What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2021-02-08 · 116 added, 115 removed, 798 unchanged (22% of the section changed)

38 unchanged sentences

issued and outstanding:

none at December 31, 2020 and June 30, 2020

none at March 31, 2021 and June 30, 2020

Common shares, par value $ 0.002 per share:

1 unchanged sentence

issued and outstanding:

32,394 shares and 25,765 shares, respectively at December 31, 2020 and 31,944 shares and 25,305 shares, respectively at June 30, 2020

32,710 shares and 26,085 shares, respectively at March 31, 2021 and 31,944 shares and 25,305 shares, respectively at June 30, 2020

Treasury shares at cost:

6,629 shares at December 31, 2020 and 6,639 shares at June 30, 2020

6,625 shares at March 31, 2021 and 6,639 shares at June 30, 2020

( 66,064 ) ( 66,184 )

10 unchanged sentences

(Unaudited, in thousands except per share data)

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

5 unchanged sentences

Selling, general and administrative 19,338 16,909 56,579 47,723

Impairment of privately-held investment — 600 — 600

Total operating expenses 34,895 31,078 102,250 86,407

2 unchanged sentences

Income (loss) before income taxes 15,981 ( 10,901 ) 38,968 ( 16,354 )

Income tax expense 669 568 1,680 978

Income tax expense (benefit) 1,014 ( 1,015 ) 2,694 ( 37 )

Net income (loss) including noncontrolling interest 14,967 ( 9,886 ) 36,274 ( 16,317 )

11 unchanged sentences

(Unaudited, in thousands)

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

14 unchanged sentences

Total AOS Shareholders' Equity Noncontrolling Interest Total Equity

Balance, September 30, 2020 $ 64 $ ( 66,171 ) $ 248,967 $ ( 2,146 ) $ 128,394 $ 309,108 $ 140,114 $ 449,222

Balance, December 31, 2020 $ 65 $ ( 66,097 ) $ 254,980 $ 1,481 $ 141,289 $ 331,718 $ 142,938 $ 474,656

Exercise of common stock options and release of restricted stock units — — 129 — — 129 — 129

1 unchanged sentence

Withholding tax on restricted stock units — — ( 5,200 ) — — ( 5,200 ) — ( 5,200 )

Issuance of shares under ESPP 1 — 1,635 — — 1,636 — 1,636

Share-based compensation — — 3,025 — — 3,025 — 3,025

Restricted stock units settlement in connection with service — — 1,000 — — 1,000 — 1,000

Net income (loss) — — — — 16,100 16,100 ( 1,133 ) 14,967

Cumulative translation adjustment — — — ( 485 ) — ( 485 ) ( 314 ) ( 799 )

Balance, December 31, 2020 $ 65 $ ( 66,097 ) $ 254,980 $ 1,481 $ 141,289 $ 331,718 $ 142,938 $ 474,656

Balance, March 31, 2021 $ 65 $ ( 66,064 ) $ 252,934 $ 996 $ 157,356 $ 345,287 $ 141,491 $ 486,778

Common Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total AOS Shareholders' Equity Noncontrolling Interest Total Equity

8 unchanged sentences

Cumulative translation adjustment — — — 6,123 — 6,123 5,595 11,718

Balance, December 31, 2020 $ 65 $ ( 66,097 ) $ 254,980 $ 1,481 $ 141,289 $ 331,718 $ 142,938 $ 474,656

Balance, March 31, 2021 $ 65 $ ( 66,064 ) $ 252,934 $ 996 $ 157,356 $ 345,287 $ 141,491 $ 486,778

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

1 unchanged sentence

(Unaudited, in thousands)

Common Shares

Treasury Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Income (Loss) Retained Earnings

Total AOS Shareholders' Equity Noncontrolling Interest Total Equity

Balance, September 30, 2019 $ 62 $ ( 66,227 ) $ 236,683 $ ( 5,876 ) $ 126,481 $ 291,123 $ 146,430 $ 437,553

Exercise of common stock options and release of restricted stock units — — 26 — — 26 — 26

Common Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total AOS Shareholders' Equity Noncontrolling Interest Total Equity

Balance, December 30, 2019 $ 63 $ ( 66,227 ) $ 240,797 $ ( 4,239 ) $ 125,476 $ 295,870 $ 144,280 $ 440,150

Reissuance of treasury stock upon exercise of common stock options and release of restricted stock units — 43 — — ( 43 ) — — —

Withholding tax on restricted stock units — — ( 1,203 ) — — ( 1,203 ) — ( 1,203 )

Issuance of shares under ESPP 1 — 1,700 — — 1,701 — 1,701

Share-based compensation — — 2,876 — — 2,876 — 2,876

1 unchanged sentence

Cumulative translation adjustment — — — ( 1,169 ) — ( 1,169 ) ( 1,039 ) ( 2,208 )

Balance, December 31, 2019 $ 63 $ ( 66,227 ) $ 240,797 $ ( 4,239 ) $ 125,476 $ 295,870 $ 144,280 $ 440,150

Balance, March 31, 2020 $ 63 $ ( 66,184 ) $ 242,470 $ ( 5,408 ) $ 118,938 $ 289,879 $ 139,850 $ 429,729

Common Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total AOS Shareholders' Equity Noncontrolling Interest Total Equity

Balance, June 30, 2019 $ 62 $ ( 66,240 ) $ 234,410 $ ( 2,693 ) $ 125,485 $ 291,024 $ 152,265 $ 443,289

Exercise of common stock options and release of restricted stock units — — 26 — — 26 — 26

Exercise of common stock options and release of RSUs — — 26 — — 26 — 26

Reissuance of treasury stock upon exercise of common stock options and release of restricted stock units — 56 — — ( 56 ) — — —

2 unchanged sentences

Share-based compensation — — 7,732 — — 7,732 — 7,732

Net income (loss) — — — — 4 4 ( 6,435 ) ( 6,431 )

Net loss — — — — ( 6,491 ) ( 6,491 ) ( 9,826 ) ( 16,317 )

Cumulative translation adjustment

Balance, December 31, 2019 $ 63 $ ( 66,227 ) $ 240,797 $ ( 4,239 ) $ 125,476 $ 295,870 $ 144,280 $ 440,150

— — — ( 2,715 ) — ( 2,715 ) ( 2,589 ) ( 5,304 )

Balance, March 31, 2020 $ 63 $ ( 66,184 ) $ 242,470 $ ( 5,408 ) $ 118,938 $ 289,879 $ 139,850 $ 429,729

See accompanying notes to these condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Six Months Ended December 31,

Nine Months Ended March 31,

Cash flows from operating activities

4 unchanged sentences

Deferred income taxes, net 732 85

Loss on disposal of property and equipment 40 89

Changes in assets and liabilities:

Accounts receivable, net ( 11,662 ) ( 9,576 )

(Gain) loss on disposal of property and equipment 40 ( 206 )

Impairment of privately-held investment — 600

Changes in operating assets and liabilities:

Accounts receivable ( 20,448 ) 6,826

Inventories ( 9,582 ) ( 14,660 )

38 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included in the interim periods.

Operating results for the three and six months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021 or any other interim period.

The condensed consolidated balance sheets at June 30, 2020 is derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Operating results for the three and nine months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021 or any other interim period.

The condensed consolidated balance sheet at June 30, 2020 is derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Reclassification

4 unchanged sentences

The Fab is being built in phases.

As of December 31, 2020, the Company owns 51 %, and the Chongqing Funds own 49 % of the equity interest in the JV Company.

As of March 31, 2021, the Company owned 51 %, and the Chongqing Funds owned 49 % of the equity interest in the JV Company.

The Joint Venture is accounted under the provisions of the consolidation guidance since the Company has controlling financial interest.

If both parties agree that the termination of the JV Company is the best interest of each party or the JV Company is bankrupt or insolvent where either party may terminate early, after paying the debts of the JV Company, the remaining assets of the JV Company shall be paid to the Chongqing Funds to cover the principal of its total paid-in contributions plus interest at 10 % simple annual rate prior to distributing the balance of the JV Company's assets to the Company.

The JV Company has reached its targeted production of assembly and testing and is currently ramping up its Phase I of the 12-inch wafer fabrication.

The JV Company has reached its targeted production in assembly and testing and is currently ramping up its Phase I of the 12-inch wafer fabrication.

Certain Significant Risks and Uncertainties Related to Outbreak of Coronavirus Disease 2019 (“COVID-19”)

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

increasing demand of PC related products, there is no guarantee that this trend will continue, and such increasing demand may discontinue or decline as government authorities relax COVID-19 related restrictions.

Furthermore, as the COVID-19 pandemic continues and global economic downturn and high unemployment persists, consumer spending may slow down substantially, in which case the Company may experience a significant decline of customer orders for its products, including those designed for PC-related applications, and such decline will adversely affect its financial conditions and results of operations.

36 unchanged sentences

Restricted Cash

As a condition of the loan agreement, the Company is required to keep a compensating balance at the issuing bank (see Note 5).

As a condition of certain loan agreement, the Company is required to keep a compensating balance at the issuing bank (see Note 5).

In addition, the Company maintains restricted cash in connection with cash balances temporarily restricted for regular business operations, including the possibility of a dispute with a vendor.

These balances have been excluded from the Company’s cash and cash equivalents balance and are classified as restricted cash in the Company’s condensed consolidated balance sheets.

As of December 31, 2020 and June 30, 2020, the amount of restricted cash was $ 2.4 million and $ 4.2 million, respectively.

As of March 31, 2021 and June 30, 2020, the amount of restricted cash was $ 2.4 million and $ 4.2 million, respectively.

Fair Value of Financial Instruments

8 unchanged sentences

The Company records such grants either as a reduction of the related expense, a reduction of the cost of the related asset, or as other income depending upon the nature of the grant.

As a result of such grants, during the three and six months ended December 31, 2020, the Company reduced interest expense by $ 0.7 million and $ 1.5 million , property, plant and equipment by $ 0.1 million and $ 0.1 million, and operating expenses by $ 1.7 million and $ 3.6 million, r espectively.

During the three and six months ended December 31, 2019, the Company reduced interest expense by $ 1.1 million and $ 3.4 million, property, plant and equipment by $ 1.3 million and $ 1.3 million, and operating expenses by $ 0.5 million and $ 0.5 million, respectively.

As a result of such grants, during the three and nine months ended March 31, 2021, the Company reduced interest expense by $ 0.7 million and $ 2.2 million, property, plant and equipment by nil and $ 0.1 million, and operating expenses by $ 0.0 million and $ 3.7 million, respectively.

During the three and nine months ended March 31, 2020, the Company reduced interest expense by $ 0.7 million and $ 4.1 million , property, plant and equipment by nil and $ 1.3 million, and operating expenses by $ 1.8 million and $ 2.0 million, respectively.

Long-lived Assets

7 unchanged sentences

The result of the recoverability test indicated that the sum of the expected future cash flows (undiscounted and without interest charges) was greater than the carrying amount of the long-lived assets.

Therefore, the Company concluded that the carrying amount of the long-lived assets is recoverable as of June 30, 2020.

Therefore, the Company concluded that the carrying amount of the long-lived assets was recoverable as of June 30, 2020.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

51 unchanged sentences

The Company determines whether there is an expected loss on its accounts receivable by reviewing all available data, including its customers' latest available financial statements, their credit standing and historical collection experience, as well as current and future market and economic conditions.

As of December 31, 2020, the allowance for credit losses on the Company's trade receivables remained immaterial.

As of March 31, 2021, the allowance for credit losses on the Company's trade receivables remained immaterial.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

2 unchanged sentences

The following table presents the calculation of basic and diluted net income (loss) per share attributable to common shareholders:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

10 unchanged sentences

The following potential dilutive securities were excluded from the computation of diluted net income (loss) per share as their effect would have been anti-dilutive:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

18 unchanged sentences

Summarized below are individual customers whose revenue or accounts receivable balances were 10% or higher than the respective total consolidated amounts:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

Percentage of revenue 2021 2020 2021 2020

6 unchanged sentences

Customer C 17.8 % 29.8 %

Customer D 10.0 % *

Customer E * 20.1 %

33 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Pr operty, plant and equipment, net:

Property, plant and equipment, net:

2021 June 30,

54 unchanged sentences

The activities in the warranty accrual, included in accrued liabilities, are as follows:

Six Months Ended December 31,

Nine Months Ended March 31,

(in thousands)

4 unchanged sentences

The activities in the stock rotation accrual, included in accrued liabilities, are as follows:

Six Months Ended December 31,

Nine Months Ended March 31,

(in thousands)

23 unchanged sentences

Interest payments are due quarterly with the entire principal due not later than November 19, 2021.

During the three months ended December 31, 2020, the JV Company borrowed RMB 50.0 million, or $ 7.7 million, at an interest rate of 5.25 % per annum.

As of December 31, 2020, the outstanding balance of this loan was $ 7.7 million.

During the three months ended December 31, 2020, the JV Company borrowed RMB 50.0 million, or $ 7.6 million, at a n interest rate of 5.25 % per annum.

As of March 31, 2021, the outstanding balance of this loan was $ 7.6 million.

On April 15, 2020, the JV Company entered into a one-year loan agreement with China Everbright Bank in China to borrow a maximum of RMB 100.0 million (approximately $ 14.3 million based on the currency exchange rate between RMB and U.S.

2 unchanged sentences

The loan consists of RMB 20 million for working capital borrowing in Chinese yuan and RMB 80 million for borrowing in US dollars that is collateralized by eligible accounts receivable.

During the three months ended December 31, 2020, the JV Company borrowed $ 12.1 million at a fixed interest rate of 2.7 % per annum.

As of December 31, 2020, the total outstanding balance under the loan was $ 15.2 million which included RMB 20 million or $ 3.1 million borrowed during the three months ended June 30, 2020.

During the three months ended March 31, 2021, the JV Company borrow ed $ 11.9 million at a fixed interest rat e of 2.7 % per an num and repaid 12.1 million.

As of March 31, 2021, the total outstanding balance under the loan w as $ 14.9 million w hich included RMB 20 million or $ 3.0 million borrowed during the three months ended June 30, 2020.

In October 2019, the Company's subsidiary in China entered into a line of credit facility with Bank of Communications Limited in China.

4 unchanged sentences

In October 2020, this line of credit was renewed with the same terms and a maturity date of April 21, 2022.

As of December 31, 2020, there was no outstanding balance under the loan.

As of March 31, 2021, there was no outstanding balance under the loan.

On November 29 and December 4, 2018, the JV Company entered into two, one-year loan agreements with China Merchant Bank and Chongqing LiangJiang New District China Merchants Group Limited Company in China to provide loans for RMB 80 million and RMB 20 million, respectively, or $ 14.5 million in total based on the currency exchange rate between RMB and U.S.

2 unchanged sentences

Interest payments are due monthly and quarterly with the entire principal due not later than January 21, 2021.

As of December 31, 2020, there was no o utstanding balance under the loan.

As of March 31, 2021, there was no outstanding b alance under the loan.

On November 16, 2018, the Company's subsidiary in China entered into a line of credit facility with Industrial and Commercial Bank of China, which expired on September 30, 2019.

3 unchanged sentences

In December 2020, this line of credit was renewed with the same terms and a maturity date of December 31, 2021.

As of December 31, 2020, there was no outstanding balance under the loan.

As of March 31, 2021, there was no outsta nding balance under the loan.

Accounts Receivable Factoring Agreement

6 unchanged sentences

This agreement, with certain financial covenants required, has no expiration date.

The Borrower was in compliance with these covenants as of December 31, 2020.

During the three and six months ended December 31, 2020, the Company borro wed $ 7.0 million and $ 36.7 million, respectively, and repaid each amount in full.

As of December 31, 2020, there was no outstanding balance and the Company had unused credit of approximately $ 30.0 million .

The Borrower was in compliance with these covenants as of March 31, 2021.

During the three and nine months ended March 31, 2021, the Company borro wed $ 10.0 million and $ 46.7 million, respectively, and repaid each amount in full.

As of March 31, 2021, there was no outstanding balance and the Company had unused credit of approximately $ 30.0 million.

Credit Facilities

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Credit Facilities

On May 9, 2018 (the “Effective Date”), the JV Company entered into a lease finance agreement and a security agreement (the “Agreements”) with YinHai Leasing Company and China Import/Export Bank (the “Lenders”).

11 unchanged sentences

Other terms of this agreement remain the same.

As of December 31, 2020, the outstanding balance of the Lease Financ ing of 244.0 million RMB (equivalent of $ 37.4 million based on the currency exchange rate as of December 31, 2020) was recorded under short-term and long-term finance lease liabilities.

As of March 31, 2021, the outstanding balance of the Lease Financ ing of 217.0 million RMB (equivalent of $ 33.1 million based on the currency exchange rate as of March 31, 2021) was recorded under short-term and long-term finance lea se liabilities.

See future minimum lease payment table for finance lease liabilities in Note 6.

7 unchanged sentences

Dollar on June 30, 2020) in April 2020.

As of December 31, 2020, the outstanding balance of the loan was $ 36.0 million.

As of March 31, 2021, the outstanding balance of the loan was $ 35.8 million.

In December 2019, the JV Company entered into a loan agreement with China Development Bank in the amount of $ 24.0 million.

3 unchanged sentences

The interest is required to be paid on March 21 and September 21 each year.

As of December 31, 2020, the outstanding balance of the loan was $ 21.6 million.

As of March 31, 2021, the outstanding balance of the loan was $ 21.6 million.

On March 12, 2019, the JV Company entered into a loan agreement with The Export-Import Bank of China in the aggregate principal amount of RMB 200 million (approximately $ 29.8 million based on currency exchange rate between RMB and U.S.

2 unchanged sentences

The JV Company drew down RMB 190 million and RMB 10 million in March 2019 and December 2019, respectively.

The loan withdraw window expired on February 28, 2020.

The l oan withdraw window expired on February 28, 2020.

The interest is accrued based on the China Base Rate multiplied by 1.1 , or 5.39 %.

4 unchanged sentences

On June 24, 2020, a modification of this loan was signed, pursuant to which the interest rate was changed to be based on the five-year loan prime rate in China plus 0.74 %, or 5.39 %.

Other terms of this loan remain the same.

As of March 31, 2021, the outstanding balance of the loan was 189 million R MB (equivalent of $ 28.8 million based on th e currency exchange rate as of March 31, 2021).

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of this loan remain the same.

As of December 31, 2020, the outstanding balance of the loan was 189 million RMB (equivalent of $ 28.9 million b ased on the currency exchange rate as of December 31, 2020).

On May 1, 2018, Jireh Semiconductor Incorporated ("Jireh"), a wholly-owned subsidiary of the Company, entered into a loan agreement with a financial institution (the "Bank") that provided a term loan in the amount of $ 17.8 million.

4 unchanged sentences

The loan agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios.

The Company was in compliance with these covenants as of December 31, 2020.

As of December 31, 2020, the outstanding balance of the term loan w as $ 15.5 million.

The Company was in compliance with these covenants as of March 31, 2021.

As of March 31, 2021, the outstanding balance of the term loa n was $ 15.3 million.

On August 15, 2017, Jireh entered into a credit agreement with the Bank that provided a term loan in an amount up to $ 30.0 million for the purpose of purchasing certain equipment for the Company's fabrication facility located in Oregon.

5 unchanged sentences

The credit agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios and fixed charge coverage ratio.

The Company was in compliance with these covenants as of December 31, 2020.

As of December 31, 2020, the outstanding balance of the term loan w as $ 13.0 million.

The Company was in compliance with these covenants as of March 31, 2021.

As of March 31, 2021, the outstanding balance of the term loan was $ 11.2 million.

Maturities of short-term debt and long-term debt were as follows (in thousands):

24 unchanged sentences

The components of the Company’s operating and finance lease expenses are as follows for the periods presented (in thousands):

Six Months Ended December 31,

Nine Months Ended March 31,

Operating leases:

24 unchanged sentences

Supplemental cash flow information related to the Company’s operating and finance lease is as follows (in thousands):

Six Months Ended December 31,

Nine Months Ended March 31,

Cash paid from amounts included in the measurement of lease liabilities:

4 unchanged sentences

Operating lease right-of-use assets obtained in exchange for lease obligations $ 2,843 $ 15,699

Future minimum lease payments are as follows as of December 31, 2020 (in thousands):

Operating Leases Finance Leases

Future minimum lease payments are as follows as of March 31, 2021 (in thousands):

Year ending June 30, Operating Leases Finance Leases

The remainder of fiscal 2021 $ 1,707 $ 4,577

16 unchanged sentences

Any remaining balance of the losses is charged to retained earnings.

During the six months ended December 31, 2020, the Company did no t repurchase any shares pursuant to the Repurchase Program.

During the nine months ended March 31, 2021, the Company did no t repurchase any shares pursuant to the Repurchase Program.

Since the inception of the program, the Company repurchased an aggregate of 6,784,648 shares for a total cost of $ 67.3 million, at an average price of $ 9.92 per share, excluding fees and related expenses.

No repurchased shares have been retired.

Of the 6,784,648 repurchased shares, 155,670 shar es with a weighted average repurchase price o f $ 10.19 per share, were reissued at an average price of $ 5.37 p er share pursuant to option exercises and vested restricted share units ("RSU").

As of December 31, 2020, approximately $ 13.4 million remained available under the Repurchase Program.

Time-based Restricted Stock Units ("TRSU")

The following table summarizes the Company's TRSU activities for the six months ended December 31, 2020:

Of the 6,784,648 repurchased shares, 159,645 shares with a weighted average repurchase price of $ 10.15 per share, were reissued at an average price of $ 5.24 per share pursuant to option exercises and vested restricted share units ("RSU").

As of March 31, 2021, approximately $ 13.4 million remained available under the Repurchase Program.

Time-based Restric ted Stock Units ("TRSU")

The following table summarizes the Company's TRSU activities for the nine months ended March 31, 2021:

Number of Restricted Stock

7 unchanged sentences

Forfeited ( 14,850 ) $ 10.72

Nonvested at December 31, 2020 948,938 $ 11.85 1.29 $ 22,432,894

Nonvested at March 31, 2021 1,062,977 $ 21.00 1.90 $ 34,759,348

Market-based Restricted Stock Units ("MSUs")

5 unchanged sentences

The fair value of these MSUs was recalculated to reflect the change as of August 31, 2020 and the unrecognized compensation amount was adjusted to reflect the increase in fair value.

The incremental expenses for the three and six months ended December 31, 2020 were immaterial.

The Company recorded approximatel y $ 0.4 million and $ 0.6 million of expenses for MSUs during the three and six months ended December 31, 2020, respectively, and approximately $ 0.1 million and $ 0.3 million during the three and six months ended December 31, 2019, respectively.

The incremental expenses for the three and nine months ended March 31, 2021 were immaterial.

The Company recorded approximatel y $ 0.3 million and $ 0.9 million of expenses for MSUs during the three and nine months ended March 31, 2021, respectively, and approximately $ 0.1 million and $ 0.4 million during the three and nine months ended March 31, 2020, respectively.

Performance-based Restricted Stock Units ("PRSUs")

5 unchanged sentences

goals were met.

The Company recorded approximately $ 0.4 million and $ 0.8 million o f expense for these PRSUs during the three and six months ended December 31, 2020, respectively, and approximately $ 0.5 million and $ 0.7 million during the three and six months ended December 31, 2019, respectively.

The Company recorded approximatel y $ 0.5 million and $ 1.3 million of expens e for these PRSUs during the three and nine months ended March 31, 2021, respectively, and approximately $ 0.4 million and $ 1.1 million during the three and nine months ended March 31, 2020, respectively.

During the three months ended June 30, 2019, the Company announced an incentive program.

1 unchanged sentence

In June 2020, the Company believed it was most likely that predetermined goal measures would be met.

Therefore, started June 2020 quarter the Company recorded $ 0.6 million of non-cash compensation expense each quarter for these awards.

The expense was reported in the other current liabilities line on the condensed consolidated balance sheets as the amount of bonus is to be settled in variable number of RSU’s at the completion of the objective goals.

Such non-cash compensation expense was recorded as part of share-based compensation expense in the condensed consolidated statements of operations.

During the three and six months ended December 31, 2020, the Company granted RSUs valued at $ 1.0 million and $ 2.0 million, respectively, to participants, which were fully vested due to achievement of certain objective measures.

The following table summarizes the Company's PRSUs activities for the six months ended December 31, 2020:

Therefore, the Company reported such expenses in the other current liabilities line on the condensed consolidated balance sheets as the amount of bonus is to be settled in variable number of RSU’s at the completion of the objective goals.

Such non-cash compensation expense was recorded as part of share-based compensation exp ense in the condensed consolidated statements of operations.

During the three and nine months ended March 31, 2021, the Company recorded $ 0.8 million and $ 2.2 million such non-cash compensation expense, respectively.

As of March 31, 2021, the Company granted RSUs valued at $ 2.0 million to participants, which were fully vested due to achievement of certain objective measures.

The following table summarizes the Company's PRSUs activities for the nine months ended March 31, 2021:

Number of Performance-based Restricted Stock

5 unchanged sentences

Nonvested at June 30, 2020 342,775 $ 12.38 1.60 $ 3,729,392

Granted 165,500 $ 36.27

Vested ( 148,211 ) $ 14.24

Forfeited ( 5,865 ) $ 17.29

Nonvested at December 31, 2020 341,025 $ 12.36 1.09 $ 8,061,831

Nonvested at March 31, 2021 354,199 $ 22.68 1.99 $ 11,582,307

Stock Options

The Company did no t grant any stock options during the three and six months ended December 31, 2020 and 2019.

The following table summarizes the Company's stock option activities for the six months ended December 31, 2020:

The Company did no t grant any stock options during the three and nine months ended March 31, 2021 and 2020.

The following table summarizes the Company's stock option activities for the nine months ended March 31, 2021:

Weighted Average

4 unchanged sentences

Exercised ( 150,289 ) $ 11.24

Outstanding at December 31, 2020 509,419 $ 8.05 2.81 $ 7,940,606

Outstanding at March 31, 2021 493,689 $ 8.05 2.54 $ 12,170,703

Options vested and expected to vest 493,689 $ 8.05 2.54 $ 12,170,703

Exercisable at December 31, 2020 509,419 $ 8.05 2.81 $ 7,940,606

Exercisable at March 31, 2021 493,689 $ 8.05 2.54 $ 12,170,703

Employee Share Purchase Plan ("ESPP")

The assumptions used to estimate the fair values of common shares issued under the ESPP were as follows:

Six Months Ended December 31,

Nine Months Ended March 31,

Volatility rate 63.1 %

6 unchanged sentences

T he total share-based compensation expense recognized in the condensed consolidated statements of operations for the periods presented was as follows:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

4 unchanged sentences

$ 3,825 $ 2,876 $ 9,925 $ 7,732

As of December 31, 2020, total unrecognized compensation cost under the Company's equity plans was $ 12.4 million, which is expected to be recognized over a weighted-average period of 2.4 years.

The Company recognized income tax expense of approximately $ 0.7 million and $ 0.6 million for the three months ended December 31, 2020 and 2019, respectively.

The income tax expense of $ 0.7 million for the three months ended December 31, 2020 included a $ 0.01 million discrete tax expense.

The income tax expense of $ 0.6 million for the three months ended December 31, 2019 included a $ 0.01 million discrete tax expense.

Excluding the discrete income tax items, the effective tax rate for the three months ended December 31, 2020 and 2019 was 5.0 % and ( 13.8 )%, respectively.

The changes in the effective tax rate and tax expense between the periods resulted primarily from the Company reporting pretax book income of $ 13.2 million for the three months ended December 31, 2020 as compared to a pretax book loss of $ 4.0 million for the three months ended December 31, 2019.

The Company recognized income tax expense of approximately $ 1.7 million and $ 1.0 million for the six months ended December 31, 2020 and 2019, respectively.

The income tax expense of $ 1.7 million for the six months ended December 31, 2020 included a $ 0.02 million discrete tax benefit.

The income tax expense of $ 1.0 million for the six months ended December 31, 2019 included a $ 0.03 million discrete tax expense.

Excluding the discrete income tax items, the effective tax rate for the six months ended December 31, 2020 and 2019 was 7.4 % and ( 17.4 )%, respectively.

The changes in the effective tax rate and tax expense between the periods resulted primarily from the Company reporting pretax book income of $ 23.0 million for the six months ended December 31, 2020 as compared to a pretax book loss of $ 5.5 million for the six months ended December 31, 2019.

As of March 31, 2021, total unrecognized compensation cost under the Company's equity plans w as $ 30.6 million, which is expected to be recognized over a weighted-average period of 2.3 years.

The Company recognized income tax expense of approximately $ 1.0 million and income tax benefit of approximately $ 1.0 million for the three months ended March 31, 2021 and 2020, respectively.

The income tax expense of $ 1.0 million for the three months ended March 31, 2021 included immaterial discrete tax.

The income tax benefit of $ 1.0 million for the three months ended March 31, 2020 included a $ 1.3 million discrete tax benefit, $ 1.1 million related to re-measuring the tax benefit of net operating losses that can be carried back to prior years following the passage of the U.S.

CARES Act, and $ 0.2 million related primarily to a prior year reserve release.

Excluding the discrete income tax items, the effective tax rate for the three months ended March 31, 2021 and 2020 was 6.3 % and ( 2.3 )%, respectively.

The changes in the effective tax rate and tax expense between the periods resulted primarily from the Company reporting pretax book income of $ 16.0 million for the three months ended March 31, 2021 as compared to a pretax book loss of $ 10.9 million for the three months ended March 31, 2020.

The Company recognized income tax expense of approximately $ 2.7 million and income tax benefit of approximately $ 0.04 million for the nine months ended March 31, 2021 and 2020, respectively.

The income tax expense of $ 2.7 million for the nine months ended March 31, 2021 included a $ 0.04 million discrete tax benefit.

The income tax benefit of $ 0.04 million for the nine months ended March 31, 2020 included a $ 1.30 million discrete tax benefit, $ 1.1 million of which related to remeasuring the tax benefit of net operating losses that can be carried back to prior years following the passage of the U.S.

CARES Act, and $ 0.2 million of which related to a prior year reserve release.

Excluding the discrete income tax items, the effective tax rate for the nine months ended March 31, 2021 and 2020 was 7.0 % and ( 7.4 )%, respectively.

The changes in the effective tax rate and tax expense between the periods resulted primarily from the Company reporting pretax book income of $ 39.0 million for the nine months ended March 31, 2021 as compared to a pretax book loss of $ 16.4 million for the nine months ended March 31, 2020.

The Company files its income tax returns in the United States and in various foreign jurisdictions.

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These assessments can require considerable estimates and judgments.

As of December 31, 2020, the gross amount of unrecognized tax benefits was approximately $ 7.2 million, of which $ 4.3 million , if recognized, would reduce the effective income tax rate in future periods.

As of March 31, 2021, the gross amount of unrecognized tax benefits was approximately $ 7.2 million, of which $ 4.3 million, if recognized, would reduce the effective income tax rate in future periods.

If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required.

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Coronavirus Aid, Relief and Economic Security Act” (“CARES Act”), Enacted March 27, 2020

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”), which made the changes to existing U.S.

tax laws, including, but not limited to, (1) allowing U.S.

federal net operating losses originated in the 2018, 2019 or 2020 tax years to be carried back five years to recover taxes paid based upon taxable income in the

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

prior five years, (2) eliminating the 80% of taxable income limitation on net operating losses for the 2018, 2019 and 2020 tax years (the 80% limitation will be reinstated for tax years after 2020), (3) accelerating the refund of prior year alternative minimum tax credits, (4) modifying the bonus depreciation for qualified improvement property and (5) modifying the limitation on deductible interest expense.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”), which made the changes to existing U.S.

tax laws, including, but not limited to, (1) allowing U.S.

federal net operating losses originated in the 2018, 2019 or 2020 tax years to be carried back five years to recover taxes paid based upon taxable income in the prior five years, (2) eliminating the 80% of taxable income limitation on net operating losses for the 2018, 2019 and 2020 tax years (the 80% limitation will be reinstated for tax years after 2020), (3) accelerating the refund of prior year alternative minimum tax credits, (4) modifying the bonus depreciation for qualified improvement property and (5) modifying the limitation on deductible interest expense.

As a result of the ability to carryback net operating losses from the June 2018 and June 2019 years to the June 2015 to June 2017 tax years, net operating losses which were previously tax-effected using the current 21% U.S.

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There was no material impact of the tax law changes included in the Consolidated Appropriations Act, 2021 to the Company.

“The American Rescue Plan Act of 2021”, Enacted March 11, 2021

On March 11, 2021, the United States enacted the American Rescue Plan Act of 2021, which made changes to existing U.S.

There was no material impact of the tax law changes included in the American Rescue Plan Act of 2021 to the Company.

On July 27, 2015, in Altera Corp.

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Court of Appeals for the Ninth Circuit’s decision.

AOS has no t recorded any benefit related to the Altera Corporation Tax Court decision in any period through December 2020.

AOS has no t recorded any benefit related to the Altera Corporation Tax Court decision in any period through March 2021.

The Company will continue to monitor ongoing developments and potential impact to its financial statements.

11 unchanged sentences

The revenue by geographical location in the following tables is based on the country or region in which the products were shipped to:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

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The following is a summary of revenue by product type:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2021 2020 2021 2020

16 unchanged sentences

Purchase Commitments

As of December 31, 2020 and June 30, 2020, the Company had approximately $ 45.6 million and $ 43.9 million, respectively, of outstanding purchase commitments primarily for purchases of semiconductor raw materia ls, wafers, spare parts, packaging and testing services and others.

As of December 31, 2020 and June 30, 2020, the Company had approximate ly $ 38.1 million a nd $ 18.0 million, primarily for the JV Company, respectively, of capital commitments for the purchase of property and equipment.

As of March 31, 2021 and June 30, 2020, the Company had approxim ately $ 66.1 million and $ 43.9 million, respectively, of outstanding purchase commitments primarily for purchases of semiconductor raw materials, wafers, spare parts, packaging and testing services and others.

As of March 31, 2021 and June 30, 2020, the Company had approximately $ 52.2 million and $ 18.0 million, primarily for the JV Company, respectively, of capital commitments for the purchase of property and equipment.

Other Commitments

6 unchanged sentences

Department of Justice ("DOJ") commenced an investigation into the Company's compliance with export control regulations relating to its business transactions with Huawei and its affiliates (“Huawei”), which were added to the “Entity List” maintained by the Department of Commerce (“DOC”) on May 16, 2019.

The Company is cooperating fully with federal authorities in the investigation, including responding to requests for documents and information from DOJ in connection with the investigation.

The Company is cooperating fully with federal authorities in the investigation, including responding to requests for documents, information and interviews from DOJ in connection with the investigation.

The Company has maintained an export control compliance program and has been committed to comply fully with all applicable laws and regulations.

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Further, the Company's obligations under these agreements may be limited in time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by it under these agreements.

The Company has not historically paid or recorded any material indemnifications, and no accrual was made at December 31, 2020 and June 30, 2020.

The Company has not historically paid or recorded any material indemnifications, and no accrual was made at March 31, 2021 and June 30, 2020.

The Company has agreed to indemnify its directors and certain employees as permitted by law and pursuant to its Bye-laws, and has entered into indemnification agreements with its directors and executive officers.

2 unchanged sentences

However, such insurance may not cover any, or may cover only a portion of, the amounts the Company may be required to pay.

In addition, the Company may not be able to maintain such insurance coverage in the future.

In addition, the Company may not be able to acquire, maintain or renew such insurance coverage in the future under favorable terms or at all.

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

What changed 10-Q

Item 1. Financial Statements