What changed in this filing

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Item 9A. Controls and Procedures

2025-02-28 compared with 2024-02-23 · 355 added, 217 removed, 1180 unchanged (33% of the section changed)

5 unchanged sentences

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024 .

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this Form 10-K, our disclosure controls and procedures were not effective as a result of the material weakness in internal control over financial reporting discussed below.

Management’s Annual Report on Internal Control over Financial Reporting.

6 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that our degree of compliance with the policies or procedures may deteriorate.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of the period covered by this Form 10-K based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023 .

Based on this evaluation, management concluded, based on a material weakness related to operation of controls over our review of technical accounting analysis , that our internal control over financial reporting was not effective as of December 31, 2024 .

T his material weakness did not result in any material misstatement of our financial statements.

While this material weakness did not result in a material misstatement of our financial statements, there is a reasonable possibility that it could have resulted in a material misstatement in the Company's annual or interim consolidated financial statements that would not be detected.

Accordingly, we determined that it constituted a material weakness.

As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements were prepared in accordance with U.S.

generally accepted accounting principles.

Accordingly, management believes that the consolidated financial statements included in this Form 10-K present fairly in all material respects our financial position, results of operations, and cash flows for the period presented.

The Company’s management, under the oversight of the Audit Committee, is undertaking steps to implement a remediation plan.

Specifically, we are expanding and improving our review process for analyses relating to complex accounting transactions.

Grant Thornton LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued a report, included below, on the effectiveness of our internal control over financial reporting as of December 31, 2024.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Applied Optoelectronics, Inc.

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(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated February 23, 2024 expressed an unqualified opinion on those financial statements.

In our opinion, because of the effect of the material weakness described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.

A material weakness is a deficiency, or combination of control 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.

The following material weakness has been identified and included in management’s assessment.

Management identified a material weakness in internal controls related to the operation of controls over the Company’s review of technical accounting analysis.

The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated February 28, 2025 which expressed an unqualified opinion on those financial statements.

Basis for opinion

21 unchanged sentences

Name Title Action Date Adopted Expiration Date Aggregate # of Securities to be Purchased/Sold

Chih-Hsiang (Thompson) Lin ( 1 ) CEO Adoption 12/14/2023 3/15/2025 60,000

Stefan Murry ( 2 ) CFO Adoption 12/14/2023 10/31/2024 12,000

Hung-Lun (Fred) Chang ( 1 ) SVP/North America General Manager Adoption 11/27/2024 12/31/2025 10,258

David Kuo ( 4 ) SVP/CLO Adoption 12/14/2023 2/28/2025 40,000

( 1 ) Chih-Hsiang (Thompson) Lin , our CEO , entered into a Rule 10b5 - 1 Plan on December 14, 2023 .

Lin's plan provides for the potential sale of 60,000 shares of the Company's common stock.

The Plan expires on March 15, 2025 , or upon the earlier of completion of all authorized transactions under the plan.

( 2 ) Stefan Murry , our CFO , entered into a Rule 10b5 - 1 Plan on December 14, 2023 .

Murry's plan provides for the potential sale of 12,000 shares of the Company's common stock.

The Plan expires on October 31, 2024 , or upon the earlier of completion of all authorized transactions under the plan.

( 3 ) Hung-Lun (Fred) Chang , our Senior Vice President and North America General Manager , entered into a Rule 10b5 - 1 Plan on December 14, 2023 .

Chang's plan provides for the potential sale of up to 18,195 shares of the Company's common stock.

The plan expires January 31, 2025 , or upon the earlier of the completion of all authorized transactions under the plan.

( 4 ) David Kuo , our Senior Vice President and Chief Legal Officer , entered into a Rule 10b5 - 1 Plan on December 14, 2023 .

Kuo's plan provides for the potential sale of up to 40,000 shares of the Company's common stock.

The plan expires February 28, 2025 , or upon the earlier completion of all authorized transactions under the plan.

Shu-Hua (Joshua) Yeh ( 2 ) SVP/Asia General Manager Adoption 12/09/2024 12/31/2025 50,000

( 1 ) Hung-Lun (Fred) Chang, our Senior Vice President and North America General Manager, entered into a Rule 10b5 - 1 Plan on November 27, 2024.

Chang's plan provides for the potential sale of 10,258 shares of the Company's common stock.

The Plan expires on December 31, 2025, or upon the earlier of completion of all authorized transactions under the plan.

( 2 ) Shu-Hua (Joshua) Yeh, our Senior Vice President and Asia General Manager, entered into a Rule 10b5 - 1 Plan on December 9, 2024.

Yeh's plan provides for the potential sale of 50,000 shares of the Company's common stock.

The Plan expires on December 31, 2025, or upon the earlier of completion of all authorized transactions under the plan.

Disclosure Regarding Foreign Jurisdiction that Prevent Inspections

6 unchanged sentences

There were no amendments to the Code or waivers granted thereunder relating to the Principal Executive Officer, Principal Financial Officer or Principal Accounting Officer during 2024 .

Adoption of Insider Trading Policy

The Company has adopted an insider trading policy governing the purchase, sale, and other dispositions of its securities by our directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations and any applicable listing standards.

A copy of our insider trading policy is filed as Exhibit 19 to this Annual Report.

Executive Compensation

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Exhibit Description

Agreement for the Sale and Purchase of a New Company to Be Established in Hong Kong Special Administrative Region of The People's Republic of China, dated as of September 15, 2022, by and between Prime World International Holdings Ltd., Applied Optoelectronics, Inc.

and Yuhan Optoelectronics Technology (Shanghai) Co., Ltd.

September 15, 2022

Amended and Restated Certificate of Incorporation of the registrant, as currently in effect

6 unchanged sentences

November 14, 2016

Indenture, dated as of March 5, 2019 between Applied Optoelectronics, Inc.

and Wells Fargo Bank, National Association, as trustee, paying agent, and conversion agent

March 5, 2019

Form of Note representing the Company’s 5.00% Convertible Senior Notes due 2024 (included as Exhibit A to the Indenture)

March 5, 2019

Indenture, dated as of December 5, 2023, between Applied Optoelectronics, Inc.

1 unchanged sentence

December 5, 2023

Form of 5.250% Convertible Senior Note due 2026 (included as an exhibit to Exhibit 4.1)

Form of 5.250% Convertible Senior Note due 2026

December 5, 2023

2 unchanged sentences

December 5, 2023

Indenture, dated as of December 23, 2024, between Applied Optoelectronics, Inc.

and Computershare Trust Company, N.A., as Trustee

December 23, 2024

Form of 2.750% Convertible Senior Note due 2030

December 23, 2024

First Supplemental Indenture, dated as of December 23, 2024, between Applied Optoelectronics, Inc.

and Computershare Trust Company, N.A., as Trustee

December 23, 2024

Description of Company's Common Stock

February 23, 2024

Form of Indemnification Agreement between the registrant each of its Directors and certain of its Executive Officers

10 unchanged sentences

August 13, 2013

2021 Stock Incentive Plan

2021 Equity Incentive Plan

August 5, 2021

6 unchanged sentences

Applied Optoelectronic, Inc.

2023 Equity Incentive Plan

2023 Equity Inducement Plan

November 9, 2023

44 unchanged sentences

November 18, 2019

Paycheck Protection Program Loan Promissory Note, dated April 17, 2020, executed by Applied Optoelectronics, Inc.

April 22, 2020

Incorporated By Reference

Exhibit Description

Paycheck Protection Program Loan Promissory Note, dated April 17, 2020, executed by Applied Optoelectronics, Inc.

April 22, 2020

Translation of the Maximum Loan Contract between Global Technology, Inc.

4 unchanged sentences

June 10, 2022

Form of Trademark License Agreement, by and among Applied Optoelectronics, Inc., and Global Technology Co., Ltd., and Yuhan Optoelectronic Technology (Shanghai) Co., Ltd.

September 15, 2022

Form of Technology Cross-License Agreement, by and among Applied Optoelectronics, Inc., Global Technology Co., Ltd., and Yuhan Optoelectronic Technology (Shanghai) Co., Ltd.

September 15, 2022

Form of Product Supply Agreement, by and between Applied Optoelectronics, Inc.

and Yuhan Optoelectronic Technology (Shanghai) Co., Ltd.

September 15, 2022

Form of Contract Manufacturing Agreement, by and among Applied Optoelectronics, Inc., Global Technology Co., Ltd., and Yuhan Optoelectronic Technology (Shanghai) Co., Ltd.

September 15, 2022

Loan Security and Guarantee Agreement, dated November 16, 2022, between Applied Optoelectronics, Inc.

and CIT Northbridge Credit, LLC.

November 21, 2022

Statement of Work No.

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December 27, 2023

Translation of the Financing Credit Line Agreement, dated May 24, 2024, between Global Technology, Inc.

and Shanghai Pudong Development Bank Co., Ltd.

Translation of the Maximum Mortgage Contract (Security Agreement), dated May 24, 2024, between Global Technology, Inc.

and Shanghai Pudong Development Bank Co., Ltd.

Translation of the Land and Building Lease Agreement, dated October 7, 2024, between Prime World International Holdings Ltd., Taiwan Branch and San Ho Enterprise Co., Ltd.

October 10, 2024

Form of Exchange Agreement, dated December 18, 2024, between Applied Optoelectronics, Inc.

and the applicable Noteholders

December 20, 2024

Translation of the Construction Contract, dated December 26, 2024, between Prime World International Holdings Ltd., Taiwan Branch and Chyi Ding Technologies Co., Ltd.

December 31, 2024

Applied Optoelectronics, Inc.

Insider Trading Policy and Guidelines

Subsidiaries of the registrant

7 unchanged sentences

Compensation Recovery Policy

February 23, 2024

Inline XBRL Instance Document

54 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Applied Optoelectronics, Inc.

1 unchanged sentence

We have audited the accompanying consolidated balance sheets of Applied Optoelectronics, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 23, 2024 expressed an unqualified opinion.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, 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 position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2025 expressed an adverse opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Reserve

12 unchanged sentences

tested the sensitivity of the inputs utilized in the reserve calculation.

Impairment of Long-Lived Assets

As described further in Note B to the financial statements, the Company accounts for impairment of long-lived assets in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”).

Long-lived assets consist primarily of property, plant and equipment, right-of-use assets and intangible assets.

The Company evaluates the carrying value of long-lived assets when it determines a triggering event has occurred, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

When indicators exist, recoverability of assets is measured by a comparison of the carrying value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group.

If assets are determined not to be recoverable, the Company performs an analysis of the fair value of the asset group and will recognize an impairment loss when the fair value is less than the carrying amounts of such assets.

The undiscounted future net cash flows, and any subsequent fair value determination, are based on assumptions and projections that require subjective judgments.

We identified the long-lived assets impairment assessment and cash flow analysis as a critical audit matter.

The principal consideration for our determination that the long-lived assets impairment assessment and cash flow analysis represents a critical audit matter is the judgments and assumptions associated with management’s determination of the recoverability of the long-lived assets including any subsequent fair value assessments.

Auditing the undiscounted future net cash flows involved a high degree of subjectivity, auditor judgment and audit effort in evaluating management’s significant assumptions primarily due to the sensitivity of the underlying significant assumptions used in the cash flow analysis.

The Company used an undiscounted cash flow model to assess the recoverability of the long-lived assets, which included assumptions such as revenue growth rates, operating expenses, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) margins, capital expenditures, asset grouping, forecast period and future sales values.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

Our audit procedures related to the assessment of long-lived asset impairment and cash flow analysis included the following:

We assessed the qualifications and competence of management and evaluated the methodologies used in the impairment assessment of long-lived assets;

We tested the design and operating effectiveness of key controls related to the accounting for possible impairment, including controls relating to management’s development of forecasts for revenue growth rates, operating expenses, EBITDA margins, capital expenditures, asset grouping, forecast period and future sales values;

We tested the assumptions, including testing of underlying source information and the mathematical accuracy of the calculations, used within the undiscounted cash flow models to estimate the recoverability of long-lived assets, which included assumptions such as revenue growth rates, operating expenses, EBITDA margins, capital expenditures, asset grouping, forecast period and future sales values;

We tested the Company’s ability to forecast future cash flows by reviewing actual results compared to amounts previously forecasted;

We tested the sensitivity of the undiscounted cash flows utilized in the recoverability test.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2008.

Houston, Texas

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Operating right of use asset

Financing right of use asset

Intangible assets, net

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Current lease liability - operating

Current lease liability - financing

Current portion of notes payable and long-term debt

22,370 23,197

Current portion of convertible notes

Current portion of convertible senior notes

Total current liabilities

3 unchanged sentences

Non-current lease liability - operating

Notes payable and long-term debt, less current portion

TOTAL LIABILITIES

317,920 174,317

Commitments and contingencies ( Note T)

Stockholders' equity:

7 unchanged sentences

683,462 478,972

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

( 2,548 ) 975

Accumulated deficit

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Year ended December 31,

$ 249,365 $ 217,646 $ 222,818

Cost of goods sold

187,565 158,725 189,191

61,800 58,921 33,627

Operating expenses

Research and development

54,955 35,975 36,244

Sales and marketing

18,154 11,069 9,723

General and administrative

59,599 53,226 46,658

Total operating expenses

132,708 100,270 92,625

Loss from operations

( 70,908 ) ( 41,349 ) ( 58,998 )

Other income (expense)

1 unchanged sentence

Interest expense

( 6,826 ) ( 9,428 ) ( 6,319 )

Other income (expense), net

( 109,871 ) ( 5,871 ) ( 1,205 )

Total other income (expense), net

( 115,823 ) ( 14,690 ) ( 7,398 )

Loss before income taxes

( 186,731 ) ( 56,039 ) ( 66,396 )

Income tax expense

( 2 ) ( 9 ) ( 1 )

$ ( 186,733 ) $ ( 56,048 ) $ ( 66,397 )

Net loss per share

$ ( 4.50 ) $ ( 1.75 ) $ ( 2.38 )

Weighted average shares used to compute net loss per share:

41,538,551 31,944,259 27,846,387

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

1 unchanged sentence

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

Year ended December 31,

Gain/(Loss) on foreign currency translation adjustment

$ ( 186,733 ) $ ( 56,048 ) $ ( 66,397 )

Loss on foreign currency translation adjustment

( 3,523 ) ( 1,208 ) ( 13,888 )

Comprehensive loss

$ ( 190,256 ) $ ( 57,256 ) $ ( 80,285 )

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

8 unchanged sentences

January 1, 2022

— $ — 27,323 $ 27 $ 381,143 $ 16,071 $ ( 142,671 ) $ 254,570

Public offering of common stock, net

— — 437 1 1,237 — — 1,238

Stock options exercised, net of shares withheld for employee tax

— — — — — — — —

Issuance of restricted stock, net of shares withheld for employee tax

— — 862 1 ( 454 ) — — ( 453 )

Share-based compensation

— — — — 9,600 — — 9,600

Foreign currency translation adjustment

— — — — — ( 13,888 ) — ( 13,888 )

— — — — — — ( 66,397 ) ( 66,397 )

December 31, 2022

— $ — 28,622 $ 29 $ 391,526 $ 2,183 $ ( 209,068 ) $ 184,670

Public offering of common stock, net

— — 8,275 8 76,498 — — 76,506

Stock options exercised, net of shares withheld for employee tax

— — 48 — 21 — — 21

Issuance of restricted stock, net of shares withheld for employee tax

— — 1,203 1 ( 957 ) — — ( 956 )

Share-based compensation

— — — — 11,884 — — 11,884

Foreign currency translation adjustment

— — — — — ( 1,208 ) — ( 1,208 )

— — — — — — ( 56,048 ) ( 56,048 )

December 31, 2023

— $ — 38,148 $ 38 $ 478,972 $ 975 $ ( 265,116 ) $ 214,869

Public offering of common stock, net

— — 9,968 10 196,826 — — 196,836

Stock options exercised, net of shares withheld for employee tax

— — — — ( 2 ) — — ( 2 )

Issuance of restricted stock, net of shares withheld for employee tax

— — 1,277 1 ( 4,334 ) — — ( 4,333 )

Share-based compensation

— — — — 12,000 — — 12,000

Foreign currency translation adjustment

— — — — — ( 3,523 ) ( 2 ) ( 3,525 )

— — — — — — ( 186,733 ) ( 186,733 )

December 31, 2024

— $ — 49,393 $ 49 $ 683,462 $ ( 2,548 ) $ ( 451,851 ) $ 229,112

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

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Operating activities:

$ ( 186,733 ) $ ( 56,048 ) $ ( 66,397 )

Adjustments to reconcile net loss to net cash used in operating activities:

Allowance of bad debt

Lower of cost or net realizable value reserve adjustment to inventory

( 2 ) ( 24 ) ( 3 )

Allowance for obsolete inventory

3,434 8,728 4,900

Depreciation and amortization

20,649 20,427 23,202

Amortization of debt issuance costs

1,430 2,308 902

Loss (gain) on disposal of assets

132 51 ( 47 )

Share-based compensation

Interest for extinguishment of debt

Extinguishment of debt

Unrealized foreign exchange (gain) loss

14,790 11,884 9,600

Loss on debt extinguishment

Unrealized foreign exchange loss (gain)

689 ( 1,313 ) 1,916

Changes in operating assets and liabilities:

Accounts receivable, trade

( 68,727 ) 13,128 ( 12,749 )

Notes receivable

Prepaid income tax

( 2 ) ( 3 ) 1

( 29,412 ) 6,790 1,150

Other current assets

( 12,032 ) 1,008 ( 2,406 )

Operating right of use asset

( 5,027 ) 530 888

Accounts payable

72,076 ( 14,953 ) 12,966

Accrued income taxes

Accrued liabilities

3,826 1,333 5,260

Unearned Revenue

( 1,803 ) ( 1,197 ) —

Lease liability

5,006 ( 660 ) ( 969 )

Net cash used in operating activities

( 69,526 ) ( 7,929 ) ( 14,022 )

Investing activities:

Purchase of property, plant and equipment

( 43,406 ) ( 9,079 ) ( 3,210 )

Proceeds from disposal of equipment

Deposits and prepaid for equipment

Deposits and prepayment on equipment

( 6,792 ) ( 5,229 ) ( 529 )

Purchase of intangible assets

( 506 ) ( 588 ) ( 498 )

Net cash used in investing activities

( 50,697 ) ( 14,761 ) ( 3,834 )

Financing activities:

Principal payments of long-term debt and notes payable

Proceeds from line of credit borrowings, net of debt issuance costs

Repayments of line of credit borrowings, net of debt issuance costs

( 251 ) ( 80,214 ) ( 7,336 )

Proceeds from line of credit borrowing

48,676 57,626 143,261

Repayments of line of credit borrowings

( 44,778 ) ( 91,791 ) ( 131,030 )

Proceeds from bank acceptance payable

44,152 57,057 45,666

Repayments of bank acceptance payable

Proceeds from issuance of convertible senior notes, net of debt issuance costs

( 40,168 ) ( 53,748 ) ( 40,573 )

Payment on issuance convertible Notes

( 4,620 ) — —

Process from issuance of convertible senior notes, net of debt issuance cost

Principal payments of financing lease

( 63 ) ( 19 )

Exercise of stock options

Payments of tax withholding on behalf of employees related to share-based compensation

( 4,333 ) ( 956 ) ( 454 )

Proceeds from common stock offering, net

146,293 68,984 1,238

Cash settlement of PSU

( 2,790 ) — —

Net cash provided by financing activities

142,179 40,578 10,753

Effect of exchange rate changes on cash

Net decrease in cash, cash equivalents and restricted cash

2,080 1,622 1,553

Net increase (decrease ) in cash, cash equivalents and restricted cash

24,036 19,510 ( 5,550 )

Cash, cash equivalents and restricted cash at beginning of period

55,097 35,587 41,136

Cash, cash equivalents and restricted cash at end of period

$ 79,133 $ 55,097 $ 35,587

Supplemental disclosure of cash flow information:

Cash paid (received) for:

Cash paid for:

$ 4,940 $ 8,098 $ 5,142

Non-cash investing and financing activities:

Net change in accounts payable related to property and equipment additions

$ 1,061 $ 1,053 $ ( 164 )

Net change in deposits and prepaid for equipment related to property and equipment additions

79 ( 1,297 ) 67

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

34 unchanged sentences

The carrying value of cash, cash equivalents and short-term investments, accounts receivable, accounts payable, and note receivable approximate their historical fair values due to their short-term maturities.

The carrying value of the debt approximates its fair value due to the short-term nature of the debt since it renews frequently at current interest rates.

The carrying value of the debt and bank acceptance notes approximates its fair value due to the short-term nature of the debt since it renews frequently at current interest rates.

Management believes that the interest rates in effect at each year end represent the current market rates for similar borrowings.

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The Company has not experienced any losses and believes it is not exposed to any significant risk with such accounts.

Restricted Cash/Compensating Balances

Restricted cash includes guarantee deposits for customs duties and compensating balances associated with credit facilities.

Restricted Cash

Restricted cash includes guarantee deposits for customs duties and deposits as collateral in order to secure bank acceptance notes issued to vendors.

Accounts Receivable/Allowance for Doubtful Accounts

The Company carries its accounts receivable at the net amount that it estimates to be collectible.

An allowance for uncollectable accounts is maintained through a charge against operations.

The allowance is determined by management review of outstanding amounts per customer, historical payments and the aging of accounts.

We have established an allowance for credit losses to estimate the risk of loss associated with our accounts receivable balances.

The Company estimates its allowance for the credit losses based on historical collection, the age of outstanding receivables of the customer, existing economic conditions and reasonable forecasts.

Different assumptions or changes in economic circumstances could result in changes to the allowance.

Concentration of Credit Risk and Significant Customers

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In 2024, 2023 and 2022 , its top five customers represented 92.9 %, 85.6 % and 78.2 % of its revenue, respectively.

In 2024 , Microsoft, Digicomm and Oracle represented 43.7 %, 35.1 % and 12.4 % of its revenue, respectively.

In 2023, Microsoft, ATX and Digicomm represented 46.6 %, 15.6 % and 11.3 % of its revenue, respectively.

In 2022, ATX and Microsoft represented 47.3 % and 18.4 % of its revenue.

The five largest receivable balances for customers represented an aggregate of 95.5 % and 75.4 % of total accounts receivable at December 31, 2024 and 2023 , respectively.

As of December 31, 2024 , Digicomm represented 66.6 % of total accounts receivable and Microsoft represented 16.8 % of total accounts receivable.

As of December 31, 2023, Digicomm represented 35.2 % of total accounts receivable and ATX represented 21.4 % of total accounts receivable .

As of December 31, 2022, ATX represented 64.9 % of total accounts receivable, respectively.

No other customer represented greater than ten percent of revenue in 2024 or 2023 had greater than ten percent of total accounts receivable at December 31, 2024 or 2023.

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Recent Accounting Pronouncements Adopted in 2024

There was no accounting pronouncement adopted in 2023.

In November 2023, the FASB issued ASU No.

2023 - 07 "Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, mainly through enhanced disclosures about significant segment expenses.

We adopted this ASU for our 2024 annual period with the comparable periods updated to meet additional disclosure requirements.

See Note R for additional disclosure.

Recent Accounting Pronouncements Yet to be Adopted

In November 2024, the FASB issued ASU 2024 - 03 "Income Statement:

Reporting Comprehensive Income/Expense Disaggregation Disclosures (Subtopic 220 - 40 )" to improve the disclosures about an entity's expenses.

Upon adoption, we will be required to disclose in the notes a disaggregation of certain expense categories included within the expense captions of the income statement.

The standard is effective for our 2027 annual period, and our interim periods beginning in 2028.

The Company is currently evaluating the impact of the new standard will have on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023 - 09 Income Taxes (Topic 740 ):

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The Company is currently evaluating the impact the new standard will have on its financial statements and related disclosure.

In November 2023, the FASB issued ASU 2023 - 07 "Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures", which requires the Company to expand the breadth and frequency of segment disclosures to include additional information about significant segment expenses, the chief operating decision maker (CODM) and other items, and also require the annual disclosures on an interim basis.

This guidance is effective for annual periods beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating the impact the new standard will have on its financial statements and related disclosure.

In October 2023, the FASB issued ASU 2023 - 06 "Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative", which amends U.S.

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Unearned Revenue results from cash received or amounts billed to customers in advance of revenue recognized upon the satisfaction of performance obligations.

As of December 31, 2023, and 2022, the Company had Unearned Revenue of $ 1.8 million and $ 3 million, respectively.

As of December 31, 2024, and 2023, the Company had Unearned Revenue of $ 0 and $ 1.8 million, respectively.

The following table reflects the changes in Unearned Revenue in our consolidated financial statements for the periods indicated (in thousands).

The remaining $ 1.8 million will be expected to be recognized as revenue gradually in 2024, depending on the customer's request.

December 31, 2024

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Unearned Revenue, beginning of period

$ 1,803 $ 3,000

Additional Unearned Revenue

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The Company also leases certain machinery, office equipment and a vehicle under operating leases.

The Company determines if an arrangement is or contains a lease at contract inception.

Many of its leases include both lease (e.g.

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Several warehouses and apartments have non-cancellable lease terms of less than one -year and therefore, the Company has elected the practical expedient to exclude these short-term leases from its ROU asset and lease liabilities.

On October 7, 2024, Prime World International Holdings Ltd.

(“Prime World”), a wholly owned subsidiary of Applied Optoelectronics, Inc., entered into a Land and Building Lease Agreement (the “Lease Agreement”) with San Ho Enterprise Co., Ltd.

(the “Lessor”), under which Prime World will lease approximately 3,537 square meters of two adjoining parcels of land, in New Taipei City.

The lease also includes a building on these parcels, totaling approximately 3,406 square meters.

The lease term is for fifteen years, commencing on December 1, 2024, and ending on November 30, 2039.

A two -month renovation period from October 1 to November 30, 2024, will precede the lease term, during which no rent will be charged by the Lessor.

During the lease term, the monthly rent will increase by three percent ( 3 %) every three years.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

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$ 1,697 $ 1,697

1,307 — 1,307

1,106 — 1,106

1,092 — 1,092

1,093 — 1,093

2030 and thereafter

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Operating cash flows from operating leases

$ 1,286 $ 1,250

Operating cash flows from financing lease

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$ 79,133 $ 55,097

Restricted cash includes guarantee deposits for customs duties, China government subsidy fund, and compensating balances associated with certain credit facilities.

Restricted cash includes guarantee deposits for customs duties, China government subsidy fund, and deposits as collateral in order to secure bank acceptance notes issued to vendors , see Note K for details.

As of December 31, 2024 and 2023 , there was $ 8.5 million and $ 6.5 million of restricted cash required for bank acceptance notes issued to vendors, respectively.

There was $ 2.5 million and $ 1.1 million certificate of deposit with original maturity of 90 days or less associated with credit facilities with a bank in China as of December 31, 2023 and 2022 respectively.

There was $ 0.7 million and $ 1.0 million guarantee deposits for customs duties as of December 31, 2023 and December 31, 2022.

There were both $ 2.5 million certificates of deposit with original maturity of 90 days or less associated with credit facilities with a bank in China as of December 31, 2024 and 2023 .

There were both $ 0.7 million guarantee deposits for customs duties as of December 31, 2024 and December 31, 2023.

NOTE F—EARNINGS PER SHARE

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Diluted net loss per share has been computed using the weighted-average number of shares of common stock and dilutive potential common shares from options and restricted stock units outstanding during the period .

Convertible senior notes are included in the denominator as if it were converted at the beginning of the period or, if issued during the period, at the time of issuance.

In periods with net losses, normally dilutive shares become anti-dilutive.

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Restricted stock units

Shares for convertible senior notes

Shares for Notes 2026

Shares for Notes 2030

Total antidilutive shares

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Construction in progress

29,939 30,434

Total property, plant and equipment, net

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$ 9,502 $ ( 5,981 ) $ 3,521

138 ( 31 ) 107

Total intangible assets

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For the years ended December 31, 2024, 2023 and 2022 , amortization expense for intangible assets, included in general and administrative expenses on the income statement, was $ 0.4 million, $ 0.7 million and $ 0.6 million, respectively.

The remaining weighted average amortization period for intangible assets is approximately six years.

The remaining weighted average amortization period for intangible assets is approximately 9 years.

At December 31, 2024 , future amortization expense for intangible assets is estimated to be (in thousands):

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11,705 — — 11,705

Note receivable

$ 79,133 $ — $ — $ 79,133

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December 31, 2023

Revolving line of credit with a U.S.

bank up to $ 27.8 million with interest at 8.984 %, maturing the earlier of either 12/14/2023 or 11/16/2025 if the convertible debt remained in effect

Revolving line of credit with a China bank up to $ 23.6 million with interest from 4.00 % to 4.35 %, maturing May 24, 2029

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The current portion of long-term debt is the amount payable within one year of the balance sheet date of December 31, 2024 .

On November 16, 2022, the Company entered into a Loan Security and Guarantee Agreement (the “Credit Facility”) with CIT Northbridge Credit, LLC, as agent for secured parties.

The Credit Facility provided the Company with a three -year, $ 27.78 million revolving line of credit.

Borrowings under the Credit Facility were to be used to repay senior debt with Truist Bank and for working capital needs, capital expenditures, and other corporate purposes.

The Company's obligations under the Credit Facility were secured by the Company's inventory, accounts receivable, instruments, equipment, intellectual property, and all business assets with the exception of real estate and all foreign assets.

Borrowings were to bear interest at a rate equal to the Secured Overnight Financing Rate (SOFR) plus 3.75 %, while monthly average usage was less than 50% of the Credit Facility, otherwise SOFR plus 4.75 %.

The Credit Facility was to become due at the earlier date of either November 16, 2025 or 91 days prior to the maturity of the 2024 Notes.

On August 16, 2023, the Company delivered a termination notice to CIT to terminate the Credit Facility.

As a result of the Company's delivery of such termination notice, the Credit Facility was terminated effective as of November 17, 2023 and was fully repaid.

On May 24, 2019, the Company’s China subsidiary, Global, entered into a five -year revolving credit line agreement, totaling 180,000,000 RMB (the “SPD Credit Line”), or approximately $ 25.4 million, and a mortgage security agreement (the “Security Agreement”), with Shanghai Pudong Development Bank Co., Ltd ("SPD").

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Global’s obligations under the SPD Credit Line will be secured by real property owned by Global and mortgaged to the Bank under the terms of the Security Agreement.

As of December 31, 2023, $ 12.6 million was outstanding under the SPD Credit Line and the outstanding balance of bank acceptance notes issued to vendors was $ 12.5 million.

On May 24, 2024, Global renewed the SPD Credit Line for a five -year revolving credit line, totaling 170,000,000 RMB (the “Renewed SPD Credit Line”) or approximately $ 23.9 million at that time, and Global also entered into a mortgage contract security agreement, with SPD.

Global may draw upon the Renewed SPD Credit Line on an as-needed basis between May 24, 2024 and May 24, 2029.

As of December 31, 2024, $ 13.5 million was outstanding under the Renewed SPD Credit Line and the outstanding balance of bank acceptance notes issued to vendors was $ 11.3 million.

On June 7, 2022, the Company's China Subsidiary, Global, entered a security agreement with China Zheshang Bank in Ningbo City, China ("CZB") for a five -year credit line agreement, totaling 200,000,000 RMB (the "¥200M Credit Facility"), or approximately $ 29.9 million.

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On December 5, 2023, the Company issued approximately $ 80.2 million aggregate principal amount of 5.250 % convertible senior notes due 2026 (the "2026 Notes"), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2024 Notes to exchange or repurchase approximately $ 80.2 million principal amount of the 2024 Notes for aggregate consideration consisting of approximately $ 81.1 million in cash, which included accrued interest on the 2024 Notes, and approximately 466,368 shares of the Company's common stock, par value $ 0.001 per share.

The 2026 Notes were issued pursuant to an Indenture, dated as of December 5, 2023, ( the "Indenture"), between the Company and Computershare Trust Company, N.A., as trustee.

The 2026 Notes will bear interest at a rate of 5.250% per year and will pay interest semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2024.

The Company paid off the remaining $ 0.29 million of the 2024 Notes on March 15, 2024.

The 2026 Notes bears interest at a rate of 5.250% per year and will pay interest semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2024.

The 2026 Notes will mature on December 15, 2026, unless earlier converted, redeemed or repurchased in accordance with their terms.

The following table presents the carrying value of the 2026 Notes for the periods indicated (in thousands):

On December 18, 2024, the Company entered into exchange agreements with certain holders of the 2026 Notes to exchange approximately $ 76.7 million principal amount of the 2026 Notes for aggregate consideration consisting of (i) $ 125.0 million aggregate principal amount of 2.75 % Convertible Senior Notes due 2030 (the “2030 Notes”), (ii) 1,487,874 shares of the Company’s common stock, par value $ 0.001 per share (the "Common Stock") and (iii) approximately $ 89.6 thousands of cash in aggregate, representing accrued and unpaid interest on the 2026 Notes and the value of fractional shares of Common Stock (such transactions, collectively, the "Exchanges").

There was $ 3.5 million principal amount for the 2026 Notes remaining.

The Exchanges closed on December 23, 2024.

We recorded a debt extinguishment loss of $ 112.0 million due to these Exchanges.

2030 Notes were issued pursuant to an Indenture, dated as of

December 23, 2024 ( the "Indenture"), between the Company, as issuer, and Computershare Trust Company, N.A., as trustee.

2030 Notes bear interest at a rate of

2.750 % per year and will pay interest semiannually in arrears on

January 15 and

July 15 of each year, beginning on

July 15, 2025.

2030 Notes will mature on

January 15, 2030, unless earlier converted, redeemed or repurchased in accordance with their terms.

The following table presents the carrying value of the 2026 Notes and the 2030 Notes for the periods indicated (in thousands):

December 31, 2024

Principal Amount

Unamortized debt issuance costs

Net carrying amount

The conversion rate for the 2026 Notes is 65.6276 shares of the Company’s common stock per $ 1,000 principal amount of the 2026 Notes (which is equivalent to a conversion price of approximately $ 15.24 per share of the Company’s common stock, representing a premium of approximately 15 % over the last reported sale price of the Company’s common stock on November 30, 2023 of $ 13.25 per share), subject to adjustment.

Before September 15, 2026, holders of the 2026 Notes will have the right to convert their 2026 Notes only upon the occurrence of certain events.

From and after September 15, 2026, holders of the 2026 Notes may convert their 2026 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

Net carrying amount for 2026 Notes

Principal Amount

Premium upon issuance

Unamortized debt issuance costs

Net carrying amount for 2030 Notes

Total net carry amount

The conversion rate for the 2030 Notes is 23.0884 shares of Common Stock per $1,000 principal amount of the 2030 Notes (which is equivalent to a conversion price of approximately $ 43.31 per share of Common Stock, representing a premium of approximately 27.50 % over the last reported sale price of the Common Stock on December 18, 2024 of $ 33.97 per share), subject to adjustment.

Before October 15, 2029, holders of the 2030 Notes will have the right to convert their 2030 Notes only upon the satisfaction of a common stock sale price condition or a note trading price condition (each, as described in the Indenture) or upon the occurrence of certain events (including the occurrence of a Fundamental Change, Make-Whole Fundamental Change or Common Stock Change Event (each as defined in the Indenture).

From and after October 15, 2029, holders of the 2030 Notes may convert their 2030 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its Common Stock or a combination of cash and shares of its Common Stock, at the Company’s election, based on the applicable conversion rate(s).

Initially there are

no guarantors of the

2026 Notes, but the

2026 Notes will be fully and unconditionally guaranteed, on a senior, unsecured basis by certain of the Company’s future domestic subsidiaries.

2026 Notes are the Company’s senior, unsecured obligations and are equal in right of payment with existing and future senior, unsecured indebtedness, senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the

2026 Notes and effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.

The Note Guarantee (as defined in the Indenture) of each future guarantor, if any, will be such guarantor’s senior, unsecured obligations and is equal in right of payment with existing and future senior, unsecured indebtedness, senior in right of payment to such future guarantor’s existing and future indebtedness that is expressly subordinated to the

2026 Notes and effectively subordinated to such future guarantor’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.

The Indenture contains covenants that limit the Company’s ability and the ability of our subsidiaries to, among other things:

(i) incur or guarantee additional indebtedness or issue disqualified stock;

and (ii) create or incur liens.

2026 Notes will be redeemable, in whole or in part (subject to certain limitations described in the Indenture), at the Company’s option at any time, and from time to time, on or after

December 15, 2024 and on or before the

The 2030 Notes will be redeemable, in whole or in part (subject to certain limitations described in the Indenture), at the Company’s option at any time, and from time to time, on or after January 15, 2027 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Common Stock exceeds 130 % of the conversion price on ( 1 ) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

and ( 2 ) the trading day immediately before the date it sends such notice.

In addition, the

2030 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or before the

40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the

2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds

130 % of the conversion price on (

1 ) each of at least

20 trading days, whether or

not consecutive, during the

30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

2 ) the trading day immediately before the date it sends such notice.

In addition, the 2026 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of a holder of 2026 Notes as of the close of business on a record date to receive the related interest payment on the corresponding interest payment date), if the Company completes the "Specified Divestiture" of ( x ) one or more of its manufacturing facilities located in the People’s Republic of China and/or (y) significant assets located in the People’s Republic of China which relate to the Company’s transceiver business and multi-channel optical sub-assembly products (or any substantially related assets), for aggregate consideration in cash to the Company of not less than the U.S.

Dollar equivalent of $ 150,000,000 (measured at the time of completion).

Calling any Convertible Note for redemption will constitute a “Make-whole fundamental change” (as defined in the Indenture) with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption.

In addition, if the Specified Divestiture is completed, then each holder of

2030 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of a holder of

2030 Notes as of the close of business on a record date to receive the related interest payment on the corresponding interest payment date), if the “Specified Divestiture” (as defined in the Indenture) is completed.

2030 Note for redemption will constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) with respect to that

2030 Note, in which case the conversion rate applicable to the conversion of that

2030 Note will be increased in certain circumstances if i

after it is called for redemption.

In addition, if the Specified Divestiture is completed, then unless the Company has previously elected to redeem all of the

2030 Notes, each holder of

2030 Notes will have the right to require the Company to repurchase its

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35, nor less than

20, business days after we send the related notice of Specified Divestiture.

20, business days after the date the Company’s sends the related notice of Specified Divestiture.

The repurchase price for a note tendered for such repurchase will be equal to the principal amount of the

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2030 Notes as of the close of business on a record date to receive the related interest payment on the corresponding interest payment date).

Moreover, if the Company undergoes a fundamental change, as described in the Indenture, holders of the 2026 Notes may require the Company to repurchase for cash all or part of their 2026 Notes at a repurchase price equal to 100 % of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the required repurchase date.

Moreover, if the Company undergoes a fundamental change, as described in the Indenture, holders of the

may require the Company to repurchase for cash all or part of their

2030 Notes at a repurchase price equal to

100 % of the principal amount of the

2030 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the required repurchase date.

Additionally, the 2030 Notes are subject to customary events of default.

The 2030 Notes do not restrict the Company’s ability to incur debt or liens.

No sinking fund is provided for the 2030 Notes.

There are no guarantors of the 2030 Notes.

Pursuant to the guidance in ASC 815 - 40, Contracts in Entity’s Own Equity, the Company evaluated whether the conversion feature of the note needed to be bifurcated from the host instrument as a freestanding financial instrument.

Under ASC 815 - 40, to qualify for equity classification (or non-bifurcation, if embedded) the instrument (or embedded feature) must be both ( 1 ) indexed to the issuer’s own stock and ( 2 ) meet the requirements of the equity classification guidance.

Based upon the Company’s analysis, it was determined the conversion option is indexed to its own stock and also met all the criteria for equity classification contained in ASC 815 - 40 - 25 - 7 and 815 - 40 - 25 - 10.

Accordingly, the conversion option is not required to be bifurcated from the host instrument as a freestanding financial instrument.

Since the conversion feature meets the equity scope exception from derivative accounting, the Company then evaluated whether the conversion feature needed to be separately accounted for as an equity component under ASC 470 - 20, Debt with Conversion and Other Options.

The Company determined that notes should be accounted for in their entirety as a liability.

The following table sets forth interest expense information related to the 2024 Notes (in thousands):

Based upon the Company’s analysis, it was determined the conversion option is indexed to its own stock and also met all the criteria for equity classification.

Accordingly, the conversion option is not required to be bifurcated from the host instrument as a derivative.

Pursuant to ASC 815 - 15, the Company further determined that the contingent redemption features in the 2030 Notes are not required to be bifurcated from the host contract and accounted for separately.

Additionally, the Company then evaluated whether the conversion feature needed to be separately accounted for as an equity component under ASC 470 - 20, Debt with Conversion and Other Options, and determined that the additional premium was not substantial.

Accordingly, that amount was recognized as a premium on the 2030 Notes.

The following table sets forth interest expense information related to the 2026 Notes and the 2030 Notes (in thousands):

Year ended December 31,

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Government subsidy income

Gain (loss) on disposal of assets

( 132 ) ( 51 ) 47

Other non-operating gain(loss)

Loss on debt extinguishment

( 111,962 ) — —

Loan forgiveness

Gain (loss) on disposal of assets

Other non-operating gain(loss)

1,684 ( 7,468 ) 76

Total other gain (loss), net

Total other income (expense), net

$ ( 109,871 ) $ ( 5,871 ) $ ( 1,205 )

( 1 ) Please see the details in Note L - Convertible Senior Notes.

NOTE O—INCOME TAXES

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$ ( 39,214 ) $ ( 11,768 ) $ ( 13,943 )

PPP loan forgiveness

— — ( 1,308 )

Interest Carryforward

Non-deductible/non-taxable items

Global intangible low-taxed incom

Global intangible low-taxed income

Foreign rate differences

( 314 ) 242 552

Foreign permanent differences

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Extinguishment of debt

22,602 1,580 —

Foreign other

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Tax (benefit) expense

The Company's provision for income taxes in 2024 was higher than 2023 primarily due to state taxes.

The Company's provision for income taxes in 2023 was higher than 2022 primarily due to state taxes and foreign taxes.

The Company's provision for income taxes in 2022 was lower than 2021 primarily due to state taxes.

The Company’s wholly owned subsidiary, Prime World is a tax-exempt entity under the Income Tax Code of the British Virgin Islands.

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Among other things, the CHIPS Act provides for refundable tax credits and certain other financial incentives to further investments in domestic manufacturing.

There was no material impact of this Act in 2023, and the Company has determined that any future impacts will depend on the extent to which the Company expands its semiconductor manufacturing operations in accordance with the requirements of the Act.

At least a portion of our current and future capital expenditures and research and development costs will qualify for this credit, which benefits us by allowing us to net the credit received against our costs.

This credit is accounted for outside of ASC 740 as a reduction to the depreciable basis of the assets used in operations and will not have an impact on our effective tax rate.

On August 16, 2022, legislation commonly known as the Inflation Reduction Act was signed into law.

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Nonqualified and Incentive Stock Options, RSAs and RSUs may be granted from these plans.

Prior to the Company’s initial public offering in September 2013, the fair market value of the Company’s stock had been historically determined by the board of directors and from time to time with the assistance of third party valuation specialists.

Stock Options

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Outstanding, December 31, 2024

1 13.84 7.12 0.08 8

Exercisable, December 31, 2024

1 13.84 7.12 0.08 8

Vested and expected to vest

1 13.84 7.12 0.08 8

As of December 31, 2024 , there was no unrecognized stock option expense.

For the years 2024, 2023 and 2022, the intrinsic value of options was $ 2 thousand, $ 237 thousand and zero .

Performance Based Incentive Plan

The Company approved to grant restricted performance stock units (“PSUs”) to senior executives as a part of our long-term equity compensation program starting from June 2021.

The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 0 % to 200 % of the number granted and is determined based on certain performance criteria over a three -year measurement period.

The performance criteria for the PSUs are based on a combination of the performance of our stock price and the Total Shareholder Return (“TSR”) for the performance period compared with the TSR of certain peer companies or index for the performance period.

PSUs granted vest 100 % on the third anniversary of their grant, assuming achievement of the applicable performance criteria.

We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant.

Compensation expense is recognized ratably over the explicit service period.

The Company recognized PSU expense for the twelve months ended December 31, 2023 and 2022 was $ 3 million and $ 1.7 million, respectively.

Starting in 2021, certain senior executives were granted performance stock units (“PSUs”) under our 2021 Equity Incentive Plan ( “2021 Plan”), which generally vest over a three -year period subject to achievement of certain pre-established performance metrics.

The number of shares of common stock that would ultimately be issued to settle PSUs granted ranged from 0 % to 200 % of the target number of shares granted.

We estimate the fair value of the PSUs on the date of grant using a Monte Carlo simulation model, with stock-based compensation expense recognized ratably over the appliable three -year performance period.

The Company recognized stock-based compensation expense for the PSUs for the twelve months ended December 31, 2024, 2023 and of $ 4.0 million, $ 3.0 million and $ 1.7 million, respectively.

On June 12, 2024, the Compensation Committee certified the Company exceeded the maximum performance target level for each of the performance targets set for the PSUs granted in June 2021 ( the “2021 PSUs”).

Therefore, applicable employees were entitled to payment of the 2021 PSUs at 200 % of the target shares granted under the 2021 Plan.

On June 6, 2024, at the annual meeting of stockholders, a proposal to increase the number of shares of common stock for issuance under the 2021 Plan by 2,000,000 shares was not approved, and as a result, the Company did not have enough shares of common stock available for issuance to satisfy the additional shares earned above 100 % of target shares of the 2021 PSUs (the “2021 Additional Shares”).

In lieu of shares of common stock, the Company settled the 2021 Additional Shares in cash, resulting in an additional $ 2.8 million of stock-based compensation expense in the twelve months ended December 31, 2024.

The following is a summary of PSU activity (in thousands, except per share data):

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192 16.40 1,958

( 277 ) 14.27 2,890

Cancelled/Forfeited

3 unchanged sentences

1,448 7.82 53,347

As of December 31, 2023, there was $ 6.6 million of unrecognized compensation expense related to these PSUs.

As of December 31, 2024, there was $ 5.7 million of unrecognized stock-based expense related to outstanding PSUs.

This expense is expected to be recognized over 1.7 years.

For the years 2024, 2023 and 2022, the weighted-average grant value for PSUs was $ 16.40 , $ 8.89 and $ 0 per share.

The intrinsic values of PSUs exercised were $ 2.9 million, $ 3.6 million and $ 0 million for the years 2024, 2023 and 2022.

The total fair value of shares vested for PSUs during years 2024, 2023 and 2022 are $ 4.0 million, $ 0 and $ 0 million.

Restricted Stock Units

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This expense is expected to be recognized over 2.42 years.

For the years of 2024, 2023 and 2022, the weighted-average grant value for RSU are $ 10.73 , $ 6.15 and $ 2.75 per share.

The intrinsic values of RSU exercised are $ 19.0 million, $ 7.8 million and $ 2.8 million for the years of 2024, 2023 and 2022.

The total fair value of shares vested for RSU during years 2024, 2023 and 2022 are $ 8.1 million, $ 8.6 million and $ 8.8 million.

Share-Based Compensation

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$ 185 million.

Pursuant to Rule

6 ) under the Securities Act, the securities registered pursuant to this registration statement include unsold securities previously registered for sale pursuant to our previously filed Registration Statement on Form S-

3, which became effective on

January 9, 2020.

March 24, 2023, we entered into an Equity Distribution Agreement (the "Agreement") with Raymond James & Associates (the "Sales Agent") pursuant to which the Company

may issue and sell shares of the Company’s common stock, par value

March 13, 2024, we entered into an Equity Distribution Agreement (the "First ATM Agreement") with Raymond James & Associates (the "Sales Agent") pursuant to which the Company could issue and sell shares of the Company’s common stock having an aggregate offering price of up to

$ 25 million (the "First ATM Offering"), from time to time through the Sales Agent.

August 6, 2024, we entered into Amendment

1 to the First ATM Agreement with the Sales Agent, to increase the aggregate offering price from

$ 25 million to

$ 60 million.

November 6, 2024, we provided notice of its termination, effective on such date, of the First ATM Agreement, as amended.

We sold approximately

5.7 million shares at a weighted average price of

$ 10.55 per share, providing proceeds of

$ 58.7 million, net of expenses and underwriting discounts and commissions, under the First ATM Offering.

November 7, 2024, we entered into another Equity Distribution Agreement (the "Second ATM Agreement") with the Sales Agent pursuant to which the Company could issue and sell shares of the Company’s common stock, par value

$ 0.001 per share (the "Shares") having an aggregate offering price of up to

$ 35 million (the "ATM Offering"), from time to time through the Sales Agent.

Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales, if any, of the Shares will be made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule

$ 55 million (the "Second ATM Offering"), from time to time through the Sales Agent.

Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were be made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule

415 of the Securities Act of

1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agent.

In the placement notice, the Company will designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales are requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that

may be sold in any

Subject to the terms and conditions of the Agreement, the Sales Agent will use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.

The Company has

no obligation to sell any Shares under the Agreement and

may at any time suspend offers and sales of the Shares under the Agreement.

The Agreement provides that the Sales Agent will be entitled to compensation of up to

In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in any

Subject to the terms and conditions of the Agreement, the Sales Agent would use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.

The Second ATM Agreement provided that the Sales Agent would be entitled to compensation of up to

2 % of the gross sales price of the Shares sold through the Sales Agent from time to time.

The Company has also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc.,

The Company also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc.,

not to exceed

$ 10,000 in the aggregate, and any associated application fees incurred.

Additionally, if the Agreement is terminated under certain circumstances, and the Company fails to sell a minimum amount of the Shares as set forth in the Agreement, then the Company has agreed to reimburse the Sales Agent for reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel incurred by the Sales Agent, up to a maximum of

$ 30,000 in the aggregate.

The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent

may be required to make because of any of those liabilities.

September 12, 2023, we entered into Amendment

1 to the Agreement with the Sales Agent, to increase the aggregate offering price from

$ 35 million to

$ 70 million.

November, 2023, we completed sales under the ATM Offering.

The details of the shares of common stock sold through the ATM Offering through December 31, 2023 are as follows (in thousands, except shares and weighted average per share price):

The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent could be required to make because of any of those liabilities.

November 22, 2024, the Company completed the Second ATM Offering and sold approximately

1.8 million shares at a weighted average price of

$ 31.17 per share, providing proceeds of

$ 53.9 million, net of expenses and underwriting discounts and commissions.

The details of the shares of common stock sold through the First ATM Offering and the Second ATM Offering through December 31, 2024 are as follows (in thousands, except shares and weighted average per share price):

Distribution Agent

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7,442 $ 112,602 $ 2,298

7,808 $ 69,057 $ 1,410

Automatic Shelf Registration Statement

On December 18, 2024, the Company filed an automatic shelf registration statement on Form S- 3ASR (Registration File No.

333 - 283905 ) (the "Automatic Shelf Registration Statement") with the U.S.

Securities and Exchange Commission, which became effective immediately upon filing.

Registered Direct Offering

On December 23, 2024, the Company issued an aggregate of 1,036,458 shares of the Company’s common stock, par value $ 0.001 per share, at a purchase price of $ 33.97 per share, in a registered direct offering (the "Registered Direct Offering").

The Registered Direct Offering was made pursuant to the Automatic Shelf Registration Statement.

The Registered Direct Offering closed on December 23, 2024.

Raymond James and Associates, Inc.

acted as the sole placement agent (the "Placement Agent") for the Company in connection with the Registered Direct Offering.

Pursuant to that certain Placement Agency Agreement, dated as of December 18, 2024, between the Company and the Placement Agent, the Placement Agent is entitled to a fee equal to an aggregate of 3 % of the aggregate principal amount of the Registered Direct Offering.

The Registered Direct Offering generated proceeds of approximately $ 33.7 million, after deducting placement agent fees and other estimated offering expenses payable by us.

The Company intends to use the net proceeds from the Registered Direct Offering for general corporate purposes, which may include among other things, capital expenditures and working capital.

The Company may also use such proceeds to fund acquisitions of businesses, technologies or product lines that complement its current business;

however the Company has no present plans, agreements or commitments with respect to any potential acquisition.

NOTE R—SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in one reportable segment.

The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker, manages the Company’s operations as a whole and reviews financial information presented on a consolidated basis, accompanied by information about product revenue, for purposes of evaluating financial performance and allocating resources.

The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker ("CODM"), manages the Company’s operations as a whole and reviews financial information presented on a consolidated basis, accompanied by information about product revenue, for purposes of evaluating financial performance and allocating resources.

Our CEO is the functional head of all operations and manufacturing.

Our Board, in conjunction with our CODM, considers our consolidated performance and does not have individual financial or operating goals for each location, nor for any other subset of the Company's operations.

As such, the Company has determined it operates as one reportable segment.

Our CODM uses net income or loss to allocate resources and assess performance.

The CODM regularly reviews the consolidated net income or loss to make strategic decisions, such as capital expenditure plan, production plan and manpower allocation.

Years Ended December 31,

$ 249,365 $ 217,646 $ 222,818

Cost of goods sold

( 187,565 ) ( 158,725 ) ( 189,191 )

Adjusted research and development

( 53,383 ) ( 34,483 ) ( 34,899 )

Adjusted sales and marketing

( 15,805 ) ( 9,959 ) ( 8,857 )

Adjusted general and admin

( 41,037 ) ( 37,118 ) ( 34,547 )

Other segment items

( 138,308 ) ( 33,409 ) ( 21,721 )

( 186,733 ) ( 56,048 ) ( 66,397 )

We exclude share-based compensation and related expense, certain legal expenses associated with litigation and other one -time expenses from adjusted research and development, adjusted sales and marketing and adjusted general and administrative expenses.

Other segment items include share-based compensation expense, interest expense, interest income, certain legal expenses associated with litigation and other one -time items.

The following tables set forth the Company’s revenue and asset information by geographic region.

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The Company serves four primary markets, the internet data center, CATV, telecom and FTTH markets.

Of the Company’s total revenues in 2024, the Company earned $ 148.5 million, or 59.5 %, from the internet data center market, $ 87.7 million, or 35.2 %, from the CATV market, $ 11.0 million, or 4.4 %, from the telecom market and $ 2.1 million, or 0.9 %, from the FTTH and other markets.

Of the Company’s total revenues in 2023, the Company earned $ 141.2 million, or 64.9 %, from the internet data center market, $ 59.9 million, or 27.5 %, from the CATV market, $ 13.8 million, or 6.4 %, from the telecom market and $ 0.1 million, or 0.0 %, from the FTTH market.

Of the Company’s total revenues in 2022 , the Company earned $ 118.2 million, or 53.0 %, from the CATV market, $ 77.1 million, or 34.6 %, from the internet data center market, $ 24.7 million, or 11.1 %, from the telecom market and $ 0.1 million, or 0.0 %, from the FTTH market.

Of the Company’s total revenues in 2021, the Company earned $ 94.3 million, or 44.6 %, from the CATV market, $ 97.5 million, or 46.1 %, from the internet data center market, $ 16.2 million, or 7.7 %, from the telecom market and $ 2.7 million, or 1.2 %, from the FTTH and Other markets.

NOTE S—EMPLOYEE BENEFIT PLANS

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On January 22, 2024, the Company filed its response, generally denying the Purchaser’s allegations and asserting counterclaims for recovery of a break-up fee.

While the Company does not believe the Purchaser’s claims have merit and intends to vigorously defend this matter, it is not able to determine the outcome of this dispute or the likelihood or amount of the Company’s loss or recovery, if any, arising from this matter.

If specific performance is granted by HKIAC, the transaction contemplated by the Purchase Agreement would still have to be approved by the Committee on Foreign Investment in the United States prior to its consummation.

A hearing date for the arbitration has not been set.

This matter was settled on January 27, 2025, with the Company paying only its own legal fees and expenses.

Other Contingencies

On August 9, 2021, the Company received a Taxes Notification of Audit Result ("Notice") from the Texas Comptroller’s Office (the "Comptroller"), for fiscal years between 2016 and 2019, informing the Company that the Comptroller believes the Company did not qualify for certain sales and use tax exemptions on various Research and Development purchases and accordingly the Company is liable for Sale and Use Tax in the amount of approximately $ 1.0 million including interest charges.

The Company paid $ 0.4 million for the tax notice in May 2021, but challenged the remaining tax assessments and vigorously defended its position.

The Comptroller’s office exhausted its redetermination period and therefore moved AOI’s case to the hearing process.

No hearing date has yet been scheduled, and as a result the Company is not able to determine the outcome of this sales tax dispute or the likelihood or amount of the Company’s loss, if any, arising from this matter.

NOTE U—SUBSEQUENT EVENTS

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures