0001158114 APPLIED OPTOELECTRONICS, INC. false --12-31 Q3 2022 23 30 45,000 45,000 0.001 0.001 28,058 28,058 27,323 27,323 0.5 6 20,000 20,000 4.063 4.063 April 15, 2023 April 15, 2023 3.1 3.1 January 21, 2022 January 21, 2022 20,185 20,185 2.95 2.95 4.57 4.57 June 28, 2023 June 28, 2023 23,722 23,722 3.44 3.44 5.43 5.43 March 14, 2023 March 14, 2023 7,167 7,167 5.7 5.7 June 27, 2022 June 27, 2022 1.56 22,311,381 159,027,448 5 5 3 4 10 0 21 0 21 0.2 00011581142022-01-012022-09-30 xbrli:shares 00011581142022-11-01 thunderdome:item iso4217:USD 00011581142022-09-30 00011581142021-12-31 iso4217:USDxbrli:shares 00011581142022-07-012022-09-30 00011581142021-07-012021-09-30 00011581142021-01-012021-09-30 0001158114us-gaap:PreferredStockMember2022-06-30 0001158114us-gaap:CommonStockMember2022-06-30 0001158114us-gaap:AdditionalPaidInCapitalMember2022-06-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-30 0001158114us-gaap:RetainedEarningsMember2022-06-30 00011581142022-06-30 0001158114us-gaap:PreferredStockMember2022-07-012022-09-30 0001158114us-gaap:CommonStockMember2022-07-012022-09-30 0001158114us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-30 0001158114us-gaap:RetainedEarningsMember2022-07-012022-09-30 0001158114us-gaap:PreferredStockMember2022-09-30 0001158114us-gaap:CommonStockMember2022-09-30 0001158114us-gaap:AdditionalPaidInCapitalMember2022-09-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-30 0001158114us-gaap:RetainedEarningsMember2022-09-30 0001158114us-gaap:PreferredStockMember2021-06-30 0001158114us-gaap:CommonStockMember2021-06-30 0001158114us-gaap:AdditionalPaidInCapitalMember2021-06-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-30 0001158114us-gaap:RetainedEarningsMember2021-06-30 00011581142021-06-30 0001158114us-gaap:PreferredStockMember2021-07-012021-09-30 0001158114us-gaap:CommonStockMember2021-07-012021-09-30 0001158114us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-30 0001158114us-gaap:RetainedEarningsMember2021-07-012021-09-30 0001158114us-gaap:PreferredStockMember2021-09-30 0001158114us-gaap:CommonStockMember2021-09-30 0001158114us-gaap:AdditionalPaidInCapitalMember2021-09-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-30 0001158114us-gaap:RetainedEarningsMember2021-09-30 00011581142021-09-30 0001158114us-gaap:PreferredStockMember2021-12-31 0001158114us-gaap:CommonStockMember2021-12-31 0001158114us-gaap:AdditionalPaidInCapitalMember2021-12-31 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-31 0001158114us-gaap:RetainedEarningsMember2021-12-31 0001158114us-gaap:PreferredStockMember2022-01-012022-09-30 0001158114us-gaap:CommonStockMember2022-01-012022-09-30 0001158114us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-30 0001158114us-gaap:RetainedEarningsMember2022-01-012022-09-30 0001158114us-gaap:PreferredStockMember2020-12-31 0001158114us-gaap:CommonStockMember2020-12-31 0001158114us-gaap:AdditionalPaidInCapitalMember2020-12-31 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-31 0001158114us-gaap:RetainedEarningsMember2020-12-31 00011581142020-12-31 0001158114us-gaap:PreferredStockMember2021-01-012021-09-30 0001158114us-gaap:CommonStockMember2021-01-012021-09-30 0001158114us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-30 0001158114us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-30 0001158114us-gaap:RetainedEarningsMember2021-01-012021-09-30 0001158114aaoi:YuhanOptoelectronicTechnologyCoLtdMemberaaoi:ManufacturingFacilitiesInPrcMember2022-09-15 xbrli:pure 0001158114aaoi:YuhanOptoelectronicTechnologyCoLtdMemberaaoi:ManufacturingFacilitiesInPrcMembersrt:MinimumMember2022-09-15 0001158114aaoi:YuhanOptoelectronicTechnologyCoLtdMemberaaoi:ManufacturingFacilitiesInPrcMembersrt:MaximumMember2022-09-15 0001158114aaoi:CATVMember2022-07-012022-09-30 0001158114aaoi:CATVMember2021-07-012021-09-30 0001158114aaoi:DataCenterMember2022-07-012022-09-30 0001158114aaoi:DataCenterMember2021-07-012021-09-30 0001158114aaoi:TelecomMember2022-07-012022-09-30 0001158114aaoi:TelecomMember2021-07-012021-09-30 0001158114aaoi:FTTHMember2022-07-012022-09-30 0001158114aaoi:FTTHMember2021-07-012021-09-30 0001158114us-gaap:ProductAndServiceOtherMember2022-07-012022-09-30 0001158114us-gaap:ProductAndServiceOtherMember2021-07-012021-09-30 0001158114aaoi:CATVMember2022-01-012022-09-30 0001158114aaoi:CATVMember2021-01-012021-09-30 0001158114aaoi:DataCenterMember2022-01-012022-09-30 0001158114aaoi:DataCenterMember2021-01-012021-09-30 0001158114aaoi:TelecomMember2022-01-012022-09-30 0001158114aaoi:TelecomMember2021-01-012021-09-30 0001158114aaoi:FTTHMember2022-01-012022-09-30 0001158114aaoi:FTTHMember2021-01-012021-09-30 0001158114us-gaap:ProductAndServiceOtherMember2022-01-012022-09-30 0001158114us-gaap:ProductAndServiceOtherMember2021-01-012021-09-30 utr:Y 0001158114us-gaap:BankersAcceptanceMember2022-09-30 0001158114us-gaap:BankersAcceptanceMember2021-12-31 0001158114country:CN2022-09-30 0001158114country:CN2021-12-31 0001158114aaoi:GuaranteeDepositsForCustomsDutiesMember2022-09-30 0001158114aaoi:GuaranteeDepositsForCustomsDutiesMember2021-12-31 0001158114us-gaap:EmployeeStockOptionMember2021-07-012021-09-30 0001158114us-gaap:EmployeeStockOptionMember2021-01-012021-09-30 0001158114us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-30 0001158114us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-30 0001158114us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-30 0001158114us-gaap:ConvertibleDebtSecuritiesMember2022-07-012022-09-30 0001158114us-gaap:ConvertibleDebtSecuritiesMember2021-07-012021-09-30 0001158114us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-09-30 0001158114us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-09-30 0001158114us-gaap:LandImprovementsMember2022-09-30 0001158114us-gaap:LandImprovementsMember2021-12-31 0001158114us-gaap:BuildingAndBuildingImprovementsMember2022-09-30 0001158114us-gaap:BuildingAndBuildingImprovementsMember2021-12-31 0001158114us-gaap:MachineryAndEquipmentMember2022-09-30 0001158114us-gaap:MachineryAndEquipmentMember2021-12-31 0001158114us-gaap:FurnitureAndFixturesMember2022-09-30 0001158114us-gaap:FurnitureAndFixturesMember2021-12-31 0001158114aaoi:ComputerEquipmentAndSoftwareMember2022-09-30 0001158114aaoi:ComputerEquipmentAndSoftwareMember2021-12-31 0001158114us-gaap:VehiclesMember2022-09-30 0001158114us-gaap:VehiclesMember2021-12-31 0001158114us-gaap:ConstructionInProgressMember2022-09-30 0001158114us-gaap:ConstructionInProgressMember2021-12-31 0001158114us-gaap:LandMember2022-09-30 0001158114us-gaap:LandMember2021-12-31 0001158114us-gaap:PatentsMember2022-09-30 0001158114us-gaap:TrademarksMember2022-09-30 0001158114us-gaap:PatentsMember2021-12-31 0001158114us-gaap:TrademarksMember2021-12-31 0001158114us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-30 0001158114us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-30 0001158114us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-30 0001158114us-gaap:FairValueMeasurementsRecurringMember2022-09-30 0001158114us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001158114us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001158114us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001158114us-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SixthAmendmentToLoanAgreementWithTruistBankMemberaaoi:TruistBankMemberaaoi:SecuredOvernightFinancingRateSOFRMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SixthAmendmentToLoanAgreementWithTruistBankMemberaaoi:TruistBankMemberaaoi:SecuredOvernightFinancingRateSOFRMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SixthAmendmentToLoanAgreementWithTruistBankMemberaaoi:TruistBankMemberaaoi:SecuredOvernightFinancingRateSOFRMember2022-01-012022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SixthAmendmentToLoanAgreementWithTruistBankMemberaaoi:TruistBankMemberaaoi:SecuredOvernightFinancingRateSOFRMember2021-01-012021-12-31 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PromissoryNoteMember2022-09-30 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PromissoryNoteMember2021-12-31 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PromissoryNoteMember2022-01-012022-09-30 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PromissoryNoteMember2021-01-012021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMembersrt:MinimumMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMembersrt:MinimumMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMembersrt:MaximumMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMembersrt:MaximumMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMember2022-01-012022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:SPDBankMember2021-01-012021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMembersrt:MinimumMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMembersrt:MinimumMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMembersrt:MaximumMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMembersrt:MaximumMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2022-01-012022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2021-01-012021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2022-01-012022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:ChinaZheshangBankCoLtdMember2021-01-012021-12-31 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TruistBankMember2017-09-28 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TruistBankMemberaaoi:SecuredOvernightFinancingRateSOFRMember2021-12-292021-12-29 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TruistBankMemberaaoi:SecuredOvernightFinancingRateSOFRMember2021-12-29 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TruistBankMember2022-09-30 iso4217:TWD 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PrimeWorldInternationalHoldingsLtdPrimeWorldMember2022-01-212022-01-21 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PrimeWorldInternationalHoldingsLtdPrimeWorldMember2019-01-212019-01-21 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PrimeWorldInternationalHoldingsLtdPrimeWorldMemberaaoi:SecondSalesContractMember2020-09-152020-09-15 0001158114aaoi:ChaileaseFinanceCoLtdMemberaaoi:PrimeWorldInternationalHoldingsLtdPrimeWorldMemberaaoi:PromissoryNoteMember2020-09-152020-09-15 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TheSPDCreditLineMemberaaoi:GlobalTechnologyIncMemberaaoi:SPDBankMember2019-05-242019-05-24 iso4217:CNY 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TheSPDCreditLineMemberaaoi:GlobalTechnologyIncMemberaaoi:SPDBankMember2019-05-24 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TheSPD30MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:SPDBankMember2019-05-07 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TheSPD99MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:SPDBankMember2019-04-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TheSpd20mCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:SPDBankMember2019-05-08 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TheSPDCreditLineMemberaaoi:GlobalTechnologyIncMemberaaoi:SPDBankMember2022-09-30 utr:M 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2019-06-212019-06-21 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The100MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2019-06-21 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2022-06-072022-06-07 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The200mCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2022-06-07 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The200mCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2022-09-30 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2019-06-212019-06-21 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:The50MCreditFacilityMemberaaoi:GlobalTechnologyIncMemberaaoi:ChinaZheshangBankCoLtdMember2019-06-21 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2019-03-05 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2019-03-052019-03-05 0001158114aaoi:CapExLoanAndTermLoanMemberaaoi:TruistBankMember2019-03-052019-03-05 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2022-09-30 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2021-12-31 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2022-07-012022-09-30 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2021-07-012021-09-30 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2022-01-012022-09-30 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2021-01-012021-09-30 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2022-09-30 0001158114aaoi:The5PercentConvertibleSeniorNotesDue2024Member2021-09-30 0001158114us-gaap:EmployeeStockOptionMember2022-01-012022-09-30 0001158114us-gaap:EmployeeStockOptionMemberaaoi:ExercisableOnTheFirstAnniversaryDateFollowingTheDateOfGrantMember2022-01-012022-09-30 0001158114us-gaap:EmployeeStockOptionMemberaaoi:ExercisableOnSemiannualBasisMember2022-01-012022-09-30 00011581142021-01-012021-12-31 0001158114us-gaap:PerformanceSharesMembersrt:MinimumMember2022-09-30 0001158114us-gaap:PerformanceSharesMembersrt:MaximumMember2022-09-30 0001158114us-gaap:PerformanceSharesMemberaaoi:VestingOnTheThirdAnniversaryMember2022-01-012022-09-30 0001158114us-gaap:PerformanceSharesMember2022-07-012022-09-30 0001158114us-gaap:PerformanceSharesMember2021-07-012021-09-30 0001158114us-gaap:PerformanceSharesMember2022-01-012022-09-30 0001158114us-gaap:PerformanceSharesMember2021-01-012021-09-30 0001158114us-gaap:RestrictedStockUnitsRSUMember2021-12-31 0001158114us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-30 0001158114us-gaap:RestrictedStockUnitsRSUMember2022-09-30 0001158114aaoi:RestrictedStockAwardsAndRestrictedStockUnitsMember2022-09-30 0001158114aaoi:RestrictedStockAwardsAndRestrictedStockUnitsMember2022-01-012022-09-30 0001158114us-gaap:CostOfSalesMember2022-07-012022-09-30 0001158114us-gaap:CostOfSalesMember2021-07-012021-09-30 0001158114us-gaap:CostOfSalesMember2022-01-012022-09-30 0001158114us-gaap:CostOfSalesMember2021-01-012021-09-30 0001158114us-gaap:ResearchAndDevelopmentExpenseMember2022-07-012022-09-30 0001158114us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-30 0001158114us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-09-30 0001158114us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-30 0001158114us-gaap:SellingAndMarketingExpenseMember2022-07-012022-09-30 0001158114us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-30 0001158114us-gaap:SellingAndMarketingExpenseMember2022-01-012022-09-30 0001158114us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-30 0001158114us-gaap:GeneralAndAdministrativeExpenseMember2022-07-012022-09-30 0001158114us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-30 0001158114us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-09-30 0001158114us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-30 0001158114country:US2022-07-012022-09-30 0001158114country:US2021-07-012021-09-30 0001158114country:US2022-01-012022-09-30 0001158114country:US2021-01-012021-09-30 0001158114country:TW2022-07-012022-09-30 0001158114country:TW2021-07-012021-09-30 0001158114country:TW2022-01-012022-09-30 0001158114country:TW2021-01-012021-09-30 0001158114country:CN2022-07-012022-09-30 0001158114country:CN2021-07-012021-09-30 0001158114country:CN2022-01-012022-09-30 0001158114country:CN2021-01-012021-09-30 0001158114country:US2022-09-30 0001158114country:US2021-12-31 0001158114country:TW2022-09-30 0001158114country:TW2021-12-31 0001158114aaoi:LossContingencyObligationForSalesAndUseTaxMember2021-08-092021-08-09 0001158114aaoi:LossContingencyObligationForSalesAndUseTaxMembersrt:MinimumMember2021-08-09 0001158114aaoi:LossContingencyObligationForSalesAndUseTaxMembersrt:MaximumMember2021-08-09 0001158114us-gaap:RevolvingCreditFacilityMemberaaoi:TruistBankMemberus-gaap:SubsequentEventMember2022-10-062022-10-06
 
 

Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-36083

Applied Optoelectronics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

76-0533927

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

13139 Jess Pirtle Blvd.

Sugar Land, TX 77478

(Address of principal executive offices)

(281295-1800

(Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Trading Name of each exchange on which registered

Common Stock, Par value $0.001

AAOI

NASDAQ Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒    No ☐ 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes ☒    No ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

☐ 

Accelerated filer

 

Non-accelerated filer

☐ 

Smaller reporting company

 

 

  

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                     ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                       Yes   No ☒

 

As of November 1, 2022 there were 28,523,719 shares of the registrant’s Common Stock outstanding.

 

1

 

 

Applied Optoelectronics, Inc.

Table of Contents

   

Page

Part I. Financial Information

   

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

   

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021

3

   

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2022 and 2021 (Unaudited)

4

   

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months ended September 30, 2022 and 2021 (Unaudited)

5

   

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2022 and 2021 (Unaudited)

6

   

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021 (Unaudited)

7

   

 

 

Notes To Condensed Consolidated Financial Statements (Unaudited)

8

   

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

   

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

   

 

Item 4.

Controls and Procedures

28

   

 

Part II. Other Information

     

Item 1.

Legal Proceedings

28

     

Item 1A.

Risk Factors

28

     

Item 6.

Exhibits

28

     
 

Signatures

30

 

2

 

 

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

  

September 30,

  

December 31,

 

 

2022

  

2021

 

ASSETS

 

  

 

Current Assets

 

  

 

Cash and cash equivalents

 $26,268  $34,656 

Restricted cash

  8,307   6,480 

Accounts receivable - trade, net of allowance of $23 and $30, respectively

  52,823   47,944 

Notes receivable

  9   8,148 

Inventories, net

  94,261   92,516 

Prepaid income tax

  -   1 

Prepaid expenses and other current assets

  6,132   4,334 

Total current assets

  187,800   194,079 

Property, plant and equipment, net

  211,586   243,035 

Land use rights, net

  5,168   5,856 

Operating right of use asset

  5,600   7,078 

Financing right of use asset

  34   57 

Intangible assets, net

  3,740   3,836 

Other assets, net

  415   518 

TOTAL ASSETS

 $414,343  $454,459 

LIABILITIES AND STOCKHOLDERS' EQUITY

    

 

Current liabilities

      

Current portion of notes payable and long-term debt

 $51,357  $49,689 

Accounts payable

  52,311   34,402 

Bank acceptance payable

  13,760   8,198 

Current lease liability - operating

  998   1,062 

Current lease liability - financing

  19   19 

Accrued liabilities

  12,444   15,587 

Total current liabilities

  130,889   108,957 

Notes payable and long-term debt, less current portion

  -   5,000 

Convertible senior notes

  79,298   78,680 

Non-current lease liability - operating

  5,570   7,189 

Non-current lease liability - financing

  48   63 

TOTAL LIABILITIES

  215,805   199,889 

Stockholders' equity:

     

Common Stock; 45,000 shares authorized at $0.001 par value; 28,058 and 27,323 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

  28   27 

Additional paid-in capital

  388,316   381,143 

Accumulated other comprehensive income

  (988)  16,071 

Accumulated deficit

  (188,818)  (142,671)

TOTAL STOCKHOLDERS' EQUITY

  198,538   254,570 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 $414,343  $454,459 

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

3

 

 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)

   

Three months ended September 30,

   

Nine months ended September 30,

 

 

2022

   

2021

   

2022

   

2021

 

Revenue, net

  $ 56,693     $ 53,267     $ 161,233     $ 157,157  

Cost of goods sold

    46,944       45,143       133,832       127,537  

Gross profit

    9,749       8,124       27,401       29,620  

Operating expenses

       

         

 

Research and development

    9,206       10,149       27,021       31,990  

Sales and marketing

    2,385       2,783       7,107       8,576  

General and administrative

    11,654       10,645       33,908       32,195  

Total operating expenses

    23,245       23,577       68,036       72,761  

Loss from operations

    (13,496 )     (15,453 )     (40,635 )     (43,141 )

Other income (expense)

       

         

 

Interest income

    31       17       90       49  

Interest expense

    (1,621 )     (1,359 )     (4,431 )     (4,158 )

Other income (expense), net

    (541 )     998       (1,171 )     7,628  

Total other income (expense), net

    (2,131 )     (344 )     (5,512 )     3,519  

Loss before income taxes

    (15,627 )     (15,797 )     (46,147 )     (39,622 )

Net loss

  $ (15,627 )   $ (15,797 )   $ (46,147 )   $ (39,622 )

Net loss per share

 

   

   

   

 

Basic

  $ (0.56 )   $ (0.58 )   $ (1.67 )   $ (1.48 )

Diluted

  $ (0.56 )   $ (0.58 )   $ (1.67 )   $ (1.48 )

 

   

   

   

 

Weighted average shares used to compute net loss per share:

 

   

   

   

 

Basic

    27,839,245       27,097,372       27,639,671       26,791,415  

Diluted

    27,839,245       27,097,372       27,639,671       26,791,415  

 

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

4

 

 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

 

Three months ended September 30,

   

Nine months ended September 30,

 

 

2022

   

2021

   

2022

   

2021

 

Net loss

  $ (15,627 )   $ (15,797 )   $ (46,147 )   $ (39,622 )

Gain (Loss) on foreign currency translation adjustment

    (8,214 )     (421 )     (17,059 )     2,175  

Comprehensive loss

  $ (23,841 )   $ (16,218 )   $ (63,206 )   $ (37,447 )

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

 

5

 

 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine Months ended September 30, 2022 and 2021

(Unaudited, in thousands)

   

   

   

   

   

   

Accumulated

   

   

 

 

Preferred Stock

   

Common Stock

   

Additional

   

other

   

   

 

 

Number

   

   

Number

   

   

paid-in

   

comprehensive

   

Accumulated

   

Stockholders'

 

 

of shares

   

Amount

   

of shares

   

Amount

   

capital

   

gain (loss)

   

deficit

   

equity

 

June 30, 2022

        $       27,658     $ 28     $ 385,531     $ 7,226     $ (173,191 )   $ 219,594  

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

                306             (111 )                 (111 )

Share-based compensation

                            2,627                   2,627  

Public offering of common stock, net

                94             269                   269  

Foreign currency translation adjustment

                                  (8,214 )           (8,214 )

Net loss

                                        (15,627 )     (15,627 )

September 30, 2022

        $       28,058     $ 28     $ 388,316     $ (988 )   $ (188,818 )   $ 198,538  

   

   

   

   

   

   

Accumulated

   

   

 

 

Preferred Stock

   

Common Stock

   

Additional

   

other

   

   

 

 

Number

   

   

Number

   

   

paid-in

   

comprehensive

   

Accumulated

   

Stockholders'

 

 

of shares

   

Amount

   

of shares

   

Amount

   

capital

   

gain (loss)

   

deficit

   

equity

 

June 30, 2021

        $       26,919     $ 27     $ 375,312     $ 14,286     $ (112,334 )   $ 277,291  

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

                249             (236 )                 (236 )

Share-based compensation

                            3,130                   3,130  

Public offering of common stock, net

                7             1                   1  

Foreign currency translation adjustment

                                  (421 )           (421 )

Net loss

                                        (15,797 )     (15,797 )

September 30, 2021

        $       27,175     $ 27     $ 378,207     $ 13,865     $ (128,131 )   $ 263,968  

 

   

   

   

   

   

   

Accumulated

   

   

 

 

Preferred Stock

   

Common Stock

   

Additional

   

other

   

   

 

 

Number

   

   

Number

   

   

paid-in

   

comprehensive

   

Accumulated

   

Stockholders'

 

 

of shares

   

Amount

   

of shares

   

Amount

   

capital

   

gain (loss)

   

deficit

   

equity

 

January 1, 2022

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

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

                641       1       (339 )                 (338 )

Share-based compensation

                            7,243                   7,243  

Public offering of common stock, net

                94             269                   269  

Foreign currency translation adjustment

                                  (17,059 )           (17,059 )

Net loss

                                        (46,147 )     (46,147 )

September 30, 2022

        $       28,058     $ 28     $ 388,316     $ (988 )   $ (188,818 )   $ 198,538  

 

   

   

   

   

   

   

Accumulated

   

   

 

 

Preferred Stock

   

Common Stock

   

Additional

   

other

   

   

 

 

Number

   

   

Number

   

   

paid-in

   

comprehensive

   

Retained

   

Stockholders'

 

 

of shares

   

Amount

   

of shares

   

Amount

   

capital

   

gain (loss)

   

earnings

   

equity

 

January 1, 2021

        $       25,110     $ 25     $ 354,685     $ 11,690     $ (88,509 )   $ 277,891  

Stock options exercised, net of shares withheld for employee tax

                2             8                   8  

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

                510             (637 )                 (637 )

Share-based compensation

                            8,922                   8,922  

Public offering of common stock, net

                1,553       2       15,229                   15,231  

Foreign currency translation adjustment

                                  2,175             2,175  

Net loss

                                        (39,622 )     (39,622 )

September 30, 2021

        $       27,175     $ 27     $ 378,207     $ 13,865     $ (128,131 )   $ 263,968  

 

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

 

6

 

 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

   

Nine months ended September 30,

 

 

2022

   

2021

 

Operating activities:

 

   

 

Net loss

  $ (46,147 )   $ (39,622 )

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

 

   

 

Provision for losses on accounts receivable

    (8 )     -  

Lower of cost or market reserve adjustment to inventory

    3,852       3,335  

Depreciation and amortization

    17,698       19,188  

Amortization of debt issuance costs

    641       650  

Loss on disposal of assets

    (34 )     3  

Share-based compensation

    7,243       8,922  

Interest for extinguishment of debt

    -       (70 )

Extinguishment of debt

    -       (6,229 )

Unrealized foreign exchange gain

    2,443       1,021  

Changes in operating assets and liabilities:

           

Accounts receivable, trade

    2,258       (900 )

Notes receivable

    8,089       (8,102 )

Prepaid income tax

    1       -  

Inventories

    (12,734 )     13,551  

Other current assets

    (2,251 )     448  

Operating right of use asset

    665       609  

Accounts payable

    10,781       (1,149 )

Accrued liabilities

    (2,312 )     (2,372 )

Lease liability

    (724 )     (666 )

Net cash used in operating activities

    (10,539 )     (11,383 )

Investing activities:

       

 

Purchase of property, plant and equipment

    (2,450 )     (5,555 )

Proceeds from disposal of equipment

    118       111  

Deposits for equipment

    (488 )     (2,141 )

Purchase of intangible assets

    (390 )     (324 )

Net cash used in investing activities

    (3,210 )     (7,909 )

Financing activities:

       

 

Principal payments of long-term debt and notes payable

    (7,336 )     (3,276 )

Proceeds from line of credit borrowings

    103,505       103,925  

Repayments of line of credit borrowings

    (97,298 )     (86,922 )

Proceeds from bank acceptance payable

    33,891       16,702  

Repayments of bank acceptance payable

    (27,062 )     (26,150 )

Principal payments of financing lease

    (14 )     (13 )

Exercise of stock options

    -       8  

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

    (337 )     (696 )

Proceeds from common stock offering, net

    238       15,397  

Net cash provided by financing activities

    5,587       18,975  

Effect of exchange rate changes on cash

    1,601       (900 )

Net decrease in cash, cash equivalents and restricted cash

    (6,561 )     (1,217 )

Cash, cash equivalents and restricted cash at beginning of period

    41,136       50,114  

Cash, cash equivalents and restricted cash at end of period

  $ 34,575     $ 48,897  

Supplemental disclosure of cash flow information:

           

Cash paid for:

           

Interest, net of amounts capitalized

  $ 4,861     $ 4,691  

Income taxes

    -       1  

Non-cash investing and financing activities:

           

Extinguishment of Debt and interest

    -       (6,299 )

Net change in accounts payable related to property and equipment additions

    (192 )     (4,147 )

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

    52       83  

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

 

7

 

Applied Optoelectronics, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1.   Description of Business​

Business Overview

Applied Optoelectronics, Inc. (“AOI” or the “Company”) is a Delaware corporation. The Company is a leading, vertically integrated provider of fiber-optic networking products, primarily for four networking end-markets: cable television ("CATV"), internet data center, telecommunications ("telecom") and fiber-to-the-home ("FTTH"). The Company designs and manufactures a wide range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment.

The Company has manufacturing and research and development facilities located in the U.S., Taiwan and China. In the U.S., at its corporate headquarters and manufacturing facilities in Sugar Land, Texas, the Company primarily manufactures lasers and laser components and performs research and development activities for laser component and optical module products. In addition, the Company also has a research and development facility in Duluth, Georgia. The Company operates in Taipei, Taiwan and Ningbo, China through its wholly-owned subsidiary Prime World International Holdings, Ltd. (“Prime World”, incorporated in the British Virgin Islands). Prime World operates a branch in Taipei, Taiwan, which primarily manufactures transceivers and performs research and development activities for the transceiver products. Prime World is also the parent of Global Technology, Inc. (“Global”, incorporated in the People’s Republic of China). Through Global, the Company primarily manufactures certain of its data center transceiver products, including subassemblies, as well as CATV systems and equipment, and performs research and development activities for the CATV products.

Interim Financial Statements

The unaudited condensed consolidated financial statements of the Company as of September 30, 2022 and December 31, 2021 and for the three and nine months ended September 30, 2022 and September 30, 2021, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information and with the instructions on Form 10-Q and Rule 10-01 of Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, the Company has omitted certain information and notes required by GAAP for annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented. The year-end condensed balance sheet data was derived from audited financial statements. These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2021. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results expected for the entire fiscal year. All significant inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates in the consolidated financial statements and accompanying notes. Significant estimates and assumptions that impact these financial statements and the accompanying notes relate to, among other things, revenue recognition, allowance for credit losses, inventory reserve, impairment of long-lived assets, service and product warranty costs, share-based compensation expense, estimated useful lives of property and equipment, and taxes.

 

Divestiture Agreement with Yuhan Optoelectronic Technology (Shanghai) Co., Ltd

 

On September 15, 2022, the Company entered into a definitive purchase agreement with Yuhan Optoelectronic Technology (Shanghai) Co., Ltd ("Purchaser"), which is a company incorporated in the People's Republic of China ("PRC"), to divest the Company's manufacturing facilities in PRC and certain assets related to its transceiver business and multi-channel optical sub-assembly products. The closing of the transactions subject to the satisfaction of certain closing conditions, including the approval from the Committee on Foreign Investment in the United States ("CFIUS"). 

 

The purchase price will be an amount equal to the $150 million USD equivalent of Renminbi, less a holdback amount. Prior to the closing of the transaction the Company anticipates investing an amount equal to between 4% and 10% of the estimated proceeds from the transaction in exchange for a 10% equity interest in the Purchaser. 

 

Our management has performed an evaluation as required by ASC-360-10-45-9 to determine whether to classify certain our assets and liabilities as held for sale as of September 30, 2022. ASC 360 requires that a company classifies a business as held for sale in the period in which management commits to a plan to sell the business, the business is available for immediate sale in its present condition, an active program to complete the plan to sell the business is initiated, the sale of the business within one year is probable and the business is being marketed at a reasonable price in relation to its fair value. The proposed sale is subject to CFIUS' approval and the probability is less likely to be deemed "probable" as of September 30, 2022. Additionally, there is no financial disincentive for the buyer not to request additional changes. As a result, our management concludes that none of our assets or liabilities are required to be classified as held for sale.

 

Note 2.  Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies for the three and nine months ended September 30, 2022, as compared to the significant accounting policies described in its 2021 Annual Report, except as described below.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Yet to be Adopted

 

To date, there have been no recent accounting pronouncement not yet effective that have significance, or potential significance, to our Consolidated Financial Statements. 

 

8

 
 

Note 3.  Revenue Recognition

Disaggregation of Revenue

Revenue is classified based on the location where the product is manufactured. For additional information on the disaggregated revenues by geographical region, see Note 17, "Geographic Information.”

 

Revenue is also classified by major product category and is presented below (in thousands):

  

Three months ended September 30,

 

     

% of

      

% of

 

 

2022

  

Revenue

  

2021

  

Revenue

 

CATV

 $31,260   55.2% $23,101   43.4%

Data Center

  17,697   31.2%  23,929   44.9%

Telecom

  6,821   12.0%  5,148   9.7%

FTTH

  -   0%  62   0.1%

Other

  915   1.6%  1,027   1.9%

Total Revenue

 $56,693   100.0% $53,267   100.0%

  

Nine months ended September 30,

 

     

% of

      

% of

 

 

2022

  

Revenue

  

2021

  

Revenue

 

CATV

 $79,953   49.6% $69,339   44.1%

Data Center

  60,608   37.5%  72,259   46.0%

Telecom

  18,362   11.4%  12,959   8.2%

FTTH

  124   0.1%  784   0.5%

Other

  2,186   1.4%  1,816   1.2%

Total Revenue

 $161,233   100.0% $157,157   100.0%

 

 

 

Note 4.  Leases

The Company leases space under non-cancellable operating leases for manufacturing facilities, research and development offices and certain storage facilities and apartments. These leases do not contain contingent rent provisions. The Company also leases certain machinery, office equipment and a vehicle. Many of its leases include both lease (e.g. fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g. common-area or other maintenance costs) which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. Several of the leases include one or more options to renew which have been assessed and either included or excluded from the calculation of the lease liability of the right of use ("ROU") asset based on management’s intentions and individual fact patterns. Several warehouses and apartments have non-cancellable lease terms of less than one-year and therefore, the Company has elected the practical expedient to exclude these short-term leases from its ROU asset and lease liabilities.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on the applicable lease terms and current economic environment, the Company applies a location approach for determining the incremental borrowing rate.

The components of lease expense were as follows for the periods indicated (in thousands):

 

  

Three months ended September 30,

  

Nine months ended September 30,

 

 

2022

  

2021

  

2022

  

2021

 

Operating lease expense

 $283  $311  $882  $922 

Financing lease expense

  8   8   24   24 

Short Term lease expense

  34   4   55   17 

Total lease expense

 $325  $323  $961  $963 

 

Maturities of lease liabilities are as follows for the future one-year periods ending  September 30, 2022 (in thousands):

   Operating   Financing 

2023

  1,194   22 

2024

  1,118   49 

2025

  1,101   0 

2026

  1,064   0 

2027

  1,038   0 

2028 and thereafter

  1,757   0 

Total lease payments

  7,272   71 

Less imputed interest

  (704)  (4)

Present value

  6,568   67 

9

 

The weighted average remaining lease term and discount rate for the leases were as follows for the periods indicated:

  

Nine months ended September 30,

 

 

2022

  

2021

 

Weighted Average Remaining Lease Term (Years) - operating leases

  6.41   7.38 

Weighted Average Remaining Lease Term (Years) - financing leases

  1.08   2.33 

Weighted Average Discount Rate - operating leases

  3.22%  3.23%

Weighted Average Discount Rate - financing leases

  5.00%  5.00%

 

Supplemental cash flow information related to the leases was as follows for the periods indicated (in thousands):

 

  

Nine months ended September 30,

 

 

2022

  

2021

 

Cash paid for amounts included in the measurement of lease liabilities

 

  

 

Operating cash flows from operating leases

  903   980 

Operating cash flows from financing lease

  3   4 

Financing cash flows from financing lease

  14   13 

Right-of-use assets obtained in exchange for new operating lease liabilities

  -   121 

 

Note 5.  Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statement of financial position that sum to the total of the same such amounts in the statement of cash flows (in thousands):

 

  

September 30,

  

December 31,

 

 

2022

  

2021

 

Cash and cash equivalents

 $26,268  $34,656 

Restricted cash

  8,307   6,480 

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

 $34,575  $41,136 

Restricted cash includes guarantee deposits for customs duties, China government subsidy fund, and compensating balances required for certain credit facilities. As of September 30, 2022 and December 31, 2021, there was $6.4 million and $3.0 million of restricted cash required for bank acceptance notes issued to vendors, respectively. In addition, there was $0.8 million and $2.4 million certificate of deposit associated with credit facilities with a bank in China as of September 30, 2022 and December 31, 2021, respectively. There was $11.2 million and $1.0 million guarantee deposits for customs duties as of  September 30, 2022 and December 31, 2021, respectively.

 

Note 6.  Earnings (Loss) Per Share

Basic net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share has been computed using the weighted-average number of shares of common stock and dilutive potential common shares from stock options, restricted stock units and senior convertible notes outstanding during the period. In periods with net losses, normally dilutive shares become anti-dilutive. Therefore, basic and diluted loss per share are the same.

The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (in thousands):

  

Three months ended September 30,

  

Nine months ended September 30,

 

 

2022

  

2021

  

2022

  

2021

 

Numerator:

 

  

  

  

 

Net loss

 $(15,627) $(15,797) $(46,147) $(39,622)

Denominator:

 

   

   

   

  

Weighted average shares used to compute net loss per share

 

   

   

   

  

Basic

  27,839   27,097   27,640   26,791 

Diluted

  27,839   27,097   27,640   26,791 

Net loss per share

 

   

   

   

  

Basic

 $(0.56) $(0.58) $(1.67) $(1.48)

Diluted

 $(0.56) $(0.58) $(1.67) $(1.48)

 

The following potentially dilutive securities were excluded from the diluted net loss per share as their effect would have been antidilutive (in thousands):

  

Three months ended September 30,

  

Nine months ended September 30,

 

 

2022

  

2021

  

2022

  

2021

 

Employee stock options

  

   1      3 

Restricted stock units

  

322

   2      6 

Shares for convertible senior notes

  4,587   4,587   4,587   4,587 

Total antidilutive shares

  4,909   4,590   4,587   4,596 

10

 
 

Note 7.  Inventories

Inventories, net of inventory write-downs, consist of the following for the periods indicated (in thousands):

 

September 30, 2022

  

December 31, 2021

 

Raw materials

 $34,372  $29,469 

Work in process and sub-assemblies

  48,961   41,528 

Finished goods

  10,928   21,519 

Total inventories

 $94,261  $92,516 

The lower of cost or market adjustment expensed for inventory for the three months ended September 30, 2022 and 2021 was $1.4 million and $1.1 million, respectively. The lower of cost or market adjustment expensed for inventory for the nine months ended September 30, 2022 and 2021 was $3.9 million and $3.3 million, respectively.

 

For the three months ended September 30, 2022 and 2021, the direct inventory write-offs related to scrap, discontinued products, and damaged inventories were $1.1 million and $4.2 million, respectively. For the nine months ended September 30, 2022 and 2021, the direct inventory write-offs related to scrap, discontinued products, and damaged inventories were $3.8 million and $15 million, respectively.

 

Note 8.  Property, Plant & Equipment

Property, plant and equipment consisted of the following for the periods indicated (in thousands):

 

September 30, 2022

  

December 31, 2021

 

Land improvements

 $806  $806 

Buildings and improvements

  85,078   89,698 

Machinery and equipment

  246,605   266,386 

Furniture and fixtures

  5,303   5,658 

Computer equipment and software

  11,430   12,727 

Transportation equipment

  661   726 

  349,883   376,001 

Less accumulated depreciation and amortization

  (169,898)  (167,772)

  179,985   208,229 

Construction in progress

  30,500   33,705 

Land

  1,101   1,101 

Total property, plant and equipment, net

 $211,586  $243,035 

For the three months ended September 30, 2022 and 2021, the depreciation expense of property, plant and equipment was $5.5 million and $6.2 million, respectively. For the nine months ended September 30, 2022 and 2021, the depreciation expense of property, plant and equipment was $17.2 million and $18.7 million, respectively. For the three months ended September 30, 2022 and 2021, the capitalized interest was $0.1 million and $0.3 million, respectively. For the nine months ended September 30, 2022 and 2021, the capitalized interest was $0.2 million and $0.6 million, respectively.

 

As of September 30, 2022, the Company concluded that its continued loss history constitutes a triggering event as described in ASC 360-10-35-21,Property, Plant, and Equipment.  The Company performed a recoverability test and concluded that future undiscounted cash flows exceed the carrying amount of the Company’s long-lived assets and therefore no impairment charge was recorded. 

 

 

11

 
 

Note 9.  Intangible Assets, net

Intangible assets consisted of the following for the periods indicated (in thousands):

  

September 30, 2022

 

 

Gross

  

Accumulated

  

Intangible

 

 

Amount

  

amortization

  

assets, net

 

Patents

 $8,865  $(5,155) $3,710 

Trademarks

  50   (20)  30 

Total intangible assets

 $8,915  $(5,175) $3,740 

 

  

December 31, 2021

 

 

Gross

  

Accumulated

  

Intangible

 

 

Amount

  

amortization

  

assets, net

 

Patents

 $8,597  $(4,779) $3,818 

Trademarks

  35   (17)  18 

Total intangible assets

 $8,632  $(4,796) $3,836 

For the three months ended September 30, 2022 and 2021, amortization expense for intangible assets, included in general and administrative expenses on the statement of operations, was $0.2 million and $0.1 million, respectively. For the nine months ended September 30, 2022 and 2021, included in general and administrative expenses on the statement of operations, the amortization expense for intangible assets, was each $0.5 million. The remaining weighted average amortization period for intangible assets is approximately 6 years.

 

At September 30, 2022, future amortization expense for intangible assets for future one year periods is estimated to be (in thousands):

 

2023

  616 

2024

  616 

2025

  616 

2026

  616 

2027

  616 

2028

  616 

thereafter

  44 
   3,740 

 

 

Note 10.  Fair Value of Financial Instruments​

The following table represents a summary of the Company’s financial instruments measured at fair value on a recurring basis for the periods indicated (in thousands):

  

As of September 30, 2022

  

As of December 31, 2021

 

 

(Level 1)

  

(Level 2)

  

(Level 3)

  

Total

  

(Level 1)

  

(Level 2)

  

(Level 3)

  

Total

 

Assets:

 

  

  

  

  

  

  

  

 

Cash and cash equivalents

 $26,268  $  $  $26,268  $34,656  $  $  $34,656 

Restricted cash

  8,307         8,307   6,480         6,480 

Note receivable

     9      9      8,148      8,148 

Total assets

 $34,575  $9  $  $34,584  $41,136  $8,148  $  $49,284 

Liabilities:

 

  

  

  

  

  

  

  

 

Bank acceptance payable

 $  $13,760  $  $13,760  $  $8,198  $  $8,198 

Convertible senior notes

     56,524      56,524      67,588      67,588 

Total liabilities

 $  $70,284  $  $70,284  $  $75,786  $  $75,786 

The carrying value amounts of accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair value because of the short-term maturity of these instruments. The carrying value amounts of bank acceptances approximate fair value due to the short-term nature of the debt since it renews frequently at current interest rates. The Company believes that the interest rates in effect at each period end represent the current market rates for similar borrowings.

 

The fair value of its convertible senior debt is measured for disclosure purpose. The fair value is based on observable market prices for this debt, which is traded in less active markets and are therefore classified as a Level 2 fair value measurement.​

  

12

 
 

Note 11.  Notes Payable and Long-Term Debt

Notes payable and long-term debt consisted of the following for the periods indicated (in thousands):

  

September 30, 2022

  

December 31, 2021

 

Revolving line of credit with a U.S. bank up to $20,000 with interest at 4.063% , maturing April 15, 2023

 $17,831  $14,373 

Notes payable to a finance company due in monthly installments with 3.1% interest, matured January 21, 2022

  -   170 

Revolving line of credit with a China bank up to $20,185 with interest from 2.95% to 4.57%, maturing June 28, 2023

  17,166   19,595 

Credit facility with a China bank up to $23,722 with interest of 3.44%~5.43%, maturing March 14, 2023

  16,361   13,044 

Credit facility with a China bank up to $7,167 with interest of 5.7%, matured June 27, 2022

  -   7,529 

Sub-total

  51,358   54,711 

Less debt issuance costs, net

  (1)  (22)

Grand total

  51,357   54,689 

Less current portion

  (51,357)  (49,689)

Non-current portion

 $-  $5,000