent the
financial information of the Consolidated VIEs classified as discontinued operations for the period ended October 29, 2020 before eliminating
the intercompany balances and transactions between the Consolidated VIEs and other entities within the Group:
The period
starting
from
January 1 to
October 29,
2020
$
Net revenues
29,023
Cost of revenues
(
21,637
)
Total gross profit
7,386
Operating expenses:
Sales and marketing expenses
(
4,598
)
General and administrative expenses
(
540
)
Research and development expenses
(
938
)
Total operating expenses
(
6,076
)
Operating (loss) income
1,310
Interest income, net
4
Other (expense) income, net
(
12
)
(Loss) income from discontinued operation, before income taxes
1,302
Income tax benefit (expense)
-
(Loss) income from discontinued operations
1,302
Less: net income (loss) attributable to noncontrolling interest
-
Net (loss) income attributable to Borqs Technologies, Inc.
1,302
F-
21
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION (CONTINUED)
The period
starting
from
January 1 to
October 29,
2020
$
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
1,302
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Impairment of doubtful debt
(
300
)
MNVO BU management compensation
-
Deferred income tax benefits
-
Changes in operating assets and liabilities
(
2,557
)
Net cash used in operating activities
(
1,555
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(
37
)
Purchases of intangible assets
(
355
)
Proceeds from disposal of non-controlling interest
-
Payments to acquiring non-controlling interest
-
Net cash provided by (used in) investing activities
(
392
)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term bank and other borrowings
-
Net cash generated from (used in) financing activities
-
Effect of foreign exchange rate changes on cash and short-term investment
38
Net change in cash and cash equivalents and restricted cash
(
1,910
)
Cash and cash equivalents and restricted cash at beginning of year
2,296
Cash and cash equivalents and restricted cash at end of year
386
(e)
HHE reclassified as discontinued operation disclosures
In December 2022, the Group received letter from
Department of the Treasury/Committee on Foreign Investment in the United States ("CFIUS" or "the Committee") regarding
the case of Borqs owned
51
% of HHE's class A shares. The Committee identified risks to the national security of the United States
arising from the transaction relate to foreign proximity to US military personnel and installations through HHE's physical access
to customers and facilities.
According to the Committee's assessments
and evaluation, Borqs and HHE ("the parties") may seek to abandon the transaction. Such action will require negotiation with
CFIUS to fully divest Borqs' ownership interests and rights in HHE, subject to terms that fully address all identified national
security risks to the satisfaction of CFIUS.
On March 16, 2023, the Company and
HHE entered into a National Security Agreement ("NSA") with the Department of Defense and Department of Treasury. The NSA
provides that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill provisions
which provide that the Group shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any changes to
the rights held by the Company, except as necessary to effect its obligations under the NSA, or acquire or take possession of any assets
of HHE. Further, upon the completion of the Divestment, the Group shall terminate or irrevocably waive any information, consent, board
appointment, board observer, or other governance rights held by the Group, except for any and all rights that are determined by the U.S.
Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the Divestment:
engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes; assigning
and hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs' administrative
and technical influence over HHE; and creating a plan to divest all of Borqs' investment interests and rights in HHE. Pursuant
to the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment Trust Agreement
("DTA") dated March 20, 2023 entered into between Borqs, HHE and a trustee.
F-
22
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION (CONTINUED)
As of December 31, 2021, the Group classified
the HHE as held for sale and reported in discontinued operation (see Note 4(c) for details).
The following tables represent the financial information
of HHE classified as discontinued operations as of December 31, 2021, and as of December 31, 2022 before the deconsolidation of HHE, and
for the years ended December 31, 2021 and 2022 before eliminating the intercompany balances and transactions between HHE and other entities
within the Group:
As of December 31,
2021
2022
Deconsolidation Date
Carrying amounts of major classes of assets included as part of the assets held for sale
$
$
Cash and cash equivalents
1,597
1,117
Inventories, net
430
973
Prepaid expenses and other current assets, net
193
31
Current assets held for sale
2,220
2,121
Property and equipment, net
9
45
Intangible assets, net
4,399
3,949
Goodwill
12,208
12,208
Contract assets
1,485
-
Non-current assets held for sale
18,101
16,202
Total assets of HHE classified as held for sale
20,321
18,323
Carrying amounts of major classes of liabilities included as part of liabilities held for sale
Accounts payable
754
1,755
Accrued expenses and other payables
287
218
Contract liabilities - current
1,095
6,567
Amount due to related parties
20
-
Short-term borrowings
914
851
Current liabilities held for sale
3,070
9,391
Long-term borrowings
661
472
Deferred tax liabilities
1,143
1,143
Non-current liabilities held for sale
1,804
1,615
Total liabilities of HHE classified as held for sale
4,874
11,006
F-
23
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
1.
ORGANIZATION (CONTINUED)
For the years ended
December 31,
2021
2022
$
$
Net revenues
-
4,034
Cost of revenues
-
(
8,160
)
Total gross profit
-
(
4,126
)
Operating expenses:
Sales and marketing expenses
(
51
)
(
142
)
General and administrative expenses
(
1,066
)
(
4,044
)
Total operating expenses
(
1,117
)
(
4,186
)
Operating loss
(
1,117
)
(
8,312
)
Interest expense, net
(
275
)
(
343
)
Other expense
-
(
1,261
)
Loss from discontinued operation, before income taxes
(
1,392
)
(
9,916
)
Income tax benefit (expense)
-
-
Loss from discontinued operations
(
1,392
)
(
9,916
)
For the years ended
December 31,
2021
2022
$
$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
(
1,392
)
(
9,916
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
102
479
Changes in operating assets and liabilities
(
343
)
7,489
Net cash used in operating activities
(
1,633
)
(
1,948
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
-
(
66
)
Net cash used in investing activities
-
(
66
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholders
3,547
1,487
Proceeds from short-term and other borrowings
200
155
Repayments of short-term and other borrowings
(
527
)
(
218
)
Proceeds from long-term and other borrowings
-
112
Repayments of long-term and other borrowings
(
111
)
(
2
)
Net cash generated from financing activities
3,109
1,534
Net increase (decrease) in cash and cash equivalents and restricted cash
1,476
(
480
)
Cash and cash equivalents and restricted cash at beginning of year
121
1,597
Cash and cash equivalents and restricted cash at end of year
1,597
1,117
F-
24
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying consolidated financial
statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
In December 2022, the Group received
a letter from the Department of the Treasury on behalf of the Committee on Foreign Investment in the United States ("CFIUS")
stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests and rights in HHE due to HHE's
solar energy storage system and EnergyShare technology for Multi-Dwelling Residential Units being deemed a potential national security
risk.
On March 16, 2023, the Group entered
into the National Security Agreement by and among (i) Borqs; (ii) HHE; and (iii) Department of Defense and Department of Treasury, represents
the U.S. Government. According to the agreement, the Group shall complete the Divestment within six months unless extended by the U.S.
Government. The Group's solar energy business met the criteria to be reported as a discontinued operation and, as a result, HHE's
historical financial results are reflected in the Group's consolidated financial statements as a discontinued operation, and assets and
liabilities were retrospectively reclassified as assets and liabilities held for sale for all periods presented. Refer to Note 1 (d) for
detailed information.
(b) Liquidity and going concern
The Group's consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during
the normal course of operations. As of December 31, 2022, the Group had cash and cash equivalents of $
11.3
million and restricted cash
of $
0.03
million and has generated a net loss from continuing operations of $
28.9
million and cash inflows of $
3.4
million for the year
then ended.
The Group's cash level at December
31, 2022 was not adequate for operations in the 2022 fiscal year and financing was needed; and the due to the COVID-19 pandemic, negative
effects from slow collection from receivables and significant cancellation of otherwise signed purchase orders from customers were observed
as early as January 2020. The Group's operations in the fiscal year 2020 was reduced to minimal levels due to lock down of cities
in India and in China, and our contracted manufacturing with third parties was also reduced to about one third of the previous year's
volume. The Group had to rely on customer advances and short-term supply chain related load to sustain such minimal operation during the
months affected most severely affected by the COVID-19 pandemic. Except for one significant customer in the U.S., all other purchase order
from different countries of the world have been reduced or cancelled.  Although the Group's businesses have recovered or are
starting to recover in the fiscal 2022, it is not possible to determine the ultimate impact of the COVID-19 pandemic on the Group's
business operations and financial results as the quick spread of Omicron new variant across mainland China and Hong Kong, many cities
in China had experienced lockdown or partial lockdown from time to time since the beginning of 2022.
During the year ended December 31,
2022, the Group executed a settlement agreement with Samsung regarding the arbitration compensation. According to the settlement agreement,
the payment period of eighteen months beginning on July 2022.
These factors raise substantial doubt
about the Group's ability to continue as a going concern for the next twelve months from the date of issuance of these consolidated
financial statements. Management's plan to alleviate the substantial doubt about the Group's ability to continue as a going
concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to
meet its operating needs on a timely basis. The management plan cannot alleviate the substantial doubt of the Group's ability to
continue as a going concern. There can be no assurance that the Group will be successful in achieving its strategic plans, that the Group's
future capital raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely
manner or with acceptable terms, if at all. If the Group is unable to raise sufficient financing or events or circumstances occur such
that the Group does not meet its strategic plans, it would have a material adverse effect on the Group's financial position, results
of operations, cash flows, and ability to achieve its intended business objectives. The consolidated financial statements have been prepared
assuming that the Group will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome
of this uncertainty.
(c) Principles of consolidation
The consolidated financial statements
include the financial statements of the Company, its subsidiaries and Consolidated VIEs, for which, the Company is the primary beneficiary.
All significant inter-company transactions and balances between the Company, its subsidiaries and the Consolidated VIEs are eliminated
upon consolidation. Results of its subsidiaries and its Consolidated VIEs are consolidated from the date on which control is transferred
to the Company.
F-
25
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Discontinued operations
A component of a reporting entity or
a 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,
having the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued operations
if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results.
Discontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed
of, if the component either (1) represents a strategic shift or (2) have a major impact on an entity's financial results and operations.
In the consolidated statement of operations, result from discontinued operations is reported separately from the income and expenses from
continuing operations and prior periods are presented on a comparative basis. Cash flows for discontinued operations are presented separately
in Note 1 (c) and 1 (d).
Assets and liabilities of the discontinued
operations are classified as held for sale when the carrying amounts will be recovered principally through a sale transaction.
(e) Use of estimates
The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the year. Areas where management uses subjective judgment include, but are not limited
to, estimating the useful lives of long-lived assets and intangible assets and the subsequent impairment assessment of long-lived assets,
intangible assets and goodwill, determining the provisions for accounts receivable, prepaid expenses and other current assets and inventories,
determining the valuation allowance for deferred tax assets and accounting for deferred income taxes, uncertain tax benefits, determining
the valuation for share-based compensation arrangements, warrants for Series D convertible redeemable preferred shares and beneficiary
conversion feature on the Series E Preferred Shares, convertible notes and warrants associated with convertible notes, fair value of identifiable
intangible assets, contingent consideration liabilities and goodwill in a business combination,. Changes in facts and circumstances may
result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated
financial statements.
(f) Foreign currency
The functional currency of the Group
and its non-PRC subsidiaries, excluding Borqs India, is the United States dollar ("$"). The functional currency of Borqs India
is Rupee ("INR"), whereas the functional currency of the Group's PRC subsidiaries and its Consolidated VIEs is the Chinese
Renminbi ("RMB") as determined based on the criteria of ASC Topic 830,
Foreign Currency Matters
, ("ASC 830").
The Group uses the $ as its reporting currency. Transactions denominated in foreign currencies are re-measured into the functional currency
at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured
at the balance sheet date exchange rate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated
statements of operations.
Assets and liabilities of the Group's
PRC subsidiaries are translated into $ at fiscal year-end exchange rates. Equity amounts are translated at historical exchange rates.
Income and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments arising from
translation of foreign currency financial statements are reported as cumulative translation adjustments and are shown as a separate component
of other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).
(g) Cash and cash equivalents
Cash and cash equivalents consist of
cash on hand and demand bank deposits which are unrestricted as to withdrawal and use have original maturities less than three months.
All highly liquid investments with a stated maturity of 90 days or less from the date of purchase are classified as cash equivalents.
F-
26
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Restricted cash and time
deposits
Cash and time deposits that are restricted
as to withdrawal or use for current operations are classified as restricted cash and restricted term deposits, respectively.
Restricted cash as of December 31,
2021 mainly represents the cash frozen by the authority related to a lawsuit in PRC (Note 12). Restricted cash as of December 31, 2022
mainly represents the cash frozen by a bank as credit card deposit.
Time deposits as of December 31, 2022
represents a bank deposit has original maturity with six months in one of the Group's subsidiaries. As of December 31, 2021, the
Group has no time deposit.
(i) Accounts Receivable
Accounts receivable are carried at
net realizable value. An allowance of doubtful accounts is recorded in the period when the collection of full amount is no longer probable.
The Group reviews the accounts receivable for expected credit loss on a periodic basis and makes specific allowances when there is doubt
as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Group considers
many factors, including the age of the balance, the customer's payment history, its current credit-worthiness and current economic
trends. The Group adopt Accounting Standard Update (ASU) 2016-13, Financial Instruments-Credit Losses (codified as Accounting Standard
Codification Topic 326) on January 1, 2020, which requires measurement and recognition of current expected credit losses for financial
instruments held at amortized cost. See Note 2 (o) below for current expected credit loss.
(j) Inventories
Inventories are stated at the lower
of cost or market. Cost is determined using the first-in, first-out method. Adjustments to reduce the cost of inventories to its net market
value are made, if required, for decreases in sales prices, obsolescence or similar reductions in the estimated net realizable value.
Inventories provision of $
2,255
and $
1,924
were recorded as of December 31, 2021 and 2022, respectively.
(k) Property and equipment
Property and equipment are stated at
cost and are depreciated using the straight-line method over the estimated useful lives of the assets, as follows:
Category
Estimated useful life
Computer and network equipment
3
-
5
years
Office equipment
5
years
Motor vehicles
5
years
Leasehold improvements
Over the shorter of lease term or the estimated useful lives of the assets
Repair and maintenance costs are charged
to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment are capitalized as additions
to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any
resulting gain or loss reflected in the consolidated statements of operations.
F-
27
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Intangible assets
Intangible assets are carried at cost
less accumulated amortization and any recorded impairment. Intangible assets acquired in a business combination are recognized initially
at fair value at the date of acquisition. Intangible assets with finite useful lives are amortized using the straight-line method. These
amortization methods reflect the estimated pattern in which the economic benefits of the respective intangible assets are to be consumed.
Development costs of software to be
sold, leased, or otherwise marketed are subject to capitalization beginning when technological feasibility is reached and ending when
the software is available for general release to customers, in accordance with ASC 350-20,
Costs of Software to be Sold, Leased, or
Marketed
, ("ASC 350-20").
Intangible assets have weighted average
useful lives from the date of purchase as follows:
Purchased software
4.5
years
MVNO license
10
years
Capitalized software development costs
3
years
Internal-use software
5
years
Developed technology
10
years
(m) Business combination
Business combinations are accounted
for using the acquisition method. The Group recognizes separately from goodwill the assets acquired, the liabilities assumed and the noncontrolling
interest at their acquisition date fair values. Goodwill represents the excess of the purchase price over the amounts assigned to the
fair value of the assets acquired and the liabilities assumed of an acquired business. In accordance with ASC Topic 350,
Goodwill and
Other Intangible Assets
, ("ASC 350"), recorded goodwill amounts are not amortized, but rather are tested for impairment
annually or more frequently if there are indicators of impairment present.
In addition, the share purchase agreements
entered into may contain contingent consideration provisions obligating the Group to pay additional purchase consideration, upon the acquired
business's achievement of certain agreed upon operating performance-based milestones. Under ASC 805, these contingent consideration
arrangements are required to be recognized and measured at fair value at the acquisition date as either a liability or as an equity instrument,
with liability instruments being required to be remeasured at each reporting period through the Company's statements of comprehensive
income (loss) until such time as to when the contingency is resolved.
The fair value of the contingent consideration
is valued by external valuers. The valuations are presented to the Group's management.   The fair value of the earn-out
payments was measured using a Monte Carlo simulation analysis.
In accordance with ASC 350, the Group
assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below
the operating segment. The Group has determined that it has two operating segments as its reporting units, namely Solar Energy Business
and Connected Solution. Goodwill is recorded at the Solar Energy reporting unit. The Group performed impairment analysis on goodwill as
of December 31 every year beginning with a qualitative assessment, or starting with the quantitative assessment instead. The quantitative
goodwill impairment test compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit
constitutes a business for which discrete profit and loss financial information is available. The fair value of each reporting unit is
established using a combination of expected present value of future cash flows   and income approach valuation methodologies.
If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount
of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total
amount of goodwill allocated to that reporting unit.
Determining when to test for impairment,
the Group's reporting units, the fair value of a reporting unit and the fair value of assets and liabilities within a reporting
unit, requires judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue
growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market
conditions and determination of appropriate market comparable. The Group bases fair value estimates on assumptions it believes to be reasonable
but that are unpredictable and inherently uncertain.
F-
28
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Significant changes in the economic
characteristics of components or reorganization of an entity's reporting structure can sometimes result in a re-assessment of the
affected operating segment and its components to determine whether reporting units need to be redefined where the components are no longer
economically similar.
Future changes in the judgments and
estimates underlying the Group's analysis of goodwill for possible impairment, including expected future cash flows and discount
rate, could result in a significantly different estimate of the fair value of the reporting units and could result in additional impairment
of goodwill.
(n) Long-term investments
The Group's long-term investments
consist of equity investments without readily determinable fair value. The Group makes a qualitative assessment of whether the investment
is impaired at each reporting date, applying judgment in considering various factors and events including a) adverse performance of investees;
b) adverse industry developments affecting investees; and c) adverse regulatory social, economic or other developments affecting investees.
If a qualitative assessment indicates that the investment is impaired, the Group estimates the investment's fair value in accordance
with the principles of ASC 820. If the fair value is less than the investment's carrying value, the Group recognizes an impairment
loss of investments equal to the difference between the carrying value and fair value.
(o) Current expected credit loss
In 2016, the FASB issued ASU No. 2016-13,
"Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASC
Topic 326"), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment
model that is based on expected losses rather than incurred losses. The Group no longer qualified as an emerging growth company in the
year 2020 and adopted this ASC Topic 326 on January 1, 2020.
The Group has identified the relevant
risk characteristics of its customers and the related receivables, and other receivables which include type of the products the Group
provides, nature of the customers or a combination of these characteristics. Receivables with similar risk characteristics have been grouped
into pools. For each pool, the Group considers the historical credit loss experience, current economic conditions, reasonable and supportable  
forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence
the expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers,
and industry-specific factors that could impact the Group's receivables. Additionally, external data and macroeconomic factors are
also considered.
Movement of the allowance for doubtful
accounts for accounts receivable and contract assets is as follows:
Year ended December 31,
2021
2022
$
$
Balance as of January 1
12,883
13,049
Provisions (reversal of provision) for doubtful accounts
169
(
153
)
Write offs
-
-
Changes due to foreign exchange
(
3
)
(
15
)
Balance as of December 31
13,049
12,881
Movement of the allowance for other
receivables in prepaid expenses and other current assets, is as follows:
Year ended December 31,
2021
2022
$
$
Balance as of January 1
13,992
11,327
Provisions for doubtful accounts
-
133
Reversal of provision for doubtful accounts
(
1,926
)
-
Write offs
(
764
)
-
Changes due to foreign exchange
25
(
77
)
Balance as of December 31
11,327
11,383
F-
29
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Impairment of long-lived
assets
The Group evaluates its long-lived
assets or asset group, including intangible assets with indefinite and finite lives, for impairment. Intangible assets with indefinite
lives that are not subject to amortization are tested for impairment at least annually or more frequently if events or changes in circumstances
indicate that the assets might be impaired in accordance with ASC 350. Such impairment test compares the fair values of assets with their
carrying values with an impairment loss recognized when the carrying values exceed fair values.
For long-lived assets and intangible
assets with finite lives that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances
(such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount
of an asset or a Group of long-lived assets may not be recoverable. When these events occur, the Group evaluates impairment by comparing
the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual
disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize
an impairment loss based on the excess of the carrying amount of the asset group over its fair value.
The impairment loss of long-lived assets
was $
703
, $
nil
and $
nil
for the years ended December 31, 2020, 2021 and 2022, respectively, based on the impairment test performed.
(q) Convertible Promissory Notes
In August 2020, the FASB issued ASU
No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's
Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made
certain disclosure amendments to improve the information provided to users. For public business entities that meet the definition of an
SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than
fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Group has elected to adopt the
amendments in these ASUs on January 1, 2021.
The Group determines the appropriate
accounting treatment of its convertible notes in accordance with the terms in relation to the conversion feature, call and put options,
and any other embedded features. After considering the impact of such features, the Group may account for such instrument as a liability
in its entirety, or separate the instrument into debt and equity components following the respective guidance described under ASC 815
"Derivatives and Hedging" and ASC 470 "Debt". The debt discount, if any, together with the related issuance cost
are subsequently amortized as interest expense, using the effective interest method, from the issuance date to the earliest maturity date.
Interest expenses are recognized in the consolidated statements of operations in the period in which they are incurred.
(r) Debt Issuance Costs and Debt
Discounts
The Group may record debt issuance
costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash,
or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying
debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.
(s) Derivative financial instruments
The Group evaluates all of its equity-linked
financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features
that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity and whether embedded derivative shall be bifurcated from the host instrument
and separately accounted for as a derivative, is reassessed at the end of each reporting period. Derivative assets and liabilities are
recorded at fair value at inception and re-valued at each reporting date, with changes in the fair value reported in the consolidated
statements of operations.
(t) Fair value of financial instruments
The Group's financial instruments
include cash and cash equivalents, restricted cash, accounts receivable and payable, accounts receivable from related parties, short-term
bank and other borrowings and long-term bank borrowings. Other than the long-term bank borrowings, the carrying values of these financial
instruments approximate their fair values due to their short-term maturities. The carrying amounts of long-term bank borrowings approximated
their fair values since they bear interest rates which approximate market interest rates.
The Group applies ASC Topic 820,
Fair
Value Measurements and Disclosures
, ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.
F-
30
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ASC 820 establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 — Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Other inputs that are
directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs
which are supported by little or no market activity.
ASC 820 describes three main approaches
to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach
uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on
the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently
be required to replace an asset.
(u) Revenue recognition
The Group is mainly engaged in the
business of providing 1) Android+ platform solutions and services, 2) hardware product sales, 3) MVNO services and 4) Solar. The Group
adopted the new revenue recognition standards, or ASC 606, effective January 1, 2019 using the modified retrospective method for contracts
which were not completed at the date of initial adoption. In accordance with ASC Topic 606, revenues are recognized when control of the
promised goods or services is transferred to the Group's customers, in an amount that reflects the consideration the Group expects
to be entitled to in exchange for those goods or services. In determining when and how much revenue is recognized from contracts with
customers, the Group performs the following five-step analysis: (1) identify the contract(s) with a customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in
the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation.
When either party to a contract has
performed, the Group presents the contract in the consolidated balance sheet as a contract asset or a contract liability, depending on
the relationship between the entity's performance and the customer's payment.
A contract asset is the Group's
right to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when
the Group has an unconditional right to consideration, and it is probable that substantially all of the consideration will be collected.
If a customer pays consideration or
the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer,
the Group presents the contract liability when the payment is made or a receivable is recorded (whichever is earlier). A contract liability
is the Group's obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount
of consideration is due) from the customer.
The Group's contract with customers
do not include significant financing component and material variable consideration.
Generally, the Group recognizes revenue
under ASC Topic 606 for each type of its major revenue streams as follows:
1. Android+ platform solutions and
services
Android+ platform solutions
The Group provides customized Android+
software platform solutions that are developed to maximize the commercial grade quality or performance of open source Android+ software
for integration with particular chipsets. The Group also provides customized Android+ service platform solutions that are end-to-end software
developed for mobile operators to allow data synchronization between their platform and mobile devices. The Group charges its customers,
mainly including mobile device manufacturers and mobile operators, fixed fees for project-based software contracts, as well as per chip
or per mobile device royalty fees.
There are executed contracts and purchase
orders between the Group and each customer, and each party's rights regarding the service to be rendered are written on the contracts.
For this type of customers, the Group enters contract with them, which has the commercial substance to identify each party's rights
and obligations.
F-
31
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
There are two major performance obligations
in the contracts with this type of customers: the delivery of the software product and the completion of the post-contract-service ("PCS").
The allocation of the transaction price between the two major performance obligations is based on the estimated standalone selling prices.
The selling price for the performance obligation of PCS is estimated as the reasonable cost budget plus a margin or industrial standard.
The rest of the transaction price other than the reasonable cost budget plus a margin for PCS will be allocated to the performance obligation
of the delivery of the software product.
For the sales derived from software
development project in which the customer's contract specifies the technical requirements of the software product, the Group recognizes
revenue in accordance with the satisfaction of each performance obligation. For the performance obligation of the delivery of the software
product, the Group recognizes the revenue at the point of time, upon the customers sign off the final acceptance. For the performance
obligation of the completion of PCS Period, the Group recognizes the revenue over the period of the PCS Period.
Service contracts
The Group provides research and development
services to certain customers for their mobile-computing related development projects where fees are charged on a time and material basis
and the Group is not responsible for the outcome of such development projects. The revenue is recognized proportionately over the time.
The Group elects right to invoice expedient as the measure of progress.
The revenue arising from contracts
related to Android+ platform solutions and services is included as "Software Revenues" on the Group's consolidated statement
of operations.
2. Hardware product sales
The Group provides total solutions
on original design manufacturer ("ODM") basis to customers of mobile devices. The Group recognizes revenue at the point of
time, upon the delivery of products to customers, which is when the goods delivered to the designated address and it is probable that
substantially all of the consideration will be collected. Warranty is provided to all customers, which is not considered an additional
service; rather, an integral part of the product sales. ASC Topic 450, Contingencies, specifically addresses the accounting for standard
warranties. The Group believes that accounting for its standard warranty pursuant to ASC 450 does not impact revenue recognition because
the cost of honoring the warranty can be reliably estimated. The Group has determined the likelihood of claims arising from warranties
to be remote based on strong quality control procedures in the production process and historical experience with regard to claims being
made by customers. The basis for the warranty accrual will be reviewed periodically based on actual experience. The Group does not sell
extended warranty coverage.
The revenue arising from contracts
related to hardware product sales is included as "Hardware Revenues" on the Group's consolidated statement of operations.
3. MVNO
On July 11, 2014, the Group, through
the VIE, acquired and obtained control of Yuantel, which mainly operates the MVNO business. The license to operate such MVNO business
is issued by the Chinese Ministry of Industry and Information Technology and the core mobile network is provided by the PRC government
owned China Unicom. Yuantel receives wholesale rates for mobile voice and data services from China Unicom and repackages the voice and
data services into competitive bundles for Chinese consumers.
In accordance with ASC Subtopic 606-10-55,
the Group is the principal in providing the bundled voice and data services to Chinese consumers, thus revenue is recognized on a gross
basis. As sales of bundled services are mostly pre-paid by the consumers, cash received in advance of voice and data consumption are recognized
as advances from customers. Revenue is recognized over the time by measuring the consumption of the time of voice and the amount of data.
Pre-paid bundled services do not expire.
4. Solar
Solar, Holu Hou Energy LLC ("HHE")
provides services under three business models, which are residential projects, commercial projects and wholesale equipment sales. For
residential projects and commercial projects, HHE complete solar + battery systems to residential homeowners and commercial customers.
There are several milestones in both projects. The Group recognizes the revenue at the point of time, upon the satisfaction of the performance
obligation (upon all of the contract milestones complete). For wholesale equipment sale, customers either purchases equipment from HHE
inventory, or purchase a large order of equipment from HHE with payment terms. Revenue is recognized upon the satisfaction of the performance
obligation (upon equipment delivery).
F-
32
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The revenue arising from contracts
related to MVNO business is included in the line of "Income (loss) from operations of discontinued entities" on the Group's
consolidated statement of operations.
Practical expedients and exemptions
Besides the right to invoice expedients,
the Group generally expenses sales commissions if any incurred because the amortization period would have been one year or less.
Remaining performance obligations
The following table includes estimated
revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied   at
the end of the reporting period.
2023
2024
2025
(US$ in thousands)
Software development service
1,025
177
255
Hardware product sales
1,614
17
854
(v) Contract assets
Contract assets represent the right
to consideration in exchange for services that the Group have transferred to the customer before payment is due.
(w) Deferred cost of revenue
The Group's deferred cost of
revenues primarily consists of (i) materials and equipment costs, (ii) compensation and related overhead expenses for personnel involved
in the customization of its products, delivery, installation and maintenance ("compensation and overhead costs"), and (iii)
contractor costs. The deferred cost of revenue will be charged to the cost of revenue when revenue is recognized.
(x) Contract Costs
Costs of fulfilling a contract are
recognized as an asset if those costs meet all the following criteria: (1) the costs relate directly to a contract that the Group can
specifically identify; (2) the costs generate or enhance resources of the Group that will be used in satisfying performance obligations
in the future; (b) the costs are expected to be recovered. The Group chooses to use consistent method to amortize such contract costs,
with the timing of the transfer of goods and services to customers. Over time, the carrying amount of the contract costs may become impaired.
(y) Contract Liabilities
Contract liabilities primarily relate
to multiple element arrangements for which billing has occurred but transfer of control of all elements to the customer has either partially
or not occurred at the balance sheet date. This includes cash received from customers for services or products in advance of the transfer
of control. For the year ended December 31, 2022, the Group recognized revenue of $
5,738
that was included in the advances from customers
and deferred revenue at January 1, 2022. For the year ended December 31, 2021, the Group recognized revenue of $
4,949
that was included
in the advances from customers and deferred revenue at January 1, 2021.
(z) Cost of revenues
Cost of revenues consists primarily
of telecommunication costs, depreciation of long-lived assets, amortization of acquired intangible asset, payroll and other related costs
of operations.
(aa) Advertising expenditures
Advertising expenditures are expensed
as incurred and are included in sales and marketing expenses, which amounted to $
1
,
nil
and
nil
for the years ended December 31, 2020,
2021 and 2022, respectively for the Group's continuing operation.
(bb) Research and development
expenses
Research and development expenses include
payroll, employee benefits, and other headcount-related expenses associated with research and platform development. Research and development
expenses also include rent, depreciation and other related expenses. Research and development expenses are expensed as incurred.
F-
33
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(cc) Government grants
Government grants are provided by the
relevant PRC municipal government authorities to subsidize the cost of certain technology development projects. The amount of such government
grants are determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will continue
to receive these government grants in the future. Government grants are recognized when it is probable that the Group will comply with
the conditions attached to them, and the grants are received. When the grant relates to an expense item, it is recognized in the consolidated
statement of operations over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate,
as a reduction of the related operating expense. When the grant relates to an asset, it is recognized as deferred government grants and
released to the consolidated statement of operations in equal amounts over the expected useful life of the related asset, when operational,
as a reduction of the related depreciation expense.
(dd) Leases
On January 1, 2019, the Group adopted
ASU No. 2016-02, Leases (Topic 842), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires
lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide
enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.
The Group elected to apply practical
expedients permitted under the transition method that allow the Group to use the beginning of the period of adoption as the date of initial
application, to not recognize lease assets and lease liabilities for leases with a term of twelve months or less, to not separate non-lease
components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing
or expired contract contains a lease. The Group used modified retrospective method and did not adjust the prior comparative periods. Under
the new lease standard, the Group determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities
are recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. The Group considers
only payments that are fixed and determinable at the time of lease commencement.
ASC 842 requires a lessee to discount
its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental
borrowing rate. As most of the Group's leases do not provide an implicit rate, the Group uses its incremental borrowing rate as
the discount rate for the lease. The Group's incremental borrowing rate is estimated to approximate the interest rate on a collateralized
basis with similar terms and payments. The right-of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less
any lease incentives received. The Group's lease terms may include options to extend or terminate the lease. Renewal options are
considered within the right-of-use assets and lease liability when it is reasonably certain that the Group will exercise that option.
Lease expense for lease payments is
recognized on a straight-line basis over the lease term.
(ee) Income taxes
The Group accounts for income taxes
using the liability method. Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets
and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group
records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that
some 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
in income in the period that includes the enactment date.
The Group applies ASC Topic 740,
Accounting
for Income Taxes
, ("ASC 740"), to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold
a tax position is required to meet before being recognized in the financial statements. The Group has elected to classify interest related
to unrecognized tax benefits, if and when required, as part of "income tax expense" in the consolidated statements of operations
and to classify all deferred income tax assets and liabilities as non-current on the consolidated balance sheets.
F-
34
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(ff) Reverse stock split
The Board of Directors of the Group
approved a reverse stock split of the Group's issued and outstanding shares at a ratio of 1-for-16 (the "Reverse Stock Split")
on June 08, 2022. The Reverse Stock Split became effective on June 27, 2022. As a result, the Group's issued and outstanding shares
was decreased in inverse proportion to the ratio.
When the Reverse Stock Split became
effective, each sixteen shares of issued and outstanding shares were converted into one newly issued and outstanding share. No fractional
shares were issued in connection with the Reverse Stock Split. Any fractional shares of common stock that would have otherwise resulted
from the Reverse Stock Split were rounded up to the nearest full share. No cash or other consideration was paid in connection with any
fractional shares that would otherwise have resulted from the Reverse Stock Split.
As a result of the Reverse Stock Split,
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 stock
(taking into account the rounding of fractional shares).
Except where otherwise specified, all
number of shares, share prices and per share data in the consolidated financial statements and the notes to the consolidated financial
statements have been retroactively restated as if the Reverse Stock Split occurred at the beginning of the periods presented.
(gg) Subscriptions receivable
As of December 31, 2022, subscriptions
receivable included investment amounts in the form of (i) ownership of KADI that has been contemplated to be sold to the Group in exchange
for shares of the Group, and (ii) escrow shares to Samsung in the year 2019 and 2022 as security for arbitration compensation. Since the
shares in all these cases have already been issued, these items were recorded as subscriptions receivable on the equity section of the
Group's consolidated balance sheet as of December 31, 2022.
(hh) Share-based compensation
The Group accounts for share-based
compensation in accordance with ASC Topic 718,
Compensation-Stock Compensation: Overall
, ("ASC 718").
In accordance with ASC 718, the Group
determines whether an award should be classified and accounted for as a liability award or equity award. All grants of share-based awards
to employees classified as equity awards are measured based on their grant date fair values and recognized as compensation expense over
the requisite service period and/or performance period in the consolidated statements of operations.
The Group recognizes compensation expense
using the accelerated method for share-based awards granted with service and performance conditions. According to ASC 718, the amount
of compensation cost recognized (or attributed) when achievement of a performance condition is probable depends on the relative satisfaction
of the performance condition based on performance to date. According to ASC 718, probable means the future event or events are likely
to occur and the Group interprets "probable" to be generally in excess of a
70
% likelihood of occurrence. The Group elected
to account for forfeitures as they occur.
F-
35
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(ii) Comprehensive income (loss)
Comprehensive income (loss) is defined
as the increase (decrease) in equity of the Group during a period from transactions and other events and circumstances excluding transactions
resulting from investments by owners and distributions to owners. Accumulated other comprehensive loss of the Group includes foreign currency
translation adjustments related to the Group and its PRC subsidiaries, whose functional currency is RMB.
(jj) Segment reporting
In accordance with ASC Topic 280,
Segment
Reporting
, ("ASC 280"), the Group historically had two operating segments, namely Yuantel and Connected Solution as the
Group's chief executive officer, who has been identified as the Group's chief operating decision maker ("CODM")
reviews the operating results of the two difference service lines in order to allocate resources and assess performance for the Group.
As discussed in Note 1(c), in November
2018, assets and liabilities related to Yuantel were reclassified as held for sale and revenues and expenses related to Yuantel segment
were reclassified in the accompanying consolidated financial statements as discontinued operations for all periods presented.
As discussed in Note 1(c), assets and
liabilities related to HHE, which the Group acquired in October 2021 were reclassified as held for sale and revenues and expenses related
to Solar segment were reclassified in the accompanying consolidated financial statements as discontinued operations for all periods presented.
(kk) Employee benefits
The full-time employees of the Group's
PRC subsidiaries are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance,
which are governmental mandated defined contribution plans. These entities are required to accrue for these benefits based on certain
percentages of the employees' respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations,
and make cash contributions to the state-sponsored plans out of the amounts accrued.
(ll) Loss per share
Loss per share is computed by dividing
net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period using the
two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based
on their participating rights. The Group's Convertible Redeemable Preferred Shares (Note 24) were participating securities. As the
participating securities do not share the losses of the Group, the computation of basic earnings per share using two-class method is not
applicable when the Group is at a net loss position. Diluted (loss) earnings per share is calculated by dividing net loss attributable
to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period.
Ordinary equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method and shares issuable
upon the exercise of the Group's warrant using the if-converted method. Ordinary equivalent shares are not included in the denominator
of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.
F-
36
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(mm) Recent accounting pronouncements
Recently issued accounting pronouncements
not yet adopted
In October 2021, the FASB issued ASU
2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which
provides guidance on the acquirer's accounting for acquired revenue contracts with customers in a business combination. The amendments
require an acquirer to recognize and measures contract assets and contract liabilities acquired in a business combination at the acquisition
date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers
when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The
new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance
is effective for the Group for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early
adoption is permitted. The Group does not expect that the adoption of this guidance will have a material impact on its financial position,
results of operations and cash flows.
Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU No.
2016-13, Measurement of Credit Losses on Financial Instruments, to require financial assets carried at amortized cost to be presented
at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the FASB issued
ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope
of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU 2019-10 and ASU 2019- 11 to provide additional
guidance on the credit losses standard. The ASUs are effective for interim and annual periods beginning after December 15, 2019, with
early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. The Group has adopted the amendments in these ASUs
on January 1, 2020, and the adoption of the amendments did not have a material impact on the consolidated financial position and results
of operations.
In August 2018, the FASB issued ASU
No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value
Measurement". The amendments in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements.
The amendments in this ASU, among other things, require public companies to disclose the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements. The amendments in this ASU are effective for all entities for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2019, and entities are permitted to early adopt either the entire
standard or only the provisions that eliminate or modify the requirements. The Group has adopted the amendments in these ASUs on January
1, 2020, and the adoption of these amendments did not have a material impact on the consolidated financial position and results of operations.
In August 2020, the FASB issued ASU
No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's
Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made
certain disclosure amendments to improve the information provided to users. For public business entities that meet the definition of an
SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than
fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Group has elected to adopt the
amendments in these ASUs on January 1, 2021, and the adoption of these amendments did not have a material impact on the consolidated financial
position and results of operations.
F-
37
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
3.
CONCENTRATION OF RISKS
(a) Credit risk
Financial instruments that potentially
subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts
receivable and accounts receivable from related parties. As of December 31, 2021 and 2022, the aggregate amount of cash and cash equivalents
and restricted cash from continuing operations were $
6,328
and $
11,337
, respectively. As of December 31, 2021 and 2022, the aggregate
amount of cash and cash equivalents and restricted cash of $
1,443
and $
1,930
respectively, were held at major financial institutions located
in the PRC, and $
4,885
and $
9,407
, respectively, were deposited with major financial institutions located outside the PRC. Management
believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial
institutions. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors' interests. However,
China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly
stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law.
Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China's concession to the World Trade Organization,
foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects,
especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese
banks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds the Group's deposits,
the 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
laws.
The Group has cash held by Silicon
Valley Bank as of December 31, 2022. On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon
Valley Bank and appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver. On March 12, 2023, the U.S. Department
of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of Silicon Valley Bank would
have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. The Group
received full access to the funds in its deposit and money market accounts on March 13, 2023. In light of actions by the federal government
to fully protect deposit accounts, the Group has not experienced any credit losses on its deposits of cash.
Accounts receivable, and accounts receivable
from related parties are both typically unsecured and are derived from revenues earned from customers. The risk is mitigated by credit
evaluations the Group performs on its ongoing credit evaluations of its customers' financial conditions and ongoing monitoring process
of outstanding balances.
(b) Business supplier, customer,
and economic risk
The Group participates in a dynamic
and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect
on the Group's future financial position, results of operations or cash flows: changes in the overall demand for services; competitive
pressures due to new entrants; advances and new trends in new technology; control of telecommunication infrastructures by local regulators
and industry standards; strategic relationships or customer relationships; regulatory considerations; and risks associated with the Group's
ability to attract and retain employees necessary to support its growth.
(i) Customer concentration risk –
the Group's main operations are dependent upon a few customers, with one particularly large customer representing
30.05
% of our
net revenues in the 2022 fiscal year. It is always considered at least reasonably possible that any customer can 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 volume of business to the
Group. The Group's top five customers accounted for
88.2
%,
87.8
% and
86.4
% of our net revenues in the years ended December 31, 2020,
2021 and 2022, respectively.
The accounts receivable from the largest
single customer accounted for
77
% and
43
% of the Group's total accounts receivable for the years ended December 31, 2021 and 2022,
respectively.
(ii) Product concentration and geography
concentration risks – For the fiscal year of 2020, approximately
41.8
% of the Group's net revenue was focused on the mobile
tracker device. For the fiscal year of 2021, approximately
37.6
% of the Group's net revenues was focused on the handset mobile device.
For the fiscal year of 2022, approximately
43.4
% of the Group's net revenues was focused on the handset mobile device. There is
no guarantee that this product type will continue to have demand in the fast-changing telecom industry or that the Group can continue
to feasibly compete as a designer and manufacturer of such products.
F-
38
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
3.
CONCENTRATION
OF RISKS (CONTINUED)
(iii) Business supplier risk –
the Group's MVNO operations are dependent upon telecommunication resources provided by China Unicom. There is no guarantee that
the supply of telecommunication resources provided by China Unicom will be renewed annually. Further, there is no guarantee around the
continuance of the MVNO license granted by the PRC government Ministry of Industry and Information Technology which may be amended or
discontinued in light of changes to political, economic and social reforms. In November 2018, the Company's board of directors approved
the plan to dispose all of its reporting units operating the MVNO business (Note 1 (c)).
For the Group's continuous operations,
the Group's top five suppliers accounted for
75.7
% and
68.8
% of our cost of goods sold in the years ended December 31, 2021
and 2022, respectively.
(iv) Economic risk – the Group's
operations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government
has been pursuing economic reform policies for more than 40 years, no assurance can be given that the PRC government will continue to
pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social
or political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee
that the PRC government's pursuit of economic reforms will be consistent or effective.
(c) Foreign currency exchange
rate risk
For financial reporting purposes, the
financial statements of the Group's PRC operating subsidiaries and VIE, which are prepared using the functional currency of the
PRC, Renminbi ("RMB"), are translated into the Company's reporting currency, the United States Dollar ("U.S. dollar").
Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average
rates prevailing during each reporting period, and shareholders' equity is translated at historical exchange rates. Adjustments
resulting from the translation are recorded as a separate component of accumulated other comprehensive income in shareholders' equity.
The exchange rates used to translate
amounts in RMB into US$ for the purposes of preparing the consolidated financial statements are as follows:
As of December 31,
2021
2022
Balance sheet items, except for equity accounts
6.3757
6.9646
Years ended
December 31,
2021
2022
Items in the statements of operations and comprehensive loss
6.8976
6.7261
(d) Interest rate risk
The Group is exposed to interest rate
risk on its interest-bearing liabilities. As part of its liability risk management, the Group reviews and takes appropriate steps to manage
its interest rate exposures on its interest-bearing liabilities. The Group has not been exposed to material risks due to changes in market
interest rates, and not used any derivative financial instruments to manage the interest risk exposure during the years presented.
F-
39
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
4.
BUSINESS
ACQUISITIONS AND DISPOSAL
(a)
Acquisition of HHE during fiscal 2021
On October 19, 2021, the Group signed
definitive agreements to acquire
51
% equity interests in Holu Hou Energy LLC ("HHE"). The total consideration for the acquisition
of HHE amounted to $
10.0
million in cash as capital contribution, and
877,183
of the Group's ordinary shares. Of this consideration,
$
3.25
million cash and
219,296
shares were released at the closing date and the remaining $
6.75
million of cash and
657,887
shares will
be held in escrow and released as earn-out payments.
The earn-out payment is based on the
performance of the acquiree to achieve certain earn-out requirements from July 2022 to January 2024. The fair value of the earn-out payments
was measured using a Monte Carlo simulation analysis. As of the acquisition date, the total contingent consideration recognized with the
amount 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.
HHE is an innovative solar energy and
storage provider for the residential, multi-family residential and commercial building markets. With operations in California, Hawaii,
Wisconsin and Shanghai, HHE engineers proprietary storage system and software and control platform solutions. The HHE team is made up
of renewable energy industry veterans, engineering and deploying energy storage systems that enable greater energy independence.
After the completion of the acquisition,
HHE became a subsidiary of the Group.
During the year ended December 31,
2022, the Group issued additional
5,000,000
shares to HHE as an additional acquisition cost, which held in escrow and will be released
as earn-out payments.
F-
40
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
4.
BUSINESS
ACQUISITIONS AND DISPOSAL (CONTINUED)
This transaction was considered a business
acquisition and therefore was recorded using the acquisition method of accounting. The acquired assets and liabilities were recorded at
their fair values at the date of acquisition. The purchase price for the acquisition was allocated as follows:
Amount
('000)
$
Net liabilities acquired
$
(
2,265
)
Amortizable intangible assets
Developed Technology
4,492
Goodwill
12,208
Deferred tax liabilities
(
1,143
)
Noncontrolling interests
(
6,513
)
Total
$
6,779
Total purchase price consisted of:
- cash consideration (paid in fiscal 2021)
3,250
- share-based consideration (
219,296
of the Group's ordinary shares)
1,860
- contingent considerations
1,669
Total
$
6,779
The goodwill is attributable to intangible
assets that cannot be recognized separately as identifiable assets under U.S. GAAP, and comprise of (a) the assembled work force and (b)
the expected but unidentifiable business growth as a result of the economy of scale, increase in cross-selling opportunities as well as
synergy resulting from the acquisition.
The amortizable intangible assets represent
the developed technology acquired as of the acquisition date with the amount of $
4,492
, it was valued using the multi-period excess earnings
approach.
The non-controlling interest with the
amount of $
6,513
as of the acquisition date was valued using the discounted cashflow method.
The key input and assumptions included
internal rate of return of
11.2
%, weighted average cost of capital of
12.0
% and weighted average return of assets of
12.0
%.
Transaction Expenses
Transaction costs directly related
to the acquisition of $
538
for the year ended December 31, 2021, recorded in share-based compensation expense for the ordinary shares
issued to the financial advisors and general and administrative expenses for other related fees.
See Note 4(c) below for the deconsolidation
of HHE during the year ended December 31, 2022.
(b)
Disposal of Borqs Wireless Ltd. ("BWL") during the year ended December 31, 2021
In July 2021, the Group entered into
an agreement to sell its entire equity shares in Borqs Wireless Ltd. ("BWL") a
100
% subsidiary. Since the date of loss of
control BWL was deconsolidated from the Group's financial statements. The Group had balances due from BWL and exempted the balances
before entering into the agreement.
F-
41
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
4.
BUSINESS
ACQUISITIONS AND DISPOSAL (CONTINUED)
The loss on the disposal of BWL was
calculated as the difference between:
(i)
The fair value of the consideration received
(ii)
the carrying value of net assets disposed of, as of the date of the transaction
Amount
$ '000
The fair value of the consideration received
Cash received
$
-
*
Less: Net assets of BWL derecognized on disposal
303
Loss on disposal
$
(
303
)
*
According to the agreement, the cash consideration was RMB 1 Yuan.
Below are the assets and liabilities
of BWL as of date of disposal:
Amount
$ '000
Assets
Cash
$
4
Other current assets
332
Total Assets
$
336
Liabilities
Other current liabilities
$
33
Total liabilities
$
33
(c)
Deconsolidation of HHE during the year ended December 31, 2022
In December 2022, the Group received
a letter (the "CFIUS Letter") from the Department of the Treasury on behalf of the Committee on Foreign Investment in the
United States ("CFIUS") stating that the Company is required to negotiate with CFIUS to fully divest its ownership interests
and rights in HHE due to HHE's solar energy storage system and EnergyShare technology for Multi-Dwelling Residential Units being
deemed a potential national security risk.
On December 31, 2022, the Group resolved
that in order to comply fully with the requirements of the CFIUS Letter which involve multiple steps that the Group must adhere to, including:
(i) Entering into a National Security Agreement with various departments of the US government with a plan that is effective, monitorable
and verifiable to divest Borqs' investment interests and rights in HHE; (ii) Selection of a trustee and entering into a Divestment
Trust Agreement, and assigning the Group's interest in HHE to the trustee; and, (iii) Selection of a nationally recognized investment
bank as the exclusive agent for the divestment of HHE. Besides, the Group also resolved that as of December 31, 2022, terminate its control
of HHE by (i) removal of all of the Group's representatives from HHE's Board of Directors, (ii) relinquishment of Class A
Membership Unit voting rights, and (iii) reduction of the Group's ownership of HHE from
51
% down to
49
% by allowing HHE to increase
the total number of Class B membership units for employees of HHE such that the Group's ownership is proportionally reduced. And
the Group resolved to comply fully with the requirements of the CFIUS Letter and terminate its control of HHE on December 31, 2022. By
taking above actions, the Group no longer has a controlling interest in HHE and result in deconsolidation of HHE as of December 31, 2022.
F-
42
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
4.
BUSINESS
ACQUISITIONS AND DISPOSAL (CONTINUED)
On March 16, 2023, the Group and HHE
entered into a National Security Agreement ("NSA") with the Department of Defense and Department of Treasury. The NSA provides
that the divestment shall occur within six months unless extended by the U.S. Government. The NSA also contains standstill provisions
which provide that the Group shall not acquire any additional ownership interest in HHE, merge with or into HHE, effect any changes to
the rights held by the Group, except as necessary to effect its obligations under the NSA, or acquire or take possession of any assets
of HHE. Further, upon the completion of the Divestment, the Group shall terminate or irrevocably waive any information, consent, board
appointment, board observer, or other governance rights held by the Group, except for any and all rights that are determined by the U.S.
Government to be necessary to effect the provisions of the NSA. The NSA outlines the steps to be taken with respect to the Divestment:
engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes; assigning and
hiring of security and monitoring personnel to directly communicate with the U.S. Government; removing all of Borqs' administrative
and technical influence over HHE; and creating a plan to divest all of Borqs' investment interests and rights in HHE. Pursuant to
the requirement of the NSA, Borqs has assigned its interests in HHE into a Divestment Trust according to a Divestment Trust Agreement
("DTA") dated March 20, 2023 entered into between Borqs, HHE and a trustee. According to the DTA, when Borqs' interests
in HHE are being placed in a Voting Trust Agreement as a security measure designed to insulate HHE from any foreign control or influence
that may arise from Borqs' ownership of the investment interest. Also, it shall not accept direction from the Group on any matter
before 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
management of HHE
As above, HHE, which identified the
innovative clean energy business, a separate segment was deconsolidated on December 31, 2022, and reclassified as held for sale as of
December 31, 2021, for the carrying amounts will be recovered principally through a sale and revenues and expenses related to HHE have
been reclassified in the accompanying consolidated financial statements as discontinued operations for fiscal 2022.
The loss on the deconsolidation of
HHE was calculated as below:
Amount
$ '000
The fair value of the consideration received
$
-
Carrying value of non-controlling interest prior to the deconsolidation
1,926
Less: Net assets of HHE derecognized on deconsolidation
7,317
Loss from deconsolidation
(
5,391
)
Derecognition of contingent liabilities recognized during the acquisition
1,781
Net loss on deconsolidation
$
(
3,610
)
After the deconsolidation of HHE on December 31, 2022, the Group recorded
the investment as equity investments without readily determinable fair value. Based on the valuation of the retained interest in HHE,
the fair value of the investment is zero and the Group recognized the impairment loss equal to the difference between the carrying value
and fair value. The loss related to the remeasurement of remaining investment in HHE is $
5,391
.
The fair value of HHE was valued using
the market approach and income approach.
The key input and assumptions included
long-term growth rate of
2.4
%, weighted average cost of capital of
14.0
% and risk-free rate of
4.1
%.
F-
43
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
5.
INVENTORIES, NET
Inventories consisted of the following:
As of December 31,
2021
2022
$
$
Raw materials
7,714
5,779
Work in process
1,198
301
Finished goods
103
79
9,015
6,159
Less: provision
(
2,255
)
(
1,924
)
Inventories, net
6,760
4,235
Provisions were $
2,255
and $
1,924
as
of December 31, 2021 and 2022, respectively, due to obsolescence including the inventories from previous years.
F-
44
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
6.
PREPAID
EXPENSES AND OTHER CURRENT ASSETS, NET
Prepaid expenses and other current
assets consisted of the following:
As of December 31,
2021
2022
$
$
Staff advances
134
61
Prepayment for products
2,346
1,174
Advance to OEMs
16,939
14,285
Rental and other deposits
1,010
736
VAT recoverable
2,696
1,836
Receivable from an export/import agent
1,138
-
Investment of convertible bond
238
338
Cash loan
100
100
Others
366
354
25,160
18,884
Less: provision
(
11,327
)
(
11,383
)
13,640
7,501
Provisions were $
11,327
and $
11,383
as of December
31, 2021 and 2022, respectively. The Group reviews staff advances, rental and other deposits, receivable from an agent and other for expected
credit loss. The Group determined the allowance based on known troubled accounts, historical experience, and other currently available
evidence.
7.
LEASE
The Group leases office space under
non-cancelable operating lease agreements, which expire at various dates through 2024. As of December 31, 2021 and 2022, the Group's
operating leases had a weighted average discount rate of
11.2
% and
8.16
%, respectively. Weighted-average remaining lease term for the
year ended December 31, 2021 and 2022 were
2.91
years and
2.83
years, respectively. Future lease payments under operating leases as of
December 31, 2022 were as follows:
As of
December 31,
2022
$
2023
604
2024
39
Total lease payments
643
Less: imputed interest
68
Present value of lease liabilities
575
Operating lease cost for the year ended
December 31, 2022 was $
592
, which excluded cost of short-term contracts. Short-term lease cost for the year ended December 31, 2022 was
$
480
. Operating lease cost for the year ended December 31, 2021 was $
537
, which excluded cost of short-term contracts. Short-term lease
cost for the year ended December 31, 2021 was $
379
. Operating lease cost for the year ended December 31, 2020 was $
899
, which excluded
cost of short-term contracts. Short-term lease cost for the year ended December 31, 2020 was $
223
.
Cash paid for amounts included in the
measurement of operating lease liabilities was $
1,008
, $
1,088
and $
678
for the year ended December 31, 2020, 2021 and 2022, respectively.
F-
45
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
8.
PROPERTY
AND EQUIPMENT, NET
Property and equipment consisted of
the following:
As of December 31,
2021
2022
$
$
At cost:
Computer and network equipment
1,516
1,592
Office equipment
1,118
1,318
Motor vehicles
185
171
Production equipment
312
466
3,131
3,547
Less: accumulated depreciation
(
2,407
)
(
2,523
)
724
1,024
Depreciation expense from continuing
operations was $
79
, $
114
and $
346
for the years ended December 31, 2020, 2021 and 2022, respectively. Certain fully depreciated computer
equipment and related peripherals were disposed in the year 2021.
For the years ended December 31,
2020
2021
2022
$
$
$
Cost of revenues
-
-
145
Sales and marketing expenses
1
-
26
General and administrative expenses
13
44
155
Research and development expenses
65
70
20
79
114
346
F-
46
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
9.
INTANGIBLE
ASSETS, NET
The following table presents the intangible
assets as of the respective balance sheet dates:
Software
Capitalized
software
development
costs
Total
$
$
$
Balance as of January 1, 2021
6
3,532
3,538
Additions
-
-
-
Disposal
-
(
554
)
(
554
)
Amortization expense
-
(
2,017
)
(
2,017
)
Foreign currency translation difference
(
6
)
17
11
Accumulated impairment loss
-
-
-
Foreign currency translation difference
-
-
-
Balance as of December 31, 2021
-
978
978
Additions
-
-
-
Amortization expense
-
(
978
)
(
978
)
Foreign currency translation difference
-
-
-
Accumulated impairment loss
-
-
-
Foreign currency translation difference
-
-
-
-
-
-
Balance as of December 31, 2022
-
-
-
The intangible assets are amortized
using the straight-line method, which is the Group's best estimate of how these assets will be economically consumed over their
respective estimated useful lives of
3
-
10
years.
There was no capitalization of intangible
assets in the year ended December 31, 2021 and 2022 due to the fact that the Group received no orders for new products that required R&D
expenditures that should be capitalized.
For the year ended December 31, 2021
and 2022, the Group did not recognize any impairment loss associated with its intangible assets.
F-
47
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
10.
LONG-TERM
INVESTMENTS
On January 18, 2018, the Company entered
into an agreement with Colmei Technology International Ltd ("Colmei") and its affiliate Shenzhen Crave Communication Co.,
Ltd ("Crave"), along with the shareholders of Crave and Colmei (the "Selling Shareholders"), pursuant to which
the Selling Shareholders sold to the Company
13.8
% of the outstanding shares of Crave and
13.8
% of the outstanding shares of Colmei. Under
the agreement, the Company paid purchase consideration consisting of the Company's
29,607
ordinary shares at the fair value of $
3,000
and 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
Company has not yet paid as of the filing of this annual report. Subject to board approval,
the Company agreed to issue 11,459 additional
shares to the Selling Shareholders if the aggregate value of the ordinary shares initially issued at the closing to the Selling Shareholders
was less than $3,000 in fair value as of August 18, 2018. The board of directors approved and 11,459 shares that were issued on January
10, 2019.
The Company does not have significant
influence over the investees and therefore the investment was accounted for under the cost method. Cost of the long-term investments originally
consisted of the fair value of the ordinary shares on the dates of issuance and the present value of the cash consideration determined
based on management's estimated payment schedule.
Due to significant numbers of claims
against Crave and Colmei in the year 2019, the Company recorded $
13,000
of impairment loss as of December 31, 2018. In June 2020, Crave
and Colmei filed for bankruptcy, the Company cancelled any further investment into these entities.
F-
48
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
11.
BANK
AND OTHER BORROWINGS
Bank and other borrowings were as follows
as of the respective balance sheet dates:
As of December 31,
2021
2022
$
$
Short-term bank and other borrowings
(i)
361
-
Long-term bank and other borrowings, current portion
(ii)
1,250
-
Subtotal
1,611
-
Long-term bank and other borrowings, non-current portion
(ii)
-
-
Total borrowings
1,611
-
(i)
The short-term bank and other borrowings outstanding as of December 31, 2021 and 2022 bore a weighted average interest rate of
103.20
% and
21.09
% per annum, respectively, and were denominated in RMB. The borrowings was obtained from financial institution.
The outstanding balances as of December
31, 2021 represented a loan borrowed by one of the Group's subsidiaries. A subsidiary has entered into a short-term loan with the
financial institution. As of December 31, 2021, the balance of this loan amounted to US $
361
. The balance has been fully paid off in the
year 2022.
(ii)
The outstanding loans as of December 31, 2021 represented a loan from an individual shareholder.
The long-term bank borrowing as of December
31, 2020 was a loan from an individual shareholder, bearing interest rates of
6.00
% per annum with a period of 15 months. The loans were
denominated in US$ with the amount of
$1,250
. The Group need to repay the principal amount in its entirely to the lender, together with
interests. Subsequently in February 2022, the Group entered into an amendment agreement with the individual shareholder for the loan extension.
The original due date of February 27, 2022 has been extended to December 31, 2022. The balance recorded in current portion of long-term
bank borrowings as of December 31, 2021.
On May 03, 2022, the Group entered into
a share exchange agreement regarding the $
1,250
loan with an individual shareholder. According to the agreement, the Group repaid the
loan balance with the Group's
338,968
ordinary shares on May 03, 2022.
F-
49
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
12.
ACCRUED
EXPENSES AND OTHER PAYABLES
The components of accrued expenses
and other payables were as follows:
As of December 31,
2021
2022
$
$
Payroll and welfare payable
2,853
2,356
VAT, and other taxes payable
492
514
Payables for office supply and utilities
226
124
Payables for purchase of property and equipment
53
49
Professional service fees
963
748
Payables for share purchase consideration (Note 10)
10,000
10,000
Payables for Samsung arbitration compensation (Note 20(e))
3,749
1,958
Interest and penalty payable
1,137
159
Advance from customers
5,084
5,422
Payables to an export/import agent
924
959
Payable related to a lawsuit
2,108
1,593
Others
60
56
27,649
23,938
Payable related to a lawsuit represented an amount
due to a third-party company. The original debtor claimed that the Group has breached the previously agreed settlement agreement, and
transferred the debt to the third-party company during the year ended December 31, 2021. On April 20, 2023, the Group entered into a settlement
agreement with the third-party company regarding the payments. According to the agreement, the Group will settle the balance in several
payments until March 2024, and part of the balance has been classified to other payables – noncurrent.
During the year ended December 31, 2022, the Group
executed a settlement agreement with Samsung regarding the payments with a payment period of eighteen months beginning on July 2022.
F-
50
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
13.
CONVERTIBLE
NOTES
Prior Private Placement Notes and Warrants
On February 25, 2021 and April 14, 2021 the Group
entered into securities purchase agreements with institutional and individual investors, pursuant to which the Group sold approximately
$
6.67
million of notes (the "February 25 Notes") and
730,994
warrants at an exercise price of $
35.55
per share (the "February
25 Warrants), $
1
million of notes (the "April 14 Notes") and
157,563
warrants at an exercise price of $
24.64
per share (the
"April 14 Warrants" and, together with the February 25 Warrants, the "Prior Private Placement Warrants") and $
15.3
million of notes (the "May 5 Notes" and, together with the February 25 Notes and the April 14 Notes, the "Prior Private
Placement Notes.") The Prior Private Placement Notes have a two-year term with a conversion price of $
15.55
per share. The Prior
Private Placement Notes have certain anti-dilution protections in the event of a lower priced issuance. Interest shall accrue on the notes
at
8
% annually, payable on a quarterly basis, in either cash or, in the event the registration statement registering such shares has been
declared effective, ordinary shares. The Prior Private Placement Notes held by a particular holder will not be convertible to the extent
such conversion would result in such holder owning more than
9.9
% of the number of ordinary shares outstanding after giving effect to
the issuance of ordinary shares issuable upon conversion of such note calculated in accordance with Section 13(d) of the Exchange Act.
On May 5, 2021, the Company issued additional $
15.3
million Prior Private Placement Notes to investors in the February and April transactions.
The Prior Private Placement Warrants are exercisable
immediately for a period of five years for cash, at an exercise price of $
35.55
per ordinary share for the February 25 Warrants and $
24.64
per ordinary share for the April 14 Warrants, subject to adjustment in the event of stock dividends and splits, or sales or grants of
ordinary shares or ordinary share equivalents in certain transactions at less than the then current exercise price, or where the exercise
price is higher than the then-current market price of the ordinary shares, on a cashless exercise basis, using the Black Scholes Value.
The Prior Private Placement Warrants held by a particular holder will not be exercisable to the extent such conversion would result in
such holder owning more than
9.9
% of the number of ordinary shares outstanding after giving effect to the issuance of ordinary shares
issuable upon exercise of such warrants calculated in accordance with Section 13(d) of the Exchange Act.
During the year ended December 31, 2021, all of
the February 25 Notes, April 14 Notes and May 5 Notes (except for $
1.57
million), and the Prior Private Placement Warrants have been converted
into
1,496,271
ordinary shares, and all the
888,083
warrants exercised to
1,770,838
ordinary shares. During the year ended December 31,
2022, all of the February 25 Notes, April 14 Notes, May 5 Notes and the Prior Private Placement Warrants have been converted into
421,339
ordinary shares.
September 2021 Private Placement Notes and
Warrants
On September 14, 2021 the Group entered into securities
purchase agreements with institutional and individual investors, pursuant to which the Group sold $
13,575,000
of notes (the "September
2021 Notes") and
2,337,293
Warrants (the "September 14 Warrants").
The September 2021 Notes have a two year term and
are convertible into ordinary shares at the lower of (i) $10.45 per share, (ii) 90% of the closing price of the ordinary shares on the
date that the registration statement registering the underlying shares is declared effective, or (iii) in the event that the registration
statement registering the underlying shares is not declared effective by the date that the shares underlying the September 2021 Notes
are eligible to be sold, assigned or transferred under Rule 144, 90% of the closing price of the ordinary shares on such date.
The September
2021 Notes have certain anti-dilution protections in the event of a lower priced issuance. Interest shall accrue on the notes at
8
% annually,
payable on a quarterly basis, in either cash or, in the event the registration statement registering the underlying shares has been declared
effective, ordinary shares. The September 2021 Notes held by a particular holder will not be convertible to the extent such conversion
would result in such holder owning more than
9.9
% of the number of ordinary shares outstanding after giving effect to the issuance of
ordinary shares issuable upon conversion of such note calculated in accordance with Section 13(d) of the Exchange Act. An additional $
13,575,000
of notes with the same terms will be issued upon the satisfaction of certain conditions, including the effectiveness of the registration
statement.
F-
51
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
13.
CONVERTIBLE
NOTES (CONTINUED)
The Warrants are exercisable immediately for a
period of five years for cash, at an exercise price of $13.89 per ordinary share, subject to adjustment in the event of stock dividends
and splits, or sales or grants of ordinary shares or ordinary share equivalents in certain transactions at less than the then current
exercise price, or where the exercise price is higher than the then-current market price of the ordinary shares, on a cashless exercise
basis, using the Black Scholes Value. The Warrants held by a particular holder will not be exercisable to the extent such conversion would
result in such holder owning more than 9.9% of the number of ordinary shares outstanding after giving effect to the issuance of ordinary
shares issuable upon exercise of such warrants calculated in accordance with Section 13(d) of the Exchange Act.
During the year ended December 31, 2021,
88,240
warrants were exercised into
128,418
ordinary shares on a cashless basis.
As of December 31, 2022, all of the September
2021 Notes have been converted into
3,588,307
ordinary shares, and
1,080,406
warrants of the September 14 Warrants have been exercised
to
2,782,471
ordinary shares.
May 2022 Private Placement Notes and Warrants
On May 25, 2022, the Group signed agreements
with institutional and individual investors, for the sale of $
16,000,000
in secured convertible notes.
The notes are due in two years,
have 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
90% of the closing bid price of the ordinary shares on the date that such shares are first eligible to be sold, assigned or transferred
under Rule 144 or Regulation S, as applicable, whichever is lower but in no event at less than $0.1 per ordinary share, which was $1.476
per shares.
The Group also issued warrants to purchase an aggregate of
6,049,607
ordinary shares at an exercise price of $
3.34
per share,
subject to adjustment in certain conditions. The Group issued the notes and warrants on May 25, 2022.
As of December 31, 2022, $
13.55
million of May
2022 Notes have been converted into
15,314,982
ordinary shares.
3,829,109
warrants were exercised into
14,578,181
ordinary shares on a
cashless basis.
The detachable Warrants issued to the above holder
are considered to be indexed to the Company's own stock and classified in stockholders' equity and therefore they meet the
scope exception prescribed in ASC 815-10-15.
The Group early adopted ASU 2020-06 on January
1, 2021. As a result, the Notes above were accounted for as a liability in its entirety, equal to the proceeds received, net of debt issuance
discounts and debt issuance costs if any. At the time of issuance, the Group allocated the proceeds to the Convertible Notes and the Warrants
based on their relative fair values. During the year ended December 31, 2021, in connection with the issuance of the Convertible Notes
and the Warrants, the Group recorded debt discount of $
15,097
that will be amortized over the term of the Convertible Notes. During the
year ended December 31, 2022, in connection with the issuance of the Convertible Notes and the Warrants, the Group recorded debt discount
of $
6,994
that will be amortized over the term of the Convertible Notes.
The fair value of the Warrants was computed using
the Black-Scholes option-pricing model. Variables used in the option-pricing model include the following:
Value
per share
Risk-free
interest
rate
Expected
warrant
life
Expected
volatility
February 25, 2021 Warrants
1.76
0.60
%
5
years
170
%
April 14, 2021 Warrants
1.25
0.86
%
5
years
168
%
September 14, 2021 Warrants
0.72
0.78
%
5
years
160
%
May 25, 2022 Warrants
0.17
2.73
%
5
years
152
%
The fair values of the convertible notes are determined
by the optimized value derived from valuation of straight debt and valuation of convertible debt. The assumptions include the following:
Coupon rate
Risk-free
interest
rate
Volatility
Bond yield
February 25, 2021 Notes ($
6.67
million)
8
%
0.13
%
196
%
28
%
April 14, 2021 Notes ($
1
million)
8
%
0.16
%
196
%
29
%
May 5, 2021 Notes ($
13.33
million)
8
%
0.16
%
194
%
28
%
May 5, 2021 Notes ($
2
million)
8
%
0.16
%
193
%
28
%
September 14, 2021 Notes ($
13.575
million)
8
%
0.21
%
200
%
30
%
May 25, 2022 Notes ($
16.0
million)
10
%
2.50
%
153
%
33
%
F-
52
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
13.
CONVERTIBLE
NOTES (CONTINUED)
As of December 31,
2021
2022
$
$
Principal amount
15,142
2,450
Less: unamortized discount and debt issuance costs
(
5,152
)
(
759
)
Total
9,990
1,691
Balance as of December 31, 2021:
Principal
Less:
unamortized
discount and
debt
issuance
costs
$
$
US$
20.0
million
8
% note due
2023
($
18.4
million converted in fiscal 2021)
1,567
(
463
)
US$
3.0
million
8
% note due
2023
(fully converted in fiscal 2021)
-
-
US$
13.58
million
8
% note due
2023
13,575
(
4,689
)
Total
15,142
(
5,152
)
Balance as of December 31, 2022:
Principal
Less:
unamortized
discount and
debt
issuance
costs
$
$
US$
20.0
million
8
% note due
2023
(fully converted in fiscal 2022)
-
-
US$
3.0
million
8
% note due
2023
(fully converted in fiscal 2021)
-
-
US$
13.58
million
8
% note due
2023
(fully converted in fiscal 2022)
-
-
US$
16.0
million
10
% note due
2024
($
13.6
million converted in fiscal 2022)
2,450
(
759
)
Total
2,450
(
759
)
During the year ended December 31, 2021 and 2022,
the holders of the convertible notes have converted into total of
1,496,271
and
19,324,628
the Group's ordinary shares, respectively.
Interest expense related to the amortization of the debt discount of $
9,945
and $
11,387
recorded for the year ended December 31, 2021
and 2022, respectively.
F-
53
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
14.
ACCUMULATED
OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive
loss, net of tax of nil, were as follows:
Foreign currency
translation
Total
$
$
Balance as of January 1, 2020
(
1,904
)
(
1,904
)
Current year other comprehensive income
661
661
Balance as of December 31, 2020
(
1,243
)
(
1,243
)
Current year other comprehensive income
152
152
Balance as of December 31, 2021
(
1,091
)
(
1,091
)
Current year other comprehensive loss
(
2,421
)
(
2,421
)
Balance as of December 31, 2022
(
3,512
)
(
3,512
)
15.
MAINLAND
CHINA EMPLOYEE CONTRIBUTION PLAN
As stipulated by the regulations of
the PRC, full-time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan organized
by municipal and provincial governments. Under the plan, certain pension benefits, medical care, unemployment insurance, employee housing
fund and other welfare benefits are provided to employees. The Group is required to make contributions to the plan based on certain percentages
of employees' salaries. The total expenses for the plan from continuing operations were $
803
, $
1,026
and $
721
and from discontinued
operations were $
172
,
nil
and
nil
for the years ended December 31, 2020, 2021 and 2022, respectively.
F-
54
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
16.
SHARE BASED COMPENSATION
(a) Options issued in 2020
The Group granted
140,625
shares of
options to three non-employees to purchase ordinary shares with the exercise price of $
20.0
per share on March 19, 2020. The expiration
date of these options is March 19, 2023.
The Group granted
6,250
shares of warrants
to an advisory company to purchase ordinary shares with the exercise price of $
0.16
per share on May 18, 2020.   The expiration
date of these warrants is May 18, 2027. The recipients received such warrants for bringing to the Company a merger possibility and have
the ability to exercise the warrants into ordinary shares of the Company at the time of their own choosing by the expiration date or by
the closing of a merger brought forth by them, whichever occurs earlier.
In December 2020, the Group decided
to cancel all the shares of options as of December 31, 2019 and replaced with issuing ordinary shares.
Number of
options
Weighted
average
exercise
price
Weighted average
remaining
contractual term
Aggregate
intrinsic
value
($)
(Years)
($)
Outstanding, January 1, 2020
157,264
84.64
5.52
5,653
Granted
146,875
19.20
Forfeited
(
157,264
)
81.92
Outstanding, December 31, 2020
146,875
19.20
2.39
4,828
Outstanding, January 1, 2021
146,875
19.20
2.39
4,828
Granted
-
-
-
-
Forfeited
-
-
-
-
Outstanding, December 31, 2021
146,875
19.20
1.22
-
Outstanding, January 1, 2022
146,875
19.20
1.22
-
Granted
-
-
-
-
Forfeited
-
-
-
-
Outstanding, December 31, 2022
146,875
19.20
1.22
-
F-
55
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
16.
SHARE BASED COMPENSATION (CONTINUED)
As of December 31, 2020, the Group
had options outstanding to purchase an aggregate of
146,875
shares with an exercise price below the fair value of the Group's shares,
resulting in an aggregate intrinsic value of $
4,828
. As of December 31, 2021 and 2022, the Group had options outstanding to purchase an
aggregate of
146,875
shares with an exercise price above the fair value of the Group's shares, resulting in an aggregate intrinsic
value of
nil
.
The Group calculated the estimated
fair value of the options on the respective grant dates using the binomial-lattice option valuation model with the following assumptions
for each applicable period which takes into account variables such as volatility, dividend yield, and risk-free interest rate, contractual
term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of
termination or retirement of the option holder in computing the value of the option:
Year 2020
Risk-free interest rates
0.56
%-
0.57
%
Expected life (years)
3
-
7
years
Expected volatility
70.6
-
72.2
%
Expected dividend yield
0
%
Exercise multiple
2.2
Post-vesting forfeit rate
0
%
Fair value of underlying ordinary shares
$
16.32
-$
20.00
Fair value of share option
$
8.80
-$
19.84
No compensation expenses relating to
share options granted to employees recognized for the years ended December 31, 2020, 2021 and 2022.
(b) Ordinary shares issued in 2020
In December 2020, the Group issued
873,946
ordinary shares to certain employees and non-employees. $
18,220
recorded as general and administrative expenses, $
87
recorded
as selling and marketing expenses and $
1,687
recorded as research and development expenses. The ordinary shares were fully vested as of
December 31, 2020.
(c) Ordinary shares issued in 2021
During fiscal 2021, the Group issued
643,194
ordinary shares to certain employees and non-employees. $
17,308
recorded as general and administrative expenses,
nil
recorded
as selling and marketing expenses and $
225
recorded as research and development expenses. The ordinary shares issued were fully vested
as of December 31, 2021.
(d) Ordinary shares issued in 2022
During fiscal 2022, the Group issued
3,945,572
ordinary shares to certain employees and non-employees. $
2,291
recorded as general and administrative expenses, $
47
recorded
as selling and marketing expenses and $
1,048
recorded as research and development expenses. The ordinary shares issued were fully vested
as of December 31, 2022.
17.
TAXATION
Enterprise income tax ("EIT")
British Virgin Islands
The Company is incorporated in the
British Virgin Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC, India and Hong Kong.
Under the current laws of the British Virgin Islands, the Company is not subject to tax on income or capital gains. Additionally, upon
payments of dividends by the Company to its shareholders, no BVI withholding tax will be imposed.
F-
56
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
17.
TAXATION (CONTINUED)
Cayman Islands
Borqs International is incorporated
in the Cayman Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC, India and Hong Kong.
Under the current laws of the Cayman Islands, Borqs International is not subject to tax on income or capital gains. Additionally, upon
payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
Borqs HK is subject to Hong Kong profits
tax rate of
16.5
% for the years ended December 31, 2020, 2021 and 2022. No provision for Borqs HK profits tax has been made in the consolidated
financial statements as the entity had losses in the years ended December 31, 2020, 2021 and 2022. Additionally, upon payments of dividends
by the Company to its shareholders, no HK withholding tax will be imposed.
India
Borqs India is subject to income tax
rate of
25.17
% for the years ended December 31, 2020, income tax rate of
25.17
% for the years ended December 31, 2021 and income tax rate
of
25.17
% for the years ended December 31, 2022. Amounts $
691
are included as income tax expense for the years ended December 31, 2020,
and $
445
are included as income tax benefit for the years ended December 31, 2021, and $
59
are included as income tax expense for the
years ended December 31, 2022.
The PRC
The Company's subsidiaries and
VIE in the PRC are subject to the statutory rate of
25
%, in accordance with the Enterprise Income Tax law (the "EIT Law"),
which was effective since January 1, 2008, except for certain entities eligible for preferential tax rates.
Dividends, interests, rent or royalties
payable by the Company's PRC subsidiaries, to non-PRC resident enterprises, and proceeds from any such non-resident enterprise investor's
disposition of assets (after deducting the net value of such assets) shall be subject to
10
% withholding tax, unless the respective non-PRC
resident enterprise's jurisdiction of incorporation has a tax treaty or arrangements with China that provides for a reduced withholding
tax rate or an exemption from withholding tax.
BORQS Beijing was qualified for a High
and New Technology Enterprises ("HNTE") since 2012 and was eligible for a 15% preferential tax rate from 2012 to 2014. In
July 2015, BORQS Beijing obtained a new HNTE certificate. BORQS Beijing has successfully renewed the HNTE certificate in December 2021
with effective term of three years until 2023. In accordance with the PRC Income Tax Laws, an enterprise awarded with the HNTE status
may enjoy a reduced EIT rate of 15%. For the years ended December 31, 2020, 2021 and 2022, BORQS Beijing enjoyed a preferential tax rate
of 15%.
Yuantel Telecom was qualified for a
High and New Technology Enterprises ("HNTE") since 2011 and is eligible for a 15% preferential tax rate from 2011 to 2013.
In October 2014, Yuantel Telecom obtained a new HNTE certificate, which expired in October 2017. Yuantel Telecom has successfully renewed
the HNTE certificate in December 2017 with effective term of three years until 2019. In accordance with the PRC Income Tax Laws, an enterprise
awarded with the HNTE status may enjoy a reduced EIT rate of 15%.
For the period from January 1 through October 29, 2020, Yuantel Telecom
enjoyed a preferential tax rate of 15%.
The New EIT Law also provides that
enterprises established under the laws of foreign countries or regions and whose "place of effective management" is located
within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of
25
% on worldwide income. The definition
of "place of effective management" refers to an establishment that exercises, in substance, overall management and control
over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2022, no detailed interpretation
or guidance has been issued to define "place of effective management". Furthermore, as of December 31, 2022, the administrative
practice associated with interpreting and applying the concept of "place of effective management" is unclear. If 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 changes in the
interpretation or guidance of this law.
F-
57
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
17.
TAXATION (CONTINUED)
Profit (loss) from continuing operations
before income taxes consisted of:
For the years ended December 31,
2020
2021
2022
$
$
$
Non-PRC
(
29,385
)
(
44,550
)
(
29,722
)
PRC
(
6,298
)
(
11,105
)
836
(
35,683
)
(
55,655
)
(
28,886
)
Income tax benefit (expense) comprised
of:
For the years ended December 31,
2020
2021
2022
$
$
$
Current
(
1,410
)
-
(
343
)
Deferred
1,004
445
284
(
406
)
445
(
59
)
The reconciliation of tax computed
by applying the statutory income tax rate of
25
% for the years ended December 31, 2020, 2021 and 2022 applicable to the PRC operations
to income tax expense was as follows:
For the years ended December 31,
2020
2021
2022
$
$
$
Loss before income taxes
(
35,683
)
(
55,655
)
(
28,886
)
Income tax income computed at the statutory income tax rate at 25%
4,594
13,914
7,220
Non-deductible expenses
380
(
1,095
)
71
Non-taxation income
-
-
19
Preferential rate
(
820
)
(
935
)
1,970
Current and deferred tax rate differences
(
291
(
709
)
299
Foreign rate differences
(
5
)
(
3,316
)
(
3,682
)
Change of valuation allowance
(
4,587
)
(
8,024
)
(
6,860
)
Statutory income
-
-
-
R&D super deduction
323
610
904
Income tax (expense) benefit
(
406
)
445
(
59
)
F-
58
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
17.
TAXATION (CONTINUED)
Deferred Taxes
The significant components of deferred
taxes were as follows:
As of December 31,
2021
2022
$
$
Deferred tax assets
Inventories provision
28
32
Accrued salary and welfare payable
214
217
Property, plant and equipment
-
175
Tax losses
229
-
Valuation allowance
-
-
Others
-
-
Total deferred tax assets
471
424
Deferred tax liabilities
Intangible assets
671
15
Deferred cost of revenue
15
-
Others
325
894
Total deferred tax liabilities
1,011
909
The Group operates through several
subsidiaries and its Consolidated VIEs. Valuation allowance is considered for each of the entities where it was determined it was more
likely than not that the benefits of the deferred tax assets will not be realized.
Realization of the net deferred tax
assets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income,
exclusive of reversing deductible temporary differences and tax loss or credit carry forwards.
As of December 31, 2022, the Group
had net tax losses from its PRC subsidiaries, as per filed tax returns, of $
18,657
which can be carried forward per tax regulation to
offset future taxable income.
The PRC taxable losses will expire from 2022 to 2031 if not utilized.
The Group has net tax losses from
its HK subsidiary of $
76,963
, which will not expire.
Unrecognized Tax Benefits
As of December 31, 2021 and 2022, the
Group recorded an unrecognized tax benefits of $
2,174
and $
1,990
, respectively, of which, $
1,947
and $
2,394
, respectively, are presented
on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balance sheets. The unrecognized
tax benefits and its related interest are primarily related to under-reported intercompany profit. The amount of unrecognized tax benefits
will change in the next 12 months, pending clarification of current tax law or audit by the tax authorities, however, an estimate of the
range of the possible change cannot be made at this time. As of December 31, 2021 and 2022, unrecognized tax benefits of $
227
and
nil
,
respectively, if ultimately recognized, will impact the effective tax rate.
F-
59
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
17.
TAXATION (CONTINUED)
A roll-forward of unrecognized tax
benefits is as follows:
For the years ended December 31,
2020
2021
2022
$
$
$
Balance at beginning of year
1,987
2,124
2,174
Reversal based on tax positions related to prior years
-
-
-
Additions based on tax positions related to the current year
-
-
-
Foreign currency translation difference
137
50
(
184
)
Balance at end of year
2,124
2,174
1,990
In the years ended December 31, 2021
and 2022, the Group recorded interest expense accrued in relation to the unrecognized tax benefit of
nil
and
nil
in income tax expense,
respectively. As of December 31, 2022, the tax years ended December 31, 2016 through 2021 for the PRC subsidiaries remain open for statutory
examination by the PRC tax authorities.
18.
RELATED
PARTY TRANSACTIONS
(a) Related parties
Names of related parties
Relationship with the Group
Bluecap
A company controlled by a key management of the Group
Hareesh Ramanna
Executive Vice President and Co-General Manager of Connected Solutions Business Unit
(b)
Other than disclosed elsewhere, the Group had the following significant related party transactions for the years ended December 31, 2020, 2021 and 2022:
For the years ended December 31,
2020
2021
2022
$
$
$
Software services provided to:
Bluecap
507
-
-
F-
60
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
18.
RELATED PARTY TRANSACTIONS (CONTINUED)
(c)
Other than disclosed elsewhere, the Group had the following significant related party balances for the years ended December 31, 2020, 2021 and 2022:
For the years ended December 31,
2020
2021
2022
$
$
$
Loan from:
Bluecap
2,695
1,834
-
Interest expense on loan from:
Bluecap
438
658
746
All balances with related parties as
of December 31, 2021 and 2022 were unsecured, and had no fixed terms of repayment.
On July 31, 2018, the Group entered
into a $
1,325
short-term loan agreement with Bluecap Mobile Private Limited ("Bluecap"), a company controlled by a key management
of the Group, bearing an interest rate of
8
% per annum to fund the Company's working capital. The loan does not carry a maturity
date and the outstanding principal balance as of December 31, 2022 was
nil
. The accrued interests were recorded in amount due to related
parties.
19.
RESTRICTED NET ASSETS
The Company's ability to pay
dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries and VIE. Relevant PRC statutory
laws and regulations permit payments of dividends by the Company's PRC subsidiaries only out of their retained earnings, if any,
as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the consolidated financial
statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company's
PRC subsidiaries and VIE.
In accordance with the PRC Regulations
on Enterprises with Foreign Investment and the articles of association of the Company's PRC subsidiaries, a foreign-invested enterprise
established in the PRC is required to provide certain statutory reserves, namely the general reserve fund, the enterprise expansion fund
and the staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise's PRC statutory accounts.
A foreign-invested enterprise is required to allocate at least 10% of its annual net profit to the general reserve until such reserve
has reached 50% of its respective registered capital based on the enterprise's PRC statutory accounts.
Appropriations to the enterprise
expansion fund and the staff welfare and bonus fund are at the discretion of the board of directors for all foreign-invested enterprises.
The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The PRC subsidiaries were
established as foreign-invested enterprises and therefore, are subject to the above mandated restrictions on distributable profits. As
of December 31, 2021 and 2022 the Group's PRC subsidiaries had appropriated $
1,901
and $
1,901
, respectively, in its statutory reserves.
Foreign exchange and other regulations
in the PRC may further restrict the Company's VIE from transferring funds to the Company in the form of dividends, loans and advances.
Amounts restricted include paid-in capital and statutory reserves of the Company's PRC subsidiaries and the equity of the Consolidated
VIEs, as determined pursuant to PRC generally accepted accounting principles. As of December 31, 2022, restricted net assets of the Company's
PRC subsidiaries were $
82,072
.
20.
Equity
(a)
Disposal of MVNO BU (Note 1(c))
See Note 1(c) for details for equity
transactions related to disposal of Yuantel.
F-
61
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
20.
Equity (CONTINUED)
(b)
Investment with KADI
On December 15, 2018,
the Group entered
into a Share Purchase Agreement ("Purchase Agreement") with Shanghai KADI Machinery Technology Co., Ltd. ("KADI SH"),
KADI Technologies Limited ("KADI HK") (collectively, "KADI") and Lin Hu and Shou Huajun, the sole shareholders
of KADI SH and KADI HK (the "KADI's Selling Shareholders"), for the purchase of 60% of the issued and outstanding ordinary
shares of KADI SH ("KADI SH Shares") and 60% of the issued and outstanding ordinary shares of KADI HK ("KADI HK Shares",
together with the KADI SH Shares, the "KADI Shares"). The transaction with KADI consists of total cash consideration of $4,600
in installments and share consideration equivalent to $9,750 in installments upon achievement of earn-outs by KADI SH from 2018 to 2021.
As of December 31, 2018, $600 was prepaid to KADI SH. The transaction did not close as of December 31, 2019 due to KADI not able to present
audited financial statements as required by the earn-out provisions of the agreement and that KADI has not performed the ownership change
registration at the local jurisdiction. Although KADI was not able to present audited financial statements as required by the earn-out
provisions of the agreement and has not performed the ownership change registration, 102,035 of Borqs' ordinary shares were issued
to KADI on January 9, 2019, for which the Group recorded the fair value of these shares in an aggregate of $5,217 in additional paid-in
capital, with a corresponding amount included in subscription receivable. As a result, future capital commitments for KADI has been voided
due to KADI's breach of provisions of the agreements. As of the filing of this annual report, the Group has cancelled all the ordinary
shares of 36,813 shares, which were issued into escrow account with KADI. Also, the Group is in negotiation with KADI for a reduced ownership
of KADI or a recission of the acquisition.
The Group has initiated arbitration
proceeding in February 2022 in Hong Kong against KADI and its owners for breach of contract according to the KADI Agreement, seeking from
KADI of
i) a payment of $600 in cash previously paid to KADI, ii) the return of 65,222 ordinary shares of Borqs previously issued to the
owners of KADI, and iii) payment in cash for loss of profit from KADI's projected business in the amount of $5.3 million. As of
the filing of this annual report, the arbitration is in its initial stages and there is no assurance that the outcome of the proceedings
will be in favor of Borqs.
(c)
Equity financing from Chongqing City Youtong Equity Investment Fund ("Chongqing Youtong")
On April 18, 2019,
the Group entered
into an equity financing agreement with Chongqing Youtong owned by the Chongqing Government in the PRC. According to the agreement, Chongqing
Youtong purchased 9.9 % equity interest of the Company equivalent to 233,392 ordinary shares with a total purchase consideration of $13,865
on May 16, 2019, for which 75% of the total purchase consideration amounting to $10,399 in cash was received. The remaining 25% of the
total purchase consideration amounting to $3,466 will be contributed in the form of real property and equipment (the "Property Investment")
by Chongqing Youtong within six months from May 16, 2019 the date that the cash investment portion was completed. However, the Property
Investment has not yet been completed.
In February 2023, the Group entered
into a settlement agreement with Chongqing Youtong on the settlement of the equity financing. For the cash consideration with the amount
of $10,399, the Group agreed to repay Chongqing Youtong the principal plus 8% annually interest with its ordinary shares. Besides, both
parties agreed to not proceed with the remainder 25% investment and the related previous issued 58,348 shares will not withdraw. Also,
to compensate Youtong's investment loss from the share price decline, the Group issued additional 56,024,444 ordinary shares in
February 2023 equal to approximately $13.46 million including interest expense from May 2019 to February 2023, with annual interest rate
of 8%.
By entering into the agreement not
to proceed with the remainder 25% investment in the form of real property and equipment, the amount was released from subscriptions receivable,
and a loss related to equity financing recognized during the year ended December 31, 2022.
F-
62
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
20.
Equity (CONTINUED)
(d)
Repurchase of Shares from Zhengqi International Holding Limited ("Zhengqi")
On January 10, 2018, we entered into
a stock repurchase agreement ("Stock Repurchase Agreement") with Zhengqi International Holding Limited ("Zhengqi"),
pursuant to which we agreed to repurchase
60,384
of our ordinary shares that were originally issued and sold to Zhengqi on August 18,
2017, at an aggregate purchase price of approximately $
10,070
or $
166.40
per share. The $
10,048
was paid on February 28, 2018 and recorded
as prepayment. On May 20, 2019, the
60,384
repurchased shares were cancelled. (Note 6)
(e)
Settlement of arbitration with Claimant Samsung Electronics Co., Ltd. ("Samsung")
On November 27, 2018,
the Secretariat
of the International Court of Arbitration for the International Chamber of Commerce issued a final award to Samsung Electronics Co., Ltd.
("Samsung") that constituted the final decision on the Group's dispute with Samsung over a sales contract. The court
order required the Group to pay to Samsung total payments of $4,650 including: i) $4,280 as the "Principal Amount", plus (ii)
accrued interest of $370 computed from March 31, 2019 on the outstanding balance of the Principal Amount at a simple interest rate of
9% per annum (together with the Principal Amount, collectively referred to as the "Settlement Payment"). On April 26, 2019,
the Group entered into a settlement agreement with Samsung according to which, the Group shall pay the full and total amount of the Settlement
Payment in equal monthly installments over a period of twenty-four months beginning on March 31, 2019. In addition, a total of 138,108
ordinary shares were issued to Samsung as escrow shares in the year 2019 as security for the payments. The Group recorded the fair value
of the shares issued in an aggregate of $6,401 in additional paid-in capital, with a corresponding amount included in subscription receivable.
Due to cash constraints, particularly due to the COVID-19 pandemic, the Group has not made monthly installments to Samsung since the fourth
quarter of 2019, and Samsung has not pursued alternative means of repayment from the Group.
In April 2022, the Group executed a
settlement agreement with Samsung regarding the payments. The total amount of principal and accrued interest as of the end of May 2022
is 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
to the agreement, the Group shall pay the full and total amount of the payments in equal monthly installments over a period of eighteen
months beginning on July 2022. In addition, a total of 1,003,593 ordinary shares were issued to Samsung as escrow shares as security for
the payments. The Group recorded the fair value of the shares issued in an aggregate of $2,760 in additional paid-in capital, with a corresponding
amount included in subscription receivable.
(f)
Investment in Shenzhen Crave Communication Co., Ltd. ("Crave") and
Colmei Technology International Ltd. ("Colmei")
Refer to Note 10 for
11,459
shares
on January 10, 2019 related to long-term investments.
F-
63
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
20.
Equity (CONTINUED)
(g)
Debt Repayments with ordinary shares
(1)
In May 2020, we issued ordinary shares to settle debt due to Coming Technologies Ltd valued per agreement at a total amount of $
1,998
which comprised of:
a. $
880
in payables for products Borqs ordered from TianFu in the amount of $
658
and EPIC in the amount of $
222
. TianFu and EPIC in turn ordered the manufacturing of components and parts from Coming Tech. Coming Tech had delivered such products, via TianFu and EPIC, to Borqs. These orders and deliveries were made in the year 2018. Borqs confirmed the receipt of the products in full and then delivered them to Borqs' customer. Borqs had recorded these amounts as Accounts Payable to TianFu and EPIC; and by settling the amount of $
880
directly with Coming Tech, Borqs can reduce our Accounts Payable with TianFu and EPIC for their respective amounts.
b. $
937
with Purchase Orders placed with EPIC in January of 2020 which EPIC in turn placed with Coming Tech. We anticipated to deliver the products to our customer by the end of the first calendar quarter in 2020. However, we determined that the project was cancelled by April 2020 most significantly due to the fact that the COVID-19 virus was spreading worldwide and turning into a pandemic, and the cancellation came prior to the delivery of our products to the customer. We sought alternative channels of distribution for the products but no customers were willing to commit to taking merchandise when many retail businesses were closing at that time. However, Coming Tech had already manufactured the products and Borqs became liable for the total of amount of $
937
.
c. $
182
in an extra compensation to Coming Tech in the settlement, for receiving ordinary shares of Borqs that were not freely tradable for a minimum of six months from issuance. No registration statement was to be filed for the settlement shares received by Coming Tech, and the shares could only become sellable after a minimum of six months from the date of issuance according to Rule 144. Also, if Borqs Technologies becomes not in compliance with the SEC rules and regulations as a listed company, the shares cannot be sold in the public market. The lapse of time by this minimum holding period and compliance requirements added risk to Coming Tech regarding the value of the shares. The Company and Coming Tech came to terms that an extra
10
% in value of the shares were to be issued to Coming Tech due to this additional risk.
F-
64
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
20.
Equity (CONTINUED)
The
60,679
ordinary shares issued on May 7, 2020 at the closing price of the Company stock of $
24.96
per share. The Company recognized gain of $
484
in gain on debt settlement during fiscal year 2020. For the year ended December 31, 2020, the issuance of $
1,988
in value of ordinary shares caused a reduction of our Accounts Payable to TianFu of $
658
and EPIC of $
222
, recording G&A Expense of $
937
and Financing Expense of $
182
.
(2)
The Company entered into a loan agreement with American West Pacific International Investment Corporation ("AWP") on June 8, 2020. Under this agreement, the Company need to repay the principal amount of $
0.4
million in its entirety, with interest on the due date. AWP claimed the Company to the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County in Florida. On October 21, 2020, the Court issued an agreed order for the settlement of the claim and approved the issuance of
32,943
common shares of the Company in exchange for the settlement. The shares issued on October 29, 2020 at the closing price of the Company stock of $
15.38
per share. The Company recognized loss of $101 in loss on debt settlement during fiscal year 2020. Significantly affected by the pandemic during 2020 when business activities dropped over 70% from the prior year, operational cash flow was severely challenged and we could not payback this loan in cash. We sought the alternate means via a court approval under securities rule 3(a)(10) and was able to issue free-trading shares to the lender as settlement.
(3)
Sinowinglaw LLP, aka Beijing Zhongpeng Law Firm ("Sinowing") provided services to the Company. The Company was in default of its payment obligations to Sinowing for consulting and legal fees and costs in the amount of approximate $
1.2
million. Sinowing claimed against the Company to the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County in Florida.
On October 29, 2020, the Court issued an agreed order for the settlement of the claim and approved the issuance of 98,808 common shares of the Company in exchange for the settlement. The shares issued on November 4, 2020 at the closing price of the Company stock of $15.92 per share. The Company recognized loss of $356 in loss on debt settlement during fiscal year 2020. Significantly affected by the pandemic during 2020 when business activities dropped over 70% from the prior year, operational cash flow was severely challenged and we could not payback these back-due fees in cash.
We sought the alternate means via a court approval under securities rule 3(a)(10) and was able to issue free-trading shares to Sinowing as settlement.
(4)
The Group was default with the terms of our loans and revolving credit lines PFG which is the prime lender. The Group has entered into agreements dated December 14, 2020 with PFG and LMFA Financing LLC ("LMFA"), a Florida limited liability company and wholly owned subsidiary of LM Funding America, Inc. (Nasdaq: LMFA), in which LMFA will purchase approximately $
18
million of debt in tranches. As of February 10, 2021, LMFA has completed the purchase of $
17.87
million of principal, accrued interest and applicable fees (the "Debt"), converted into all
1.42
million shares of the Group's ordinary shares by February 10, 2021. With the Company settling another $
1.27
million of Debt directly with PFG through the issuance of
94,170
shares on February 17, 2021. As of December 31, 2021, the Group's defaulted Debts with PFG totaling $
19.14
million have been eliminated. The Group recognized loss of $
16,580
in loss on debt settlement during fiscal year 2021.
(5)
On March 03, 2020, the Group entered into an agreement with AWP. The Group has been offered a term loan of principal of $
1
million for 6 months with interest at
12
% per annum. On June 15, 2021, the Group has settled the $
1
million loan principal with
99,206
shares. The Group recognized loss of $
619
in loss on debt settlement during fiscal year 2021.
(6)
On May 03, 2022, the Group entered into a share exchange agreement regarding the $
1,250
loan with an individual shareholder. According to the agreement, the Group shall repay the loan balance with
338,968
the Group's ordinary shares. The Group issued shares on May 03, 2022 and recognized gain of $
217
in loss on debt settlement during fiscal year 2022.
F-
65
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
20.
Equity (CONTINUED)
(h)
Management's contribution
Due to stringent operational cash flows
caused by the COVID-19 pandemic, the CFO voluntarily forfeited his salary for the year 2020 as a contribution to the Group.
(i)
Collateral of
250,000
restricted ordinary shares to AWP
In December 2020, the Group entered
into an agreement with AWP.
The Group has been offered a term loan for 6 months with interest at 12% per annum. According to the agreement,
the Group issued 250,000 restricted ordinary shares to be held in escrow at Continental Stock Transfer & Trust Company as collateral.
The Group recorded the fair value of the shares issued in an aggregate of $4,080 in additional paid-in capital, with a corresponding amount
included in subscription receivable.
On June 15, 2021, the Group has released
the
250,000
shares from escrow to AWP as full payment of the $
1
million loan principal with
99,206
shares, and a compensation for service
of a future project with
150,794
shares.
(j)
Shares conversion from the holders of the convertible notes
During the year ended December 31,
2021, all of the February 25 Notes, April 14 Notes and May 5 Notes (except for $
1.57
million) have been converted into the Group's
ordinary shares of
1,496,271
shares. None of the September 2021 Notes have been converted. During the year ended December 31, 2022, total
of
19,324,628
ordinary share were converted by the holders.
(k)
Warrants exercised from the holders of the convertible notes
During the year ended December 31,
2021, all of the February 25, 2021, April 14, 2021 and May 5, 2021 Warrants have been exercised by the holders into
1,770,838
of the Group's
ordinary shares.
88,240
warrants of the September 14, 2021 Warrants have been exercised into
128,418
of the Group's ordinary shares.
During the year ended December 31,
2022,
1,080,406
warrants of the September 14, 2021 Warrants have been exercised into
2,782,471
of the Group's ordinary shares. And
3,829,109
warrants of the May 25, 2022 Warrants have been exercised into
14,578,181
of the Group's ordinary shares.
All of these warrants were exercised
on a cashless basis.
(l)
Acquisition of HHE
Refer to Note 4 for
877,183
shares
issued on October 20, 2021 related to the acquisition of HHE.
F-
66
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
20.
Equity (CONTINUED)
(m)
Capital injection from non-controlling shareholders of a subsidiary
The non-controlling shareholders of
HHE have capital injection to HHE with the amount of $
297
after the Group's acquisition of HHE in 2021 and capital injection with
the amount of $
438
during the year ended December 31, 2022.
21.
FAIR VALUE MEASUREMENTS
The Group applies ASC 820, Fair Value
Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about
fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement. The Group has adopted the ASU 2018-13
Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement on January 1, 2020. It requires public
companies to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.
ASC 820 establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 — Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Include other inputs
that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs
which are supported by little or no market activity.
ASC 820 describes three main approaches
to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach
uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on
the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently
be required to replace an asset.
The Group differentiate between those
assets and liabilities required to be carried at fair value at every reporting period ("recurring") and those assets and liabilities
that are only required to be adjusted to fair value under certain circumstances ("nonrecurring").
The key input and assumptions included
internal rate of return of
11.2
%, weighted average cost of capital of
12.0
% and weighted average return of assets of
12.0
%.
The following tables present recorded
amounts of major financial assets and liabilities measured at Level 3 fair value on a recurring basis as of December 31, 2021:
December 31,
2021
Contingent consideration - current
(
1,392
)
Contingent consideration – non-current
(
389
)
Total
(
1,781
)
The contingent consideration was recognized
through the acquisition of HHE. As of the acquisition date, the fair value of the contingent consideration was $
1,669
and the change in
fair value from the acquisition date to December 31, 2021 was recorded as change in fair value of contingent consideration. As of December
31, 2022, HHE was deconsolidated and the contingent consideration was derecognized.
F-
67
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
22.
DEBT FORGIVENESS
During the year ended December 31,
2021, the Group entered into an account payable forgiveness agreement with a supplier in December 2021. The Group has long cooperation
relationship with the supplier, and there was long-aging balance of account payable due to the supplier. The supplier agreed to waive
part of the long-aging account payable balance with the amount of $
2.1
million, and retained the remaining part of the balance. According
to the agreement, the Group wrote off $
2.1
million of liability and recorded as other income in the consolidated statement of operations
for the year ended December 31, 2021.
23.
LOSS PER SHARE
Basic and diluted loss per share for
each of the years presented are calculated as follows:
For the years ended December 31,
2020
2021
2022
$
$
$
Numerator:
Net loss from continuing operations
(
36,089
)
(
55,210
)
(
28,945
)
Less: Net loss attributable to noncontrolling interest from continuing operation
(
1
)
(
54
)
(
190
)
Net loss from continuing operations attributable to Borqs Technologies, Inc.
(
36,088
)
(
55,156
)
(
28,755
)
Accretion to redemption value of preferred shares for continuing operations
-
-
-
Net loss from continuing operations attributable to Borqs Technologies, Inc.'s ordinary shareholders
(
36,088
)
(
55,156
)
(
28,755
)
Net income (loss) from discontinued operations
1,302
(
1,392
)
(
9,916
)
Less: Net income (loss) attributable to noncontrolling interest from discontinued operation
716
(
683
)
(
4,639
)
Net income (loss) from discontinued operations attributable to Borqs Technologies, Inc.
586
(
709
)
(
5,277
)
Net loss attributable to Borqs Technologies, Inc.'s ordinary shareholders
(
35,502
)
(
55,865
)
(
34,032
)
Denominator:
Weighted-average number of ordinary shares—basic
2,782,188
7,370,719
22,951,092
Weighted-average number of ordinary shares—diluted
2,782,188
7,370,719
22,951,092
Weighted-average number of shares outstanding from discontinued operations—basic
2,782,188
7,370,719
22,951,092
Weighted-average number of shares outstanding from discontinued operations—diluted
2,782,188
7,370,719
22,951,092
Net loss per share from continuing operations attributable to Borqs Technologies, Inc.
Loss per share—Basic:
(
12.97
)
(
7.48
)
(
1.25
)
Loss per share—Diluted:
(
12.97
)
(
7.48
)
(
1.25
)
Net earnings (loss) per share from discontinued operations attributable to Borqs Technologies, Inc.
Earnings (loss) per share—Basic:
0.21
(
0.10
)
(
0.23
)
Earnings (loss) per share—Diluted:
0.21
(
0.10
)
(
0.23
)
Net loss per share attributable to Borqs Technologies, Inc.
Loss per share—Basic:
(
12.76
)
(
7.58
)
(
1.48
)
Loss per share—Diluted:
(
12.76
)
(
7.58
)
(
1.48
)
For the years ended December 31, 2020,
2021 and 2022, share options and warrants associated with private placements were anti-dilutive and excluded from the calculation of diluted
net loss per share. See Note 20(c) for the
56,024,444
ordinary shares issued subsequently in February 2023.
F-
68
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
24.
COMMITMENTS
AND CONTINGENCIES
(a) Capital commitments and contingencies
Refer to Note 21 (b) for details related
to investments with KADI. As of the filing of this annual report, the Group is in negotiation with KADI for a reduced ownership of KADI
or a rescission of the acquisition.
(b) Income taxes
As of December 31, 2021 and 2022, the
Group recognized an accrual of $
2,174
and $
1,990
, respectively, in unrecognized tax benefits and its interest (Note 17). The final outcome
of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes
of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits
by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties.
As of December 31, 2021 and 2022, the Group classified the accrual for unrecognized tax benefits as a non-current liability.
(c) Contingent liability in relation
to disposal of a subsidiary
One of the nominee shareholders of
Big Cloud Network denied his entrustment relationship with the Group and claimed his rights and interests proceeds of the disposal of
Yuantel. Although there were agreements between the Group and the nominee shareholder, there was no direct evidence to show the entrustment
relationship between both parties, which may not be supported by the existing PRC laws and regulation. As a result, the Group assessed
that a probable loss could be incurred. The Group estimated a loss ranged from $
3.2
million to $
3.6
million based on the best estimate
of the information available. Because of there was no amount within the range would be a better estimate than any other amount, the minimum
amount of $
3.2
million was recorded as a contingent liability as of December 31, 2020. Even though the minimum amount in the range is
not necessarily the amount of loss that will be ultimately determined, it is not likely that the ultimate loss will be less than the minimum
amount. The ultimate amount could result in a loss of up to $
0.4
million in excess of the amount accrued.
During the year ended December 31,
2021, the nominee shareholder of Big Cloud Network signed an agreement with the Group, to transfer his equity share in Big Cloud Network
to one of the Group's subsidiaries. By transferring all the shareholder's rights and obligations under the agreement, the
nominee shareholder no longer has any rights in Big Cloud Network or rights and interests in the proceeds of disposal of Yuantel. As a
result, the probable loss has been reversed and the contingent liability of $
3.2
million has been reversed as of December 31, 2021.
(d) Contingency in business disposal
during 2021
During the year ended December 31 2021,
the Group(transferor) disposed one of its subsidiaries (the target company) to a 3rd party (transferee) (Note 4). The Group is currently
not a party to any claims related to the disposal of this subsidiary. However, according to the disposal agreement, after the completion
of this transfer, the Group may compensate the transferee for losses suffered in the event that:
a.
the transferee is liable for the debts of the target company, or
b.
the target company goes into liquidation or bankruptcy, and the transferee is required to assume the responsibility for repayment of any debt of the target company.
Also, if losses are caused to the transferee,
due to any claims and liabilities that have occurred before the completion of the transfer, The Group shall compensate the transferee
for any such losses.
While management believes that such
matter is currently not likely to happen, there can be no assurance that matter arising in the course of business for which the Group
is or could become involved.
F-
69
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
25.
PARENT
COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed balance sheets
As of December 31,
Note
2021
2022
$
$
ASSETS
Current assets
Prepaid expenses and other current assets
-
1,514
Amount due from related parties
41,646
38,405
Total current assets
41,646
39,919
Non-current assets
Investments in subsidiaries and Consolidated VIEs
(
33,781
)
(
18,166
)
Total non-current assets
(
33,781
)
(
18,166
)
Total assets
7,865
21,753
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accrued expenses and other payables
14,733
14,658
Total current liabilities
14,733
14,658
Total liabilities
14,733
14,658
Shareholders' (deficit) equity
Additional paid-in capital
262,271
310,267
Accumulated deficit
(
271,040
)
(
305,073
)
Statutory reserve
1,901
1,901
Total shareholders' (deficit) equity
(
6,868
)
7,095
Total liabilities and shareholders' equity
7,865
21,753
F-
70
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
25.
PARENT
COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)
Condensed statements of operations
For the years ended December 31,
2020
2021
2022
$
$
$
Operating Expenses
General and administrative expenses
(
2,125
)
(
2,450
)
(
1,653
)
Operating loss
(
2,125
)
(
2,450
)
(
1,653
)
Share of losses of subsidiaries and Consolidated VIEs
(
33,965
)
(
54,152
)
(
37,208
)
Loss before income taxes
(
36,090
)
(
56,602
)
(
38,861
)
Income tax expense
-
-
-
Net loss
(
36,090
)
(
56,602
)
(
38,861
)
Condensed statements of comprehensive
income (loss)
For the years ended December 31,
2020
2021
2022
$
$
$
Net loss
(
36,090
)
(
56,602
)
(
38,861
)
Other comprehensive (loss) income, net of tax of nil:
Foreign currency translation adjustments, net of tax of nil
1,498
507
(
1,456
)
Other comprehensive income (loss), net of tax of nil:
Comprehensive loss
(
34,592
)
(
56,095
)
(
40,317
)
Comprehensive loss attributable to the Company's ordinary shareholders
(
34,633
)
(
56,085
)
(
40,393
)
Condensed statements of cash
flows
For the years ended December 31,
2020
2021
2022
$
$
$
Net cash generated from operating activities
-
-
-
Net cash used in investing activities
-
-
-
Net cash generated from (used in) financing activities
-
-
-
Net increase (decrease) in cash and cash equivalent and restricted cash
-
-
-
Cash and cash equivalent and restricted cash at beginning of the year
-
-
-
Cash and cash equivalent and restricted cash at end of the year
-
-
-
Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents at end of the year
-
-
-
Restricted cash at the end of the year
-
-
-
Total cash and cash equivalents and restricted cash at the end of year
-
-
-
F-
71
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
25.
PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)
(a) Basis of presentation
In the Company-only financial statements,
the Company's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since inception.
The Company records its investment
in its subsidiary under the equity method of accounting as prescribed in ASC Subtopic 323-10,
Investment-Equity Method and Joint Ventures
,
("ASC 323-10"), and such investments are presented on the balance sheet as "Investment in subsidiaries and Consolidated
VIEs" and the share of the subsidiaries' profit or losses are presented as "Share of profits (losses) of subsidiaries
and Consolidated VIEs" on the statements of operations.
The subsidiaries did not pay any dividends
to the Company for the years presented.
Certain information and footnote disclosures
normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted and as such, these Company-only
financial statements should be read in conjunction with the Company's consolidated financial statements.
(b) Intercompany transactions
The Company had the following related
party balances as of December 31, 2021 and 2022:
As of December 31,
2021
2022
$
$
Amount due from (to) related parties
- Borqs HK
17,472
17,280
- Borqs Beijing
(
83
)
(
113
)
- Borqs USA
808
808
- Borqs International
23,449
20,430
F-
72
BORQS TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of $, unless otherwise
stated, except for number of shares and per share data)
26.
SUBSEQUENT
EVENTS
The Group has cash balance of $
1,823
held by Silicon Valley Bank as of December 31, 2022. On March 10, 2023, the California Department of Financial Protection and Innovation
closed Silicon Valley Bank and appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver. On March 12, 2023,
the U.S. Department of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of Silicon
Valley Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit
accounts. The Group received full access to the funds in its deposit and money market accounts on March 13, 2023. On March 14, 2023, the
Group wired out the majority of the cash balance deposit in Silicon Valley Bank to HSBC bank account located in Hong Kong within the Group
and only $
0.4
thousand left.
The Group has a payable related to
a lawsuit due to a third-party company. The original debtor claimed that the Group has breached the previously agreed settlement agreement,
and transferred the debt to the third-party company during the year ended December 31, 2021. On April 20, 2023, the Group entered into
a settlement agreement with the third-party company regarding the payments. According to the agreement, the Group will settle the balance
in several payments until March 2024.
On May 03, 2023,
the Group
received written notification from the Listing Qualifications Staff of The Nasdaq Stock Market LLC ("Nasdaq") indicating
that the Group has not regained compliance with the minimum bid price of $1 required for continued listing on The Nasdaq Capital
Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Requirement").
The Group has engaged an advisory firm
to request a hearing which will stay the suspension or delisting action pending the hearing and the expiration of any extension period
granted by the Panel following the hearing. Consequently, the Group's ordinary shares are expected to remain listed on The Nasdaq
Capital Market at least until the Panel renders a decision following the hearing. There can be no assurance that the Panel will determine
to continue the Company's listing on the Nasdaq Capital Market or that the Group will timely evidence compliance with the terms
of any extension that may be granted by the Panel following the hearing.
F-73