APPLIED OPTOELECTRONICS, INC. 10-K

Item 9A. Controls and Procedures a. Evaluation of Disclosure Controls and Procedures. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. 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, 2025 . 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 effective. b. Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 ("COSO") of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025 . 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. 54 Table of Contents Remediation of Material Weakness Identified in 2024 As described on our Form 10-K for the year ending December 31, 2024, management identified a material weakness related to the operation of controls over our review of technical accounting analysis. Although this material weakness did not result in any material misstatement of our financial statements, we nevertheless concluded that our internal control over financial reporting was not effective as of December 31, 2024. During 2025, we took steps to remediate this material weakness, including instituting additional levels of review for technical accounting analyses, additional scrutiny of externally-prepared technical accounting analyses, and personnel changes within the Accounting department that possess knowledge of technical accounting matters sufficient to allow them to perform a review of the analysis that is precise enough to detect errors in the analysis that could lead to a conclusion that would have a material impact to the Company’s financial statements. Under the oversight of our Audit Committee, we believe that these steps have been effective in remediating the material weakness. 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, 2025. c. Changes in Internal Control over Financial Reporting Other than the remediation steps discussed above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with management’s evaluation required by the Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 55 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Applied Optoelectronics, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Applied Optoelectronics, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2025, 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, 2025, 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, 2025, and our report dated February 26, 2026 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Houston, Texas February 26, 2026 56 Table of Contents Item 9B. Other Information Rule 10b5 - 1 Trading Plans The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our Section 16 offers and directors for the three months ended December 31, 2025 , each of which is intended to satisfy the affirmative defense conditions of Rule 10b5 - 1 (c) under the Exchange Act ("Rule 10b5 - 1 Plan"), were as follows: Name Title Action Date Adopted Expiration Date Aggregate # of Securities to be Purchased/Sold Shu-Hua (Joshua) Yeh ( 1 ) SVP/Asia General Manager  Adoption 12/09/2025 12/31/2026 50,000 ( 1 ) Shu-Hua (Joshua) Yeh, our Senior Vice President and Asia General Manager, entered into a Rule 10b5 - 1 Plan on December 9, 2025. Mr. Yeh's plan provides for the potential sale of 50,000 shares of the Company's common stock. The Plan expires on December 31, 2026, or upon the earlier of completion of all authorized transactions under the plan. Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections None. 57 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item (other than the information set forth in the next paragraph in this Item 10) will be included in our definitive proxy statement with respect to our 2026 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission and is incorporated herein by reference. Adoption of Code of Ethics The Company has adopted a Code of Business Conduct and Ethics (the "Code") applicable to all of our board of director members, employees and executive officers, including our Chief Executive Officer (Principal Executive Officer), and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer). The Company has made the Code available on our website at http://www.ao-inc.com. The Company intends to satisfy the public disclosure requirements regarding (1) any amendments to the Code, or (2) any waivers under the Code given to our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer by posting such information on our website at www.ao-inc.com. 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 2025 . 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. Item 11. Executive Compensation The information required by this item will be included in our definitive proxy statement with respect to our 2026 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be included in our definitive proxy statement with respect to our 2026 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be included in our definitive proxy statement with respect to our 2026 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information required by this item will be included in our definitive proxy statement with respect to our 2026 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission and is incorporated herein by reference. 58 Table of Contents Part IV Item 15. Exhibits, Financial Statements Schedules (a)(1) The consolidated financial statements are listed on the Index to Consolidated Financial Statements to this Form 10-K beginning on page F-1. (a)(2) Financial Statement Schedules. Financial statement schedules have been omitted, as the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto appearing in this Form 10-K. (a)(3) Exhibits. See the Exhibit immediately following Item 16. Form 10-K Summary of this Form 10-K. Item 16. Form 10-K Summary None. EXHIBIT INDEX Incorporated By Reference Number Exhibit Description Form File No. Exhibit Filing Date 3.1 Restated Certificate of Incorporation 8 -K 001-36083 3.2 June 12, 2025 3.2 Amended and Restated Bylaws of the registrant, as currently in effect 10-Q 001-36083 3.2 November 14, 2013 3.3 Amendment No. 1 to the Amended and Restated By-laws of Applied Optoelectronics, Inc. 8-K 001-36083 3.1 April 2, 2025 4.1 Common Stock Specimen 8-K 001-36083 4.1 November 14, 2016 4.2 Indenture, dated as of December 23, 2024, between Applied Optoelectronics, Inc. and Computershare Trust Company, N.A., as Trustee 8-K 001-36083 4.1 December 23, 2024 4.3 Form of 2.750% Convertible Senior Note due 2030 8-K 001-36083 4.1 Exhibit A December 23, 2024 4.4 First Supplemental Indenture, dated as of December 23, 2024, between Applied Optoelectronics, Inc. and Computershare Trust Company, N.A., as Trustee 8-K 001-36083 4.3 December 23, 2024 4.5 Warrant to Purchase Common Stock of Applied Optoelectronics, Inc. by and between Applied Optoelectronics, Inc. and Amazon.com NV Investment Holdings LLC, dated as of March 13, 2025 8-K 001-36083 4.1 March 13, 2025 4.6 * Description of the Company's Common Stock 59 Table of Contents Incorporated By Reference Number Exhibit Description Form File No. Exhibit Filing Date 10.1 † Form of Indemnification Agreement between the registrant each of its Directors and certain of its Executive Officers S-1 333-190591 10.1 August 13, 2013 10.2 † Amended and Restated 2021 Equity Incentive Plan S-8 333-286464 99.1 April 10, 2025 10.2.1 † Form of Restricted Stock Unit Award Agreement under 2021 Equity Incentive Plan 10-Q 001-36083 10.4.1 August 5, 2021 10.2.2 † Form of Performance Restricted Stock Unit Award Agreement under 2021 Equity Incentive Plan 10-Q 001-36083 10.4.2 August 5, 2021 10.3 † Applied Optoelectronic, Inc. 2023 Equity Inducement Plan 10-Q 001-36083 10.1 November 9, 2023 10.4 † Amended and Restated Employment Agreement regarding Change of Control or Separation of Service between the registrant and Chih-Hsiang (Thompson) Lin, dated April 16, 2013 S-1 333-190591 10.12.1 August 13, 2013 10.5 † Employment Agreement, dated August 5, 2016, between Applied Optoelectronics, Inc. and Stefan J. Murry 10-Q/A 001-36083 10.20 August 9, 2016 10.6 † Employment Agreement, dated August 5, 2016, between Applied Optoelectronics, Inc. and Mr. Joshua Yeh 10-Q/A 001-36083 10.21 August 9, 2016 10.7 † Employment Agreement, dated August 5, 2016, between Applied Optoelectronics, Inc. and Dr. Fred Chang 10-Q/A 001-36083 10.22 August 9, 2016 10.8 † Employment Agreement, dated August 5, 2016, between Applied Optoelectronics, Inc. and David C. Kuo 10-K 001-36083 10.9 February 28, 2018 10.9 Translation of Lease Agreement between Global Technology, Inc. and the People’s Republic of China in Zhejiang Province, Ningbo City, Land Resources Bureau 10-K 001-36083 10.30 February 28, 2018 10.10 Statement of Work No. 1 – Foundry between Applied Optoelectronics, Inc. and Microsoft Corporation, effective December 16, 2022 8-K 001-36083 10.1 May 3, 2023 10.10.1 Microsoft Corporation Purchase Order Terms & Conditions (included as Appendix C to Exhibit 10.10) 8-K 001-36083 10.1 (Appendix C) May 3, 2023 60 Table of Contents Incorporated By Reference Number Exhibit Description Form File No. Exhibit Filing Date 10.11 Statement of Work No. 2 – Design and Assembly, between Applied Optoelectronics, Inc. and Microsoft Corporation, effective June 21, 2023 8-K 001-36083 10.1 June 21, 2023 10.11.1 Microsoft Corporation Purchase Order Terms & Conditions (included as Appendix J to Exhibit 10.11) 8-K 001-36083 10.1 (Appendix C) June 21, 2023 10.12 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. 8-K 001-36083 10.1 October 10, 2024 10.13 Form of Exchange Agreement, dated December 18, 2024, between Applied Optoelectronics, Inc. and the applicable Noteholders 8-K 001-36083 10.1 December 20, 2024 10.14 Transaction Agreement, by and between Applied Optoelectronics, Inc. and Amazon.com, Inc., dated as of March 13, 2025 8-K 001-36083 10.1 March 13, 2025 10.15 Lease, dated April 3, 2025, between Applied Optoelectronics, Inc. and Albany Road-Breck Exchange, LLC 8-K 001-36083 10.1 April 9, 2025 10.16 Translation of the Land and Building Lease Agreement, dated June 7, 2025, between Prime World International Holdings Ltd., Taiwan Branch and San Ho Electric Machinery Industry Co., Ltd. 8-K 001-36083 10.1 June 11, 2025 10.17 Translation of the RMB Working Capital Loan Contract (RMB 96,800,000), between Global Technology, Inc. and China Construction Bank Co., Ltd., dated June 12, 2025 8-K 001-36083 10.1 June 18, 2025 10.18 Translation of the Maximum Loan (Credit) Contract (Credit Line Agreement), dated June 26, 2025, between Global Technology, Inc. and China Construction Bank Co., Ltd. 8-K 001-36083 10.1 July 1, 2025 10.18.1 Translation of the Maximum Mortgage Contract (Security Agreement), dated June 26, 2025, between Global Technology, Inc. and China Construction Bank Co., Ltd. 8-K 001-36083 10.2 July 1, 2025 10.19 Translation of the Working Capital Loan Contract (RMB82,000,000), between Global Technology, Inc. and Shanghai Pudong Development Bank Co., Ltd., dated July 18, 2025 8-K 001-36083 10.1 July 23, 2025 61 Table of Contents Incorporated By Reference Number Exhibit Description Form File No. Exhibit Filing Date 10.20 Translation of the Financing Credit Line Agreement, dated July 29, 2025, between Global Technology, Inc. and Shanghai Pudong Development Bank Co., Ltd. 8-K 001-36083 10.1 August 4, 2025 10.20.1 Translation of the Maximum Mortgage Contract (Security Agreement), dated July 29, 2025, between Global Technology, Inc. and Shanghai Pudong Development Bank Co., Ltd. 8-K 001-36083 10.2 August 4, 2025 10.21 Loan and Security Agreement, dated July 31, 2025, between Applied Optoelectronics, Inc. and BOKF, NA dba BOK Financial 8-K 001-36083 10.1 August 6, 2025 10.21.1 Revolving Note, dated July 31, 2025, between Applied Optoelectronics, Inc. and BOKF, NA dba BOK Financial 8-K 001-36083 10.2 August 6, 2025 10.22 Translation of the Agreement to Terminate Land and Building Lease dated August 20, 2025, between Prime World International Holdings Ltd., and San Ho Electric Machinery Industry Co., Ltd. 8-K 001-36083 10.1 August 26, 2025 10.23 Translation of the Premises Lease Agreement, dated September 1, 2025, between Prime World International Holdings Ltd., Taiwan Branch and International Games System Co., Ltd. 8-K 001-36083 10.1 September 4, 2025 10.24 Lease Agreement, dated September 19, 2025, by and between Applied Optoelectronics, Inc., and Coleman Logistics Assets, LLC 8-K 001-36083 10.1 September 24, 2025 10.25 Translation of the Premise Lease Agreement, dated October 28, 2025, between Prime World International Holdings Ltd., Taiwan Branch and International Games System Co., Ltd. 8-K 001-36083 10.1 November 3, 2025 10.26 Translation of the Approval Notice of Credit Line, dated October 20, 2025 8-K 001-36083 10.1 December 3, 2025 10.26.1 Translation of the General Agreement for Financial Transaction, dated November 27, 2025, between Prime World International Holdings Ltd. and Taishin International Bank 8-K 001-36083 10.2 December 3, 2025 10.26.2 Translation of the Loan Agreement, dated November 27, 2025, between Prime World International Holdings Ltd. and Taishin International Bank 8-K 001-36083 10.3 December 3, 2025 10.26.3 Translation of the Promissory Note, dated November 27, 2025, between Prime World International Holdings Ltd. and Taishin International Bank 8-K 001-36083 10.4 December 3, 2025 62 Table of Contents Incorporated By Reference Number Exhibit Description Form File No. Exhibit Filing Date 19 Applied Optoelectronics, Inc. Insider Trading Policy and Guidelines 10-K 001-36083 19 February 28, 2025 21 Subsidiaries of the registrant S-1 333-190591 21.1 August 13, 2013 23.1 * Consent of Grant Thornton LLP 24.1 Power of Attorney (see the signature page in this Annual Report on Form 10-K). 31.1 * Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. 31.2 * Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. 32.1 * Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. 97 Compensation Recovery Policy 10-K 001-36083 97 February 23, 2024 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. † Management contract, compensatory plan or arrangement. ** Confidential Treatment has been granted for portions of this document. 63 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities and Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. APPLIED OPTOELECTRONICS, INC. By: /s/ Chih-Hsiang (Thompson) Lin Chih-Hsiang (Thompson) Lin , President and Chief Executive Officer and Chairman of the Board of Directors February 26, 2026 64 Table of Contents POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Chih-Hsiang (Thompson) Lin and Stefan J. Murry, and each of them, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities and Exchange Act of 1934, this Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Date /s/ Chih-Hsiang (Thompson) Lin CHIH-HSIANG (THOMPSON) LIN, President, Chief Executive Officer and February 26, 2026 Chairman of the Board of Directors (principal executive officer) /s/ STEFAN J. MURRY STEFAN J. MURRY, Chief Financial Officer February 26, 2026 (principal financial officer and principal accounting officer) Signature Date /s/ WILLIAM H. YEH WILLIAM H. YEH, February 26, 2026 Director /s/ RICHARD B. BLACK RICHARD B. BLACK, February 26, 2026 Director /s/ CHE-WEI LIN CHE-WEI LIN, February 26, 2026 Director /s/ CYNTHIA (CINDY) DELANEY CYNTHIA (CINDY) DELANEY, February 26, 2026 Director /s/ ELIZABETH LOBOA ELIZABETH LOBOA, February 26, 2026 Director /s/ MIN-CHU (MIKE) CHEN MIN-CHU (MIKE) CHEN, February 26, 2026 Director 65 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pages Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Applied Optoelectronics, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Applied Optoelectronics, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of December 31, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, 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, 2025, 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 26, 2026, expressed an unqualified opinion. Basis for opinion 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters Critical audit matters 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. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2008. Houston, Texas February 26, 2026 F-2 Table of Contents Applied Optoelectronics, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands except the par value) December 31, 2025 2024 ASSETS Current Assets: Cash and cash equivalents $ 206,140 $ 67,428 Restricted cash 9,895 11,705 Accounts receivable, net 244,404 116,801 Inventories 183,105 88,135 Prepaid expenses and other current assets 32,183 17,199 Total current assets 675,727 301,268 Property, plant and equipment, net 376,050 219,235 Land use rights, net 4,825 4,837 Operating right of use asset 49,697 9,646 Intangible assets, net 3,623 3,680 Other assets, net 58,501 8,366 TOTAL ASSETS $ 1,168,423 $ 547,032 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 143,932 $ 104,969 Bank acceptance payable 33,363 19,259 Accrued liabilities 42,491 22,091 Current lease liability - operating 3,522 1,380 Current portion of notes payable and long-term debt 33,975 22,370 Total current liabilities 257,283 170,069 Convertible senior notes 129,829 134,497 Non-current lease liability - operating 47,393 9,041 Long-term debt — 4,313 TOTAL LIABILITIES 434,505 317,920 Commitments and contingencies ( Note T) Stockholders' equity: Preferred Stock: 5,000 shares authorized at $ 0.001 par value; no shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively — — Common Stock; 120,000 shares authorized at $ 0.001 par value, 74,998 shares issued and outstanding at December 31, 2025; 80,000 shares authorized at $0.001 par value and, 49,393 shares issued at December 31, 2024, respectively 75 49 Additional paid-in capital 1,224,538 683,462 Accumulated other comprehensive loss ( 617 ) ( 2,548 ) Accumulated deficit ( 490,078 ) ( 451,851 ) TOTAL STOCKHOLDERS' EQUITY 733,918 229,112 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,168,423 $ 547,032 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents Applied Optoelectronics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year ended December 31, 2025 2024 2023 Revenue, net $ 455,715 $ 249,365 $ 217,646 Cost of goods sold 318,802 187,565 158,725 Gross profit 136,913 61,800 58,921 Operating expenses Research and development 85,507 54,955 35,975 Sales and marketing 30,267 18,154 11,069 General and administrative 75,741 59,599 53,226 Total operating expenses 191,515 132,708 100,270 Loss from operations ( 54,602 ) ( 70,908 ) ( 41,349 ) Other income (expense) Interest income 1,792 874 609 Interest expense ( 3,497 ) ( 6,826 ) ( 9,428 ) Other income (expense), net 9,603 ( 109,871 ) ( 5,871 ) Total other income (expense), net 7,898 ( 115,823 ) ( 14,690 ) Loss before income taxes ( 46,704 ) ( 186,731 ) ( 56,039 ) Income tax benefit (expense) 8,476 ( 2 ) ( 9 ) Net loss $ ( 38,228 ) $ ( 186,733 ) $ ( 56,048 ) Net loss per share Basic $ ( 0.64 ) $ ( 4.50 ) $ ( 1.75 ) Diluted $ ( 0.64 ) $ ( 4.50 ) $ ( 1.75 ) Weighted average shares used to compute net loss per share: Basic 60,183,987 41,538,551 31,944,259 Diluted 60,183,987 41,538,551 31,944,259 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents Applied Optoelectronics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Year ended December 31, 2025 2024 2023 Net loss $ ( 38,228 ) $ ( 186,733 ) $ ( 56,048 ) Gain (loss) on foreign currency translation adjustment 1,931 ( 3,523 ) ( 1,208 ) Comprehensive loss $ ( 36,297 ) $ ( 190,256 ) $ ( 57,256 ) The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents Applied Optoelectronics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years ended December 2023, 2024 and 2025 (in thousands) Accumulated Retained Preferred Stock Common Stock Additional other earnings/ Number Number paid-in comprehensive (Accumulated Stockholders' of shares Amount of shares Amount capital gain (loss) deficit) equity 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 ) Net loss — — — — — — ( 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 ) Net loss — — — — — — ( 186,733 ) ( 186,733 ) December 31, 2024 — $ — 49,393 $ 49 $ 683,462 $ ( 2,548 ) $ ( 451,851 ) $ 229,112 Public offering of common stock, net — — 23,750 24 518,891 — — 518,915 Issuance of restricted stock, net of shares withheld for employee tax — — 1,616 2 ( 10,455 ) — — ( 10,453 ) Share-based compensation — — — — 11,710 — — 11,710 Foreign currency translation adjustment — — — — — 1,931 1 1,932 Equity exchanged to shares — — 239 — 3,500 — — 3,500 Warrants contra revenue — — — — 17,430 — — 17,430 Net loss — — — — — — ( 38,228 ) ( 38,228 ) December 31, 2025 — $ — 74,998 $ 75 $ 1,224,538 $ ( 617 ) $ ( 490,078 ) $ 733,918 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents Applied Optoelectronics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2025 2024 2023 Operating activities: Net loss $ ( 38,228 ) $ ( 186,733 ) $ ( 56,048 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Allowance for credit losses 4 ( 2 ) ( 24 ) Inventory reserve adjustment 7,799 3,434 8,728 Depreciation and amortization 27,696 20,649 20,427 Amortization of debt issuance cost and premium ( 1,022 ) 1,430 2,308 Gain on disposal of assets 38 132 51 Share-based compensation 11,710 14,790 11,884 Deferred income tax ( 7,575 ) — — Loss on debt extinguishment — 111,962 — Warrants contra revenue 823 — — Unrealized foreign exchange loss (gain) 272 689 ( 1,313 ) Changes in operating assets and liabilities: Accounts receivable, trade ( 127,597 ) ( 68,512 ) 13,208 Inventories ( 100,722 ) ( 29,412 ) 6,790 Other current assets ( 13,525 ) ( 12,032 ) 1,008 Operating right of use asset ( 40,900 ) ( 5,027 ) 530 Accounts payable 38,963 72,076 ( 14,953 ) Accrued liabilities 26,511 3,827 1,332 Unearned Revenue — ( 1,803 ) ( 1,197 ) Lease liability 41,325 5,006 ( 660 ) Net cash provided by (used in) operating activities ( 174,428 ) ( 69,526 ) ( 7,929 ) Investing activities: Purchase of property, plant and equipment ( 179,148 ) ( 43,406 ) ( 9,079 ) Proceeds from disposal of equipment 5 7 135 Deposits and prepayment for equipment ( 31,082 ) ( 6,792 ) ( 5,229 ) Purchase of intangible assets ( 379 ) ( 506 ) ( 588 ) Net cash used in investing activities ( 210,604 ) ( 50,697 ) ( 14,761 ) Financing activities: Proceeds from line of credit borrowings 61,198 48,676 57,626 Repayments of line of credit borrowings ( 55,011 ) ( 45,029 ) ( 172,005 ) Proceeds from bank acceptance payable 121,407 44,152 57,057 Repayments of bank acceptance payable ( 108,032 ) ( 40,168 ) ( 53,748 ) Payment on issuance convertible Notes ( 81 ) ( 4,620 ) — Process from issuance of convertible senior notes, net of debt issuance cost — — 83,661 Principal payments of financing lease — — ( 63 ) Exercise of stock options — ( 2 ) 22 Payments of tax withholding on behalf of employees related to share-based compensation ( 10,454 ) ( 4,333 ) ( 956 ) Proceeds from common stock offering, net 518,914 146,293 68,984 Cash settlement of share-based compensation — ( 2,790 ) — Net cash provided by financing activities 527,941 142,179 40,578 Effect of exchange rate changes on cash ( 6,007 ) 2,080 1,622 Net increase (decrease) in cash, cash equivalents and restricted cash 136,902 24,036 19,510 Cash, cash equivalents and restricted cash at beginning of period 79,133 55,097 35,587 Cash, cash equivalents and restricted cash at end of period $ 216,035 $ 79,133 $ 55,097 Supplemental disclosure of cash flow information: Cash paid for: Interest $ 2,483 $ 4,940 $ 8,098 Income taxes paid, net of refunds U.S. Federal — — — U.S. State and Local 2 2 1 Foreign — — 8 Non-cash investing and financing activities: Net change in accounts payable related to property and equipment additions $ 4,695 $ 1,061 $ 1,053 Net change in deposits and prepaid for equipment related to property and equipment additions $ ( 15,687 ) $ 79 $ ( 1,297 ) The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents Applied Optoelectronics, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A—ORGANIZATION AND OPERATIONS Applied Optoelectronics, Inc. ("AOI" or the "Company") was incorporated in the State of Texas on February 28, 1997. In March 2013, the Company converted into a Delaware corporation. The Company is a leading, vertically integrated provider of fiber-optic networking products, primarily for four networking end-markets: internet data center, CATV, telecom and FTTH. The Company designs and manufactures a wide range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment. The Company has manufacturing and research and development facilities located in the U.S., Taiwan and China. At its corporate headquarters and manufacturing facilities in Sugar Land, Texas, the Company primarily manufactures lasers and laser components and performs research and development activities for laser component and optical module products. The Company operates in Taipei, Taiwan and Ningbo, China through its wholly-owned subsidiary Prime World International Holdings, Ltd. ("Prime World", incorporated in the British Virgin Islands). Prime World is the parent of Global Technology, Inc. ("Global", incorporated in the People’s Republic of China). Through Global, the Company primarily manufactures certain of its data center transceiver products, including subassemblies and transceivers, as well as Cable TV Broadband ("CATV") systems and equipment, and performs research and development activities for the CATV products. Prime World also operates a branch in Taiwan, which primarily manufactures transceivers. The Company also has a research and development center in Duluth, Georgia. NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Presentation The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries and are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation. 2. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates in the consolidated financial statements and accompanying notes. Significant estimates and assumptions that impact these financial statements relate to, among other things, allowance for doubtful accounts, inventory reserve, product warranty costs, share-based compensation expense, estimated useful lives of property and equipment, and taxes. 3. Foreign Currency Translation The functional currency for the Company’s foreign operations is the local currency. The assets and liabilities of these operations are translated at the rate of exchange in effect on the balance sheet date and sales and expenses are translated at monthly average rates. The resulting gains or losses from translation are included in a separate component of other comprehensive income. There is no tax effect on the foreign currency translation because it is management’s intent to reinvest the undistributed earnings of its foreign subsidiaries indefinitely. Transaction gains and losses resulting from re-measuring monetary asset and liability accounts that are denominated in a currency other than a subsidiary’s functional currency are included in net foreign exchange gain and loss and are included in net income except for those intercompany balances that are long-term investments in nature. The translation gain or losses from the long-term investment nature of intercompany balances are treated as translation adjustments and included in comprehensive income. F- 8 Table of Contents 4. Fair Value 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 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. The fair value measurement standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard characterizes inputs used in determining fair value according to a hierarchy that prioritized inputs based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1—Inputs represent quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3—Inputs that are not observable from objective sources, such as management’s internally developed assumptions used in pricing an asset or liability. Assets and liabilities that are required to be fair valued on a recurring basis include money market funds, marketable securities, equity instruments and contingent consideration. Money market funds are valued with Level 1 inputs, using quoted market prices, and are included in cash and cash equivalents on the Company’s consolidated balance sheets. 5. Cash and Cash Equivalents The Company considers all highly liquid securities with an original maturity of ninety days or less from the date of purchase to be cash equivalents. Cash in foreign accounts was approximately $ 24.5 million and $ 28.5 million at December 31, 2025 and 2024 , respectively. The Company maintains cash and cash equivalents at U.S. financial institutions for which the combined account balances in individual institutions may exceed Federal Deposit Insurance Corporation ("FDIC") insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. As of December 31, 2025 , approximately $ 190.5 million of U.S. deposits were not covered by FDIC insurance. The Company has not experienced any losses and believes it is not exposed to any significant risk with such accounts. 6. Restricted Cash Restricted cash includes guarantee deposits for customs duties and deposits as collateral in order to secure bank acceptance notes issued to vendors. 7. Accounts Receivable/Allowance for Doubtful Accounts The Company carries its accounts receivable at the net amount that it estimates to be collectible. 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. F- 9 Table of Contents 8. Concentration of Credit Risk and Significant Customers Financial instruments which potentially subject the Company to concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company places all cash and cash equivalents with high-credit quality financial institutions. The Company performs ongoing credit valuations of its customers’ financial condition whenever deemed necessary and generally does not require deposits or collateral to support customer receivables. The historical amount of losses on uncollectible accounts has been within the Company’s estimates. The Company generates much of its revenue from a limited number of customers. In 2025, 2024 and 2023 , its top five customers represented 95.2 %, 92.9 % and 85.6 % of its revenue, respectively. In 2025 , Digicomm and Microsoft represented 53.1 % and 28.8 % of its revenue, respectively. In 2024, Microsoft, Digicomm and Oracle represented 43.7 %, 35.1 % and 12.4 % of its revenue, respectively. The five largest receivable balances for customers represented an aggregate of 94.0 % and 95.5 % of total accounts receivable at December 31, 2025 and 2024 , respectively. As of December 31, 2025 , Digicomm represented 71.6 % of total accounts receivable and Microsoft represented 13.9 % of total accounts receivable. As of December 31, 2024, Digicomm represented 66.6 % of total accounts receivable and Microsoft represented 16.8 % of total accounts receivable . No other customer represented greater than ten percent of revenue in 2025 or 2024 had greater than ten percent of total accounts receivable at December 31, 2025 or 2024. 9. Inventories Inventories are stated at the lower of cost (average-cost method) or net realizable value. Work in process and finished goods includes materials, labor and allocated overhead. The Company assesses the valuation of its inventory on a periodic basis and provides write-offs for the value of estimated excess and obsolete inventory based on estimates of future demand. Inventory reserves are recorded to account for the excess and obsolete inventory combined with the lower of cost or net realizable value assessments. To develop the reserve, the Company developed certain percentages that determine the extent of inventory reserve adjustments based on the age of the inventory. Such percentages were determined through analysis of the inventory to determine each product's lifespan, a review historical write-offs or scrapped inventory, and an assessment by product engineers of the possibility of obsolescence for each product. 10. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. The Company calculates depreciation using the straight-line method over the following estimated useful lives: Useful lives (in years) Buildings 20 - 42 Land improvements 10 Machinery and equipment 2 - 20 Furniture and fixtures 3 - 7 Computer equipment and software 3 - 10 Leasehold improvements The shorter of the life of the applicable lease or the useful life of the improvement Transportation equipment 5 Major improvements are capitalized and expenditures for maintenance and repairs are expensed as incurred. Construction in progress represents property, plant and equipment under construction or being installed. Costs include original cost, installation, construction and other direct costs which include interest on borrowings used to finance the asset. Construction in progress is transferred to the appropriate fixed asset account and depreciation commences when the asset has been substantially completed and placed in service. Land use rights allow the Company rights for 50 years to certain land in Ningbo, China on which the Company built a facility that included office space, manufacturing operations and employee dormitories. The land use rights are recorded at cost and are amortized on the straight-line basis over the useful life of the related contract. The land use rights expire on October 7, 2054 and December 28, 2067. F- 10 Table of Contents 11. Intangible Assets Intangible assets consist of intellectual property that is stated at cost less accumulated amortization. As of December 31, 2025 , the Company had 349 total patents issued. The costs incurred to obtain such patents have been capitalized and are being amortized over an estimated life between 10 and 20 years. The Company periodically evaluates its intangible assets to determine whether events or changes in circumstances indicate that a patent or trademark may not be applicable to the Company’s current products or is no longer in use. If such a determination is made, the intangible asset is impaired and the remaining value of the patent or trademark will be expensed at that time. 12. Impairment of Long-Lived Assets The Company accounts for impairment of long-lived assets in accordance with Accounting Standards Codification ("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. In accordance with ASC 360, 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. Examples of such triggering events include a significant disposal of a portion of such assets, an adverse change in the market involving the business employing the related asset, a significant decrease in the benefits realized from an acquired business, difficulties or delays in integrating the business, and a significant change in the operations of an acquired business. If such 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 fair value, based on reasonable and supportable assumptions and projections, require subjective judgments. Depending on the assumptions and estimates used, the appraised fair value projected in the evaluation of long-lived assets can vary within a range of outcomes. The Company considers the likelihood of possible outcomes in determining the best estimate for the fair value of the assets. The Company did not record any asset impairment charges in 2025 , 2024 or 2023. 13. Comprehensive Income (Loss) ASC 220, Comprehensive Income, ("ASC 220" ) establishes rules for reporting and display of comprehensive income (loss) and its components. ASC 220 requires that unrealized gains and losses on the Company’s foreign currency translation adjustments be included in comprehensive income (loss). 14. Share-based Compensation The Company accounts for share-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation. Share-based compensation expense is recognized based on the grant date fair value in order to recognize compensation cost for those shares expected to vest. Compensation cost is recognized on a straight-line basis over the vesting period of the restricted stock units and adjusted as forfeitures occur. 15. Revenue Recognition The Company derives revenue from the manufacture and sale of fiber optic networking products. Revenue recognition follows the criteria of ASC 606, Revenue from Contracts with Customers. Specifically, the Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally this occurs with the transfer of control of products or services at point of time or over times. When the Company receives payments and its obligations to customers are not satisfied, the Company will recognize the payment as Unearned Revenue from customers. F- 11 Table of Contents 16. Product Warranty The Company generally offers a one -year limited warranty for its products but it can extend for longer periods of three to five years for certain products sold to certain customers. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability for the amount of such costs at the time when product defects occur. Factors that affect the Company’s warranty liability include the historical and anticipated rates of warranty claims and cost to repair. While the Company believes that its warranty accrual is adequate, the actual warranty costs may exceed the accrual, in which case the cost of sales will increase in the future. As of December 31, 2025 and 2024 , the amount of accrued warranty was $ 0.48 million and $ 0.28 million, respectively. Changes in products warranty were as follows (in thousands): Year ended December 31, 2025 2024 Beginning Balance, January 1 $ 277 $ 255 Warranty costs incurred ( 54 ) ( 63 ) Provision for warranty 257 85 Ending Balance, December 31 $ 480 $ 277 17. Advertising Costs Advertising costs are charged to operations as incurred and amounted to approximately $ 1.9 million, $ 1.1 million and $ 0.8 million for the years ended December 31, 2025, 2024 and 2023 , respectively. 18. Research and Development Research and development costs are charged to operations as incurred. The Company receives reimbursement for certain development costs, which offset with expense up to the reimbursable amount. 19. Shipping and Handling Costs Shipping and handling costs are included in operating expenses as fulfillment costs unless we bill our customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales. 20. Income Taxes The Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes. The liability method is used to account for deferred income taxes. Under the liability method, deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The ability to realize deferred tax assets is evaluated annually and a valuation allowance is provided if it is unlikely that the deferred tax assets will not give rise to future benefits in the Company’s tax returns. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two -step process in which ( 1 ) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and ( 2 ) for those tax positions that meet the more-likely-than- not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet. 21. Government Grant The Company receives incentives from local governments in China that encourage us to establish, maintain, or increase investment, employment, or production in the region. Because there is no direct applicable U.S. GAAP guidance that addresses the recognition and measurement of government assistance received by a business entity, U.S. GAAP allows for the adoption of other analogous accounting guidance under ASC 958 - 605 ( Not -for-Profit Entities – Revenue Recognition). The Company accounts for the grant as other income based on the substance of the incentive received when the conditions associated with the grant are substantially met and collection is reasonably assured. F- 12 Table of Contents 22. Global Intangible Low-taxed Income Provisions ("GILTI") One of the base broadening provisions of the U.S. Tax Cuts and Jobs Act of 2017 ("the 2017 Act") is the global intangible low-taxed income provisions ("GILTI"). In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the fiscal years ended December 31, 2025, December 31, 2024, and December 31, 2023, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense. 23. Recent Accounting Pronouncements Recent Accounting Pronouncements Adopted in 2025 In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures, which requires the Company to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation, income taxes paid and other income tax related amounts. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The adoption is expected to enhance the Company's Notes to the Consolidated Financial Statements. We adopted this ASU on a prospective basis effective January 1, 2025. Refer to Note O, Income Taxes for the inclusion of new disclosures required. 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 September 2025, the FASB issued ASU No. 2025 - 06, Intangibles—Goodwill and Other—Internal-Use Software, which modernizes the accounting for internal-use software and clarifies capitalization criteria. The updated standard is effective for us beginning with our interim and annual reporting periods of fiscal 2029. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our Consolidated Financial Statements. In December 2025, the FASB issued ASU 2025 - 10 to establish the accounting fo r a government grant rece ived by a business entity including guidance for ( 1 ) a grant related to an asset and ( 2 ) a grant related to income. For public business entities, the provisions of ASU 2025 - 10 are effective for fiscal years beginning after December 15, 2028. Early adoption is permitted. Management is currently evaluating the requirements under this new standard and does not expect the adoption to have a material impact on the Company's results of operations or financial condition. In December 2025, the FASB issued ASU No. 2025 - 11, Interim Reporting (Topic 270 ): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements. In December 2025, the FASB issued ASU No. 2025 - 12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that ( 1 ) clarify, ( 2 ) correct errors, or ( 3 ) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements. There have been no other recent accounting pronouncements or changes in accounting pronouncements during fiscal 2025 that are of significance or potential significance to us. F- 13 Table of Contents NOTE C—REVENUE RECOGNITION Revenue from Contracts with Customers The Company derives revenue from the manufacture and sale of fiber optic networking products. Revenue is recognized when obligations under the terms of a contract with its customer are satisfied; generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. Certain customers may receive cash and/or non-cash incentives, which are accounted for as variable consideration. To achieve this core principle, the Company applies the following five steps: 1. Identify the contract with a customer A contract with a customer exists when (i) the Company enters into an agreement with a customer that defines each party's rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) both parties to the contract are committed to perform their respective obligations, (iii) the contract has commercial substance, and (iv) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's payment history or, in the case of a new customer, published credit and financial information pertaining to the customer. 2. Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised products or services, the Company must apply judgment to determine whether promised products or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised products or services are accounted for as a combined performance obligation. The Company has elected to account for shipping and handling activities as a fulfillment cost as permitted by the standard. 3. Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. To the extent the transaction price is variable, revenue is recognized at an amount equal to the consideration to which the Company expects to be entitled. This estimate includes customer sales incentives which are accounted for as a reduction to revenue and estimated using either the expected value method or the most likely amount method, depending on the nature of the program. The Company will adjust its consideration for any rebates if it is more likely than not that the rebate conditions will be met. 4. Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price for each performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. In cases where there is no directly observable stand alone selling price, allowable estimation methods are used. For example for contracts involving non-recurring engineering, an expected cost plus margin approach has typically been adopted to estimate the standalone selling price. F- 14 Table of Contents 5. Recognize revenue when or as the Company satisfies a performance obligation For product sales, the Company generally satisfies performance obligations at a point in time, most often upon shipment of a product to the customer or delivery of the product to the customer. In the case of such point in time satisfaction of a performance obligation, r evenue is recognized based on the transaction price at the time the related performance obligation is satisfied. For service obligations, the Company generally recognizes revenue over time. The most common type of service obligation encountered by the Company is an arrangement involving non-recurring engineering in which service revenue is typically recognized over time under either the time and material practical expedient, as the Company has a right to consideration from a customer, in an amount that corresponds directly with the value to the customer of the Company's performance completed to date, or under the output method, for example using contract-specific milestones or other objective measures of progress. Disaggregation of Revenue Revenue is classified based on the location of where the product is manufactured. For additional information on the disaggregated revenues by geographical region, see Note R, "Segments and Geographic Information." Revenue is also classified by major product category and is presented below (in thousands): Years ended December 31, % of % of % of 2025 Revenue 2024 Revenue 2023 Revenue CATV $ 245,124 53.8 % $ 87,713 35.2 % $ 59,942 27.5 % Data Center 195,651 42.9 % 148,525 59.5 % 141,213 64.9 % Telecom 13,729 3.0 % 10,980 4.4 % 13,831 6.4 % FTTH and other 1,211 0.3 % 2,147 0.9 % 2,660 1.2 % Total Revenue $ 455,715 100.0 % $ 249,365 100.0 % $ 217,646 100.0 % Customer Warrant On March 13, 2025, the Company issued a warrant (the "Customer Warrant") to a wholly-owned subsidiary of Amazon.com, Inc. to purchase up to an aggregate of 7,945,399 shares of the Company's common stock ("Warrant Shares") at an exercise price of $ 23.6956 per share. The Customer Warrant has a contractual term of 10 years. At the time of the issuance, the Customer Warrant is exercisable to purchase 1,324,233 Warrant Shares. The remaining 6,621,166 Warrant Shares may vest over the next 10 years, dependent on aggregate purchases by or on behalf of Amazon and its affiliates of $ 4 billion of the Company's products over this time period. The Company accounts for the Customer Warrant as an equity classified share-based consideration to a customer and will recognize the grant-date fair value of the Customer Warrant as a reduction of revenue from Amazon as the related goods or services are transferred. The grant date fair value of the Customer Warrant was determined to be $ 12.64 per share, using the Black-Scholes-Merton option pricing model. The per share grant date fair value of the Customer Warranty was estimated using the following assumptions: At Grant Date Expected volatility 80.00 % Weighted-average expected term (in years) 10 Risk-free interest rate 4.23 % Dividend yield - % Fair Value per ordinary share at grant date 15.87 For the year ended December 31, 2025, the Company recognized approximately $ 33.1 million of revenue associated with customer arrangements that included the issuance of warrants. The impact of these arrangements on the Company's consolidated financial statements was not material for the periods presented. As of December 31, 2025, the Company recorded other current asset of $ 1.0 million and other noncurrent asset of $ 15.0 million, representing the aggregate grant-date fair value of 1,324,233 Warrant Shares vested at the issuance. F- 15 Table of Contents NOTE D— Leases The Company leases space under non-cancellable operating leases for manufacturing facilities, research and development offices and certain storage facilities and apartments. These leases do not contain contingent rent provisions. 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. fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g. common-area or other maintenance costs) which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. Several of the leases include one or more options to renew which have been assessed and either included or excluded from the calculation of the lease liability of the right-of-use ("ROU") asset based on management’s intentions and individual fact patterns. 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 entered into a Land and Building Lease Agreement with San Ho Enterprise Co., Ltd. ("San Ho Enterprise"), under which Prime World will lease approximately 38,072 square feet of two adjoining parcels of land, in New Taipei City. The lease also included a building on these parcels, totaling approximately 36,662 square feet. 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, preceded the lease term, during which no rent was charged by San Ho Enterprise. During the lease term, the monthly rent will increase by three percent ( 3 %) every three years. On June 7, 2025, Prime World entered into a Land and Building Lease Agreement with San Ho Electric Machinery Industry Co., Ltd. ("San Ho Electric") in Taoyuan City. On August 20, 2025, Prime World terminated the lease with San Ho Electric and agreed to pay a termination fee in full settlement of rent, fees, damages and other amounts arising from the early termination of the lease. On September 1, 2025, Prime World entered into a Lease Agreement with International Games System Co., Ltd., under which Prime World will lease a parcel of land with a total area of approximately 65,580 square feet, in New Taipei City. The lease includes a building on the parcel, totaling approximately 346,212 square feet, excluding approximately 54,086 square feet of the leased property which, at the time, had previously been leased to an existing tenant. The lease term is for fifteen years, commencing November 1, 2025, and ending October 31, 2040. A two -month renovation period from September 1 to October 1, 2025, preceded the lease term, during which no rent was charged. During the lease term, the monthly rent will increase by three percent ( 3 %) every five years. On October 28, 2025, Prime World entered into a lease to include the first floor which was previously excluded in the leased entered into on September 1, 2025. On September 19, 2025, the Company entered into a Lease Agreement with Coleman Logistics Assets LLC ("Coleman"), pursuant to which the Company will lease approximately 209,665 square feet of space located at 1111 Gillingham Lane, Sugar Land, Texas 77478. The leased premises will be used by the Company primarily for manufacturing and related operations. The lease has a term of 126 months, commencing on the earlier of (i) the date the Company commences manufacturing operations within the leased premises, (ii) the date on which the leasehold improvements are substantially completed, or (iii) March 31, 2026, and expiring approximately 126 months thereafter, unless earlier terminated in accordance with the lease. Coleman has agreed to provide a construction allowance toward the cost of leasehold improvements in an amount equal to the lesser of (i) the actual aggregate cost of such improvements or (ii) $ 1,886,985 . Base rent under the lease is abated for the first seven months of the term and thereafter increases on a scheduled basis through the end of the term, reflecting an average annual escalation of approximately 3.5 %. Beginning in the eighth month of the term, base rent will be $ 7.44 per rentable square foot on an annual basis (approximately $ 129,992 per month), escalating periodically to $ 10.49 per rentable square foot on an annual basis (approximately $ 183,367 per month) during the final six months of the term. Although the lease agreement was executed prior to December 31, 2025, the lease had not yet commenced as of that date, as Coleman is currently completing required improvements to the leased premises. The lease will commence in 2026, at which time the Company will recognize a ROU asset and a corresponding lease liability on its consolidated balance sheet. The total undiscounted lease payments over the initial lease term are approximately $ 21.9 million, which will be recognized upon lease commencement. No ROU asset or lease liability related to this agreement has been recorded as of December 31, 2025. 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. Based on the applicable lease terms and current economic environment, the Company applies a location approach for determining the incremental borrowing rate. F- 16 Table of Contents Lease expense is included under general and administrative expenses and was $ 4.0 million, $ 1.4 million and $ 1.2 million for the years ended December 31, 2025, 2024 and 2023 , respectively. The Components of lease expense were as follows for the periods indicated (in thousands): Year ended December 31, Year ended December 31, 2025 2024 Operating lease expense $ 3,036 $ 1,282 Short Term lease expense 1,000 112 Total lease expense $ 4,036 $ 1,394 Maturities of lease liabilities are as follows for the future one -year periods ending December 31, ( in thousands): Total 2026 $ 5,190 2027 5,303 2028 5,458 2029 4,823 2030 4,404 2031 and thereafter 37,976 Total lease payments $ 63,154 Less imputed interest ( 12,239 ) Present value $ 50,915 The weighted average remaining lease term and discount rate for operating leases were as follows for the periods indicated: December 31, December 31, 2025 2024 Weighted Average Remaining Lease Term (Years) - operating leases 13.42 10.81 Weighted Average Discount Rate - operating leases 3.40 % 3.11 % Supplemental cash flow information related to operating leases was as follows for the periods indicated (in thousands): Year ended December 31, Year ended December 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,309 $ 1,286 Right-of-use assets obtained in exchange for new operating lease liabilities $ 40,955 $ 5,934 NOTE E—CASH, CASH EQUIVALENTS AND RESTRICTED CASH The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet that sum to the total of the same such amounts in the statement of cash flows (in thousands): December 31, December 31, 2025 2024 Cash and cash equivalents $ 206,140 $ 67,428 Restricted cash 9,895 11,705 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 216,035 $ 79,133 F- 17 Table of Contents 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, 2025 and 2024 , there was $ 8.7 million and $ 8.5 million of restricted cash required for bank acceptance notes issued to vendors, respectively. There were $ 1.2 million and $ 0.7 million guarantee deposits for customs duties as of December 31, 2025 and December 31, 2024 . NOTE F—EARNINGS PER SHARE Basic net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. 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. Therefore, basic and dilutive earnings per share are the same. The following table presents the computation of the basic and diluted net loss per share for the periods indicated (in thousands): Year ended December 31, 2025 2024 2023 Numerator: Net loss $ ( 38,228 ) $ ( 186,733 ) $ ( 56,048 ) Denominator: Weighted average shares used to compute net loss per share Basic 60,184 41,539 31,944 Effect of dilutive options and restricted stock units — — — Diluted 60,184 41,539 31,944 Net loss per share Basic $ ( 0.64 ) $ ( 4.50 ) $ ( 1.75 ) Diluted $ ( 0.64 ) $ ( 4.50 ) $ ( 1.75 ) The following potentially dilutive securities were excluded from diluted net loss per share as their effect would have been antidilutive (in thousands): As of December 31, 2025 2024 Restricted stock units 2,335 2,709 Shares for Notes 2026 140 5,153 Shares for Notes 2030 2,886 63 Total antidilutive shares 5,361 7,925 NOTE G—INVENTORIES At December 31, 2025 and 2024 , inventories consisted of the following (in thousands): As of December 31, 2025 2024 Raw materials $ 85,740 $ 50,379 Work in process and sub-assemblies 95,538 35,716 Finished goods 18,822 17,291 Allowance for inventory ( 16,995 ) ( 15,251 ) Total inventory $ 183,105 $ 88,135 For the years 2025, 2024 and 2023 , the inventory reserve adjustment expensed for inventory was $7.8million, $ 3.4 million and $ 8.7 million, respectively. For the years December 31, 2025, 2024 and 2023 , the direct inventory write-offs related to scrap, discontinued products, and damaged inventories were $ 9.3 million, $ 3.7 million and $ 10.6 million, respectively. F- 18 Table of Contents NOTE H—PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following for the periods indicated (in thousands): December 31, 2025 December 31, 2024 Land improvements $ 806 $ 806 Building and improvements 138,163 118,648 Machinery and equipment 404,145 275,617 Furniture and fixtures 6,974 5,150 Computer equipment and software 17,180 13,369 Transportation equipment 786 647 568,054 414,237 Less accumulated depreciation and amortization ( 232,913 ) ( 204,500 ) 335,141 209,737 Construction in progress 39,808 8,397 Land 1,101 1,101 Total property, plant and equipment, net $ 376,050 $ 219,235 For the years ended December 31, 2025, 2024 and 2023 , depreciation expense of property, plant and equipment was $ 27.2 million, $ 20.2 million and $ 19.7 million, respectively. For the years ended December 31, 2025, 2024 and 2023 , there was no capitalized interest. As of December 31, 2025 , the Company concluded that its continued loss history constitutes a triggering event as described in ASC 360 - 10 - 35 - 21, Property, Plant, and Equipment . The Company performed a recoverability test and concluded that future undiscounted cash flows exceed the carrying amount of the Company’s long-lived assets and therefore no impairment charge was recorded. NOTE I—INTANGIBLE ASSETS Intangible assets consisted of the following for the periods indicated (in thousands): December 31, 2025 Gross Accumulated Intangible Amount amortization assets, net Patents $ 10,263 $ ( 6,797 ) $ 3,466 Trademarks 243 ( 86 ) 157 Total intangible assets $ 10,506 $ ( 6,883 ) $ 3,623 December 31, 2024 Gross Accumulated Intangible Amount amortization assets, net Patents $ 9,873 $ ( 6,355 ) $ 3,518 Trademarks 218 ( 56 ) 162 Total intangible assets $ 10,091 $ ( 6,411 ) $ 3,680 For the years ended December 31, 2025, 2024 and 2023 , amortization expense for intangible assets, included in general and administrative expenses on the income statement, was $ 0.4 million, $ 0.4 million and $ 0.7 million, respectively. The remaining weighted average amortization period for intangible assets is approximately 8.7 years. F- 19 Table of Contents At December 31, 2025 , future amortization expense for intangible assets is estimated to be (in thousands): December 31, 2025 2026 $ 467 2027 467 2028 467 2029 467 2030 467 Thereafter 1,288 Total $ 3,623 NOTE J—FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents a summary of the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2025 (in thousands): Quoted prices Significant in active other markets for observable Significant identical remaining unobservable assets (Level 1) inputs (Level 2) inputs (Level 3) Total Assets: Cash and cash equivalents $ 206,140 $ — $ — $ 206,140 Restricted cash 9,895 — — 9,895 Total assets $ 216,035 $ — $ — $ 216,035 Liabilities: Bank acceptance payable — $ 33,363 — $ 33,363 Convertible senior notes — 145,231 — 145,231 Total liabilities $ — $ 178,594 $ — $ 178,594 The following table presents a summary of the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2024 (in thousands): Quoted prices Significant in active other markets for observable Significant identical remaining unobservable assets (Level 1) inputs (Level 2) inputs (Level 3) Total Assets: Cash and cash equivalents $ 67,428 $ — $ — $ 67,428 Restricted cash 11,705 — — 11,705 Note receivable — — — — Total assets $ 79,133 $ — $ — $ 79,133 Liabilities: Bank acceptance payable — $ 19,259 — $ 19,259 Convertible senior notes — 148,625 — 148,625 Total liabilities $ — $ 167,884 $ — $ 167,884 F- 20 Table of Contents NOTE K—NOTES PAYABLE AND LONG-TERM DEBT Notes payable and long-term debt consisted of the following for the periods indicated (in thousands): December 31, 2025 December 31, 2024 Revolving line of credit with a China bank up to $ 23.6 million with interest from 4.00 % to 4.35 %, terminated on June 18, 2025 $ - $ 13,466 Revolving line of credit with a China bank up to $ 35.6 million with interest of 2.6 %, maturing July 29, 2030 20,203 — Credit facility with a China bank up to $ 27.8 million with interest of 4.00 % to 4.35 %, terminated on July 23, 2025 — 13,216 Revolving line of credit with a China bank up to $ 35.6 million with interest at 2.45 % to 2.95 %, maturing June 26, 2030 13,772 — Sub-total 33,975 26,682 Less debt issuance costs, net — — Grand total 33,975 26,682 Less current portion ( 33,975 ) ( 22,369 ) Non-current portion $ - $ 4,313 Bank Acceptance Notes Payable Bank acceptance notes issued to vendors with a zero percent interest rate $ 33,363 $ 19,260 The current portion of long-term debt is the amount payable within one year of the balance sheet date of December 31, 2025 . SPD Credit Line On May 24, 2024, Global entered into a five -year revolving credit line with Shanghai Pudong Development Bank Co., Ltd. ("SPD"), totaling 170,000,000 RMB (the "SPD Credit Line") or approximately $ 23.9 million at that time. On June 18, 2025, Global used the CCB Credit Facility, as described hereinbelow, to repay certain amounts outstanding under the SPD Credit Line. Upon repayment, Global terminated the SPD Credit Line effective June 18, 2025. On July 18, 2025, Global entered into a one -year credit facility with SPD, totaling 82,000,000 RMB (the "¥82M Credit Facility"), or approximately $ 11.4 million at that time. Borrowing under the ¥82M Credit Facility was used to repay the Company’s outstanding loans with China Zheshang Bank Co., Ltd., and for general corporate and capital investment purposes. On July 29, 2025, Global entered into a five -year revolving credit line agreement with SPD in Ningbo City, China, totaling 250,000,000 RMB (the "¥250M SPD Credit Line"), or approximately $ 34.9 million at that time, and a mortgage contract. Borrowing under the ¥250M SPD Credit Line will be used for general corporate and capital investment purposes. Any credit previously extended by SPD will be applied against the available amount under the ¥250M SPD Credit Line, inclusive of the ¥82M Credit Facility. Global's obligation under the ¥250M SPD Credit Line is secured by certain real property owned by Global. As of December 31, 2025, $ 20.2 million was outstanding under the ¥250M SPD Credit Line, and the outstanding balance of bank acceptance notes issued to vendors was $19.7 million. The unused credit was $ 1.5 million as of December 31, 2025. CZB Loan On June 7, 2022, Global entered into 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 at that time. On July 23, 2025, Global used the ¥82M Credit Facility, as described hereinabove, to repay certain amounts outstanding under the ¥200M Credit Facility. Upon repayment, Global terminated the ¥200M Credit Facility effective July 23, 2025. As of December 31, 2025, the outstanding balance of bank acceptance notes issued to vendors was $ 2.8 million. The unused credit was $ 0.7 million as of December 31, 2025. F- 21 Table of Contents CCB Loan On June 12, 2025, Global entered into a one -year credit facility with China Construction Bank Co., Ltd., in Ningbo, City, China ("CCB"), totaling 96,800,000 RMB (the "CCB Credit Facility"), or approximately $ 13.5 million at that time. On June 26, 2025, Global entered into a five -year revolving credit line agreement with CCB, totaling 162,260,000 RMB (the "CCB Credit Line"), or approximately $ 22.7 million at that time. The amount available under the CCB Credit Line is inclusive of the CCB Credit Facility previously granted by CCB on June 12, 2025.On December 19, 2025, the CCB Credit Line was increased to 250,000,000 RMB. Global's obligation under the CCB Credit Line is secured by certain real property owned by Global. As of December 31, 2025, $ 13.8 million outstanding under the CCB Credit Line, and the outstanding balance of bank acceptances notes issued to vendors was $ 10.8 million. The unused credit was $ 13.2 million as of December 31, 2025. Taishin Loan On November 27, 2025, Prime World entered into a credit facility with Taishin International Bank in Taiwan, consisting of a NT$100,000,000 line of credit (the "NT$100M Credit Line") and a US$2,000,000 line of credit (the "US$2M Credit Line"), collectively, with the NT$100M Credit Line, the "Taishin Credit Facility"). Prime World may utilize the Taishin Credit Facility from November 27, 2025 through October 31, 2026. Borrowings under the NT$100M Credit Line may be drawn as short-term loans, while the US$2M Credit Line is a derivatives-based facility and may be used by Prime World to entered into foreign exchange hedging transactions. As of December 31, 2025, $ 0 was outstanding under the Taishin Credit Facility. BOKF Loan On July 31, 2025, the Company entered into a Loan and Security Agreement (the "BOKF Credit Facility") with BOKF, NA dba BOK Financial, as agent for secured parties. The BOKF Credit Facility provides the Company with a three -year, $ 35 million revolving line of credit, with the ability to request additional lender commitments in an aggregate amount not to exceed $ 40 million (for a total aggregate amount of $ 75 million) pursuant to certain conditions. As of December 31, 2025, $ 0 was outstanding under the BOKF Credit Facility. As of December 31, 2025 and December 31, 2024, the Company had $ 60.7 million and $ 24.8 million of unused borrowing capacity, respectively. As of December 31, 2025 and December 31, 2024, there was $ 8.7 million and $ 8.5 million of restricted cash, investments or security deposits associated with the loan facilities, respectively. NOTE L—C onvertible Senior Notes On March 5, 2019, the Company issued $ 80.5 million of 5 % convertible senior notes due 2024 (the "2024 Notes"). 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 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. F- 22 Table of Contents 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"). The Exchanges closed on December 23, 2024. We recorded a debt extinguishment loss of $ 112.0 million due to these Exchanges. There was $ 3.5 million principal amount for the 2026 Notes remaining. On July 30, 2025, the Company retired the final $ 3.5 million principal and accrued and unpaid interest on the 2026 Notes by exchanging such outstanding principal for 239,404 shares of the Company's common stock and by paying the accrued and outstanding interest in cash. The 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. The 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. The 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, 2025 2026 Notes Principal Amount $ — Unamortized debt issuance costs — Net carrying amount for 2026 Notes — 2030 Notes Principal Amount 125,000 Premium upon issuance 8,376 Unamortized debt issuance costs ( 3,547 ) Net carrying amount for 2030 Notes 129,829 Total net carry amount $ 129,829 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). 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. F- 23 Table of Contents 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 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. Calling any 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 t i s converted 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 2030 Notes for cash on a date of the Company’s choosing, which must be a business day that is no more than 35, nor less than 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 2030 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the repurchase 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). Moreover, if the Company undergoes a fundamental change, as described in the Indenture, holders of the 2030 Notes 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. 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 for the periods indicated (in thousands): Year ended December 31, 2025 2024 Contractual interest expense $ 1,397 $ 4,222 Amortization of debt issuance costs 954 1,466 Total interest cost $ 2,351 $ 5,688 Effective interest rate 1.0 % 5.3 % F- 24 Table of Contents NOTE M—ACCRUED LIABILITIES Accrued liabilities consisted of the following for the periods indicated (in thousands): December 31, 2025 December 31, 2024 Accrued payroll $ 28,384 $ 13,136 Accrued employee benefits 5,506 4,014 Accrued state and local taxes 965 824 Accrued interest 1,599 114 Accrued shipping and tariff expenses 516 803 Advance payments 288 188 Accrued commission 1,381 768 Accrued professional fees 581 406 Accrued product warranty 480 277 Accrued other 2,791 1,561 Total accrued liabilities $ 42,491 $ 22,091 NOTE N—OTHER INCOME AND EXPENSE Other income and expense consisted of the following for the periods indicated (in thousands): Year ended December 31, 2025 2024 2023 Foreign exchange transaction gain $ 2,039 $ 144 $ 711 Government subsidy income 4,866 395 937 Loss on disposal of assets ( 38 ) ( 132 ) ( 51 ) Loss on debt extinguishment — ( 111,962 ) — Other non-operating gain (loss) 2,736 1,684 ( 7,468 ) Total other income (expense), net $ 9,603 $ ( 109,871 ) $ ( 5,871 ) NOTE O—INCOME TAXES The sources of the Company’s loss from operations before income taxes were as follows for the periods indicated (in thousands): Years ended December 31, 2025 2024 2023 Domestic $ ( 81,667 ) $ ( 181,701 ) $ ( 52,886 ) Foreign 34,963 ( 5,030 ) ( 3,153 ) Total loss before income taxes $ ( 46,704 ) $ ( 186,731 ) $ ( 56,039 ) F- 25 Table of Contents The provision for income tax expense (benefit) for the years ended December 31, was as follows (in thousands): Current: 2025 2024 2023 Federal $ — $ — $ — State 2 2 1 Foreign — — 8 Total $ 2 $ 2 $ 9 Deferred: Federal $ — $ — $ — State — — — Foreign ( 8,478 ) — — Total $ ( 8,478 ) $ — $ — Income tax (benefit) expense $ ( 8,476 ) $ 2 $ 9 Deferred income tax assets and liabilities result principally from net operating losses, different methods of recognizing depreciation, reserves for doubtful accounts and inventory, research and development credits and foreign tax credits. At December 31, the net deferred tax assets and liabilities are comprised of the following approximate amounts (in thousands): 2025 2024 NOL carryforward $ 79,264 $ 59,788 Inventory reserves 3,261 3,700 Unrealized gains and losses 237 221 Share-based compensation 1,724 1,332 Foreign tax credit 4,599 4,599 Research and development credits 14,874 12,508 Capitalized research and development — 14,449 Interest 5,587 4,465 ASC 842 Assets 931 1,515 Other 1,391 995 Deferred tax assets 111,868 103,572 Less valuation allowance ( 95,753 ) ( 94,996 ) Deferred tax assets, net 16,115 8,576 Depreciation and amortization ( 7,812 ) ( 7,216 ) ASC 842 Liabilities ( 687 ) ( 1,360 ) Deferred tax liabilities ( 8,499 ) ( 8,576 ) Deferred tax assets, net $ 7,616 $ — The Company has a U.S. net operating loss carry forward of approximately $ 250.6 million, $ 33.6 million of which, if unused, expires between 2026 and 2032 and $ 217.0 million of which, can be carried forward indefinitely. The Company has U.S. and state research and development tax credits of $ 14.9 million, which, if unused, expire between 2028 and 2044. In addition, the Company has foreign tax credits of $ 4.6 million, which, if unused, will expire in 2028. Utilization of U.S. net operating losses and tax credit carry forwards are subject to an annual limitation due to the ownership change limitations set forth in Internal Revenue Code Section 382. As of December 31, 2025, the Company had Taiwan net operating loss carry forwards of approximately $ 86.2 million and China net operating loss carry forwards of approximately $ 40.4 million. The carryforward period for the Taiwan net operating loss carry forwards is ten years, and the expiration period begins 2028. The carryforward period for China net operating loss carry forwards is ten years, and the expiration period begins 2029. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three -year period ended December 31, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. F- 26 Table of Contents On the basis of this evaluation, as of December 31, 2025 and December 31, 2024, a valuation allowance of $ 95.8 million and $ 95.0 million, respectively, has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. The following table shows the change in the deferred tax valuation allowance as follows: 2025 2024 2023 Beginning Balance, January 1 $ 94,996 $ 78,124 $ 69,680 Change charged to expense/(income) 763 15,727 8,755 Change charged to currency translation adjustment ( 162 ) 1,145 ( 311 ) Other adjustment 156 — — Ending Balance, December 31 $ 95,753 $ 94,996 $ 78,124 The expense (benefit) for income taxes differs from the amount that would result by applying the applicable federal income tax rate to income before income taxes, as follows (in thousands): Amount Percentage U.S. federal statutory tax rate $ ( 9,808 ) 21.0 % State and local income tax, net of federal income tax effect 2* 0.0 % Foreign tax effects China Statutory tax rate difference ( 2,440 ) 5.2 % Changes in valuation allowances ( 11,990 ) 25.7 % R&D super deduction ( 2,537 ) 5.5 % Other ( 50 ) 0.1 % Taiwan Changes in valuation allowances 1,559 ( 3.3 % ) Prior Period Adjustments ( 596 ) 1.3 % Other 236 ( 0.5 % ) Effect of cross-border tax laws GILTI 9,139 ( 19.6 % ) Tax credits Research and development credit ( 2,366 ) 5.1 % Changes in valuation allowances 11,194 ( 25.2 % ) Nontaxable or nondeductible items Share-based compensation ( 1,225 ) 3.8 % Other 146 ( 0.3 % ) Other adjustments 260 ( 0.6 % ) Effective tax rate $ ( 8,476 ) 18.2 % *State and Local taxes includes the effects of changes in valuation allowance. No individual state made up the majority of the tax effect in this category. F- 27 Table of Contents As previously disclosed for the years ended December 31, 2024 and 2023, prior to adoption of ASU 2023 - 09, the effective income tax rate differs from the statutory federal income tax rate as follows (in thousands): 2024 2023 Expected taxes at statutory rate $ ( 39,214 ) $ ( 11,768 ) Interest Carryforward 1,843 — Non-deductible/non-taxable items 470 57 Global intangible low-taxed income 1,809 2,568 Foreign rate differences ( 314 ) 242 Foreign permanent differences ( 1,245 ) ( 1,212 ) Changes in valuation allowance 15,727 8,755 Share-based compensation 222 729 Research and development credits ( 1,510 ) ( 492 ) Extinguishment of debt 22,602 1,580 Foreign other — — Other, net ( 388 ) ( 450 ) Tax (benefit) expense $ 2 $ 9 The Company’s provision for income taxes in 2025 was lower than 2024 primarily due to the release of Valuation Allowance on the deferred tax assets of the Company’s wholly owned subsidiary, Global Technology, Inc. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2025, in part because in the current year we achieved three years of cumulative pretax income in China, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $ 7.6 million are realizable. It therefore reduced the valuation allowance accordingly. The Company's provision for income taxes in 2024 was higher than 2023 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. The Company’s wholly owned subsidiary, Global Technology, Inc., has enjoyed preferential tax concessions in China as a national high-tech enterprise. In March 2007, China’s parliament enacted the PRC Enterprise Income Tax Law, or the EIT Law, under which, effective January 1, 2008, China adopted a uniform income tax rate of 25 % for all enterprises including foreign invested enterprises. However, Global Technology, Inc. has been recognized as a National high-tech enterprise since 2008 and entitled to a 15 % reduced tax rate. In December 2023, Global Technology, Inc. again renewed its National high-tech enterprise certificate and therefore extended its three -year tax preferential status until December 2026. This tax holiday reduced its 2025, 2024 and 2023 income tax provision by approximately $ 0.0 million, $ 0.0 million, and $ 0.0 million, respectively. This tax holiday reduced its fiscal 2025, 2024, and 2023 diluted earnings per share by approximately $0.00, $ 0.00 , and $ 0.00 respectively . Effective January 1, 2016, China expanded the scope of the National high-tech enterprise to include additional deductions for qualifying research and development. As of December 31, 2025, 2024 and 2023, the total amount of unrecognized tax benefit was $ 0.2 million, $ 0.2 million, and $ 0.2 million, respectively. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands): 2025 2024 2023 Unrecognized tax benefits — January 1 $ 181 $ 181 $ 181 Gross increases — tax positions in prior period — — — Gross decreases — tax positions in prior period — — — Unrecognized tax benefits — December 31 $ 181 $ 181 $ 181 The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, it has not accrued penalties or interest during 2025 as a result of net operating losses. During 2024 or 2023, the Company also accrued no penalties or interest. F- 28 Table of Contents The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company’s open tax years subject to examination in the U.S. federal and state jurisdictions are 2022 through 2024. To the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or tax credit carryforward. The Company is subject to examination for tax years 2020 forward for various foreign jurisdictions. On August 9, 2022, the Creating Helpful Incentives to Produce Semiconductors and Science Act, (the "CHIPS Act") was signed into law. Among other things, the CHIPS Act provides for refundable tax credits and certain other financial incentives to further investments in domestic manufacturing. 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 July 4, 2025, legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. Among other things, the OBBBA suspends the requirement to capitalize and amortize domestic research and development (R&D) expenditures for amounts paid or incurred in taxable years beginning after December 31, 2024 and before January 1, 2030. The OBBBA also permits taxpayers to elect to accelerate deductions for the remaining unamortized domestic R&D expenditures paid or incurred between January 1, 2022 and December 31, 2024 over a one - or two -year period. The Company elected to accelerated deductions with respect to unamortized domestic R&D expenditures capitalized in 2022, 2023, and 2024 as a deduction in 2025. In addition, the OBBBA preserves a significant portion of the Inflation Reduction Act (IRA) clean energy tax credit framework but introduces certain limitations and additional diligence obligations for developers, investors, lenders, and credit purchasers, including a phaseout of the Clean Electricity Tax Credits and placed-in-service deadlines for certain wind and solar projects (Internal Revenue Code Sections 45Y and 48E ). Based on the Company’s business profile and the limited applicability of these provisions to the Company, we do not currently expect these changes to have a material impact on our income tax provision or ETR. The OBBBA permanently extends 100% bonus depreciation for qualifying property placed in service after January 19, 2025. The Company does not intend to elect bonus depreciation and, as a result, does not expect this provision to have a material impact on the Company’s income tax provision or effective tax rate. For tax years beginning after December 31, 2024, the OBBBA permanently restores the EBITDA-based calculation of adjusted taxable income (ATI) for purposes of the Section 163 (j) business interest expense limitation (i.e., allowing addbacks for depreciation, amortization, and depletion in computing ATI). This change generally increases the amount of business interest expense that can be deducted and may reduce the amount of interest subject to carryforward. The Company expects any earnings of foreign subsidiaries to be indefinitely invested outside the United States. As of December 31, 2025, however, the Company does not have any accumulated undistributed earnings generated by foreign subsidiaries and has estimated that its tax basis in foreign subsidiaries exceeds its book basis. The Company has concluded that no deferred tax asset (DTA) should be recorded because at the present time it does not expect that the temporary book-tax basis difference that would create this DTA will reverse in the foreseeable future. NOTE P—SHARE-BASED COMPENSATION Equity Plans The Company’s board of directors and stockholders approved the following equity plans: ‑ the Amended and Restated 2021 Equity Incentive Plan ( " 2021 Plan " ) ‑ the 2023 Inducement Plan ( " Inducement Plan " ) The Company has issued stock options, restricted stock awards ("RSAs") and restricted stock units ("RSUs") to employees, consultants and non-employee directors. Stock option awards generally vest over a four year period and have a maximum term of ten years. Stock options under these plans have been granted with an exercise price equal to the fair market value on the date of the grant. Nonqualified and Incentive Stock Options, RSAs and RSUs may be granted from these plans. F- 29 Table of Contents Stock Options In the years ended December 31, 2025 and 2024, the Company granted no stock options under its equity plans. As of December 31, 2025, there was no unrecognized stock-based compensation expense related to stock options. In the years ended December 31, 2025, 2024, and 2023, the intrinsic value of stock options was $ 0 , $ 0 , and $ 0.2 million, respectively. Performance Based Incentive Plan Starting in 2021, certain senior executives were granted performance stock units ("PSUs") under our 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, 2025, 2024 and 2023 of $ 4.4 million, $ 3.0 million and $ 1.7 million, respectively. On May 9, 2025, the Compensation Committee certified the Company exceeded the maximum performance level for each of the performance targets set for the PSUs granted June, 2022 ( the "2022 PSUs"). Therefore, applicable employees were entitled to payment of the 2022 PSUs at 200 % of the target shares granted under the 2021 Plan. The following is a summary of PSU activity (in thousands, except per share data): Weighted Average Share Weighted Aggregate Number of Price on Date Average Fair Intrinsic shares of Release Value Value (in thousands, except price data) Outstanding at January 1, 2025 1,447 $ 7.72 $ 53,347 Granted 719 6.94 8,851 Released ( 977 ) 14.76 2.49 14,431 Cancelled/Forfeited — — — Outstanding, December 31, 2025 1,189 11.55 41,442 Vested and expected to vest 1,189 11.55 41,442 As of December 31, 2025, there was $ 5.1 million of unrecognized stock-based expense related to outstanding PSUs. This expense is expected to be recognized over 1.7 years. For the years ended December 31, 2025, 2024 and 2023, the weighted-average grant value for PSUs was $ 6.94 , $ 16.40 and $ 8.89 per share, respectively. The intrinsic values of PSUs exercised were $ 14.4 million, $ 2.9 million and $ 3.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. The total fair value of shares vested for PSUs during years ended December 31, 2025, 2024 and 2023 were $ 4.5 million, $ 4.0 million and $ 0 million, respectively F- 30 Table of Contents Restricted Stock Units Restricted stock units are issued to employees through a vesting plan and distribution schedule after employee remains with the Company for a particular length of time. The following is a total summary of RSU activity (in thousands, except per share data): Weighted Average Share Weighted Aggregate Number of Price on Date Average Fair Intrinsic shares of Release Value Value (in thousands, except price data) Outstanding at January 1, 2025 2,231 $ 6.04 $ 82,243 Granted 497 12.74 6,332 Released ( 1,217 ) $ 24.99 6.26 30,400 Cancelled/Forfeited ( 50 ) 6.21 1,744 Outstanding, December 31, 2025 1,461 8.13 50,964 Vested and expected to vest 1,461 8.13 50,964 As of December 31, 2025 , there was $ 10.6 million of unrecognized compensation expense related to these RSUs. This expense is expected to be recognized over 2.2 years. For the years ended December 31, 2025, 2024 and 2023, the weighted-average grant value for RSUs are $ 12.74 , $ 10.73 and $ 6.15 per share, respectively. The intrinsic values of RSUs exercised are $ 30.4 million, $ 19.0 million and $ 7.8 million for the years ended December 31, 2025, 2024 and 2023, respectively. The total fair value of shares vested for RSUs during years ended December 31, 2025, 2024 and 2023 are $ 7.2 million, $ 8.1 million and $ 8.6 million, respectively. Share-Based Compensation The Company recognizes compensation expense on a straight-line basis over the applicable vesting term of the award and expense is adjusted as forfeitures occur. The Company issues RSUs as share-based compensation to employees. The Company estimates the fair value of RSUs at the fair market value on the grant date. Employee share-based compensation expenses recognized for the years ended December 31, were as follows (in thousands): Share-Based compensation - by expense type: 2025 2024 2023 Cost of goods sold $ 361 $ 473 $ 524 Research and development 1,193 1,455 1,492 Sales and marketing 1,457 1,512 1,110 General and administrative 8,699 11,350 8,758 Total share-based compensation expense $ 11,710 $ 14,790 $ 11,884 NOTE Q—STOCKHOLDERS’ EQUITY Common Stock The Company’s Restated Certificate of Incorporation authorizes the issuance of up to 120,000,000 shares of common stock, all of which have been designated voting common stock. F- 31 Table of Contents Preferred Stock The Company’s Restated Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. Public Offerings of Common Stock On December 18, 2024, the Company filed an automatic shelf registration statement on Form S- 3ASR (Registration File No. 333 - 283905 ) with the Securities and Exchange Commission, which became effective immediately upon filing. On February 28, 2025, the Company entered into an Equity Distribution Agreement with Raymond James & Associates ("Raymond James") pursuant to which the Company could issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $ 100 million (the "First ATM Offering"), from time to time through Raymond James. On April 8, 2025, the Company completed the First ATM Offering and sold approximately 5.7 million shares at a weighted average price of $ 17.71 per share, providing proceeds of approximately $ 98 million, net of expenses and underwriting discounts and commissions. On May 28, 2025, the Company entered into an Equity Distribution Agreement with Raymond James and Needham & Company, LLC (collectively, the "Sales Agents" and each, a "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 $ 100 million (the "Second ATM Offering"), from time to time through the Sales Agents. On June 18, 2025, the Company completed the Second ATM Offering and sold approximately 5.7 million shares at a weighted average price of $ 17.46 per share, providing proceeds of approximately $ 98 million, net of expenses and underwriting discounts and commissions. On August 27, 2025, the Company entered into an Equity Distribution Agreement with the Sales Agents pursuant to which the Company could issue and sell shares of the Company’s common stock having an aggregate offering price of up to $ 150 million (the "Third ATM Offering"), from time to time through the Sales Agents. On September 22, 2025, the Company completed the Third ATM Offering and sold approximately 5.7 million shares at a weighted average price of $ 26.41 per share, providing proceeds of approximately $ 147 million, net of expenses and underwriting discounts and commissions. On November 7, 2025, the Company entered into another Equity Distribution Agreement (the "Agreement") with the Sales Agents 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 $ 180 million (the "Fourth ATM Offering"), from time to time through the Sales Agents. Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were made through the Sales Agents 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 Agents. In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agents, 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 one day. Subject to the terms and conditions of the Agreement, the Sales Agents 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 Agreement provided that each of the Sales Agents would be entitled to compensation of up to 2 % of the gross sales price of the Shares sold through such Sales Agent from time to time. The Company also agreed to reimburse the Sales Agents 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. The Company agreed to indemnify the Sales Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agents could be required to make because of any of those liabilities. On December 23, 2025, the Company completed the Fourth ATM Offering and sold approximately 6.698 million shares at a weighted average price of $ 26.87 per share, providing proceeds of $ 176.4 million, net of expenses and underwriting discounts and commissions. F- 32 Table of Contents The details of the shares of common stock sold through the First ATM Offering, the Second ATM Offering, the Third ATM Offering and the Fourth ATM Offering through December 31, 2025 are as follows (in thousands, except shares and weighted average per share price): Distribution Agent Month Weighted Average Per Share Price Number of Shares Sold Net Proceeds Compensation to Distribution Agent Raymond James & Associates, Inc. Mar-25 $ 20.71 3,535,650 $ 71,755 $ 1,464 Raymond James & Associates, Inc. Apr-25 12.69 2,110,057 26,245 536 Raymond James & Associates and Needham & Company, LLC Jun-25 17.46 5,725,948 98,000 2,000 Raymond James & Associates and Needham & Company, LLC Sep-25 26.41 5,680,235 147,000 3,000 Raymond James & Associates and Needham & Company, LLC Nov-25 23.15 2,778,564 63,050 1,287 Raymond James & Associates and Needham & Company, LLC Dec-25 29.51 3,919,517 113,350 2,313 Total 23,749,971 $ 519,400 $ 10,600 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 ("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. F- 33 Table of Contents 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, 2025 2024 2023 Revenue $ 455,715 $ 249,365 $ 217,646 Cost of goods sold ( 318,802 ) ( 187,565 ) ( 158,725 ) Adjusted research and development ( 84,177 ) ( 53,383 ) ( 34,483 ) Adjusted sales and marketing ( 28,723 ) ( 15,805 ) ( 9,959 ) Adjusted general and admin ( 60,934 ) ( 41,037 ) ( 37,118 ) Other segment items ( 1,307 ) ( 138,308 ) ( 33,409 ) Net loss ( 38,228 ) ( 186,733 ) ( 56,048 ) 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. Revenue is classified based on the location of where the product is manufactured. Long-lived assets in the tables below comprise only property, plant, equipment and intangible assets (in thousands): Year ended December 31, 2025 2024 2023 Revenues: United States $ 19,378 $ 10,921 $ 30,798 Taiwan 174,197 126,639 143,528 China 262,140 111,805 43,320 $ 455,715 $ 249,365 $ 217,646 As of December 31, 2025 2024 2023 Long-lived assets: United States $ 123,677 $ 71,867 $ 75,283 Taiwan 146,673 57,907 47,668 China 162,322 107,624 91,050 $ 432,672 $ 237,398 $ 214,001 F- 34 Table of Contents The Company serves four primary markets, the internet data center, CATV, telecom and FTTH markets. Of the Company’s total revenues in 2025, the Company earned $ 245.1 million, or 53.8 %, from the CATV market, $ 195.7 million, or 42.9 %, from the internet data center market, $ 13.7 million, or 3.0 %, from the telecom market and $ 1.2 million, or 0.3 %, from the FTTH and other 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. NOTE S—EMPLOYEE BENEFIT PLANS Employees of Global participate in a state-mandated social security program in China. Under this program, pension costs are recorded on the basis of required monthly contributions to employees’ individual accounts during their service periods. Under the regulations of the People’s Republic of China, Global is required to make fixed contributions to a fund, which is under the administration of the local labor departments. Pension expense for Global was $ 2.5 million, $ 1.7 million and $ 1.7 million for the years ended December 31, 2025, 2024 and 2023 , respectively. Employees of Prime World’s Taiwan branch participate in a pension program under the Taiwan Labor Pension Act. Pension expense for the Prime World’s Taiwan branch was $ 0.7 million, $ 0.5 million, and $ 0.5 million for the years ended December 31, 2025, 2024 and 2023 , respectively. NOTE T—COMMITMENTS AND CONTINGENCIES Employment Agreements and Consultancy Agreements The Company has entered into employment and indemnification agreements with our CEO. The agreement provides that if his employment is terminated as a result of a change of control of the Company, or if his employment is terminated for certain other reasons set forth in the agreements, the Company will be required to pay a severance payment in an amount equal to his annual base salary, and other additional compensation due under the terms of the agreements. The Company has also entered into employment and indemnification agreements with four other named executive officers. These agreements provide that if their employment is terminated as a result of a change of control of the Company, the Company will be required to pay a severance payment in an amount equal to their annual base salary and other additional compensation due under the terms of the agreements. Contingencies From time to time, the Company may be subject to legal proceedings and litigation arising in the ordinary course of business, including, but not limited to, inquiries, investigations, audits and other regulatory proceedings, such as described below. The Company records a loss provision when it believes it is both probable that a liability has been incurred and the amount can be reasonably estimated. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceeding described below. F- 35 Table of Contents Arbitration filed by Yuhan Optoelectronic Technology (Shanghai) Co., Ltd. On September 12, 2023, the Company delivered notice of termination with respect to that certain 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 (the "Purchase Agreement"), dated September 15, 2022, with Prime World International Holdings Ltd. (the "Seller") and Yuhan Optoelectronic Technology (Shanghai) Co., Ltd. (the "Purchaser"), pursuant to which the Seller would divest its manufacturing facilities located in the People's Republic of China and certain assets related to its transceiver business and multichannel optical sub-assembly products for the internet data center, FTTH and telecom markets. The termination, in accordance with the terms of the Purchase Agreement, was a result of the Purchaser's failure to satisfy certain of its material obligations under the Purchase Agreement. In terminating the Purchase Agreement, we also asserted the right to recover a break-up fee from the Purchaser. On December 22, 2023, the Purchaser filed for arbitration in Hong Kong with the Hong Kong International Arbitration Centre ("HKIAC") challenging the validity of our termination notice and seeking specific performance with respect to the transactions contemplated in the Purchase Agreement, which in any case remain subject to regulatory approvals. 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. 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 On February 13, 2026, the Compensation Committee of the Board of Directors of the Company approved an amendment to each of the Employment Agreements, dated as of August 5, 2016, by and between the Company and (i) Stefan J. Murry, Chief Financial Officer and Chief Strategy Officer, (ii) Hung-Lun (Fred) Chang, Senior Vice President and North America General Manager, (iii) Shu-Hua (Joshua) Yeh, Senior Vice President and Asia General Manager, and (iv) David C. Kuo, Senior Vice President, Chief Legal Officer, Chief Compliance Officer and Corporate Secretary to provide for enhanced severance payments and benefits. On February 23, 2026, the Company entered into a Lease Agreement with Blue Ridge Commerce Center West LLC to lease approximately 153,928 rentable square feet of space in Building #3, located at 16851 Blue Ridge Commerce Dr., Houston, Texas 77489. The premises may be used for office, warehouse, and light manufacturing and assembly. F-36