What changed in this filing

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Item 1. Financial Statements

2023-02-08 compared with 2022-11-07 · 188 added, 127 removed, 768 unchanged (29% of the section changed)

3 unchanged sentences

(Unaudited, in thousands except par value per share)

September 30,

2022 June 30,

35 unchanged sentences

issued and outstanding:

none at September 30, 2022 and June 30, 2022

none at December 31, 2022 and June 30, 2022

Common shares, par value $ 0.002 per share:

1 unchanged sentence

issued and outstanding:

34,018 shares and 27,401 shares, respectively at September 30, 2022 and 33,988 shares and 27,371 shares, respectively at June 30, 2022

34,181 shares and 27,565 shares, respectively at December 31, 2022 and 33,988 shares and 27,371 shares, respectively at June 30, 2022

Treasury shares at cost:

6,617 shares at September 30, 2022 and 6,617 shares at June 30, 2022

6,616 shares at December 31, 2022 and 6,617 shares at June 30, 2022

( 65,990 ) ( 66,000 )

8 unchanged sentences

(Unaudited, in thousands except per share data)

Three Months Ended September 30,

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

2022 2021 2022 2021

Revenue $ 188,760 $ 193,319 $ 397,236 $ 380,354

8 unchanged sentences

Interest expense, net ( 397 ) ( 541 ) ( 1,005 ) ( 2,717 )

Gain on deconsolidation of the JV Company — 399,093 — 399,093

Loss on changes of equity interest in the JV Company, net — ( 7,641 ) — ( 7,641 )

Net income before income taxes 7,485 419,101 32,395 441,858

15 unchanged sentences

(Unaudited, in thousands)

Three Months Ended September 30,

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

2022 2021 2022 2021

Net income including noncontrolling interest $ 6,337 $ 385,005 $ 32,375 $ 406,442

1 unchanged sentence

Foreign currency translation adjustment ( 9,077 ) 1,587 ( 13,984 ) 1,487

Comprehensive income 21,131 21,337

Cumulative translation adjustment removal due to deconsolidation of the JV Company — ( 3,642 ) ( 3,642 )

Comprehensive income (loss) ( 2,740 ) 382,950 18,391 404,287

Noncontrolling interest — 921 ( 1,080 )

Comprehensive income attributable to Alpha and Omega Semiconductor Limited $ 21,131 $ 23,338

Comprehensive income (loss) attributable to Alpha and Omega Semiconductor Limited $ ( 2,740 ) $ 382,029 $ 18,391 $ 405,367

See accompanying notes to these condensed consolidated financial statements.

7 unchanged sentences

Total AOS Shareholders' Equity Noncontrolling Interest Total Equity

Balance, September 30, 2021 $ 66 $ ( 66,052 ) $ 264,321 $ 2,229 $ 200,307 $ 400,871 $ 141,119 $ 541,990

Exercise of common stock options and release of restricted stock units — — 301 — — 301 — 301

Reissuance of treasury stock upon exercise of common stock options and release of RSUs — 6 — — ( 6 ) — — —

Withholding tax on restricted stock units — — ( 448 ) — — ( 448 ) — ( 448 )

Issuance of shares under ESPP 1 — 2,422 — — 2,423 — 2,423

Share-based compensation — — 8,414 — — 8,414 — 8,414

Restricted stock units settlement in connection with service — — 400 — — 400 — 400

Net income including noncontrolling interest through December 1, 2021 — — — — 382,998 382,998 2,007 385,005

Foreign currency translation adjustment — — — 824 — 824 763 1,587

Deconsolidation of the JV company — — — ( 1,793 ) — ( 1,793 ) ( 143,889 ) ( 145,682 )

Balance, December 31, 2021 $ 67 $ ( 66,046 ) $ 275,410 $ 1,260 $ 583,299 $ 793,990 $ — $ 793,990

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

Balance, June 30, 2021 $ 66 $ ( 66,064 ) $ 259,993 $ 2,315 $ 176,895 $ 373,205 $ 143,120 $ 516,325

Exercise of common stock options and release of restricted stock units — — 301 — — 301 — 301

Reissuance of treasury stock upon exercise of common stock options and release of RSUs — 18 — — ( 18 ) — — —

Withholding tax on restricted stock units — — ( 622 ) — — ( 622 ) — ( 622 )

Issuance of shares under ESPP 1 — 2,422 — — 2,423 — 2,423

Share-based compensation — — 12,916 — — 12,916 — 12,916

Net income (loss) including noncontrolling interest — — — — 23,424 23,424 ( 1,987 ) 21,437

Restricted stock units settlement in connection with service — — 400 — — 400 — 400

Net income including noncontrolling interest through December 1, 2021 — — — — 406,422 406,422 20 406,442

Foreign currency translation adjustment — — — 738 — 738 749 1,487

Deconsolidation of noncontrolling interest — — — ( 1,793 ) — ( 1,793 ) ( 143,889 ) ( 145,682 )

Balance, December 31, 2021 $ 67 $ ( 66,046 ) $ 275,410 $ 1,260 $ 583,299 $ 793,990 $ — $ 793,990

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited, in thousands)

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

Balance, September 30, 2022 $ 68 $ ( 65,996 ) $ 299,196 $ ( 3,827 ) $ 656,028 $ 885,469 $ — $ 885,469

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

Reissuance of treasury stock upon exercise of common stock options and release of RSUs — 6 — ( 6 ) — — —

Withholding tax on restricted stock units — — ( 226 ) — — ( 226 ) — ( 226 )

Issuance of shares under ESPP — — 4,080 — — 4,080 — 4,080

Share-based compensation — — 13,091 — — 13,091 — 13,091

Net income — — — — 6,337 6,337 — 6,337

Foreign currency translation adjustment, net of tax — — — ( 9,077 ) — ( 9,077 ) — ( 9,077 )

Balance, December 31, 2022 $ 68 $ ( 65,990 ) $ 316,141 $ ( 12,904 ) $ 662,359 $ 899,674 $ — $ 899,674

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

3 unchanged sentences

Withholding tax on restricted stock units — — ( 596 ) — — ( 596 ) — ( 596 )

Issuance of shares under ESPP — — 4,080 — — 4,080 — 4,080

Share-based compensation — — 23,687 — — 23,687 — 23,687

1 unchanged sentence

Foreign currency translation adjustment, net of tax — — — ( 13,984 ) — ( 13,984 ) — ( 13,984 )

Balance, September 30, 2022 $ 68 $ ( 65,996 ) $ 299,196 $ ( 3,827 ) $ 656,028 $ 885,469 $ — $ 885,469

Balance, December 31, 2022 $ 68 $ ( 65,990 ) $ 316,141 $ ( 12,904 ) $ 662,359 $ 899,674 $ — $ 899,674

See accompanying notes to these condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended September 30,

Six Months Ended December 31,

Cash flows from operating activities

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on deconsolidation of the JV Company — ( 399,093 )

Loss on changes of equity interest in the JV Company, net — 7,641

Deferred income tax on deconsolidation and changes of equity interest in the JV Company — 29,292

Depreciation and amortization 20,156 25,660

Share-based compensation expense 10,596 4,635

Income from equity investment ( 3,013 ) —

Share-based compensation expense 23,687 13,182

Deferred income taxes, net ( 1,595 ) 728

7 unchanged sentences

Income taxes payable 1,440 1,269

Income taxes payable on deconsolidation and changes of equity interest in the JV Company — 3,490

Accrued and other liabilities ( 13,165 ) 70,275

1 unchanged sentence

Cash flows from investing activities

Proceeds from sale of equity interest in the JV Company — 26,347

Deconsolidation of cash and cash equivalents of the JV Company — ( 20,734 )

Purchases of property and equipment ( 68,593 ) ( 54,573 )

Proceeds from sale of property and equipment 27 9

Government grant related to equipment 631 1,242

2 unchanged sentences

Withholding tax on restricted stock units ( 596 ) ( 622 )

Proceeds from exercise of stock options and release of restricted stock 19 —

Proceeds from exercise of stock options and ESPP 4,099 2,724

Proceeds from borrowings 8,632 14,262

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 164 ) 307

Net increase in cash, cash equivalents and restricted cash 1,746 50,150

Net increase (decrease) in cash, cash equivalents and restricted cash ( 26,558 ) 64,807

Cash, cash equivalents and restricted cash at beginning of period 314,651 204,813

2 unchanged sentences

Property and equipment purchased but not yet paid $ 17,391 $ 23,182

September 30,

2022 September 30,

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

2022 December 31,

Reconciliation of cash, cash equivalents, and restricted cash:

1 unchanged sentence

Restricted cash 288 314

Restricted cash - long term — 2,168

Total cash, cash equivalents, and restricted cash $ 288,093 $ 269,620

14 unchanged sentences

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

Operating results for the three months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023 or any other interim period.

Operating results for the six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023 or any other interim period.

The consolidated balance sheet at June 30, 2022 is derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Reclassification

The Company has reclassified certain amounts previously reported in its financial statements to conform to the current presentation.

Joint Venture

5 unchanged sentences

Subsequently, the Company has accounted for its investment in the JV Company using the equity method of accounting.

As of September 30, 2022, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2 %.

Such reduction reflects (i) the sale by the Company of approximately 2.1 % of the outstanding JV equity interest which resulted in the deconsolidation of the JV Company, (ii) additional sale by the Company of approximately 1.1 % of outstanding JV equity interest in December 2021, (iii) the adoption of an employee equity incentive plan and issued an equity interest equivalent to 3.99 % of the JV Company in exchange for cash in December 2021, and (iv) the New Investors purchased newly issued equity interest of JV in January 2022.

As of December 31, 2022, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2 %.

Such reduction reflects (i) the sale by the Company of approximately 2.1 % of the outstanding JV equity interest which resulted in the deconsolidation of the JV Company, (ii) additional sale by the Company of approximately 1.1 % of outstanding JV equity interest in December 2021, (iii) the adoption of an employee equity incentive plan and the issuance of additional equity interest equivalent to 3.99 %of the JV Company to investors in exchange for cash in December 2021, and (iv) issuance of additional equity interest of JV to investors in January 2022.

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

As a result of the COVID-19 pandemic and changing consumer behaviors due to various government restrictions and the growing trend to provide remote-working options by employers, the Company has experienced shifting market trends, including an increasing demand in markets for notebooks, personal computing ("PC"), gaming devices and other products.

While it has benefited from the increasing demand for PC related products, there is no guarantee that this trend will continue, and such increasing demand may discontinue or decline if government authorities relax or terminate COVID-19 related restrictions and consumer behaviors change in response to the reopening of certain economic activities.

During the first half of calendar year 2022, COVID-19 cases and hospitalization rate continued to decline and governments in various jurisdictions, including the U.S.

and Europe, have lifted various restrictions and limitations on economic activities.

At the same time,

During the first two years of the COVID-19 pandemic from 2019 to 2021, consumer behaviors changed due to various government restrictions that accelerated the growth of remote-working options by employers.

As a result, the Company experienced an increasing demand in markets for notebooks, personal computing ("PC"), gaming devices and other products,

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

however, new variants of COVID-19 continued to emerge and contributed to recent rise of infection rates in various jurisdictions in which we operate, including China and U.S.

Furthermore, the Company may be subject to the ongoing global impacts resulting from the pandemic, including disruption of the product supply chains, shortages of semiconductor components, and delays in shipments, product development, and product launches and rising inflation rates.

In addition, the Company’s operations in China have been negatively impacted by the zero-Covid policy imposed by the Chinese government, which has resulted in lockdowns, mass testing and restrictions of travels and movement that limited our ability to conduct our business activities.

The full extent of the longer-term impact of the COVID-19 pandemic on the Company’s operational and financial performance is uncertain and will depend on many factors outside of its control, including, without limitation, the timing, extent, trajectory and duration of the pandemic;

the availability, distribution and effectiveness of vaccines;

the spread of new variants of COVID-19;

the continued and renewed imposition of protective public safety measures, including local and regional lockdown and quarantines;

the disruption of global supply chain;

and the impact of the pandemic on the global economy and demand for consumer products.

and the Company benefited from the increased demand for PC related products.

During the first half of calendar year 2022, COVID-19 cases and hospitalization rate continued to decline and governments in various jurisdictions, including the U.S.

and Europe, have lifted various restrictions and limitations on economic activities.

At the same time, new variants of COVID-19 continued to emerge and contributed to recent rise of infection rates in various jurisdictions in which the Company operates, including China and U.S.

Also, the Company was affected by certain global impacts resulting from the pandemic, including disruption of the product supply chains, shortages of semiconductor components, and delays in shipments, product development, and product launches and rising inflation rates.

In addition, during the first half of calendar year 2022, the Company's operations were negatively impacted by China’s zero-Covid policy that resulted in factory shutdowns and supply chain shortages, including the temporary suspension of its factory operations in Shanghai from April to June 2022.

In December 2022, the Chinese government issued new guidelines easing some of its strict zero-COVID policies, including the relaxation of testing requirements and travel restrictions.

However, the change of COVID-policy and reopening of commercial activities resulted in a significant increase of COVID infections in China, which may adversely affect the Company’s operations in China.

Use of Estimates

47 unchanged sentences

Restricted Cash

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

The Company maintains restricted cash in connection with cash balances temporarily restricted for regular business operations.

These balances have been excluded from the Company’s cash and cash equivalents balance and are classified as restricted cash in the Company’s Condensed Consolidated Balance Sheets.

As of September 30, 2022 and June 30, 2022, the amount of restricted cash was $ 0.3 million and $ 0.3 million, respectively.

As of December 31, 2022 and June 30, 2022, the amount of restricted cash was $ 0.3 million and $ 0.3 million, respectively.

Equity method investment

13 unchanged sentences

The Company carries inventories at the lower of cost (determined on a first-in, first-out basis) or net realizable value.

Cost primarily consists of semiconductor wafers and raw materials, labor, depreciation expenses and other manufacturing expenses

Cost primarily consists of semiconductor wafers 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.

Valuation of inventories is based on its periodic review of inventory quantities on hand as compared with its sales forecasts, historical usage, aging of

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and overhead, and packaging and testing fees paid to third parties if subcontractors are used.

Valuation of inventories is based on its 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.

inventories, production yield levels and current product selling prices.

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

11 unchanged sentences

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

As a result of such grants, during the three months ended September 30, 2022 and 2021, the Company reduced property, plant and equipment by $ 0.3 million and $ 1.1 million, respectively.

As a result of such grants, during the three and six months ended December 31, 2022, the Company reduced property, plant and equipment by $ 0.3 million and $ 0.6 million, and operating expenses by $ 0.1 million and $ 0.1 million, respectively.

During the three and six months ended December 31, 2021, the Company reduced interest expense by $ 0.9 million and $ 0.9 million, property, plant and equipment by $ 0.1 million and $ 1.2 million, and operating expenses by $ 0.2 million and $ 0.2 million, respectively.

Accounting for income taxes

Income tax expense or benefit is based on income or loss before taxes.

Income tax expense or benefit is based on income or loss before income taxes.

Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts.

5 unchanged sentences

Significant management judgment is also required in determining whether deferred tax assets will be realized in full or in part.

When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or research and experimentation tax credit carryforwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized.

When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or research and development tax credit carryforwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized.

The Company considers all available positive and negative evidence on a jurisdiction-by-jurisdiction basis when assessing whether it is more likely than not that deferred tax assets are recoverable.

3 unchanged sentences

The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement.

Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management.

If the ultimate resolution of tax uncertainties is different from what is currently estimated, a material impact on income tax expense could result.

Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

those thresholds will continue to require significant judgment by management.

If the ultimate resolution of tax uncertainties is different from what is currently estimated, a material impact on income tax expense could result.

The Company's provision for income taxes is subject to volatility and could be adversely impacted by changes in earnings or tax laws and regulations in various jurisdictions.

49 unchanged sentences

The Company accounts for its investment in the JV Company as an equity method investment and reports its equity in earnings or loss of the JV Company on a three-month lag due to an inability to timely obtain financial information of the JV Company.

During the three months ended September 30, 2022, the Company recorded $ 2.5 million of its equity in income of the JV Company, using lag reporting.

As of September 30, 2022, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.2 %.

During the three and six months ended December 31, 2022, the Company recorded $ 0.5 million and $ 3.0 million of its equity in income of the JV Company, respectively, using lag reporting.

As of December 31, 2022, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.2 %.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

1 unchanged sentence

Related Party Transactions

As of September 30, 2022, the Company owned 42.2 % equity interest in the JV Company, which, by definition, is a related party to the Company.

As of December 31, 2022, the Company owned 42.2 % equity interest in the JV Company, which, by definition, is a related party to the Company.

The JV Company supplies 12-inch wafers and provides assembly and testing services to AOS.

AOS also sells 8-inch wafers to the JV Company for further assembly and testing services.

Due to the right of offset of receivables and payables with the JV Company, as of September 30, 2022, AOS recorded the net amount of $ 19.5 million presented as payable related to equity investee, net, in the Condensed Consolidated Balance Sheet.

Since the December 2, 2021 deconsolidation of the JV Company, the purchases by AOS for the three months ended September 30, 2022 were $ 46.1 million, and the sales by AOS for the three months ended September 30, 2022 were $ 16.6 million.

Due to the right of offset of receivables and payables with the JV Company, as of December 31, 2022, AOS recorded the net amount of $ 21.6 million presented as payable related to equity investee, net, in the Condensed Consolidated Balance Sheet.

The purchases by AOS for the three and six months ended December 31, 2022 were $ 39.8 million and $ 85.9 million, respectively, and the sales by AOS for the three and six months ended December 31, 2022 were $ 13.8 million and $ 30.4 million, respectively.

The purchases and sales by AOS since the December 2, 2021 deconsolidation of the JV Company for the three months ended December 31, 2021 were $ 15.6 million and $ 4.2 million, respectively.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

2 unchanged sentences

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

Three Months Ended September 30,

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

2022 2021 2022 2021

(in thousands, except per share data)

9 unchanged sentences

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

Three Months Ended September 30,

(in thousands)

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

2022 2021 2022 2021

(in thousands) (in thousands)

Employee stock options and RSUs 118 1 361 255

ESPP 218 30 220 32

Total potential dilutive securities 336 31 581 287

8 unchanged sentences

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

Three Months Ended September 30,

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

Percentage of revenue 2022 2021 2022 2021

2 unchanged sentences

Customer C 14.6 % * 12.8 % *

September 30,

2022 June 30,

8 unchanged sentences

Accounts receivable, net:

September 30,

2022 June 30,

4 unchanged sentences

Accounts receivable, net $ 53,223 $ 65,681

September 30,

2022 June 30,

5 unchanged sentences

Other current assets:

September 30,

2022 June 30,

12 unchanged sentences

Property, plant and equipment, net:

September 30,

2022 June 30,

13 unchanged sentences

Intangible assets, net:

September 30,

2022 June 30,

13 unchanged sentences

Other long-term assets:

September 30,

2022 June 30,

9 unchanged sentences

Accrued liabilities:

September 30,

2022 June 30,

8 unchanged sentences

Other accrued expenses 5,178 5,159

Customer deposit 36,184 40,578

Customer deposits 35,053 40,578

ESPP payable 1,371 971

$ 98,107 $ 116,893

Short-term customer deposits are payments received from customers for securing future product shipments.

As of December 31, 2022, $ 12.5 million were from Customer A and $ 10.2 million were from Customer B, and $ 12.4 million were from other customers.

As of June 30, 2022, $ 12.5 million were from Customer A and $ 16.2 million were from Customer B, and $ 11.9 million were from other customers.

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

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands)

6 unchanged sentences

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

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands)

4 unchanged sentences

Other long-term liabilities:

September 30,

2022 June 30,

4 unchanged sentences

Customer deposits are payments received from customers for securing future product shipments.

As of September 30, 2022, $ 29.5 million were from Customer A and $ 20.9 million were from Customer B, and $ 21.3 million were from other customers.

As of December 31, 2022, $ 24.0 million were from Customer A and $ 16.2 million were from Customer B, and $ 20.5 million were from other customers.

As of June 30, 2022, $ 34.5 million were from Customer A and $ 21.9 million were from Customer B, and $ 13.9 million were from other customers.

3 unchanged sentences

Short-term borrowings

In January 2023, one of the Company's subsidiaries in China entered into a line of credit facility with Bank of Communications Limited in China.

The purpose of the credit facility is to provide working capital borrowings.

The Company could borrow up to approximately RMB 140 million or $ 20.6 million based on currency exchange rage between RMB and U.S.

Dollar on January 31, 2023 with a maturity date of December 1, 2023.

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

5 unchanged sentences

During the three months ended December 31, 2021, the Company borrowed RMB 11.0 million, or $ 1.6 million, at an interest rate of 3.85 % per annum, with principal due on November 18, 2022.

As of September 30, 2022, the total outstanding balance o f this loan was $ 1.5 million.

As of December 31, 2022, there was no outstanding balance and this loan was expired.

On November 16, 2018, one of the Company's subsidiaries in China entered into a line of credit facility with Industrial and Commercial Bank of China.

4 unchanged sentences

During the three months ended December 31, 2021, the Company borrowed RMB 5.0 million, or $ 0.8 million, at an interest rate of 3.7 % per annum, with principal due on September 12, 2022.

As of September 30, 2022, there was no outstandin g balance.

As of December 31, 2022, there was no out standin g balance and this loan was expired.

Accounts Receivable Factoring Agreement

8 unchanged sentences

Other terms remain the same.

As of September 30, 2022, the Borrower was in compliance with these covenants.

As of September 30, 2022, there was no outstanding balance and the Company had unused credit of approximately $ 8.0 million.

As of December 31, 2022, the Borrower was in compliance with these covenants.

As of December 31, 2022, there was no outstanding balance and the Company had unused credit of approximately $ 8.0 million.

Debt financing

12 unchanged sentences

The purchase price of this hardware was $ 0.2 million.

The financing arrangement is secured by this machinery equipment and the hardware which had the carrying amount of $ 13.1 million as of September 30, 2022.

As of September 30, 2022, the outstanding balance of this debt financing was $ 13.4 million.

Long-term bank borrowings

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

The financing arrangement is secured by this machinery equipment and the hardware which had the carrying amount of $ 13.1 million as of December 31, 2022.

As of December 31, 2022, the outstanding balance of this debt financing was $ 13.1 million.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Long-term bank borrowings

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.

3 unchanged sentences

Jireh drew down $ 45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022.

As of September 30, 2022, Jireh was in compliance with these covenants and the outstanding balance of this loan was $ 45.0 million.

As of December 31, 2022, Jireh was in compliance with these covenants and the outstanding balance of this loan was $ 42.8 million.

On May 1, 2018, Jireh entered into a loan agreement with the Bank that provided a term loan in the amount of $ 17.8 million.

6 unchanged sentences

The amendment was accounted for as a debt modification and no gain or loss was recognized.

The Company was in compliance with these covenants as of September 30, 2022.

As of September 30, 2022, the outstanding balance of the term loa n was $ 13.9 million.

The Company was in compliance with these covenants as of December 31, 2022.

As of December 31, 2022, the outstanding balance of the term loa n was $ 13.7 million.

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

7 unchanged sentences

The amendment was accounted for as a debt modification and no gain or loss was recognized.

The Company was in compliance with these covenants as of September 30, 2022.

As of September 30, 2022, there was no outstanding balance .

The loan was paid in full in September 2022.

As of December 31, 2022, there was no outstanding balance .

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

9 unchanged sentences

Total debt, less debt issuance costs $ 25,045 $ 44,101 $ 69,146

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

12 unchanged sentences

The amendment was accounted for as a debt modification and no gain or loss was recognized.

In addition, the finance lease related to the RMB 400.0 million of lease financing of the JV Company with YinHai Leasing Company and The Export-Import Bank of China was not included in the Company’s unaudited Condensed Consolidated Balance Sheet at September 30, 2022 due to the deconsolidation of the JV Company on December 2, 2021.

In addition, the finance lease related to the RMB 400.0 million of lease financing of the JV Company with YinHai Leasing Company and The Export-Import Bank of China was not included in the Company’s unaudited Condensed Consolidated Balance Sheet at December 31, 2022 due to the deconsolidation of the JV Company on December 2, 2021.

The Company does not record leases on the Condensed Consolidated Balance Sheets with a term of one year or less.

The Company’s unaudited Condensed Consolidated Statements of Income for the three months ended September 30, 2021 include the JV Company's results for the period preceding the deconsolidation on December 2, 2021.

The Company’s unaudited Condensed Consolidated Statements of Income for the six months ended December 31, 2021 include the JV Company's results for the period preceding the deconsolidation on December 2, 2021.

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

Three Months Ended September 30,

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2022 2021 2022 2021

Operating leases:

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Total lease expenses $ 2,043 $ 2,043 $ 2,619 $ 3,967 $ 5,650

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30,

2022 June 30,

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

Three Months Ended September 30,

Six Months Ended December 31,

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

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Operating lease right-of-use assets obtained in exchange for lease obligations $ 2,210 $ 1,903

Future minimum lease payments are as follows as of September 30, 2022 (in thousands):

Future minimum lease payments are as follows as of December 31, 2022 (in thousands):

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Year ending June 30, Operating Leases Finance Leases

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

During the three months ended September 30, 2022, the Company did no t repurchase any shares pursuant to the Repurchase Program.

During the six months ended December 31, 2022, the Company did no t repurchase any shares pursuant to the Repurchase Program.

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

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Of the 6,784,648 repurchased shares, 168,645 shares with a weighted average repurchase price of $ 10.05 per share, were reissued at an average price of $ 4.96 per share pursuant to option exercises and vested restricted share units (“RSU”).

As of September 30, 2022, approximately $ 13.4 million remained available under the Repurchase Program.

As of December 31, 2022, approximately $ 13.4 million remained available under the Repurchase Program.

Time-based Restric ted Stock Units ( “ TRSU ” )

The following table summarizes the Company's TRSU activities for the three months ended September 30, 2022:

The following table summarizes the Company's TRSU activities for the six months ended December 31, 2022:

Number of Restricted Stock

7 unchanged sentences

Forfeited ( 25,525 ) $ 34.88

Nonvested at September 30, 2022 1,203,318 $ 34.54 1.59 $ 37,014,062

Nonvested at December 31, 2022 1,255,533 $ 34.43 1.39 $ 35,870,578

Market-based Restricted Stock Units ( “ MSU ” )

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Risk-free interest rate of 1.0 %, expected term of 3.1 years, expected volatility of 62.8 % and dividend yield of 0 %.

The Company recorded approximately $ 2.0 million and nil of expenses for these MSUs during the three months ended September 30, 2022 and 2021, respectively.

The Company recorded $ 2.1 million and $ 4.1 million of expenses for these MSUs during the three and six months ended December 31, 2022, respectively, and $ 0.5 million of expenses during the three and six months ended December 31, 2021.

During the quarter ended September 30, 2018, the Company granted 1.3 million MSUs to certain personnel.

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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 Company recorded approximatel y $ 0.6 million and $ 0.4 million of expenses for MSUs during the three months ended September 30, 2022 and 2021, respectively.

The Company recorded $ 2.8 million and $ 3.3 million of

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

expenses for MSUs during the three and six months ended December 31, 2022, respectively, and $ 0.4 million and $ 0.8 million of expenses for MSUs during the three and six months ended December 31, 2021, respectively.

Performance-based Restricted Stock Units (“PRSUs”)

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The PRSUs vest in four equal annual installments from the first anniversary date after the grant date if certain predetermined financial goals were met.

The Company recorded approximately $ 1.6 million and $ 1.0 million of expens e for these PRSUs during the three months ended September 30, 2022 and 2021, respectively.

The following table summarizes the Company’s PRSUs activities for the three months ended September 30, 2022:

The Company recorded approximately $ 1.1 million and $ 2.7 million of e xpens e for these PRSUs during the three and six months ended December 31, 2022, respectively, and approximately $ 1.0 million and $ 2.0 million during the three and six months ended December 31, 2021.

The following table summarizes the Company’s PRSUs activities for the six months ended December 31, 2022:

Number of Performance-based Restricted Stock

5 unchanged sentences

Nonvested at June 30, 2022 389,375 $ 36.56 1.85 $ 12,981,763

Nonvested at September 30, 2022 389,375 $ 36.56 1.59 $ 11,977,175

Granted 14,000 $ 30.08

Forfeited — $ —

Nonvested at December 31, 2022 403,375 $ 36.33 1.35 $ 11,524,424

Stock Options

The Company did no t grant any stock options during the three months ended September 30, 2022 and 2021.

The following table summarizes the Company's stock option activities for the three months ended September 30, 2022:

The Company did no t grant any stock options during the six months ended December 31, 2022 and 2021.

The following table summarizes the Company's stock option activities for the six months ended December 31, 2022:

Weighted Average

4 unchanged sentences

Exercised ( 2,500 ) $ 7.56 $ 87,500

Outstanding at September 30, 2022 387,375 $ 7.70 1.28 $ 8,933,486

Outstanding at December 31, 2022 387,375 $ 7.70 1.03 $ 8,085,135

Options vested and expected to vest 387,375 $ 7.70 1.03 $ 8,085,135

Exercisable at September 30, 2022 387,375 $ 7.70 1.28 $ 8,933,486

Exercisable at December 31, 2022 387,375 $ 7.70 1.03 $ 8,085,135

Employee Share Purchase Plan (“ESPP”)

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

Three Months Ended September 30,

Six Months Ended December 31,

Volatility rate 70.5 %

5 unchanged sentences

Share-based Compensation Expense

On September 8, 2022, the Compensation Committee of the Board approved modifications to the terms of equity awards granted to a former officer who is currently a board member of the Company.

On September 8, 2022, the Compensation Committee of the Board approved modifications to the terms of equity awards granted to a former officer who was a board member of the Company.

The modifications waived the four-year time based service performance of his MSU and allowed continuing vesting of his TRSU and PRSU according to the original awards' vesting schedule after his termination as a board member.

The incremental expenses for these equity shares resulting from the modification were $ 3.9 million.

During the three months ended September 30, 2022, the Company recorded $ 0.3 million, net of reversal of prior recorded expenses, of shared-based compensation for these equity shares.

During the three and six months ended December 31, 2022, the Company recorded $ 2.8 million and $ 3.1 million, respectively, net of reversal of prior recorded expenses, of shared-based compensation for these equity shares.

The total share-based compensation expense recognized in the Condensed Consolidated Statements of Income for the periods presented was as follows:

Three Months Ended September 30,

(in thousands)

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

2022 2021 2022 2021

(in thousands) (in thousands)

Cost of goods sold $ 1,748 $ 1,709 $ 3,536 $ 2,278

2 unchanged sentences

$ 13,091 $ 8,547 $ 23,687 $ 13,182

As of September 30, 2022, total unrecognized compensation cost under the Company's equity plans was $ 78.7 million, which is expected to be recognized over a weighted-average period of 2.9 years.

The Company recognized income tax expense of approximately $ 1.4 million and $ 1.3 million for the three months ended September 30, 2022 and 2021, respectively.

The income tax expense of $ 1.4 million for the three months ended September 30, 2022 included a $ 0.07 million discrete tax expense.

The income tax expense of $ 1.3 million for the three months ended September 30, 2021 included $ 0.09 million discrete tax expense.

Excluding the discrete income tax items, the effective tax rate for the three months ended September 30, 2022 and 2021 was 4.8 % and 5.4 %, respectively.

The changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.

As of December 31, 2022, total unrecognized compensation cost under the Company's equity plans was $ 71.3 million, which is expected to be recognized over a weighted-average period of 2.9 years.

The Company recognized income tax expense of approximately $ 1.7 million and $ 34.1 million for the three months ended December 31, 2022 and 2021, respectively.

The income tax expense of $ 1.7 million for the three months ended December 31, 2022 included a $ 0.1 million discrete tax expense.

The income tax expense of $ 34.1 million for the three months ended December 31, 2021 included a $ 32.8 million discrete tax expense related to the Company’s $ 391.5 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company switches from the consolidation method of accounting to the equity method of accounting related to this investment and no longer asserts permanent reinvestment related to the Company’s investment in the joint venture.

Excluding the discrete income tax items, the income tax expense for the three months ended December 31, 2022 and 2021 was $ 1.6 million and $ 1.3 million, respectively, and the effective tax rate for the three months ended December 31, 2022 and 2021 was 20.2 % and 4.7 %, respectively.

Excluding the effects of the discrete tax expense recorded in the three months ended December 31, 2022 and 2021, the changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year as well as from reporting pretax book income of $ 8.0 million for the three months ended December 31, 2022 as compared to $ 27.6 million of pretax book income (excluding the $ 391.5 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the three months ended December 31, 2021.

The Company recognized income tax expense of approximately $ 3.0 million and $ 35.4 million for the six months ended December 31, 2022 and 2021, respectively.

The income tax expense of $ 3.0 million for the six months ended December 31, 2022 included a $ 0.1 million discrete tax expense.

The income tax expense of $ 35.4 million for the six months ended December 31, 2021 included a $ 32.8 million discrete tax expense related to the Company’s $ 391.5 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company switches from the consolidation method of accounting to the equity method of accounting related to this investment and no longer asserts permanent reinvestment related to the Company’s investment in the joint venture as well as $ 0.1 million for other discrete income tax items.

Excluding the discrete income tax items, income tax expense for the six months ended December 31, 2022 and 2021 was $ 2.9 million and $ 2.5 million, respectively, and the effective tax rate for the six months ended December 31, 2022 and 2021 was 8.2 % and 5.0 %, respectively.

Excluding the effects of the discrete tax expense recorded in the six months ended December 31, 2022 and 2021, the changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year as well as from the Company reporting a pretax book income of $ 35.4 million for the six months ended December 31, 2022 as compared to pretax book income of $ 50.4 million of pretax book income (excluding the $ 391.5 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the six months ended December 31, 2021.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5 unchanged sentences

These assessments can require considerable estimates and judgments.

As of September 30, 2022, the gross amount of unrecognized tax benefits was approximately $ 8.6 million, of which $ 5.6 million, if recognized, would reduce the effective income tax rate in future periods.

As of December 31, 2022, the gross amount of unrecognized tax benefits was approximately $ 8.7 million, of which $ 5.7 million, if recognized, would reduce the effective income tax rate in future periods.

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

7 unchanged sentences

Currently, we are evaluating the impact of the Chips Act to us.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

“The Inflation Reduction Act”, Enacted August 16, 2022

18 unchanged sentences

Court of Appeals for the Ninth Circuit’s decision.

AOS has not recorded any benefit related to the Altera Corporation Tax Court decision in any period through September 2022.

AOS has not recorded any benefit related to the Altera Corporation Tax Court decision in any period through December 2022.

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

11 unchanged sentences

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

Three Months Ended September 30,

(in thousands)

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

2022 2021 2022 2021

(in thousands) (in thousands)

Hong Kong $ 159,301 $ 159,189 $ 331,597 $ 307,844

5 unchanged sentences

The following is a summary of revenue by product type:

Three Months Ended September 30,

(in thousands)

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

2022 2021 2022 2021

(in thousands) (in thousands)

Power discrete $ 137,582 $ 134,511 $ 282,155 $ 264,875

3 unchanged sentences

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

September 30,

2022 June 30,

8 unchanged sentences

Purchase Commitments

As of September 30, 2022 and June 30, 2022, the Company had approximately $ 93.6 million and $ 89.9 million, respectively, of outstanding purchase commitments primarily for purchases of semiconductor raw materials, wafers, spare parts, packaging and testing services and others.

As of September 30, 2022 and June 30, 2022, the Company had approximately $ 32.5 million and $ 63.4 million, respectively, of capital commitments for the purchase of property and equipment.

As of December 31, 2022 and June 30, 2022, the Company had approximately $ 77.2 million and $ 89.9 million, respectively, of outstanding purchase commitments primarily for purchases of semiconductor raw materials, wafers, spare parts, packaging and testing services and others.

As of December 31, 2022 and June 30, 2022, the Company had approximately $ 23.7 million and $ 63.4 million, respectively, of capital commitments for the purchase of property and equipment.

Other Commitments

18 unchanged sentences

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

The Company has not historically paid or recorded any material indemnifications, and no accrual was made at September 30, 2022 and June 30, 2022.

The Company has not historically paid or recorded any material indemnifications, and no accrual was made at December 31, 2022 and June 30, 2022.

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

3 unchanged sentences

In addition, the Company may not be able to maintain such insurance coverage at reasonable cost, if at all, in the future.

ALPHA AND OMEGA SEMICONDUCTOR LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Event

On February 6, 2023, the Company entered into a license and engineering service agreement with a leading power semiconductor automotive supplier related to the Company’s Silicon Carbide (SiC) MOSFET and diode technology.

In the agreement, the Company will license and provide 24-month engineering support for its proprietary SiC technology for a total fee of $ 45 million, consisted of an upfront fees of $ 18 million payable within 45 days of the execution of the agreement, with the remaining amount to be paid upon our achievement of specified engineering services and product milestones.

In addition, the Company also entered an accompanying supply agreement to provide limited wafer supply.

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

What changed 10-Q

Item 1. Financial Statements