2025 second quarter financial report

Notice to Readers

The reader is advised that these financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

INDEPENDENT AUDITORS' REVIEW REPORT

To the Board of Directors and Shareholders FocalTech Systems Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of FocalTech Systems Co., Ltd. and its subsidiaries (collectively, the "Company") as of June 30, 2025 and 2024, the related consolidated statements of comprehensive income for the three months ended June 30, 2025 and 2024, and for the six months ended June 30, 2025 and 2024, the consolidated statements of changes in equity and of cash flows for the six months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies(collectively referred to as the "consolidated financial statements"). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Except as explained in the following paragraph, we conducted our reviews in accordance with the Standards on Review Engagements of the Republic of China "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in Note 13 to the consolidated financial statements, the financial statements of non-significant subsidiaries included in the consolidated financial statements referred to in the first paragraph were not reviewed. As of June 30, 2025 and 2024, combined total assets of these non-significant subsidiaries were NT$3,675,127 thousand and NT$3,383,207 thousand, respectively, representing 25% and 17%, respectively, of the consolidated total assets, and combined total liabilities of these subsidiaries were NT$1,297, 877 thousand and NT$1,122,928 thousand, respectively, representing 24% and 12%, respectively, of the consolidated total liabilities; for the three months ended and six months ended June 30, 2025 and 2024, the amounts of combined comprehensive income (loss) of these subsidiaries were NT$(451,224) thousand, NT$19,358 thousand respectively, NT$(489,756) thousand and NT$98,730 thousand ,representing 100%, 12%, 218%, 24% .

Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had the financial statements of the non-significant subsidiaries and as described in the preceding paragraph been reviewed, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not give a true and fair view of the consolidated financial position of the Group as of June 30, 2025 and 2024, its consolidated financial performance and its consolidated cash flows for the three months ended June 30, 2025 and 2024 and for the six months ended June 30, 2025 and 2024 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

The engagement partners on the reviews resulting in this independent auditors' review report are Huei-Min Huang and Chih-Ming Shao.

Deloitte & Touche Taipei, Taiwan Republic of China August 8, 2025

This is the translation of the financial statements. CPAs do not audit or review on this translation.

-1-

(Reviewed)

(Audited)

(Reviewed)

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (Notes 23 and 28)

Share capital

This is the translation of the financial statements. CPAs do not audit or review on this translation.

-2-

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

For the Three Months Ended June 30 For the Six Months Ended June 30

2025 2024 2025 2024

NON-OPERATING INCOME

(Continued)

For the Three Months Ended June 30 For the Six Months Ended June 30

2025 2024 2025 2024

Amount % Amount % Amount % Amount %

Unrealized gain (loss) from debt instrument investments measured at fair value through other comprehensive

Total other

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

(Concluded)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30

(In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Parent

Share Capital Retained Earnings Other Equity

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

June 30

Net cash (outflow) inflow from operating activities (748,194) 842,650

Net cash inflow from investing activities 455,792 23,561

(Continued)

June 30

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH

EQUIVALENTS (411,091) 91,781

NET (DECREASE) INCREASE IN CASH AND CASH

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

(Concluded)

1. GENERAL INFORMATION

   FocalTech Systems Co., Ltd. ("FocalTech" or "the Company"), formerly named as Orise Technology Co., Ltd., was incorporated in the Republic of China ("ROC") in January 2006. The Company's shares have been listed on the Taiwan Stock Exchange ("TWSE") since July 2007. On January 2, 2015, the Company acquired FocalTech Corporation, Ltd. through a share swap and renamed on January 27, 2015. This acquisition was comprehensively considered as a reverse merger, where FocalTech Corporation, Ltd. was treated as the acquirer in the financial statements. The Company mainly engages in the research, development, design, manufacturing, and sales of Human-Machine Interface solutions, such as Display Driver IC, Touch Control IC and so on.

   The consolidated financial statements are presented in the Company's functional currency of New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

   The consolidated financial statements were approved by the Company's board of directors on August 8, 2025.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

   1. Initial application of the International Financial Reporting Standards (IFRS), International Accounting

      Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, "IFRSs") endorsed and issued into effect by the Financial Supervisory Commission (FSC).

      The initial application of the amendments to the IFRSs endorsed and issued in to effect by the FSC did not have a significant impact on the Group's accounting policies.

   2. The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2026:

      New, Revised or Amended Standards and Interpretations Amendments to IFRS 9 and IFRS 7 "Amendments to the classification and Measurement of Financial Instruments" - the amendments to the application guidance of classification of financial assets

      Amendments to IFRS 9 and IFRS 7 "Contracts Referencing Nature-dependent Electricity"

      Effective Date

      Announced by IASB

      January 1, 2026

      January 1, 2026

      Annual Improvements to IFRS Accounting Standards - Volume 11 January 1, 2026 IFRS 17 "Insurance Contracts" January 1, 2023

      Amendments to IFRS 17 January 1, 2023

      Amendments to IFRS 17 "Initial Application of IFRS 9 and IFRS 17-Comparative Information"

      January 1, 2023

      As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will not have impact on the Group's financial position and financial performance.

   3. The IFRSs issued by International Accounting Standards Board (IASB), but not yet endorsed and issued into effect by the Financial Supervisory Commission (FSC):

      New, Revised or Amended Standards and Interpretations

      Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture"

      Effective Date

      Announced by IASB (Note 1)

      To be determined by IASB

      IFRS 18 "Presentation and Disclosure in Financial Statements" January 1, 2027 IFRS 19 "Subsidiaries without Public Accountability: Disclosures" January 1, 2027

      Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

      IFRS 18 "Presentation and Disclosure in Financial Statements"

      IFRS 18 will supersede IAS 1" Presentation of Financial Statements". The main changes comprise:

      • Items of income and expenses included in the statement of profit or loss shall be classified into the operating, investing, financing, income taxes and discontinued operations categories.

      • The statement of profit or loss shall present totals and subtotals for operating profit or loss, profit or loss before financing and income taxes and profit or loss.

      • Provides guidance to enhance the requirements of aggregation and disaggregation: The Group shall identify the assets, liabilities, equity, income, expenses and cash flows that arise from individual transactions or other events and shall classify and aggregate them into groups based on shared characteristics, so as to result in the presentation in the primary financial statements of line items that have at least one similar characteristic. The Group shall disaggregate items with dissimilar characteristics in the primary financial statements and in the notes. The Group labels items as "other" only if it cannot find a more informative label.

      • Disclosures on Management-defined Performance Measures (MPMs): When in public communications outside financial statements and communicating to users of financial statements management's view of an aspect of the financial performance of the Group as a whole, the Group shall disclose related information about its MPMs in a single note to the financial statements, including the description of such measures, calculations, reconciliations to the subtotal or total specified by IFRS Accounting Standards and the income tax and non-controlling interests effects of related reconciliation items.

      As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have impact on the Group's financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   1. Statement of compliance

      The present Consolidated Financial Report has been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by Financial Supervisory Commission.

   2. Basis of Preparation

      The consolidated financial statements have been prepared on the historical cost basis, except for financial instruments measured at fair value and the net defined benefit liabilities recognized in the amount of the present value of defined benefit obligation less the fair value of any plan assets.

      The evaluation of fair value could be classified into Level 1 to Level 3 by the observable intensity and importance of related input value:

      1. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

      2. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

      3. Level 3 inputs are unobservable inputs for the asset or liability.

   3. Basis of consolidation

      The detail information, holding percentages, and main business of the subsidiaries could be found in Note 13, TABLE 5 and TABLE 6.

   4. Other significant accounting policies

      Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2024.

      1. Retirement benefits

         Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, and adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

      2. Taxation

         Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period's pre-tax income and the tax rate that would be applicable to expected total annual earnings.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

   Critical accounting judgments, estimations and assumptions applied in these consolidated financial statements are consistent with those in the consolidated financial statements for the year ended December 31, 2024.

6. CASH AND CASH EQUIVALENTS June 30, 2025 December 31, 2024 June 30, 2024

   Cash on hand $ 4,116 $ 4,599 $ 4,684

   Cash equivalent (time deposits with original
   maturities within three months) 2,507,891		5,293,762	3,201,566
   $ 5,459,780		$ 8,247,879	$ 5,543,118
   FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
   	June 30,	December 31,	June 30,
   	2025	2024	2024
   Current
   Mandatorily measured at fair value through profit
   or loss (FVTPL)
   Government bonds	$ 251,027	$ 275,228	$ 265,373
   Structured deposit	116,310	-	-
   Beneficiary certificate	21,939	5,472	5,636
   Gold passbook	288	-	-
   	$ 389,564	$ 280,700	$ 271,009
   Non - Current Mandatorily measured at fair value through profit
   or loss (FVTPL)
   Listed preferred shares	$ 10,642	$ 10,285	$ 10,132
   Private funds	294,645	275,263	268,839
   Convertible Bonds	5,863	-	-
   Structured investments	-	130,278	126,466
   	$ 311,150	$ 415,826	$ 405,437

   Checking accounts and demand deposits 2,947,773 2,949,518 2,336,868

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in debt instruments Current

Foreign investments

Fixed income bonds $ 48,362 $ 54,014 $ 137,540

Non - Current Domestic investments

Fixed income bonds Foreign investments

Fixed income bonds

The average credit term for sales of goods was 30-120 days. In order to minimize credit risk, management of the Group has delegated a team responsible for determining line of credit, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual accounts receivable at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts. In this regard, the Group's management believes the Group's credit risk was significantly reduced.

The Group applies the simplified approach prescribed by IFRS 9, which permits the use of allowances of expected credit losses over the lifetime for all accounts receivables. The expected credit losses on accounts receivables are estimated by using an allowance matrix with references to past customer default records, customer's current financial position, and general economic conditions of the industry. Due to the past experiences, there is no significant difference in the loss patterns of different customer groups. Therefore, the allowance matrix does not further distinguish the customer base, and only sets the expected credit loss rate based on the overdue days of accounts receivable.

The following table details the loss allowance of accounts receivables based on the Group's allowance matrix.

Gross carrying amount

The cost of goods sold were including amounts of which write-down inventory cost to net realizable value and reverse of write-down inventories due to sales. The amounts are illustrated below:

June 30

June 30

Reversal gain on write-down of inventories

1. SUBSIDIARIES

   Details of the Company's subsidiaries included in the consolidated financial statements were as follows:

   Percentage of Ownership

   June 30,

   December 31,

   June 30,

   Investor

   Investee

   Main Businesses

   2025

   2024

   2024

   Note

   FocalTech Systems

   FocalTech Corporation,

   Investment activity

   100%

   100%

   100%

   -

   Co., Ltd.

   Ltd.

   FocalTech Systems

   FocalTech Electronics,

   Investment activity

   100%

   100%

   100%

   Note1

   Co., Ltd.

   Ltd.

   FocalTech Systems

   FocalTech Smart

   Investment activity

   66.45%

   66.45%

   66.45%

   Note1

   Co., Ltd. And

   Sensors, Ltd.

   FocalTech

   Electronics Co.,

   Ltd.

   FocalTech Smart

   FocalTech Smart

   Research, development,

   100%

   100%

   100%

   Note1&2

   Sensors, Ltd.

   Sensors Co., Ltd.

   manufacturing and sale of

   integrated circuits

   FocalTech

   FocalTech Systems, Inc.

   Investment activity

   100%

   100%

   100%

   -

   Corporation, Ltd.

   FocalTech Systems,

   FocalTech Systems, Ltd.

   Investment activity

   100%

   100%

   100%

   Note1

   Inc.

   FocalTech Systems, Ltd.

   FocalTech Electronics Co., Ltd.

   Import and export of integrated circuits

   100% 100% 100% Note1

   FocalTech Electronics, Ltd.

   FocalTech Electronics (Shanghai) Co., Ltd.

   Sales support and post-sales service for IC products

   100%

   100%

   100%

   Note1

   FocalTech

   FocalTech Electronics

   Research, development,

   100%

   100%

   100%

   -

   Electronics, Ltd.

   (Shenzhen) Co., Ltd.

   manufacturing and sale of

   integrated circuits

   FocalTech Electronics (Shanghai) Co., Ltd.

   FocalTech

   Electronics (Shenzhen) Co., Ltd.

   FocalTech Electronics (Shenzhen) Co.,

   Chengdu FocalTech Systems Co., Ltd.

   FocalTech Systems (Shenzhen) Co., Ltd.

   Hefei PineTech Electronics Co., Ltd.

   Research, development,

   manufacturing and sale of integrated circuits

   Design and research of integrated circuits

   Research, development and sale of integrated circuits

   100% 100% - Note1&3

   100% 100% 100% -

   100% 100% 100% Note1

   Ltd.

   Note 1 : Immaterial subsidiaries of the Company, whose financial statements had not been reviewed by auditors.

   Note 2 : FocalTech Smart Sensors Co., Ltd. has resolved to dissolve, and the liquidation process is currently in progress. Note 3 : Chengdu FocalTech Systems Co., Ltd. was established in August 2024.

2. PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation

Effect of foreign currency

Property, plant and equipment were depreciated on a straight-line basis over the estimated useful life as follows:

Buildings 45-50 years

Development equipment 2-5 years

Office equipment 3-5 years

Information equipment 3-5 years

Leasehold improvements 1-5 years

Property, plant and equipment were pledged as collateral. Refer to Note 33.

Considering the synergy of integration of LCD driver and touch controller under the industry trend, the reverse merger was triggered by FocalTech Corporation, Ltd. on January 2, 2015, accounted for goodwill according to business combination. The Group estimated cash flows from sales of IDC (Integrated Driver Controller) based on smartphone market growth rate and market share. Refer to Note 14 in consolidated financial statements in 2024 for related information.

1. OTHER INTANGIBLE ASSETS

   	Licenses and Franchises	Software	Patents	Trademark	Total
   Cost
   Balance, January 1, 2024	$ 125,757	$ 314,510	$ 76,706	$ 74,000	$ 590,973
   Additions	-	34,438	-	-	34,438
   Disposal	-	(24,084)	-	-	(24,084)
   Effect of foreign currency exchange differences	6,894	7,862	12	-	14,768
   Balance, June 30, 2024	$ 132,651	$ 332,726	$ 76,718	$ 74,000	$ 616,095
   Accumulated amortization
   Balance, January 1, 2024	$ 125,757	$ 214,691	$ 69,406	$ 66,600	$ 476,454
   Amortization expenses	-	41,480	3,650	3,700	48,830
   Disposal	-	(24,084)	-	-	(24,084)
   Effect of foreign currency exchange differences	6,894	7,763	12	-	14,669
   Balance, June 30, 2024	$ 132,651	$ 239,850	$ 73,068	$ 70,300	$ 515,869
   Carrying amounts as of June 30, 2024	$ -	$ 92,876	$ 3,650	$ 3,700	$ 100,226
   Cost
   Balance, January 1, 2025	$ 133,974	$ 458,546	$ 76,718	$ 74,000	$ 743,238
   Additions	-	10,994	-	-	10,994
   Effect of foreign currency exchange differences	(13,768)	(19,053)	(25)	-	(32,846)
   Balance, June 30, 2025	$ 120,206	$ 450,487	$ 76,693	$ 74,000	$ 721,386

   Accumulated amortization
   Balance, January 1, 2025	$ 133,974	$ 305,288	$ 76,718	$ 74,000	$ 589,980
   Amortization expenses	-	88,049	-	-	88,049
   Effect of foreign currency exchange differences	(13,768)	(17,495)	(25)	-	(31,288)
   Balance, June 30, 2025	$ 120,206	$ 375,842	$ 76,693	$ 74,000	$ 646,741
   Carrying amounts as of December 31, 2024 and January 1, 2025	$ -	$ 153,258	$ -	$ -	$ 153,258
   Carrying amounts as of June 30, 2025	$ -	$ 74,645	$ -	$ -	$ 74,645

   Other intangible assets were amortized on a straight-line basis over the estimated useful life as follows: Licenses and franchises 1-5 years

   Software 1-5 years

   Patents 7-10 years

   Trademark 10 years

2. REFUNDABLE DEPOSITS June 30, 2025 December 31, 2024 June 30, 2024

   Capacity guarantee deposits and others $ 5,055 $ 459,603 $ 1,230,575

   Guarantee deposits mainly consists of cash paid to suppliers to ensure stable foundry capacity.

3. BANK LOANS

   a. Short-term bank loans
   	June 30,	December 31,	June 30,
   	2025	2024	2024
   Unsecured bank loans	$ 585,144	$ 935,802	$1,575,199
   Annual interest rate Unsecured bank loans	1.70-2.60%	1.85～3.15%	2.90-3.45%

   b. Long-term bank loans

   June 30, 2025		December 31, 2024	June 30, 2024
   Secured bank loans (1)	$ -	$ -	$ 786,840
   Unsecured bank loans (2)	20,056	22,576	67,843
   Less: reclassification to Current position of	20,056	22,576	854,683
   long-term borrowings	(20,056)	( 22,576)	(103,824)
   Long-term borrowings	$ -	$ -	$ 750,859
   Annual interest rate Secured bank loans	-	-	1.875~2.00%
   Unsecured bank loans	3.00%	3.00%	3.00~3.30%
   (1) For secured bank loans, the principals	will be paid monthly	or quarterly after	three years from

   drawdown date. The period of loans is from September, 2021 to September, 2036. Commercial building is pledged as collateral for the long-term loans, please refer to Note 33. This loan was fully repaid early in December 2024.

   (2) For unsecured bank loans, the principals will be paid according to the contract. The period of loans is from June, 2024 to September, 2025.

4. ACCOUNTS PAYABLES June 30, 2025 December 31, 2024 June 30, 2024

   Accounts payables $ 1,215,538 $ 2,357,450 $ 1,687,719

   The average credit period on purchases was 30-60 days. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

5. OTHER PAYABLES

   	June 30, 2025	December 31, 2024	June 30, 2024
   Payable for rebates	$ 962,407	$1,132,417	$ 888,458
   Payable for salaries and bonus	418,623	576,337	330,538
   Payable for labor, health and social insurance	17,925	14,837	17,587
   Reserve for litigations	86,061	95,678	54,994
   Payable for professional services and others	478,348	200,384	187,779
   	$1,963,364	$2,019,653	$1,479,356

6. RETIREMENT BENEFIT

Pension expenses under the defined benefit plans, calculated using the actuarially determined pension cost rate as of December 31, 2024 and 2023, were NT$39 thousand, NT$46 thousand, NT$78 thousand and NT$89 thousand for the three months ended and the six months ended June 30, 2025 and 2024, respectively.

Guarantee deposit mainly consists of cash received from customers to ensure they have access to the Group's specified capacity

1. EQUITY

   1. Share capital

      Ordinary shares (par value at NT$10 per share)
      	June 30,	December 31,	June 30,
      	2025	2024	2024
      Numbers of shares authorized (in thousands)	500,000	500,000	500,000
      Shares authorized Number of shares issued and fully paid (in	$ 5,000,000	$ 5,000,000	$ 5,000,000
      thousands)	221,185	219,217	219,387
      Shares issued	$ 2,221,852	$ 2,192,168	$ 2,193,874
      b. Capital surplus

      The categories of uses and the sources of capital surplus based on regulations were as follows:

      May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1)

      June 30, 2025 December 31, 2024 June 30, 2024

      Additional paid-in capital	$5,701,011	$5,441,496	$5,391,649
      Treasury stock	218,494	211,325	205,428
      Employee share options-expired	34,448	34,448	34,448
      May be used to offset a deficit only
      Other - unclaimed dividend	20	14	14
      Other -exercise the right of subrogation	32	32	-

      May not be used for any purpose
      Restricted stock for employees	300,857	454,651	531,224
      Employee share options	1,784	8,276	11,085
      	$6,256,646	$ 6,150,242	$6,173,848

      1. This type of capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (at a certain percentage of the Company's capital surplus annually).

         c. Retained earnings and dividend policy

         Under the Company's Article of Incorporation, when distributing annual earnings, the Company shall pay taxes, offset its losses, set aside 10% as legal reserve, then set aside or reverse a special reserve in accordance with relevant laws or regulations. The Board of Directors shall prepare a distribution proposal for the remaining earnings plus the unappropriated retained earnings of previous years. Earnings distribution may be made in the form of shares after an approved resolution made by the shareholders' meeting.

         See Note 25(d) for policy stipulated in the Articles of Incorporation regarding to the remuneration for employees and directors.

         Considering current and future development plans, investment conditions, capital requirements, and market competition situations, and shareholder benefits, The Company would appropriate the dividends to the shareholders not less than 10% of the current year's earnings. The dividends could be paid in cash or shares. The cash portion should be equal or more than 10% of the total dividends. It is allowed not to distribute any cash dividend if the cash amount per share is less than NT 0.5.

         Legal reserve should be appropriated from earnings until the legal reserve equals the Company's paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company's paid-in capital, the excess may be transferred to capital or distributed in cash.

         The Company is required to set aside additional special capital reserve equal to the total amount of items that are accounted for as deductions from stockholders' equity shall be set aside from prior-year earnings.

         The appropriations of earnings for 2024 and 2023 were resolved by the annual shareholders' meeting on May 26, 2025, and June 7, 2024, respectively. The details of the distribution are as follows:

         2024		2023
         Legal reserve	$ 57,634	$ 34,950
         Cash dividends	$ 378,000	$ 217,151
         Cash dividends per share	$ 1.72	$ 1.00

         d. Treasury stock
         	Shares (In Thousands)
         Number of shares on January 1, 2024 and June 30, 2024	1,285
         Number of shares on January 1, 2025	1,285
         Increase during the period	3,000
         Decrease during the period	(588)
         Number of shares on June 30, 2025	3,697

         The Company's Board of Directors resolved to conduct the seventh share repurchase on February 21, 2025, 3,000 thousand shares were repurchased, bringing the total repurchase amount to NT$192,998 thousand. The repurchased shares are intended to be transferred to employees, with the transfer price based on the average actual repurchase price.

         The detailed information for other treasury stock transferred to employee programs could be found in Note 28 (b).

         The treasury shares held by the company cannot be pledged and no dividend and voting right is attached in accordance with the Regulations of Securities and Exchange Act.

         e. Unearned employee compensation

         For the Six Months Ended June 30

         2025			2024
         Balance, beginning	( $	130,869 )	( $	214,722 )
         Issuance of shares	(	145,177 )	(	150,118 )
         Retirement of shares		19,549		12,652
         Share-based payment expenses recognized	70,548		115,394
         Balance, ending	( $ 185,949 )		( $ 236,794 )

         The detailed information for restricted share for employees program referred to Note 28 (c).

2. REVENUE For the Three Months Ended

   June 30

   For the Six Months Ended

   June 30

   2025	2024	2025	2024
   $ 3,051,533	$ 2,977,338	$ 6,044,103	$ 6,537,859

   IC for human and machine interface devices

   Contract balances

   June 30, December 31, June 30, January 1,

   2025 2024

   2024

   2024

   Contract liabilities (classified as current liabilities)

   Sales of goods $ 78,528 $ 145,387 $ 89,319 $ 24,732

3. NET INCOME

   1. Finance costs

      For the Three Months Ended

      June 30

      For the Six Months Ended

      June 30

      	2025	2024	2025	2024
      Interest on bank loans	$ 5,396	$ 15,564	$ 12,485	$ 28,199

   2. Depreciation and amortization

      For the Three Months Ended

      June 30

      For the Six Months Ended

      June 30

      	2025	2024	2025	2024
      Property, plant and equipment	$ 58,225	$ 30,282	$ 107,094	$ 59,072
      Intangible assets	43,252	20,339	88,049	48,830
      	$ 101,477	$ 50,621	$ 195,143	$ 107,902
      An analysis of deprecation by function Operating costs	$ 13,065	$ 6,503	$ 22,662	$ 12,846
      Operating expenses	88,412	44,118	172,481	95,056
      	$ 101,477	$ 50,621	$ 195,143	$ 107,902

   3. Employee benefits expense

      For the Three Months Ended

      June 30

      For the Six Months Ended

      June 30

      2025 2024 2025 2024

      Post-employment benefits

      Defined contribution

      plans $ 8,466 $ 8,368 $ 19,132 $ 16,688

      Defined benefit plans

      (Note 21) 39 46 78 89

      Share-based payments

      (Note 28) Cash-settled	555	787	1,508	787
      Equity-settled	32,842	55,274	72,276	120,116
      Other employee benefits	516,462	477,742	1,040,440	950,811
      Total employee benefits expense	$ 558,364	$ 542,217	$ 1,133,434	$ 1,088,491

      An analysis of

      employee benefits expense by function
      Operating costs	$ 46,998	$ 46,857	$ 94,658	$ 88,588
      Operating expenses	511,366	495,360	1,038,776	999,903
      	$ 558,364	$ 542,217	$ 1,133,434	$ 1,088,491

   4. The remuneration of employees and directors

      According to the Company's Articles of Incorporation, the distributable compensation to employees and remuneration to directors shall not be less than 1% and not more than 1.5%, respectively, of net profit before income tax.

      In accordance with the amendments to the Securities and Exchange Act in August 2024, the Company plans to propose an amendment to its Articles of Incorporation for approval at the shareholders' meeting on May 27, 2025. The amendment will stipulate that the Corporation shall distribute no less than 2% of its remuneration of employees for rank-and-file employees.

      The accrued employees' compensation and remuneration of directors for the three months and six months ended June 30, 2025 and 2024 are as follows:

      Amount

      For the Three Months Ended June 30 For the Six Months Ended June 30

      2025		2024	2025	2024
      Employees'	$ 700	$ 1,045	$ 2,332	$ 2,185
      compensation Remuneration of	$ 37	$ 55	$ 123	$ 115

      directors

      If there is any change in the proposed amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.

      The board of directors resolved the remuneration of employees and directors for 2024 on February 21, 2025. There is no difference between the actual amount of remuneration to employees and directors resolved and the amount of remuneration to employees and directors accounted for in 2024 consolidated financial statements.

      Information on the employees' compensation and remuneration to directors resolved by the Company's board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

4. INCOME TAXES

   1. Major components of tax benefit recognized in profit or loss:

      For the Three Months Ended

      June 30

      For the Six Months Ended

      June 30

      2025		2024	2025	2024
      Current income tax
      expense
      In respect of the
      current year	$ 353	$ 219	$ 415	$ 277
      Deferred income tax
      expense
      In respect of the
      current year	( 7,969)	( 420)	( 18,892)	( 653)
      Income tax expense
      recognized in profit
      or loss	($ 7,616)	($ 201)	($ 18,477)	($ 376)

   2. Income tax assessments

      The Company's tax returns through 2022, FocalTech Smart Sensors Co., Ltd., and FocalTech Electronics Co., Ltd.'s tax returns through 2023 have been examined by the tax authorities.

5. EARNINGS PER SHARE Unit: NT$ Per Share For the Three Months Ended

   June 30

   For the Six Months Ended

   June 30

   	2025	2024	2025	2024
   Basic earnings per share	$ 0.36	$ 0.51	$ 1.16	$ 1.06
   Diluted earnings per share	$ 0.36	$ 0.51	$ 1.15	$ 1.04

   The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

   Net Profit for the Period For the Three Months Ended

   June 30

   For the Six Months Ended

   June 30

   2025	2024	2025	2024
   $ 76,752	$ 108,956	$ 248,039	$ 222,804

   Earnings used in the computation of basic earnings per share

   Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares) For the Three Months Ended

   June 30

   For the Six Months Ended

   June 30

   2025		2024	2025	2024
   Weighted average number of ordinary shares in computation of basic earnings per share	212,874	211,923	213,436	210,730
   Effect of potentially dilutive ordinary shares: Treasure share issued to employee	602	1,350	469	2,015
   Employees stock options (share)	-	54	21	54
   Restricted stock for employees (share)	941	1,556	1,604	2,160
   The compensation to employees	11	12	340	257
   Weighted average number of ordinary shares used in the computation of diluted earnings per share	214,428	214,895	215,870	215,216

6. SHARE-BASED PAYMENT ARRANGEMENTS

   The Group did not have new share option plan issued for employees for the six months ended June 30, 2025 and 2024. The detailed information could be found in Note 27 of the consolidated financial statements of the year ended December 31, 2024.

   1. Employee share option plan

      Information on outstanding options for the six months ended June 30, 2025 and 2024 were as follows: June 30, 2025

      Beginning Balance Options exercised Options expired Ending Balance

      Weighted-

      Weighted-

      Weighted-

      Weighted-

      Employee Stock

      Units of

      Average

      Units of

      Average

      Units of

      Average

      Units of

      Average

      Option Plan

      Option

      Exercise

      Option

      Exercise

      Option

      Exercise

      Option

      Exercise

      Price (NT$)

      Price (NT$)

      Price (NT$)

      Price (NT$)

      2015

      63,000

      12.80

      (63,000)

      12.80

      -

      -

      -

      -

      June 30, 2024

      Beginning Balance Options exercised Options expired Ending Balance

      Weighted-

      Weighted-

      Weighted-

      Weighted-

      Employee Stock

      Units of

      Average

      Units of

      Average

      Units of

      Average

      Units of

      Average

      Option Plan

      Option

      Exercise

      Option

      Exercise

      Option

      Exercise

      Option

      Exercise

      Price (NT$)

      Price (NT$)

      Price (NT$)

      Price (NT$)

      2015

      63,000

      12.80

      -

      -

      -

      -

      63,000

      12.80

   2. Treasury stock transferred to employees

      Information about treasury stock transferred to employee are as follows:

      The date of board of directors

      Buyback shares (In thousand

      Transferred shares

      (In thousand

      Transferred price

      Items approved share) share) (in dollar)

      The 6th treasury stock transferred to employee program

      The 7th treasury stock transferred to employee program

      2022/2/23 4,000 3,303 126.91

      2025/2/21 3,000 - -

      Information about treasury stock transferred to employee as of June 30, 2025 are as follows: The 6th treasury stock transferred to employee program

      Employee subscription base date

      Shares transferred (In Thousands)

      The fair value of the

      right to subscribe

      (NT$)

      2022/06/21		2,315	$ -
      2022/11/11		140	-
      2023/02/23		260
      2025/03/10		588	-
      Total		3,303

   3. Restricted stock for employees

      The Company's shareholders' meeting resolved to issue restricted stocks for employees up to 30,000 thousand dollars on May 26, 2025, the issued price is NT$10 per share and issued 3,000 thousand shares. The restricted stocks plan was approved by Financial Supervisory Commission on July 25, 2025.

      The information of the issued restricted stock for employees as of June 30, 2025 are as follows:

      Grant

      Fair value per share

      Actual shares of issued

      Items

      date

      (in dollar) (in thousand)

      2020 restricted stocks for employee's plan	2021/04/07	$ 205.00	5,749
      2020 restricted stocks for employee's plan	2021/07/29	265.00	236
      2023 restricted stocks for employee's plan	2023/09/26	67.40	2,033
      2023 restricted stocks for employee's plan	2024/02/23	94.00	1,597
      2023 restricted stocks for employee's plan	2024/08/09	67.30	183
      2023 restricted stocks for employee's plan	2025/04/18	67.90	2,138

      2020 restricted stocks for employee's plan

      From the date when employees are granted restricted stock units, they have to fulfill the service metrics, and should not violate the company's labor contract, work rules or the company's employee management measures, etc. The vesting condition are as follows:

      1. Upon service for two years: the shares vested in 50% to employees.

      2. Upon service for three years: the shares vested in 25% to employees.

      3. Upon service for four years: the shares vested in 25% to employees. 2023 restricted stocks for employee's plan

      From the date when employees are granted restricted stock units, they have to fulfill the service metrics, and should not violate the company's labor contract, work rules or the company's employee management measures, etc. One third of granted shares can be vested after every one year of employment, total for three years.

      The constraints of restricted stock are as follows:

      1. Employees are restricted to sell, pledge, transfer, and give to another, create any encumbrance on, or otherwise dispose of, any shares before vested.

      2. The rights of restricted stock are same as ordinary share including attendance, propose, speak, voting right and so on at the Company's shareholders' meeting. The exercise of such rights shall be performed in accordance with the trust agreement or the securities custodies by the Company's prescribed.

      3. Stock dividends and cash dividends yielding from restricted stock will be distributed to employees in the current year, and will not be restricted.

      4. National employee should transfer the granted shares to trustee appointed by the Company immediately. Before they are vested, the restriction should be kept in trustee. Non-national employee' granted share should be kept by bank appointed by the Company.

      The Company will buy back the restricted shares at issued price and write off the shares if employees do not fulfill the vesting condition.

      For the restricted share plan for employees with a purchase price, which was granted before October 10, 2024, the Group did not retrospectively apply the Q&A "Accounting Treatment for Restricted Share Plan for Employees" issued by the Accounting Research and Development Foundation (ARDF) on October 11, 2024 in accordance with the Q&A issued by the FSC. Therefore, the Group continuously measured the liabilities of the expected repayments to the employees leaving during the vesting period based on its estimated turnover rate.

   4. Compensation cost of aforementioned share-based payments for the six months ended June 30, 2025 and 2024 are as follows:

      For the Six Months Ended June 30

      	2025	2024
      Shares buyback programs	$ 1,728	$ 4,722
      Restricted stock for employees	70,548	115,394
      	$ 72,276	$ 120,116
      Adjustment account: Capital surplus - employee stock options	$ 1,728	$ 4,722
      Other equity - unearned employee compensation	70,548	115,394
      	$ 72,276	$ 120,116
      e. Cash-settled share-base payment agreements of subsidiaries
      Focaltech Electronics (Shenzhen) Co., Ltd. granted its	specific employees and	employees in its

      subsidiaries 1,500,000 units cash-settled stock appreciation rights. The expected option life of the stock appreciation rights is 8 years. The employees could exercise the stock appreciation rights after they were granted 12 months, 24 months, 36 months and 48 months separately, and the subsidiaries will pay cash when its employees exercise the stock appreciation rights according to the agreement.

      The fair value of cash-settled share-base payment use the Black-Scholes Option Pricing Model, and assumption used in calculating the fair value are disclosed as follows:

      Stock price at measurement date (in dollars)	RMB 2.50
      Exercise Price per share	-
      Expected price volatility	36.48~37.34%
      Expected option life	8 years
      Expected dividend yield	-
      Risk-free interest rate	2.31~2.38%

      The compensation cost of the cash-settled share-base payment was NT$555 thousand, NT$787 thousand, NT$1,508 thousand and NT$787 thousand for the three months ended and the six months ended June 30, 2025 and 2024.

7. NON-CASH TRANSATION

   The cash dividends resolved by the annual shareholders' meeting was not distributed as of June 30, 2024 and 2025. (Referring to Note 23)

8. OPERATING LEASE ARRANGEMENTS

   The Group as Lessee

   The Company and its subsidiaries have lease contracts in relation to office, plant and part of office equipment, and they would expire by May, 2026. Those agreements are short-term leases and qualified for the recognition exemption to leases so the Company does not recognize right-of-use assets and lease liabilities for these leases. The committed payments for the short-term leases were $5,037 thousand and

   $5,872 thousand as of June 30, 2025 and 2024.

   The lease payments recognized in profit or loss were as follows:

   For the Three Months Ended

   June 30

   For the Six Months Ended

   June 30

   	2025	2024	2025	2024
   Lease payment	$ 2,668	$ 2,454	$ 5,599	$ 4,694

9. FINANCIAL INSTRUMENTS

   1. Fair value of financial instruments that are not measured at fair value

      The Group's management believes the carrying amounts of financial assets and financial liabilities not measured at fair value approximate their fair values.

   2. Fair value of financial instruments that are measured at fair value on a recurring basis