What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-08-30 compared with 2020-09-02 · 408 added, 343 removed, 1179 unchanged (39% of the section changed)

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Opinion on Internal Control over Financial Reporting

We have audited Alpha and Omega Semiconductor Limited (a Bermuda corporation) and subsidiaries (the “Company’s”) internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

We have audited Alpha and Omega Semiconductor Limited (a Bermuda corporation) (the “Company’s”) internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of June 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2020, and the related notes and schedules and our report dated September 2, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of June 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2021, and the related notes and schedules and our report dated August 30, 2021 expressed an unqualified opinion thereon.

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 Item 9A.

Management’s 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.

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San Jose, California

September 2, 2020

August 30, 2021

Other Information

1 unchanged sentence

Directors, Executive Officers and Corporate Governance

The information required by this item concerning our directors, executive officers, Section 16 compliance and corporate governance matters is contained in part under the caption "Business - Executive Officers" in Part I of this report, and the remainder is incorporated by reference to the information set forth in the sections titled “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2020 Proxy Statement.

The information required by this item concerning our directors, executive officers, Section 16 compliance and corporate governance matters is contained in part under the caption "Business - Executive Officers" in Part I of this report, and the remainder is incorporated by reference to the information set forth in the sections titled “Election of Directors” and “Delinquent Section 16(a) Reports” in the 2021 Proxy Statement.

Executive Compensation

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The index to the consolidated financial statements is below.

Report of Independent Registered Public Accounting Firm (BDO USA, LLP)

Report of Independent Registered Public Accounting Firm (Grant Thornton LLP)

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Alpha and Omega Semiconductor Limited (a Bermuda Corporation) and subsidiaries (the “Company”) as of June 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2020, and the related notes and schedules (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 at June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2020 , 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 June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated September 2, 2020 expressed an unqualified opinion thereon.

We have audited the accompanying consolidated balance sheets of Alpha and Omega Semiconductor Limited (a Bermuda Corporation) (the “Company”) as of June 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2021, and the related notes and schedules (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 at June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021 , 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 June 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated August 30, 2021 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its accounting method for accounting for leases in fiscal year 2020 due to the adoption of Topic 842:

Leases, using a modified retrospective approach, and changed its method for recognizing revenue in fiscal year 2019 due to the adoption of Topic 606:

Revenue from Contracts with Customers.

Leases , using a modified retrospective approach.

Basis for Opinion

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

Critical Audit Matter

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

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

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

Valuation of Inventories

As described in Note 1 to the consolidated financial statements, the Company’s consolidated inventories balance, which is stated at lower of cost (determined on a first-in, first-out basis) or net realizable value, was $154.3 million as of June 30, 2021.

The valuation of inventories is made based on the Company’s periodic review of inventory quantities on hand as compared with sales forecasts, historical usage, aging of inventories, production yield levels and current product selling prices.

We identified the valuation of inventories as a critical audit matter due to the significant judgment and estimates required by Management.

Determining whether a decline in value has occurred requires Management’s complex judgments related to (i) sales forecasts based on historical sales and expected future orders, and (ii) obsolescence of certain products based on changes in technology and demand.

Auditing these judgments is especially challenging and involved subjective auditor judgment due to fluctuations in sales trends and evolving customer demands.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the completeness and accuracy of data used in the determination of the valuation of inventories by testing the completeness of the inventories analyzed, the inputs used in the analysis, and recalculating the estimated valuation of inventories based on management’s stated methodology.

• Analyzing the reasonableness of the methodology management uses to estimate the valuation of inventories by evaluating quantitative and qualitative factors considered by management in estimating the inventory reserve.

• Evaluating the reasonableness of Management's assumptions related to future demand by (i) performing retrospective review of the Company’s prior year estimates to actual results, (ii) evaluating the reasonableness of sales forecasts by comparing to current backlog and historical sales data used in the analysis, and (iii) considering additional facts and circumstances that could impact the determination of the valuation of inventories including, assessing changes in macroeconomic conditions.

/s/ BDO USA, LLP

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San Jose, California

September 2, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Alpha and Omega Semiconductor Limited

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Alpha and Omega Semiconductor Limited (a Bermuda corporation) and subsidiaries (the “Company”) as of June 30, 2018 (not presented herein), and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the year then ended, and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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

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

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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 the financial statements are free of material misstatement, whether due to error or fraud.

Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We served as the Company’s auditor from 2012 to 2018.

San Francisco, California

August 30, 2021

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Accounts receivable, net 35,789 13,272

Inventories 154,293 135,528

Other current assets 14,595 8,807

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Other long-term assets 18,869 5,804

Total assets $ 918,573 $ 792,939

LIABILITIES AND EQUITY

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

( 66,064 ) ( 66,184 )

Additional paid-in capital 259,993 246,103

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss) 2,315 ( 5,127 )

Retained earnings 176,895 118,833

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Noncontrolling interest 143,120 138,199

Total equity 516,325 431,888

Total liabilities and equity $ 918,573 $ 792,939

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Year Ended June 30,

2021 2020 2019

Revenue $ 656,902 $ 464,909 $ 450,920

Cost of goods sold 452,359 362,178 335,542

Gross profit 204,543 102,731 115,378

Operating expenses:

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Net income (loss) per common share attributable to Alpha and Omega Semiconductor Limited

Basic $ 2.25 $ ( 0.27 ) $ 0.08

Diluted $ 2.13 $ ( 0.27 ) $ 0.08

Weighted average number of common share attributable to Alpha and Omega Semiconductor Limited used to compute net income (loss) per share:

Basic 25,786 24,840 24,063

Diluted 27,272 24,840 24,698

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

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Year ended June 30,

2021 2020 2019

Net income (loss) including noncontrolling interest $ 56,289 $ ( 18,257 ) $ ( 14,638 )

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(in thousands)

Preferred Shares

Common Shares

Treasury Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Income (loss)

Retained Earnings

Total AOS Shareholders' Equity

Noncontrolling Interest

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

Shares Amount Shares Amount Shares Amount

Balance, June 30, 2018 — $ — 30,400 $ 61 ( 6,540 ) $ ( 64,790 ) $ 220,244 $ 440 $ 122,639 $ 278,594 $ 147,568 $ 426,162

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Issuance of common shares under Employee Stock Purchase Plan — — 329 — — — 2,908 — — 2,908 — 2,908

Repurchase of common shares under shares repurchase program

Repurchase of common shares under share repurchase program — — — — ( 112 ) ( 1,501 ) — — — ( 1,501 ) — ( 1,501 )

Share-based compensation expense — — — — — — 13,177 — — 13,177 — 13,177

Net income (loss) including noncontrolling interest — — — — — — — — 1,861 1,861 ( 16,499 ) ( 14,638 )

Deferred tax asset related to ASU 2016-06 adoption

Impact on retained earnings related to ASC 606 adoption — — — — — — — 1,036 1,036 — 1,036

Foreign currency translation adjustment — — — — — — — ( 3,133 ) — ( 3,133 ) ( 2,804 ) ( 5,937 )

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Issuance of common shares under Employee Stock Purchase Plan — — 400 1 — — 3,324 — — 3,325 — 3,325

Repurchase of common shares under share repurchase program

Share-based compensation expense — — — — — — 9,854 — — 9,854 — 9,854

Net income (loss) including noncontrolling interest

Impact on retained earnings related to ASC 606 adoption

Net loss including noncontrolling interest

— — — — — — — — ( 6,596 ) ( 6,596 ) ( 11,661 ) ( 18,257 )

Foreign currency translation adjustment — — — — — — — ( 2,434 ) — ( 2,434 ) ( 2,405 ) ( 4,839 )

Contributions by noncontrolling interest

Balance, June 30, 2020 — — 31,944 64 ( 6,639 ) ( 66,184 ) 246,103 ( 5,127 ) 118,833 293,689 138,199 431,888

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Share-based compensation expense — — — — — — 12,190 — — 12,190 — 12,190

Net loss including noncontrolling interest

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

Restricted stock units settlement in connection with service — — — — — — 3,600 — — 3,600 — 3,600

Net income (loss) including noncontrolling interest — — — — — — — — 58,116 58,116 ( 1,827 ) 56,289

Foreign currency translation adjustment — — — — — — — 7,442 — 7,442 6,748 14,190

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Year Ended June 30,

2021 2020 2019

Cash flows from operating activities

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Accounts receivable ( 22,517 ) 11,024 9,237

Inventories ( 18,765 ) ( 22,793 ) ( 21,461 )

Other current and long-term assets ( 5,843 ) 27,306 ( 1,887 )

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Repayments of borrowings ( 66,584 ) ( 49,394 ) ( 21,947 )

Proceeds from financing lease

Principal payments on capital leases ( 16,451 ) ( 11,028 ) ( 4,392 )

Net cash provided by financing activities

Net cash provided by (used in) financing activities ( 18,991 ) 37,651 75,099

Effect of exchange rate changes on cash, cash equivalents and restricted cash 4,895 ( 708 ) ( 1,514 )

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Year Ended June 30,

2021 2020 2019

Supplemental disclosures of cash flow information:

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Supplemental disclosures of non-cash investing and financing information:

Property and equipment purchased but not yet paid (fiscal year 2019 and 2018 amounts are presented as revised, see Note 1)

Property and equipment purchased but not yet paid $ 20,204 $ 17,370 $ 44,799

Reissuance of treasury stock $ 120 $ 56 $ 51

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The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S.

During the fiscal year ended June 30, 2020, the Company corrected an immaterial error in the corresponding amount for the fiscal year ended June 30, 2019 and 2018 of property and equipment purchased but not yet paid in the supplemental disclosures of non-cash investing and financing information by decreasing the amount by $ 14.1 million from $ 58.9 million to $ 44.8 million and $ 2.1 million from $ 68.2 million to $ 66.1 million , respectively.

This disclosure change had no effect on the consolidated statements of operations and cash flows for the fiscal year ended June 30, 2019 and 2018.

Joint Venture

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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 had been ramping up its production of assembly and testing during the fiscal year 2020.

The 12-inch wafer fabrication facility commenced its limited mass production in the quarter ended September 30, 2019 and continued its ramp in the year ended June 30, 2020.

The JV Company has reached its targeted production of assembly and testing.

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

On March 11, 2020, the World Health Organization characterized the outbreak of the coronavirus disease known as COVID-19 as a global pandemic and recommended containment and mitigation measures.

On March 13, 2020, the United States ("U.S.") declared a national emergency concerning the outbreak, and several states and municipalities have declared public health emergencies.

Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world where the Company has operations, including quarantines, and “stay-at-home” orders, closure of all business not deemed "essential", practice of social distancing when engaging in essential activities and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

In response to these steps, the Company took proactive actions from the early signs of the COVID-19 outbreak in China to adopt policies and protocols at its locations around the world, including social distancing guidelines, working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, and suspending employee travel.

As the COVID-19 pandemic reached the U.S.

and federal and state authorities imposed “stay-at-home” orders, the Company has taken similar proactive actions in California, Oregon and Texas

where the Company has business activities in order to protect the health and safety of its employees.

The Company has considered the economic implications of the COVID-19 pandemic in making critical and significant accounting estimates.

COVID-19 has had a negative impact on business activity across the globe.

As a result of the COVID-19 pandemic and the global economic downturn and changing consumer behaviors due to “stay-at-home” restrictions, the Company has experienced shifting market trends, including an increasing demand in the markets for notebooks, PCs and gaming devices and decreasing demand for mobile phone and industrial products, as more consumers are staying at and working from home.

While the Company has recently benefited from the increasing demand of PC related products, there is no guarantee that this trend will continue, and such increasing demand may discontinue as government authorities relax COVID-19 related restrictions.

The COVID-19 pandemic has had and continues to have a negative impact on business and economic activities across the globe.

As a result of the COVID-19 pandemic and the global economic downturn and changing consumer behaviors due to various restrictions imposed by governments, the Company has experienced shifting market trends, including an increasing demand in the markets for notebooks, PCs, gaming devices and other products.

While the Company has recently benefited from the 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 and consumer behaviors change.

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.

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Accordingly, the COVID-19 pandemic may have a negative impact on the Company's sales and results of operations, the size and duration of which is difficult to predict.

The Company will continue to actively monitor the situation and may take further actions altering its business operations that the Company determines are in the best interests of its employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities.

Risks and Uncertainties

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The Company believes changes in any of the following areas could have a material adverse effect on the Company's future financial position or results of operations or cash flows:

new product development, including market receptiveness, operation of in-house manufacturing facilities, operation of the JV Company, litigation or claims against the Company based on intellectual property, patent, product regulatory or other factors, competition from other products, general economic conditions, the ability to attract and retain qualified employees, the ability to successfully operate joint venture and ultimately to sustain profitable operations, risks associated with doing business in China, and ability to diversify products and develop digital business;

competition from other products, general economic conditions, the ability to attract and retain qualified employees, the ability to successfully operate joint venture and ultimately to sustain profitable operations, risks associated with doing business in China, and ability to diversify products and develop digital business;

the general state of the U.S., China and world economies;

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The Company also deploys and implements its proprietary power discrete processes and equipment at third-party foundries to maximize the performance and quality of its products.

The Company's revenue may be impacted by its ability to obtain adequate wafer supplies from third-party foundries and utilize wafer production and packaging and testing capacity from its in-house facilities.

The Company's revenue may be impacted by its ability to utilize wafer production and packaging and testing capacity from its in-house facilities and obtain adequate wafer supplies from third-party foundries.

Currently the Company's main third-party foundry is Shanghai Hua Hong Grace Electronic Company Limited, or HHGrace, located in Shanghai, China.

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Although the Company believes that its volume of production allows the Company to secure favorable pricing and priority in allocation of capacity in its third-party foundries, if the foundries' capacities are constrained due to market demands, HHGrace, together with other foundries from which the Company purchases wafers, may not be willing or able to satisfy all of the Company's manufacturing requirements on a timely basis and/or at favorable prices.

The Company is also subject to the risks of service

disruptions and raw material shortages by its foundries.

The Company is also subject to the risks of service disruptions and raw material shortages by its foundries.

Such disruptions, shortages and price increases could harm the Company's operating results.

2 unchanged sentences

Use of Estimates

The preparation of our consolidated financial statements in conformity with U.S.

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.

To the extent there are material differences between these estimates and actual results, the Company's consolidated financial statements will be affected.

On an ongoing basis, the Company evaluates the estimates, judgments and assumptions including those related to stock rotation returns, price adjustments, allowance for doubtful accounts, inventory reserves, warranty accrual, income taxes, leases, share-based compensation, recoverability of and useful lives for property, plant and equipment and intangible assets, as well as economic impacts of the COVID-19 pandemic.

To the extent there are material differences between these estimates and actual results, the Company's condensed consolidated financial statements will be affected.

Foreign Currency Transactions and Translation

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For the Company's subsidiaries which use the local currency as their functional currency, including the JV Company, their results and financial position are translated into U.S.

dollars using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses items.

dollars using exchange rates at balance sheet dates for assets and liabilities

and using average exchange rates for income and expenses items.

The resulting translation differences are presented as a separate component of accumulated other comprehensive income (loss) and noncontrolling interest in the consolidated statements of equity.

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Cost includes semiconductor wafer and raw materials, labor, depreciation expenses and other manufacturing expenses and overhead, and packaging and testing fees paid to third parties if subcontractors are used.

Inventory reserves are made based on the Company's periodic review of inventory quantities on hand as compared with its sales forecasts, historical usage, aging of inventories, production yield levels and current product selling prices.

Valuation of inventories are based on the Company's periodic review of inventory quantities on hand as compared with its sales forecasts, historical usage, aging of

inventories, production yield levels and current product selling prices.

If actual market conditions are less favorable than those forecasted by management, additional future inventory write-downs may be required that could adversely affect the Company's operating results.

Inventory reserves once established are not reversed until the related inventory has been sold or scrapped.

Adjustments to inventory once established are not reversed until the related inventory has been sold or scrapped.

Property, Plant and Equipment

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Depreciation is provided for on a straight-line basis over the estimated useful lives of the related assets as follows:

20 to 30 years

Manufacturing machinery and equipment

5 to 15 years

Equipment and tooling

Computer hardware and software

Office furniture and equipment

Leasehold and building improvements

2 to 20 years

Land use rights

Building 20 to 30 years

Manufacturing machinery and equipment 8 to 15 years

Equipment and tooling 5 years

Computer hardware and software 3 to 5 years

Office furniture and equipment 5 years

Leasehold and building improvements 2 to 20 years

Land use rights 50 years

There is no private land ownership in China.

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Equipment and construction in progress represent equipment received but the necessary installation has not been fully performed or building construction and leasehold improvements have been started but not yet completed.

Equipment and

construction in progress are stated at cost and transferred to respective asset class when fully completed and ready for their intended use.

Equipment and construction in progress are stated at cost and transferred to respective asset class when fully completed and ready for their intended use.

Internal-use software development costs are capitalized to the extent that the costs are directly associated with the development of identifiable and unique software products controlled by the Company that will probably generate economic benefits beyond one year.

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Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

Impairment of Privately-held Investment

During fiscal year 2017, the Company purchased shares of common stock in a privately-held company at a total investment cost of $ 0.6 million .

The Company made the investment because it viewed the privately-held company as having strategic technology and a business that would complement the Company's technological capabilities and help create an opportunity for the Company to sell its products.

The Company accounted for the investment on a cost basis.

During the fiscal year ended June 30, 2020, the Company recorded an impairment charge of $ 0.6 million in connection with this investment as the Company concluded the impairment to be other-than-temporary.

Government Grants

4 unchanged sentences

As a result of such grants, during the fiscal year ended June 30, 2021, the Company reduced interest expense by $ 3.0 million, property, plant and equipment by $ 0.1 million, and operating expenses by $ 3.7 million.

During the fiscal year ended June 30, 2020, the Company reduced interest expense by $ 6.1 million, property, plant and equipment by $ 1.3 million, and operating expenses by $ 4.7 million.

During the fiscal year ended June 30, 2019, the Company reduced interest expenses by $ 0.3 million.

During the fiscal year ended June 30, 2018, the Company reduced property, plant and equipment by $ 3.3 million .

Long-lived Assets

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Revenue Recognition

As a result of the adoption of the new revenue standard on July 1, 2018, at the beginning of the first quarter of fiscal year 2019, the Company determines revenue recognition through the following steps:

The Company determines revenue recognition through the following steps:

(1) identification of the contract with a customer;

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and (5) recognition of revenue when, or as, a performance obligation is satisfied.

The Company recognizes revenue when product is shipped to the customer, net of estimated stock rotation returns and price adjustments that it expects to provide to certain distributors.

The Company recognizes product revenue at a point in time when product is shipped to the customer, net of estimated stock rotation returns and price adjustments that it expects to provide to certain distributors.

The Company presents revenue net of sales taxes and any similar assessments.

Our standard payment terms range from 30 to 90 day s.

The Company sells its products primarily to distributors, who in turn sell the products globally to various end customers.

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Allowance for price adjustments is recorded against accounts receivable and the provision for stock rotation rights is included in accrued liabilities on the consolidated balance sheets.

Packaging and testing services revenue is recognized upon shipment of serviced products to the customer.

On July 1, 2019, the Company adopted Topic 842, Leases, using the modified retrospective method.

Results for reporting periods beginning after July 1, 2019 were presented under Topic 842, while prior period amounts were not adjusted and continue to be reported on a historical basis as permitted under Topic 840.

The Company's performance obligations relate to contracts with a duration of less than one year.

The Company elected to apply the practical expedient provided in ASC 606, “Revenue from Contracts with Customers”.

Therefore, the Company is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The Company recognizes the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer.

Applying the practical expedient, the Company recognizes commissions as expense when incurred, as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.

Packaging and testing services revenue is recognized at a point in time upon shipment of serviced products to the customer.

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

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Finance leases are included in property, plant and equipment, finance lease liabilities and long-term finance leases liabilities on the consolidated balance sheets.

The Company elected the practical expedient permitted under the transition guidance, which allowed the Company to carryforward its historical lease classifications, make an assessment on whether a contract was or contains a lease, and determine initial direct costs for any leases that existed prior to July 1, 2019.

The Company elected to combine its lease and non-lease components as a single lease component for all asset classes.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

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Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

Operating lease expense is generally recognized on a straight-line basis over the lease term.

Operating lease expense is generally

recognized on a straight-line basis over the lease term.

Variable lease payments are expensed as incurred and are not included within the operating lease ROU asset and lease liability calculation.

The Company does not record leases on the consolidated balance sheet with a term of one year or less.

The Company elected to combine its lease and non-lease components as a single lease component for all asset classes.

Product Warranty

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Recently Issued Accounting Standards not yet adopted

In January 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts on an entity’s own equity.

This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher than shareholder’s rights, and (3) whether collateral is required.

In addition, the ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share.

For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In January 2020, the FASB issued ASU No.

2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions.

10 unchanged sentences

The Company is currently evaluating the impacts of adoption of the new guidance to its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15 “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-15 “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2018-15").

1 unchanged sentence

The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments.

ASU 2018-15 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019.

Early adoption is permitted.

The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820):

ASU 2018-15 had no material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13”).

2 unchanged sentences

All other amendments should be applied retrospectively to all periods presented upon their effective date.

2018-13 is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019.

The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses ("ASU 2016-13").

This accounting standard update changes the accounting for recognizing impairments of financial assets.

Under the update, credit losses for certain types of financial instruments will be estimated based on expected losses.

The update also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination.

This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.

Recently Adopted Accounting Standards

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates.

These amendments are effective for entities as of March 12, 2020 through December 31, 2022.

The Company elected to apply

the provisions of ASU 2020-04 for its contracts as of June 30, 2020.

The adoption of ASU 2020-04 did not have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).

This guidance requires a dual approach for lessee accounting under which a lessee accounts for leases as finance leases or operating leases.

Both finance and operating leases result in the lessee recognizing a right-of-use asset and a corresponding liability on its balance sheet, with differing methodology for income statement recognition.

The Company adopted this standard as of July 1, 2019, using the modified retrospective transition method and recorded a cumulative-effect balance sheet adjustment.

As a result of adopting ASU 2016-02 on July 1, 2019, the Company recognized operating lease right-of-use assets and corresponding operating lease liabilities of approximately $ 21 million each from existing leases on the Company's consolidated balance sheet.

See Note 6 for further details.

In June 2018, the FASB issued ASU 2018-07, "Compensation -Stock Compensation:

Improvement to Nonemployees Share-Based Payment Accounting ("ASU 2018-07"), which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees.

ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards.

ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606.

ASU 2018-13 had no material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326).

Topic 326 adds to U.S.

GAAP the current expected credit loss ("CECL") model, a measurement model based on expected losses rather than incurred losses.

Under this new standard, an entity recognizes its estimate of expected credit losses as an allowance.

The new standard is also intended to reduce the complexity of U.S.

GAAP by decreasing the number of credit loss models that entities use to account for debt instruments.

The new guidance significantly changes the accounting for credit losses.

The Company adopted

ASU 2016-13 using the modified-retrospective approach in the first quarter of fiscal 2021 with no impact to its consolidated financial statements.

The adoption of Topic 326 did not significantly change the Company's approach to the valuation of trade receivables.

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 June 30, 2021, the allowance for credit losses on the Company's trade receivables remained immaterial.

Net Income (loss) Per Common Share Attributable to Alpha and Omega Semiconductor Limited

3 unchanged sentences

Under the treasury stock method, potential common shares outstanding are not included in the computation of diluted net income per share if their effect is anti-dilutive.

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

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

Year Ended June 30,

2021 2020 2019

(in thousands, except per share data)

6 unchanged sentences

Net income (loss) per share attributable to Alpha and Omega Semiconductor Limited:

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

Basic $ 2.25 $ ( 0.27 ) $ 0.08

Diluted $ 2.13 $ ( 0.27 ) $ 0.08

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:

Year Ended June 30,

2021 2020 2019

(in thousands)

Employee stock options and RSUs 193 2,028 593

ESPP 71 834 512

Total potential dilutive securities 264 2,862 1,105

5 unchanged sentences

The Company closely monitors the aging of accounts receivable from its distributors and direct customers, and regularly reviews their financial positions, where available.

The Company ships its product indirectly to Huawei and its affiliates (collectively, “Huawei”) through distributors.

Typically, the Company sells its products to distributors who then sell to original design manufacturers (“ODMs”) that incorporate our products into end applications that are then shipped to Huawei.

In the past, the Company shipped its product indirectly to Huawei and its affiliates (collectively, “Huawei”) through distributors.

Typically, the Company sold its products to distributors who then sold to original design manufacturers (“ODMs”) that incorporated our products into end applications that were then shipped to Huawei.

While distributor point of sale reports summarize distributor sales to ODMs, the Company must make certain assumptions and estimates in order to determine the amount of revenues attributed to indirect shipment to Huawei.

4 unchanged sentences

Percentage of revenue 2021 2020 2019

Customer A 28.7 % 29.3 % 28.8 %

Customer B 35.4 % 35.5 % 36.4 %

Percentage of accounts receivable 2021 2020

Customer A 12.4 % *

Customer B 22.1 % *

Customer C 21.9 % 29.8 %

Customer D * 10.9 %

Customer E * 20.1 %

Customer F * 10.4 %

Customer G * 10.3 %

* Less than 10%

10 unchanged sentences

Finished goods 16,569 18,288

$ 154,293 $ 135,528

Other current assets

6 unchanged sentences

Prepaid income tax 2,221 1,991

Interest receivable 2,207 —

Customs deposit 270 163

Lease financing cost

Other receivables 68 69

* Refund of the accumulated value-added tax paid previously

$ 14,595 $ 8,807

Property, plant and equipment, net

(in thousands)

Land $ 4,877 $ 4,877

Building 71,454 58,875

Manufacturing machinery and equipment 515,320 447,079

4 unchanged sentences

Land use rights 9,319 8,502

748,052 655,263

accumulated depreciation ( 348,749 ) ( 291,515 )

399,303 363,748

Equipment and construction in progress 37,674 48,592

13 unchanged sentences

Investments in privately held companies 100 100

Lease financing costs

Customs deposit 1,120 1,662

1 unchanged sentence

Office leases deposits 1,100 766

Other 740 184

$ 18,869 $ 5,804

Intangible assets, net

1 unchanged sentence

Patents and technology rights $ 18,037 $ 18,037

Trade name 268 268

Customer relationships 1,150 1,150

19,455 19,455

accumulated amortization ( 6,314 ) ( 2,954 )

13,141 16,501

Goodwill 269 269

Intangible assets, net $ 13,410 $ 16,770

Intangible assets of patents and technology rights are primarily related to a license agreement that the Company entered into with STMicroelectronics International N.V.

(“STMicro”) on September 5, 2017, pursuant to which STMicro granted the Company a world-wide, royalty-free and fully-paid license to use its technologies to develop, market and distribute certain digital multi-phase controller products, which have been offered by STMicro.

This agreement allows the Company to develop and market products in a new market, primarily in the computer server segment.

As of June 30, 2020 , the Company recorded $ 16.2 million of intangible assets related to STMicro.

The Company will begin to amortize such license fees during the September 2020 quarter, which is when the technology meets qualification requirements and becomes ready for its intended use in production.

Amortization expense for intangible assets was $ 113,000 , $ 113,000 and $ 76,000 for the years ended June 30, 2020 , 2019 and 2018 , respectively.

The Company is amortizing intangible assets of patents and technology rights related to a license agreement with STMicroelectronices International N.V.

Amortization expense for intangible assets was $ 3.4 million, $ 0.1 million and $ 0.1 million for the years ended June 30, 2021, 2020 and 2019, respectively.

The estimated useful lives for patents and technology rights and trade name were five years and ten years , respectively.

Customer relationships are fully amortized.

Estimated future minimum amortization expense of intangible assets is as follows (in thousands):

8 unchanged sentences

Accrued facilities related expenses 2,536 1,831

Accrued financing lease costs

Accrued property, plant and equipment 8,688 11,039

1 unchanged sentence

Customer deposit 7,139 2,813

ESPP payable 715 608

$ 69,494 $ 54,986

The activity in the warranty accrual, included in accrued liabilities is as follows:

Year Ended June 30,

2021 2020 2019

(in thousands)

Beginning balance $ 709 $ 623 $ 535

Addition 2,443 895 236

Utilization ( 357 ) ( 809 ) ( 148 )

Ending balance $ 2,795 $ 709 $ 623

1 unchanged sentence

Year Ended June 30,

2021 2020 2019

(in thousands)

Beginning balance $ 3,358 $ 1,921 $ 1,750

Addition 4,742 9,441 5,267

Utilization ( 4,183 ) ( 8,004 ) ( 5,096 )

Ending balance $ 3,917 $ 3,358 $ 1,921

1 unchanged sentence

(in thousands)

Deferred rent

Deferred payroll taxes $ 1,219 $ —

Customer deposits * 42,000 8,000

Computer software liabilities — 1,897

Other 904 826

Other long-term liabilities $ 44,123 $ 10,723

* Customer deposit from our customer A and customer B for securing future shipment from the Company.

The Company reclassified $ 2.0 million of the customer deposit to short term accrued liabilities during the fiscal year ended June 30, 2020 since the repayment of this amount is due within a year.

Bank borrowings

Short-term borrowing

On April 15, 2020, the JV Company entered into a one-year loan agreement with China Everbright Bank in China to provide a loan of a maximum of Chinese Renminbi (RMB) 100 million (approximately $ 14.3 million based on the currency exchange rate between RMB and U.S.

On June 29, 2021, the JV Company entered into a one-year loan agreement with China Citic Bank in China to borrow a maximum of $ 7.7 million.

Interest payments are due on the 20th of each quarter starting September 20, 2021, and the entire principal is due on June 29, 2022.

As of June 30, 2021, the outstanding balance of this loan was $ 7.7 million at an interest rate of 3.49 % per annum.

On April 19, 2021, the JV Company entered into a loan agreement with China Everbright Bank in China to borrow a maximum of Chinese Renminbi ("RMB") 100 million.

The borrowing can be in RMB or U.S.

Dollar ("USD").

The loan consists of RMB 50 million for working capital borrowings in Chinese yuan and RMB 50 million for borrowing in USD.

The loan is collateralized by eligible accounts receivable.

On April 19, 2021, the JV Company borrowed RMB 50.0 million, or $ 7.7 million based on the currency exchange rate between RMB and USD on April 19, 2021, at an interest rate of 5.1 % annum.

The interest payments are due quarterly with the entire principal due no later than May 19, 2022.

On June 16, 2021 and June 24, 2021, the JV Company also borrowed $ 4.2 million and $ 3.5 million at interest rate of 2.7 % per annum, with principal due on August 18, 2021 and September 9, 2021, respectively.

As of June 30, 2021, the total outstanding balance of these loans was $ 15.4 million.

On November 13, 2020, the JV Company entered into a one-year loan agreement with China Merchant Bank in China.

The JV Company can borrow up to Chinese Renminbi ("RMB") 50.0 million, or $ 7.6 million, based on the currency exchange rate between RMB and U.S.

Dollar on November 13, 2020.

The loan's interest rates are based on the China one-year loan prime rate ("LPR") plus 1.4 % per annum.

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 at a n interest rate of 5.25 % per annum.

As of June 30, 2021, the outstanding balance of this loan was $ 7.7 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 million (approximately $ 14.3 million based on the currency exchange rate between RMB and U.S.

Dollar on April 15, 2020), in the amount in RMB or USD.

Interest payments are due on the 20th of each month, and the entire principal is due on April 16, 2021.

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 June 30, 2020, the JV Company borrowed RMB 20 million , or $ 2.8 million based on the currency exchange rate between RMB and U.S.

Dollar, at a fixed interest rate of 5.1375 % per annum under the working capital loan .

The JV Company also borrowed $ 7.1 million and $ 1.9 million at a fixed interest rate of 2.7 % and 2.8 % per annum, respectively, during the same period under the accounts receivable collateralized loan .

As of June 30, 2020, the total outstanding balance under the loan was $ 11.8 million .

Interest payments were due on the 20th of each month, and the entire principal was due on April 16, 2021.

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

As of June 30, 2021, this loan was expired and there was no outstanding balance under the loan.

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

This line of credit matures on February 14, 2021 and is based on the China Base Rate multiplied by 1.05 , or 4.99 % on October 31, 2019.

This line of credit was scheduled to mature on February 14, 2021 and is based on the China Base Rate multiplied by 1.05 , or 4.99 % on October 31, 2019.

The purpose of the credit facility is to provide short-term borrowings.

1 unchanged sentence

Dollar on October 31, 2019.

As of June 30, 2020 , there was no outstanding balance under the loan.

On September 23, 2019, the JV Company entered into a short-term revolving loan agreement with China Everbright bank in China.

The JV Company can borrow up to RMB 50.0 million , or $ 7.1 million based on the currency exchange rate between RMB and U.S.

Dollar on September 23, 2019, at varying interest rates, in RMB or USD.

Interest payments with the entire principal were due no later than 90 days from each borrowing date.

In January and February 2020, the JV Company borrowed $ 1.6 million and $ 5.5 million , respectively, under this loan.

During the three months ended June 30, 2020, the JV Company repaid the loan in full.

As of June 30, 2020 , there was no outstanding balance under the loan.

On March 21, 2019, the JV Company entered into a one-year loan agreement with China Everbright Bank in China to provide a loan for RMB 20 million , or $ 3.0 million based on currency exchange rate between RMB and U.S.

Dollar on March 31, 2019 at fixed interest rate of 5.44 % per annum.

Interest payments were due monthly with the entire principal due on March 21, 2020.

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

As of June 30, 2021, there was no outstanding balance under the loan.

2 unchanged sentences

On January 20, 2020, the JV Company renewed the loan agreements with the same terms.

Interest payments are due monthly and quarterly with the entire principal due not later

than January 21, 2021.

During the three months ended June 30, 2020, the JV Company repaid the loan in full.

As of June 30, 2020 , there was no outstanding balance under the loan.

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

As of June 30, 2021, these two loans were expired and there was no outstanding balance under the loans.

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.

2 unchanged sentences

Dollar on November 16, 2018.

In October 2019, this line of credit was renewed with the same terms and a maturity date of September 30, 2020.

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

As of June 30, 2021, there was no outstanding balance under the line of credit.

8 unchanged sentences

The Borrower was in compliance with these covenants as of June 30, 2021.

During the fiscal year ended June 30, 2020, the Company borrowed $ 20.0 million and repaid it in full.

During the fiscal year ended June 30, 2021 and 2020, the Company borrowed $ 56.7 million and $ 20.0 million, respectively, and repaid it in full.

As of June 30, 2021, there was no outstanding balance and the Company had unused credit of approximately $ 30.0 million.

On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $ 8.0 million with certain financial covenants required.

Other terms remain the same.

Credit Facilities

9 unchanged sentences

The Agreements also contain customary events of default, including but are not limited to, failure to make payments and breach of material terms under the Agreements.

The Agreements include certain customary closing conditions, including the payment of deposit by the JV Company.

On June 28, 2020, the parties entered into a modification to this agreement, pursuant to which the interest rate was changed to be the five-year loan prime rate in China plus 0.8125 % , or 5.4625 % .

On June 28, 2020, the parties entered into a modification to this agreement as a result of a change in the bank reference rate, pursuant to which the interest rate was changed to be the five-year loan prime rate in China plus 0.8125 %, or 5.4625 %.

Other terms of this agreement remain the same.

4 unchanged sentences

Dollar on April 26, 2020).

The obligation under the loan agreement is secured by certain assets of the JV Company.

The obligation under the loan agreement is secured by certain assets of the JV Company with a carrying value of $ 114.0 million as of June 30, 2021.

Beginning December 18, 2020, the JV Company is required to make consecutive semi-annual payments of principal until December 8, 2024.

Interest payment is due on March 20, June 20, September 20 and December 20 of each year based on China one-year loan prime rate ("LPR") plus 1.3 %.

The JV Company drew down RMB 250 million (approximately $ 35.3 million based on the

currency exchange rate between RMB and U.S.

The JV Company drew down RMB 250 million (approximately $ 35.3 million based on the currency exchange rate between RMB and U.S.

Dollar on June 30, 2020) in April 2020.

1 unchanged sentence

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

The obligation under the loan agreement is secured by certain assets of the JV Company.

The obligation under the loan agreement is secured by certain assets of the JV Company with a carrying value of $ 114.0 million as of June 30, 2021.

Beginning December 18, 2020, the JV Company will make consecutive semi-annual payments of principal until December 8, 2024.

2 unchanged sentences

As of June 30, 2021, the outstanding balance of the loan was $ 19.2 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.

Dollar on March 31, 2019).

5 unchanged sentences

The principal payments are required to be paid every 6 months over the term of loan commencing in October 2019.

This loan is secured by the buildings and certain equipment owned by the JV Company.

This loan is secured by the buildings and certain equipment owned by the JV Company with a carrying value of $ 89.1 million as of June 30, 2021.

As a condition of the loan arrangements, 14 million RMB (approximately $ 2.0 million) of cash is held as restricted cash by the JV Company as a compensating balance at the JV Company's bank until the principal is paid.

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 % .

On June 24, 2020, a modification of this loan was signed as a result of a change in the bank reference rate, 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.

During the three months ended December 31, 2019, the JV Company paid 6.0 million RMB under this agreement.

As of June 30, 2021, the outstanding balance of the loan was 184 million RMB (equivalent of $ 28.5 million based on the currency exchange rate as of June 30, 2021).

7 unchanged sentences

As of June 30, 2021, the outstanding balance of the term loan was $ 15.1 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 our fabrication facility located in Oregon.

The obligation under the credit agreement is secured by substantially all assets of Jireh and guaranteed by the Company.

6 unchanged sentences

As of June 30, 2021, the outstanding balance of the term loan was $ 9.3 million.

On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the "Bank") in an amount up to $ 45.0 million for the purpose of expanding and upgrading the Company’s fabrication facility located in Oregon.

The obligation under the loan agreement substantially all assets of Jireh and guaranteed by the Company.

The agreement has a 5.5 year term and matures on February 16, 2027.

Jireh will make consecutive quarterly payments of principal and interest.

The loan accrues interest based on adjusted LIBOR plus the applicable margin based on the outstanding balance of the loan.

This agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain.

At June 30, 2021, maturities of short-term debt and long-term debt were as follows (in thousands):

Year ending June 30,

2022 $ 58,467

Total principal of debt 136,964

1 unchanged sentence

Total principal of debt, less debt issuance costs $ 136,020

Short-term Debt

Long-term Debt

Short-term Debt Long-term Debt Total

Principal amount $ 58,467 $ 78,497 $ 136,964

1 unchanged sentence

Total debt, less debt issuance costs $ 58,030 $ 77,990 $ 136,020

Under Topic 842, the Company evaluates contracts for lease accounting at contract inception and assesses lease classification at the lease commencement date.

The Company evaluates contracts for lease accounting at contract inception and assesses lease classification at the lease commencement date.

Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liabilities and operating lease liabilities - long-term on the Company's consolidated balance sheets.

10 unchanged sentences

The Company does not record leases on the consolidated balance sheet with a term of one year or less.

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

Fiscal Year Ended June 30, 2020

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

Fiscal Year Ended June 30, 2021 Fiscal Year Ended June 30, 2020

Operating leases:

3 unchanged sentences

Amortization of equipment 2,200 2,839

Interest 2,168 2,783

Short-term leases:

2 unchanged sentences

Supplemental balance sheet information related to the Company’s operating and finance leases is as follows (in thousands, except lease term and discount rate):

June 30, 2020

June 30, 2021 June 30, 2020

Operating Leases :

11 unchanged sentences

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

Fiscal Year Ended June 30, 2020

Fiscal Year Ended June 30, 2021 Fiscal Year Ended June 30, 2020

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

2 unchanged sentences

Financing cash flows from finance lease $ 16,451 $ 11,028

Non-cash investing and financing information:

Operating lease right-of-use assets obtained in exchange for lease obligations $ 5,585 $ 17,288

Future minimum lease payments are as follows as of June 30, 2021 (in thousands):

Operating Leases

Finance Leases

Total minimum lease payments

Less amount representing interest

Total lease liabilities

Prior to the adoption of the new lease standard, future minimum lease payments as of June 30, 2019 were as follows (in thousands):

Year ending June 30,

Operating Leases

Finance Leases

Operating Leases Finance Leases

2022 $ 7,221 $ 18,006

2023 6,048 13,052

Thereafter 18,850 —

Total minimum lease payments 44,348 31,058

14 unchanged sentences

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

During fiscal year 2020, the Company did not repurchase any shares pursuant to the repurchase program.

During fiscal years 2019 and 2018, the Company repurchased an aggregate of 111,509 shares and 950,046 shares, respectively, from the open market for a total cost of approximately $ 1.5 million and $ 15.1 million, excluding fees and related expenses, at an average price of $ 13.43 and $ 15.86 per share, respectively.

During fiscal year 2021 and 2020, the Company did no t repurchase any shares pursuant to the repurchase program.

During fiscal year 2019, the Company repurchased an aggregate of 111,509 shares, from the open market for a total cost of approximately $ 1.5 million, excluding fees and related expenses, at an average price of $ 13.43 per share.

As of June 30, 2021, the Company had 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, since inception of the program.

8 unchanged sentences

The 2018 Plan authorized the board of directors to grant incentive share options, non-statutory share options and restricted shares to employees, directors, non-employee directors and consultants of the Company and its subsidiaries for up to 2,065,000 common shares.

The 2018 Plan does not include an evergreen authorization, therefore the Company is not permitted to increase the number of shares reserved in the share pool without

obtaining further shareholder approval.

The 2018 Plan does not include an evergreen authorization, therefore the Company is not permitted to increase the number of shares reserved in the share pool without obtaining further shareholder approval.

Outstanding shares under the 2018 Plan and awards granted under the 2009 Plan that expire, are forfeited or cancelled or terminate prior to the issuance of the shares subject to those awards or are settled in cash will be available for subsequent issuance under the 2018 Plan.

As of June 30, 2021, 1,029,515 shares were available for grant under the 2018 Plan.

Beginning with the 2014 Annual Shareholders Meeting, on the date of each annual shareholders meeting, each individual who commences service as a non-employee Board member by reason of his or her election to the Board at such annual meeting and each individual who is to continue to serve as a non-employee Board member, whether or not that individual is standing for re-election to the Board at that particular annual meeting, will automatically be granted an award in the form of restricted share units ("RSU") covering that number of common shares determined by dividing ninety-five thousand dollars ( $ 95,000 ) by the average fair market value per share for the ninety ( 90 )-day period preceding the grant date.

Beginning with the 2014 Annual Shareholders Meeting, on the date of each annual shareholders meeting, each individual who commences service as a non-employee Board member by reason of his or her election to the Board at such annual meeting and each individual who is to continue to serve as a non-employee Board member, whether or not that individual is standing for re-election to the Board at that particular annual meeting, will automatically be granted an award in the form of restricted share units covering that number of common shares determined by dividing ninety-five thousand dollars ($ 95,000 ) by the average fair market value per share for the ninety ( 90 )-day period preceding the grant date.

Under the 2018 Plan, incentive share options and RSU are to be granted at a price that is not less than 100 % and nonstatutory share options are to be granted at not less than 85 % of the fair value of the common shares, at the date of grant for employees and consultants.

4 unchanged sentences

Number of Restricted Stock

Weighted Average

Units Weighted Average

Grant Date Fair

Value Per Share

Weighted Average

Period (Years)

Aggregate Intrinsic Value

Value Per Share Weighted Average

Period (Years) Aggregate Intrinsic Value

Nonvested at June 30, 2018 919,023 $ 15.14 1.62 $ 13,086,888

Granted 527,022 $ 11.28

Vested ( 499,954 ) $ 13.09

Forfeited ( 39,750 ) $ 13.82

Nonvested at June 30, 2019 906,341 $ 14.09 1.62 $ 8,465,225

Granted 505,440 $ 8.51

Vested ( 455,893 ) $ 13.53

Forfeited ( 23,750 ) $ 13.19

Nonvested at June 30, 2020 932,138 $ 11.36 1.66 10,141,661

Granted 722,873 $ 29.85

Vested ( 567,087 ) $ 15.70

Forfeited ( 34,400 ) $ 14.88

Nonvested at June 30, 2021 1,053,524 $ 21.60 1.73 32,016,594

Performance-based Restricted Stock Units ("PRSU")

In March each year since year 2017, the Company granted PRSU to certain personnel.

In March each year since fiscal year 2017, the Company granted PRSU to certain personnel.

The number of shares to be ultimately earned under the PRSU is determined based on the level of attainment of predetermined financial goals.

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

The Company recorded $ 0.6 million of non-cash compensation expense for these awards in the quarter ended June 30, 2020.

The expense was reported in the other current liabilities line on the consolidated balance sheet as the total 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 stock compensation expense in the consolidated statements of operations.

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 expense in the condensed consolidated statements of operations.

As of June 30, 2021 and 2020, the Company recorded $ 0.1 million and $ 0.6 million such expenses in the other current liabilities, respectively.

During the fiscal years ended June 30, 2021 and 2020, the Company recorded $ 3.1 million and $ 0.6 million of non-cash compensation expense, respectively.

As of June 30, 2021, the Company granted RSUs valued at $ 3.6 million to participants, which were fully vested due to achievement of certain objective measures.

The following table summarizes the Company's PRSU activities:

Number of Performance-based Restricted Stock

Weighted Average

Units Weighted Average

Grant Date Fair

Value Per Share

Weighted Average

Period (Years)

Aggregate Intrinsic Value

Value Per Share Weighted Average

Period (Years) Aggregate Intrinsic Value

Nonvested at June 30, 2018 422,300 $ 16.63 2.06 $ 6,013,552

Granted 291,750 $ 11.18

Vested ( 111,623 ) $ 16.68

Forfeited ( 5,703 ) $ 16.78

Nonvested at June 30, 2019 596,724 $ 13.95 1.88 $ 5,573,402

Granted 155,000 $ 7.36

Vested ( 110,659 ) $ 16.68

Forfeited ( 298,290 ) $ 11.32

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 ( 6,240 ) $ 17.23

Nonvested at June 30, 2021 353,824 $ 22.69 1.74 10,752,711

3 unchanged sentences

The MSUs vest in four equal annual installments after the end of performance period.

The Company estimated the grant date fair values of its MSUs with derived service periods of 4.5 to 7.5 years using a Monte-Carlo simulation model with the following assumptions:

On August 31, 2020, the Compensation Committee of the Board approved a modification of the terms of MSU to (i) extend the performance period through December 31, 2022 and (ii) change the commencement date for the four-year time-based service period to January 1, 2023.

The modified MSUs was valued immediately before and after the modification, using Morte Carlo simulation pricing model.

The Morte Carlo simulation pricing model applied the following assumptions for pre-modification conditions:

risk-free interest rate of 0.13 %, expected term of 1.3 years, expected volatility of 66.7 % and dividend yield of 0 %;

The Company recorded approximately $ 0.6 million and $ 0.4 million of expense for these MSUs during the years ended June 30, 2020 and 2019 , respectively.

Subsequent to June 30, 2020, the Company's Board of Directors approved the modification of the performance period of the MSU.

and for post-modification conditions:

risk-free interest rate of 0.14 %, expected term of 2.3 years, expected volatility of 59.1 % and dividend yield of 0 %.

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 fiscal year ended June 30, 2021 were immaterial.

The Company recorded approximately $ 1.2 million, $ 0.6 million and $ 0.4 million of expense for these MSUs during the years ended June 30, 2021, 2020 and 2019, respectively.

The following table summarizes the Company's stock option activities:

Exercise Price

Term (in years)

Intrinsic Value

Weighted Average

Average Remaining

Number of Exercise Price Contractual Aggregate

Shares Per Share Term (in years) Intrinsic Value

Outstanding at June 30, 2018 886,978 $ 10.97 4.03

Granted — $ —

Exercised ( 10,500 ) $ 10.50 $ 43,415

Canceled or forfeited — $ —

Outstanding at June 30, 2019 876,478 $ 10.98 3.06

Granted — $ —

Exercised ( 2,500 ) $ 10.50 $ 4,726

Canceled or forfeited ( 230,000 ) $ 17.11

Outstanding at June 30, 2020 643,978 $ 8.79 2.89

Granted — $ —

Exercised ( 156,103 ) $ 11.31 $ 1,272,291

Canceled or forfeited — $ —

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The aggregate intrinsic value for options outstanding at June 30, 2021 in the table above is based on the Company’s common stock closing price on June 30, 2021.

Information with respect to stock options outstanding and exercisable as of June 30, 2020 is as follows:

Options Outstanding

Options Exercisable

Range of Exercise Prices

Weighted-Average

Remaining Contractual Life (Years)

Weighted-Average

Exercise Price

Weighted-Average

Exercise Price

$7.21 - $7.21

$7.44 - $7.44

$7.56 - $9.19

$9.90 - $12.68

$12.91 - $12.91

$7.21 - $12.91

The 2018 Employee Share Purchase Plan

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Such deductions will accumulate over a six-month accumulation period without interest.

After such accumulation period, common

shares will be purchased at a price equal to 85 % of the fair market value per share on either the first day of the offering period or the last date of the accumulation period, whichever is less.

After such accumulation period, common shares will be purchased at a price equal to 85 % of the fair market value per share on either the first day of the offering period or the last date of the accumulation period, whichever is less.

The maximum number of shares that may be purchased by a participant on any purchase date may not exceed 875 shares for a total of 3,500 shares per a 24-month offering period.

4 unchanged sentences

Year Ended June 30,

Volatility rate

2021 2020 2019

Volatility rate 63.1 % - 68.5 %

46.4 % - 58.3 %

1 unchanged sentence

Risk-free interest rate 0.1 % - 0.2 %

Expected term

0.2 % - 1.6 %

2.1 % - 2.9 %

Expected term 1.3 years 1.3 years 1.3 years

Dividend yield — % — % — %

3 unchanged sentences

Year Ended June 30,

2021 2020 2019

(in thousands)

2 unchanged sentences

Selling, general and administrative 8,216 6,029 8,761

$ 15,324 $ 10,454 $ 13,177

Total unrecognized share-based compensation expense as of June 30, 2021 was $ 27.8 million including estimated forfeitures, which is expected to be recognized over a weighted-average period of 2.0 years.

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The employer's contribution is discretionary.

The Company had not made any contributions for eligible employees as of June 30, 2020 .

The Company had no t made any contributions for eligible employees as of June 30, 2021.

The Company makes mandatory contributions for its employees to the respective local governments in terms of retirement, medical insurance and unemployment insurance, where applicable, according to labor and social security laws and regulations of the countries and areas in which the Company operates.

3 unchanged sentences

Year Ended June 30,

2021 2020 2019

(in thousands)

federal taxes:

Current $ 31 $ ( 1,673 ) $ ( 57 )

Deferred 1,955 22 ( 510 )

Current 2,344 1,940 1,765

Deferred ( 396 ) 58 55

State taxes, net of federal benefit:

Current 1 1 3

Total provision for income taxes $ 3,935 $ 348 $ 1,256

1 unchanged sentence

Year Ended June 30,

2021 2020 2019

United States statutory rate 21.0 % 21.0 % 21.0 %

4 unchanged sentences

Tax Act deferred tax re-measurement — 6.2 —

Other ( 0.2 ) — 1.4

6.5 % ( 1.9 ) % ( 9.4 ) %

The domestic and foreign components of income before taxes are:

Year Ended June 30,

2021 2020 2019

(in thousands)

operations $ 9,622 $ 3,549 $ 4,100

operations 50,602 ( 21,458 ) ( 17,482 )

Loss before income taxes $ 60,224 $ ( 17,909 ) $ ( 13,382 )

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Net operating loss carryforwards 22,539 19,870

Depreciation 7,924 8,149

Tax credits 15,550 13,909

Operating lease liabilities 7,292 6,649

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The change in valuation allowance for June 30, 2021 and 2020 was an increase of $ 3.6 million and $ 2.4 million, respectively.

During the quarter ended September 30, 2016, the Company fulfilled its obligations to contribute certain packaging equipment as required by the JV Agreement by transferring the legal titles of such equipment to the JV Company.

As a result of the transfer, the Company reduced its deferred tax assets by $ 6.6 million and recorded a $ 6.6 million in prepaid tax asset, which is amortized to tax expense over the useful life of the assets.

On July 1, 2017, we adopted ASU 2016-16, Intra-Entity Transfers of Assets other than Inventory, which resulted in a de-recognition of a prepaid tax asset of $ 5.5 million related to the prior period intra-entity asset transfer with the JV Company, with an offsetting reduction to retained earnings.

In July 2017, the Company contributed to the JV Company certain China patent rights and certain manufacturing related IP, which per ASU 2016-16, resulted in a deferred tax asset of $ 12.9 million on the difference between the tax basis and the consolidated U.S.

GAAP book value of $ 0 .

Because the JV Company provided a full valuation allowance, there was no change to our net deferred tax assets for the initial adoption of ASU 2016-16.

At June 30, 2020 and 2019 , the Company provided a valuation allowance for its state research and development credit carryforward deferred tax assets of $ 5.4 million and $ 5.1 million , respectively, as it generated more state tax credits each year

than it can utilize.

At June 30, 2021 and 2020, the Company provided a valuation allowance for its state research and development credit carryforward deferred tax assets of $ 5.8 million and $ 5.4 million, respectively, as it generated more state tax credits each year than it can utilize.

The Company intends to maintain a partial valuation allowance equal to the state research and development credit carryforwards in excess of the state net deferred tax liabilities on all other state book/tax differences and net operating loss carryforward.

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The remaining $ 7.3 million of the state tax credits carryforward indefinitely.

At June 30, 2020 , the JV Company had $ 108.0 million of net operating loss carryforwards which begin to expire in 2021, if not utilized.

June 30, 2021, the JV Company had $ 139.1 million of net operating loss carryforwards which begin to expire in 2021, if not utilized.

The Company has not provided for withholding taxes on the undistributed earnings of its foreign subsidiaries because it intends to reinvest such earnings indefinitely.

4 unchanged sentences

Year Ended June 30,

2021 2020 2019

(in thousands)

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To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made.

The amount of interest and penalties accrued at June 30, 2020 was $ 0.1 million , of which $( 0.03 ) million was recognized in the year ended June 30, 2020 .

The amount of interest and penalties accrued at June 30, 2019 was $ 0.2 million , of which $ 0.03 million was recognized in the year ended June 30, 2019 .

The amount of interest and penalties accrued at June 30, 2021 was $ 0.1 million, of which $ 5 thousand was recognized in the year ended June 30, 2021.

The amount of interest and penalties accrued at June 30, 2020 was $ 0.1 million, of which ($ 30 thousand) was recognized in the year ended June 30, 2020.

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

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The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions.

In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its

provision for income taxes.

These assessments can require considerable estimates and judgments.

2 unchanged sentences

Tax Cuts and Jobs Act, Enacted December 22, 2017

On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S.

tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a move from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The SEC staff issued Staff Accounting Bulletin No.

118 ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act.

SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification Topic 740 ("ASC 740").

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax law that were in effect immediately before the enactment of the Tax Act.

In connection with our initial analysis of the impact of the Tax Act, we reported a second quarter of fiscal year 2018 discrete tax benefit of $ 2.7 million related to the re-measurement of certain deferred tax assets and liabilities.

The $ 2.7 million tax benefit related to the tax rate re-measurement estimated in the second quarter of fiscal year 2018 was reduced downward by $ 0.2 million in the fourth quarter of fiscal year 2018, to $ 2.5 million .

In addition, we used a 28 % U.S.

federal tax rate to measure our U.S.

federal income tax expense for fiscal year 2018, down from the 34 % U.S.

federal income tax rate used in first quarter of fiscal year 2018.

On December 22, 2017, the United States enacted tax legislation commonly known as the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changed the existing U.S.

tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a move from a worldwide tax system toward a territorial system through a “participation exemption” deduction for certain foreign-source dividends, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that allows for full expensing of qualified property,

(5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The Company is not currently subject to the Base Erosion and Anti-Abuse (BEAT) tax, which is a tax imposed on certain entities who make payments to their non U.S.

affiliates, where such payments reduce the U.S.

The BEAT tax is imposed at a rate of 10% on Adjusted Taxable Income, excluding certain payments to foreign related entities.

It is an incremental tax over and above the corporate income tax and is recorded as a period cost.

It is possible that this tax could be applicable in future periods, which would cause an increase to the effective tax rate and cash taxes.

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.

On March 27, 2020, the United States enacted the CARES Act, which made the changes to existing U.S.

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

4 unchanged sentences

Accordingly, we reported a discrete tax benefit of $ 1.1 million in the third quarter of fiscal year 2020 related to the re-measurement of the net operating losses that could be realized via the new net operating loss carryback provisions.

Consolidated Appropriations Act, 2021” (“CAA 2021”), Enacted December 27, 2020

On December 27, 2020, the United States enacted the Consolidated Appropriations Act, 2021, which made changes to existing U.S.

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.

Altera Litigation

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 June 2020.

We will continue to monitor ongoing developments and potential impact to our financial statements.

AOS has not recorded any benefit related to the Altera Corporation Tax Court decision in any period through June 2021.

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

Segment and Geographic Information

9 unchanged sentences

Year Ended June 30,

2021 2020 2019

(in thousands)

Hong Kong $ 538,068 $ 390,478 $ 355,058

China 106,810 64,058 81,955

South Korea 5,497 3,303 2,590

United States 5,492 4,465 7,015

Other countries 1,035 2,605 4,302

$ 656,902 $ 464,909 $ 450,920

During the fiscal year ended June 30, 2021, the Company corrected an immaterial error to reduce revenues relating to South Korea and to increase the revenues relating to Hong Kong by $ 7.1 million for the fiscal year ended June 30, 2020.

The following is a summary of revenue by product type:

Year Ended June 30,

2021 2020 2019

(in thousands)

Power discrete $ 482,718 $ 391,941 $ 371,837

Power IC 161,726 66,360 70,215

Packaging and testing services 12,458 6,608 8,868

Long-lived assets, net consisting of property, plant and equipment and land use rights, net by geographical area are as follows:

$ 656,902 $ 464,909 $ 450,920

Long-lived assets, net consisting of property, plant and equipment and land use rights, net, as well as operating lease right-of-use assets, net by geographical area are as follows:

(in thousands)

China $ 350,387 $ 326,010

United States 118,756 117,782

Other countries 2,494 1,496

$ 471,637 $ 445,288

Restricted Net Assets

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Irrespective of the validity of such claims, the Company could incur significant costs in the defense of such claims and suffer adverse effects on its operations.

In December 2019, the U.S.

As previously disclosed, the U.S.

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.

6 unchanged sentences

In addition, the Company is unable to predict what, if any, further action that may be taken by the government in connection with the investigation, or what, if any, penalties, sanctions or remedial actions may be sought.

On March 19, 2020, Darryl Gray, a stockholder of the Company (the “Plaintiff”), filed a putative class action complaint in the United States District Court for the Southern District of New York (the “Gray Action”), alleging that the Company and its management members made material misstatements or omissions regarding the Company’s business and operations, including its export control practices relating to business transactions with Huawei and its affiliate.

The Gray Action asserts claims under Section 10(b) of the Exchange Act against the Company, its Chief Executive Officer and Chief Financial Officer (collectively, the Defendants”), as well as claims under Section 20(a) of the Exchange Act against the Chief Executive Officer and Chief Financial Officer.

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On August 28, 2020, Plaintiff filed an amended complaint asserting the same claims against the Defendants, and adding the Company’s Executive Vice President of Product Line as a defendant on both claims.

On October 27, 2020, the Defendants moved to dismiss the action in its entirety.

Plaintiff filed his opposition on December 11, 2020 and Defendants filed their reply brief on January 25, 2021.

The Company believes the claims in the Gray Action are without merit and intends to vigorously defend this litigation.

Given the case is in its early stages and still on going, the Company cannot estimate the reasonably possible loss or range of loss that may occur.

Given the case is still on going, the Company cannot estimate the reasonably possible loss or range of loss that may occur.

The Company is a party to a variety of agreements that it has contracted with various third parties.

8 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 maintain such insurance coverage at reasonable cost, if at all, in the future.

Environmental matters

5 unchanged sentences

Subsequent Event

On August 31, 2020, the Company’s MSU grant described in Note 8 was modified with the performance period extended through December 31, 2022 and the original four-year time-based service period to commence on January 1, 2023.

The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company.

The agreement has a 5.5 year term and matures on February 16, 2027.

Jireh will make consecutive quarterly payments of principal and interest.

The loan accrues interest based on adjusted LIBOR plus the applicable margin based on the outstanding balance of the loan.

This agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED (PARENT COMPANY BASIS)

CONDENSED UNCONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

Year Ended June 30,

2021 2020 2019

Revenue $ — $ 1,334 $ 4,292

Cost of revenue — — —

Gross profit — 1,334 4,292

Operating expenses:

General and administrative 8,419 1,745 4,599

Total operating expenses 8,419 1,745 4,599

Operating loss ( 8,419 ) ( 411 ) ( 307 )

Interest expense and other income (loss), net ( 1 ) ( 1 ) 3

Income (loss) on equity investment in subsidiaries 64,709 ( 17,845 ) ( 14,334 )

Net income (loss) including noncontrolling interest 56,289 ( 18,257 ) ( 14,638 )

Net loss attributable to noncontrolling interest ( 1,827 ) ( 11,661 ) ( 16,499 )

Net income attributable to Alpha and Omega Semiconductor Limited $ 58,116 $ ( 6,596 ) $ 1,861

The accompanying notes to Schedule I are an integral part of these financial statements

ALPHA AND OMEGA SEMICONDUCTOR LIMITED (PARENT COMPANY BASIS)

CONDENSED UNCONSOLIDATED BALANCE SHEETS

2 unchanged sentences

Cash and cash equivalents $ 9,752 $ 4,538

Accounts receivable - Intercompany

Other current assets 191 220

3 unchanged sentences

Investment in subsidiaries 540,425 446,415

Total assets $ 550,514 $ 451,377

LIABILITIES AND EQUITY

13 unchanged sentences

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

( 66,064 ) ( 66,184 )

Additional paid-in capital 259,993 246,103

3 unchanged sentences

Noncontrolling interest 143,120 138,199

Total equity 516,325 431,888

Total liabilities and equity $ 550,514 $ 451,377

1 unchanged sentence

ALPHA AND OMEGA SEMICONDUCTOR LIMITED (PARENT COMPANY BASIS)

CONDENSED UNCONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

Year Ended June 30,

Cost of revenue

Operating expenses:

General and administrative

Total operating expenses

Operating loss

Interest expense and other income (loss), net

Income (loss) on equity investment in subsidiaries

Net income (loss) including noncontrolling interest

Net loss attributable to noncontrolling interest

Net income attributable to Alpha and Omega Semiconductor Limited

The accompanying notes to Schedule I are an integral part of these financial statements.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED (PARENT COMPANY BASIS)

CONDENSED UNCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

1 unchanged sentence

Year ended June 30,

2021 2020 2019

Net income (loss) including noncontrolling interest $ 56,289 $ ( 18,257 ) $ ( 14,638 )

9 unchanged sentences

Year Ended June 30,

2021 2020 2019

Cash flows from operating activities

1 unchanged sentence

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation 12 76 274

Share-based compensation expense 683 450 432

40 unchanged sentences

(in thousands)

Allowance Allowance Allowance

for Doubtful for Price for Deferred

Accounts Adjustments Tax Assets

June 30, 2018 $ 30 $ 18,902 $ 30,105

Additions — 115,842 5,315

Reductions — ( 110,669 ) —

June 30, 2019 30 24,075 35,420

Additions — 140,413 2,407

Reductions — ( 134,396 ) —

June 30, 2020 $ 30 $ 30,092 $ 37,827

Additions — 178,902 3,647

Reductions — ( 196,579 ) —

June 30, 2021 $ 30 $ 12,415 $ 41,474

(b) Index to Exhibits:

Number Description

3.1 Memorandum of Association of Registrant (incorporated by reference to Exhibit 3.1 from Registration Statement on Form F-1 (File No.

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001-34717) filed with the Commission on August 30, 2013)

Form of Director's Share Option Agreement under the Automatic Grant Program (incorporated by reference to Exhibit 10.1 from Quarterly Report on Form 10-Q (File No:

001-34717)filed with the Commission on November 6, 2013)

Amendment to Automatic Grant Program for Non-Employee Directors under the 2009 Share Option/Share Issuance Plan (incorporated by reference to Exhibit 10.2 from Quarterly Report on Form 10-Q (File No:

001-34717) filed with the Commission on May 9, 2014)

10.27(+) Form of Restricted Share Unit Agreement (incorporated by reference to Exhibit 10.3 from Quarterly Report on Form 10-Q (File No:

001-34717) filed with the Commission on May 9, 2014)

Summary of Fiscal Year 2015 Executive Incentive Plan (incorporated by reference to Exhibit 10.39 from Annual Report on Form 10-K (File No.

001-34717) filed with the Commission on August 29, 2014)

10.28†† Joint Venture Contract on Incorporation of Chongqing Alpha and Omega Semiconductor Limited, dated as of March 29, 2016, among the Registrant, certain subsidiaries of the Registrant, Chongqing Strategic Emerging Industry Equity Investment Fund Partnership (LP), and Chongqing Liangjiang New Area Strategic Emerging Industry Equity Investment Fund Partnership (LP) (English Translation) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on May 10, 2016)

Alpha and Omega Semiconductor Limited Calendar Year 2016 Executive Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on May 10, 2016)

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on February 9, 2017)

Alpha and Omega Semiconductor Limited 2017 Executive Incentive Cash Bonus Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on May 4, 2017)

Engineering, Procurement and Construction Contract dated January 10, 2017 between Chongqing Alpha and Omega Semiconductor Limited and The IT Electronics Eleventh Design & Research Institute Scientific and Technological Engineering Corporation Limited (the “EPC Contract”) (English Translation) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.

3 unchanged sentences

001-34717) filed with the Commission on May 4, 2017)

Alpha and Omega Semiconductor Limited Amended and Restated 2017 Executive Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission on November 21, 2017)

Financing Lease Contract, dated May 9, 2018, by and between Chongqing Alpha and Omega Semiconductor Limited and Chongqing YinHai Financing Lease Co., Ltd.

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10.38 Supplemental Agreement to Financing Lease Contract, dated as of June 28, 2020 between YinHai Leasing Company and China Import/Export Bank and Chongqing Alpha and Omega Semiconductor Technology Co., Ltd.

(English Translation)

Letter from Grant Thornton LLP to the Commission dated September 17, 2018 (incorporated by reference to Exhibit 16.1 to the Current Report on Form 8-K filed with the Commission on September 17, 2018)

(English Translation) ( incorporated by reference to Exhibit 10.

44 from Annual Report on Form 10-K (File No.

001-34717) filed with the Commission on September 2 , 20 20 )

10.39 Amendment to Market Performance Restricted Share Unit Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on November 6, 2020)

10.40 Supplemental Agreement to Financing Lease Contract, dated August 3, 2020 between YinHai Leasing Company and Chongqing Alpha and Omega Semiconductor Technology Co., Ltd (English Translation) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on November 6, 2020)

10.41 Letter Agreement of Severance Benefit Program for Yifan Liang, dated April 28, 2010 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on February 8, 2021)

10.42 Letter Agreement of Severance Benefit Program for Yueh-Se-Ho, dated April 28, 2010 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on February 8, 2021)

10.43(+) Alpha and Omega Semiconductor Limited Calendar Year 2021 Executive Incentive Cash Bonus Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-34717) filed with the Commission on May 7, 2021)

10.44*(+) First Amendment to CEO Employment Agreement between Dr.

Mike Chang and Alpha and Omega Semiconductor Limited

10.45*(+) 2021 Officer Form Retention Agreement for Executive Officers of Alpha and Omega Semiconductor Limited

10.46*(+) Amended and Restated Non-Employee Director Compensation Policy

10.47*(+) Second Amendment To Lease US Sunnyvale Office

10.48*(+) Third Amendment To Lease US Sunnyvale Office

21.1* List of Subsidiaries of the Registrant

23.1* Consent of BDO USA, LLP, independent registered public accounting firm

Consent of Grant Thornton LLP, independent registered public accounting firm

31.1* Certification of Chief Executive Officer required by Rule 13(a)-14(a) under the Exchange Act

2 unchanged sentences

32.2* Certification of Chief Financial Officer required by Rule 13a-14(b) under the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

XBRL Instance

XBRL Taxonomy Extension Schema

XBRL Taxonomy Extension Calculation

XBRL Taxonomy Extension Definition

XBRL Taxonomy Extension Labels

XBRL Taxonomy Extension Presentation

101.INS XBRL Instance

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation

101.DEF XBRL Taxonomy Extension Definition

101.LAB XBRL Taxonomy Extension Labels

101.PRE XBRL Taxonomy Extension Presentation

* Filed with this Annual Report on Form 10-K.

3 unchanged sentences

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

September 2, 2020

August 30, 2021

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

5 unchanged sentences

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Chairman of the Board and Chief Executive Officer

September 2, 2020

Signature Title Date

CHANG Chairman of the Board and Chief Executive Officer August 30, 2021

(Principal Executive Officer)

/s/ YIFAN LIANG

Chief Financial Officer and Corporate Secretary

September 2, 2020

/s/ YIFAN LIANG Chief Financial Officer and Corporate Secretary August 30, 2021

(Principal Financial Officer and Principal Accounting Officer)

/s/ YUEH-SE HO

Director and Chief Operating Officer

September 2, 2020

CHANG Director August 30, 2021

/s/ CLAUDIA CHEN Director August 30, 2021

/s/ YUEH-SE HO Director August 30, 2021

Yueh-Se Ho, Ph.D.

September 2, 2020

/s/ CLAUDIA CHEN

September 2, 2020

/s/ KING OWYANG

September 2, 2020

/s/ KING OWYANG Director August 30, 2021

/s/ MICHAEL L.

September 2, 2020

PFEIFFER Director August 30, 2021

/s/ MICHAEL J.

September 2, 2020

SALAMEH Director August 30, 2021

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

What changed 10-K

Item 9A. Controls and Procedures