2. BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

The accompanying unaudited interim consolidated financial statements as of and for the six months ended  June 30, 2026 and 2025 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the six months ended  June 30, 2026 are not necessarily indicative of the results that  may be expected for any future periods or the year ending  December 31, 2026. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's 2025 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on  March 12, 2026.

Investments in Debt Securities

The Company will invest excess funds to maximize investment yield, while maintaining liquidity and minimizing credit risk. Debt securities are carried at fair value and consist primarily of investments in obligations of the United States Treasury, various U.S. and foreign corporations, and certificates of deposits. The Company classifies its investments in debt securities as available-for-sale with all unrealized gains or losses included as part of other comprehensive income. The Company evaluates its available-for-sale debt securities in an unrealized loss position at each reporting date to determine whether a credit loss exists. If the Company intends to sell a security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the security’s amortized cost basis is written down to fair value through earnings. Otherwise, any credit-related impairment is recognized through an allowance for credit losses, limited to the amount by which the amortized cost basis exceeds fair value, with any remaining unrealized loss recognized in other comprehensive income. Based on this assessment, the Company did not recognize an allowance for credit losses on its available-for-sale debt securities for the six months ended June 30, 2026 and 2025.

Fair Value Measurements

The estimated fair values of financial instruments reported in the consolidated financial statements have been determined using available market information and valuation methodologies, as applicable. The fair value of cash and restricted cash approximate their carrying value due to their short maturities and are classified as Level 1 instruments within the fair value hierarchy.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value based upon the following fair value hierarchy:

As of  June 30, 2026, the following table represents the Company’s fair value hierarchy for items that are required to be measured at fair value on a recurring basis:

As of  December 31, 2025, the following table represents the Company’s fair value hierarchy for items that are required to be measured at fair value on a recurring basis:

Operating Leases

The Company adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases (“ASC 842”) which requires the recognition of the right-of-use assets and relating operating and finance lease liabilities on the balance sheet. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense.

Foreign Currency Translation

The Company has operations in China. The Company's foreign subsidiaries maintain their accounting records in their respective local currencies, which are their functional currencies. For consolidation purposes, assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Revenue and expenses are translated using average exchange rates during the reporting period. Translation adjustments resulting from the consolidation of foreign operations are recorded in accumulated other comprehensive income (loss), a component of shareholders' equity.

Other Recent Pronouncements

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.