APPLIED OPTOELECTRONICS INC

NOTE A—ORGANIZATION AND OPERATIONS

Applied Optoelectronics, Inc. (“AOI” or the “Company”) was incorporated in the State of Texas on* February**28,* 1997. In* March 2013,the Company converted into a Delaware corporation. The Company is a leading, vertically integrated provider of fiber-optic networking products, primarily forfour* networking end-markets: internet data center, CATV, telecom and FTTH. The Company designs and manufactures a wide range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment.

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

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries and are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation.

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

The functional currency for the Company’s foreign operations is the local currency. The assets and liabilities of these operations are translated at the rate of exchange in effect on the balance sheet date and sales and expenses are translated at monthly average rates. The resulting gains or losses from translation are included in a separate component of other comprehensive income. There isno tax effect on the foreign currency translation because it is management’s intent to reinvest the undistributed earnings of its foreign subsidiaries indefinitely. Transaction gains and losses resulting from re-measuring monetary asset and liability accounts that are denominated in a currency other than a subsidiary’s functional currency are included in net foreign exchange gain and loss and are included in net income except for those intercompany balances that are long-term investments in nature. The translation gain or losses from the long-term investment nature of intercompany balances are treated as translation adjustments and included in comprehensive income.

The carrying value of cash, cash equivalents and short-term investments, accounts receivable, accounts payable, and note receivable approximate their historical fair values due to their short-term maturities. The carrying value of the debt approximates its fair value due to the short-term nature of the debt since it renews frequently at current interest rates. Management believes that the interest rates in effect at each year end represent the current market rates for similar borrowings.

F-9

The fair value measurement standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard characterizes inputs used in determining fair value according to a hierarchy that prioritized inputs based on the degree to which they are observable. Thethree levels of the fair value hierarchy are as follows:

Level1—Inputs represent quoted prices in active markets for identical assets or liabilities.

Level2—Inputs other than quoted prices included within Level1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that arenot active.

Level3—Inputs that arenot observable from objective sources, such as management’s internally developed assumptions used in pricing an asset or liability.

Assets and liabilities that are required to be fair valued on a recurring basis include money market funds, marketable securities, equity instruments and contingent consideration.

Money market funds are valued with Level1 inputs, using quoted market prices, and are included in cash and cash equivalents on the Company’s consolidated balance sheets.

The Company considers all highly liquid securities with an original maturity ofninety days or less from the date of purchase to be cash equivalents. Cash in foreign accounts was approximately $17.7 million and $17.5 million at* December 31, 2023and2022*, respectively.

The Company maintains cash and cash equivalents at U.S. financial institutions for which the combined account balances in individual institutions* mayexceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. As of December 31, 2023*, approximately $36.8 million of U.S. deposits werenot covered by FDIC insurance. The Company hasnot experienced any losses and believes it isnot exposed to any significant risk with such accounts.

Restricted cash includes guarantee deposits for customs duties and compensating balances associated with credit facilities.

The Company carries its accounts receivable at the net amount that it estimates to be collectible. An allowance for uncollectable accounts is maintained through a charge against operations. The allowance is determined by management review of outstanding amounts per customer, historical payments and the aging of accounts.

Financial instruments which potentially subject the Company to concentrations of credit risk include cash, cash equivalents and accounts receivable. The Company places all cash and cash equivalents with high-credit quality financial institutions.

The Company performs ongoing credit valuations of its customers’ financial condition whenever deemed necessary and generally doesnot require deposits or collateral to support customer receivables. The historical amount of losses on uncollectible accounts has been within the Company’s estimates. The Company generates much of its revenue from a limited number of customers. In2023, 2022 and2021, its topfive customers represented 85.6%,78.2%, and 67% of its revenue, respectively. In2023, Microsoft, ATX and Digicomm represented 46.6%,15.6% and 11.3% of its revenue, respectively. In2022, ATX and Microsoft represented 47.3% and 18.4% of its revenue.

Thefive largest receivable balances for customers represented an aggregate of 75.4% and 86.9% of total accounts receivable at* December 31, 2023and2022*, respectively. As of* December 31, 2023*, Digicomm represented 35.2% of total accounts receivable and ATX represented 21.4% of total accounts receivable. As of* December 31, 2022,ATX represented 64.9% of total accounts receivable, respectively.No other customer represented greater thanten* percent of revenue in2023 or2022 had greater thanten percent of total accounts receivable at* December 31, 2023or2022.*

F-10

Inventories are stated at the lower of cost (average-cost method) or net realizable value. Work in process and finished goods includes materials, labor and allocated overhead. The Company assesses the valuation of its inventory on a periodic basis and provides write-offs for the value of estimated excess and obsolete inventory based on estimates of future demand. Inventory reserves are recorded to account for the excess and obsolete inventory combined with the lower of cost or net realizable value assessments. To develop the reserve, the Company developed certain percentages that determine the extent of inventory reserve adjustments based on the age of the inventory. Such percentages were determined through analysis of the inventory to determine each product's lifespan, a review historical write-offs or scrapped inventory, and an assessment by product engineers of the possibility of obsolescence for each product.

Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. The Company calculates depreciation using the straight-line method over the following estimated useful lives:

Major improvements are capitalized and expenditures for maintenance and repairs are expensed as incurred. Construction in progress represents property, plant and equipment under construction or being installed. Costs include original cost, installation, construction and other direct costs which include interest on borrowings used to finance the asset. Construction in progress is transferred to the appropriate fixed asset account and depreciation commences when the asset has been substantially completed and placed in service.

Land use rights allow the Company rights for50 years to certain land in Ningbo, China on which the Company built a facility that included office space, manufacturing operations and employee dormitories. The land use rights are recorded at cost and are amortized on the straight-line basis over the useful life of the related contract. The land use rights expire on* October 7, 2054and December 28, 2067.*

Intangible assets consist of intellectual property that is stated at cost less accumulated amortization. As of* December 31, 2023*, the Company had326 total patents issued. The costs incurred to obtain such patents have been capitalized and are being amortized over an estimated life between 10 and 20 years. The Company periodically evaluates its intangible assets to determine whether events or changes in circumstances indicate that a patent or trademark * may**not* be applicable to the Company’s current products or isno longer in use. If such a determination is made, the intangible asset is impaired and the remaining value of the patent or trademark will be expensed at that time.

F-11

The Company accounts for impairment of long-lived assets in accordance with Accounting Standards Codification (“ASC”)360, Property, Plant and Equipment, (“ASC360”). Long-lived assets consist primarily of property, plant and equipment, right-of-use assets and intangible assets. In accordance with ASC360, the Company evaluates the carrying value of long-lived assets when it determines a triggering event has occurred, or whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. When indicators exist, recoverability of assets is measured by a comparison of the carrying value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. Examples of such triggering events include a significant disposal of a portion of such assets, an adverse change in the market involving the business employing the related asset, a significant decrease in the benefits realized from an acquired business, difficulties or delays in integrating the business, and a significant change in the operations of an acquired business. If such assets are determinednot to be recoverable, the Company performs an analysis of the fair value of the asset group and will recognize an impairment loss when the fair value is less than the carrying amounts of such assets. The fair value, based on reasonable and supportable assumptions and projections, require subjective judgments. Depending on the assumptions and estimates used, the appraised fair value projected in the evaluation of long-lived assets can vary within a range of outcomes. The Company considers the likelihood of possible outcomes in determining the best estimate for the fair value of the assets. The Company didnot record any asset impairment charges in2023,2022 or2021.

ASC220, Comprehensive Income, (“ASC220”) establishes rules for reporting and display of comprehensive income (loss) and its components. ASC220 requires that unrealized gains and losses on the Company’s foreign currency translation adjustments be included in comprehensive income (loss).

The Company accounts for share-based compensation in accordance with the provisions of ASC718, Compensation—Stock Compensation. Share-based compensation expense is recognized based on the grant date fair value in order to recognize compensation cost for those shares expected to vest. Compensation cost is recognized on a straight-line basis over the vesting period of the restricted stock units and adjusted as forfeitures occur.

The Company derives revenue from the manufacture and sale of fiber optic networking products. Revenue recognition follows the criteria of ASC606, Revenue from Contracts with Customers. Specifically, the Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally this occurs with the transfer of control of products or servicesat point of time or over times. When the Company receives payments and its obligations to customers arenot satisfied, the Company will recognize the payment as Unearned Revenue from customers.

The Company generally offers aone-year limited warranty for its products but it can extend for longer periods ofthree tofive years for certain products sold to certain customers. The Company estimates the costs that* maybe incurred under its basic limited warranty and records a liability for the amount of such costs at the time when product defects occur. Factors that affect the Company’s warranty liability include the historical and anticipated rates of warranty claims and cost to repair. While the Company believes that its warranty accrual is adequate, the actual warranty costs mayexceed the accrual, in which case the cost of sales will increase in the future. As of December 31, 2023and2022*, the amount of accrued warranty was $0.25 million and $0.1 million, respectively. Changes in products warranty were as follows (in thousands):

Advertising costs are charged to operations as incurred and amounted to approximately $0.8 million, $0.8 million, and $0.1 million for the years ended* December 31, 2023,*2022 and2021, respectively.

F-12

Research and development costs are charged to operations as incurred. The Company receives reimbursement for certain development costs, which offset with expense up to the reimbursable amount.

Shipping and handling costs are included in operating expenses as fulfillment costs unless we bill our customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.

The Company accounts for income taxes in accordance with the provisions of ASC740, Income Taxes. The liability method is used to account for deferred income taxes. Under the liability method, deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The ability to realize deferred tax assets is evaluated annually and a valuation allowance is provided if it is unlikely that the deferred tax assets willnot give rise to future benefits in the Company’s tax returns.

The Company records uncertain tax positions in accordance with ASC740 on the basis of atwo-step process in which (1) it determines whether it is more likely thannot that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than50% likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.

One of the base broadening provisions of the U.S. Tax Cuts and Jobs Act of2017 (“the2017 Act”) is the global intangible low-taxed income provisions ("GILTI"). In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the fiscal years ended* December 31, 2023,** December**31,* 2022, and* December 31, 2021,*deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense.

Recent Accounting Pronouncements Adopted in2023

There wasno accounting pronouncement adopted in2023.

F-13

Recent Accounting Pronouncements Yet to be Adopted

In* December 2023,the FASB issued ASU2023*-09 Income Taxes (Topic740): Improvements to Income Tax Disclosures", which requires the Company to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation, income taxes paid and other income tax related amounts. This guidance is effective for annual periods beginning after* December 15, 2024,*with early adoption permitted. The adoption is expected to enhance the Company's Notes to the Consolidated Financial Statements. The Company is currently evaluating the impact the new standard will have on its financial statements and related disclosure.

In* November 2023,the FASB issued ASU2023*-07 "Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures", which requires the Company to expand the breadth and frequency of segment disclosures to include additional information about significant segment expenses, the chief operating decision maker (CODM) and other items, and also require the annual disclosures on an interim basis. This guidance is effective for annual periods beginning after* December 15, 2023,*with early adoption permitted. The Company is currently evaluating the impact the new standard will have on its financial statements and related disclosure.

In* October 2023,the FASB issued ASU2023*-06 "Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative", which amends U.S. GAAP to include14 disclosure requirements that are currently required under SEC Regulation S-X or Regulation S-K. Each amendment will be effective on the date on which the SEC removes the related disclosure requirement from SEC Regulation S-X or Regulation S-K. The Company has evaluated the new standard and determined that it will haveno material impact on its financial statements or disclosures since the Company is already subject to the relevant SEC disclosure requirements.

NOTE C—REVENUE RECOGNITION

Revenue from Contracts with Customers

The Company derives revenue from the manufacture and sale of fiber optic networking products. Revenue is recognized when obligations under the terms of a contract with its customer are satisfied; generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. Certain customers* mayreceive cash and/or non-cash incentives, which are accounted for as variable consideration. To achieve this core principle, the Company applies the followingfive* steps:

1. Identify the contract with a customer

A contract with a customer exists when (i) the Company enters into an agreement with a customer that defines each party's rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) both parties to the contract are committed to perform their respective obligations, (iii) the contract has commercial substance, and (iv) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's payment history or, in the case of a new customer, published credit and financial information pertaining to the customer.

F-14

2. Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available fromthird parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised products or services, the Company must apply judgment to determine whether promised products or services are capable of being distinct and distinct in the context of the contract. If these criteria arenot met, the promised products or services are accounted for as a combined performance obligation. The Company has elected to account for shipping and handling activities as a fulfillment cost as permitted by the standard.

3. Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. To the extent the transaction price is variable, revenue is recognized at an amount equal to the consideration to which the Company expects to be entitled. This estimate includes customer sales incentives which are accounted for as a reduction to revenue and estimated using either the expected value method or the most likely amount method, depending on the nature of the program. The Company will adjust its consideration for any rebates if it is more likely thannot that the rebate conditions will be met.

4. Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price for each performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately.

In cases where there isno directly observable stand alone selling price, allowable estimation methods are used. For example for contracts involving non-recurring engineering, an expected cost plus margin approach has typically been adopted to estimate the standalone selling price.

5. Recognize revenue when or as the Company satisfies a performance obligation

For product sales, the Company generally satisfies performance obligations at a point in time, most often upon shipment of a product to the customer or delivery of the product to the customer. In the case of such point in time satisfaction of a performance obligation, revenue is recognized based on the transaction price at the time the related performance obligation is satisfied.

For service obligations, the Company generally recognizes revenue over time. The most common type of service obligation encountered by the Company is an arrangement involving non-recurring engineering in which service revenue is typically recognized over time under either the time and material practical expedient, as the Company has a right to consideration from a customer, in an amount that corresponds directly with the value to the customer of the Company's performance completed to date, or under the output method, for example using contract-specific milestones or other objective measures of progress.

Unearned Revenue

Unearned Revenue results from cash received or amounts billed to customers in advance of revenue recognized upon the satisfaction of performance obligations. As of* December 31, 2023,and2022,* the Company had Unearned Revenue of $1.8 million and $3 million, respectively. The following table reflects the changes in Unearned Revenue in our consolidated financial statements for the periods indicated (in thousands). The remaining $1.8 million will be expected to be recognized as revenue gradually in2024, depending on the customer's request.

Disaggregation of Revenue

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

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

F-15

NOTE D—Leases

The Company leases space under non-cancellable operating leases for manufacturing facilities, research and development offices and certain storage facilities and apartments. These leases donot contain contingent rent provisions. The Company also leases certain machinery, office equipment and a vehicle under operating leases. 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 includeone or more options to renew which have been assessed and either included or excluded from the calculation of the lease liability of the ROU asset based on management’s intentions and individual fact patterns. Several warehouses and apartments have non-cancellable lease terms of less thanone-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 donot 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.

Lease expense is included under general and administrative expenses and was $1.2 million, $1.2 million, and $1.3 million, respectively, for the years ended* December 31, 2023,*2022 and2021, respectively. The Components of lease expense were as follows for the periods indicated (in thousands):

Maturities of lease liabilities are as follows for the futureone-year periods ending* December 31, (*in thousands):

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

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

F-16

NOTE E—CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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

Restricted cash includes guarantee deposits for customs duties, China government subsidy fund, and compensating balances associated with certain credit facilities. As of* December 31, 2023and2022*, there was $6.5 million and $8.7 million of restricted cash required for bank acceptance notes issued to vendors, respectively. There was $2.5 million and $1.1 million certificate of deposit with original maturity of90 days or less associated with credit facilities with a bank in China as of* December 31, 2023and2022* respectively. There was $0.7 million and $1.0 million guarantee deposits for customs duties as of* December 31, 2023and December 31, 2022.*

NOTE F—EARNINGS PER SHARE

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

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

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

F-17

NOTE G—INVENTORIES

At* December 31, 2023and2022*, inventories consisted of the following (in thousands):

For the years2023, 2022 and2021, the inventory reserve adjustment expensed for inventory was $8.7 million, $4.9 million, and $3.9 million, respectively. For the years* December 31, 2023,*2022 and2021, the direct inventory write-offs related to scrap, discontinued products, and damaged inventories were $10.6 million, $10.4 million, and $16.8 million, respectively.

NOTE H—PROPERTY, PLANT AND EQUIPMENT

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

For the years ended* December 31, 2023,2022 and2021, depreciation expense of property, plant and equipment was $19.7 million, $22.6 million, and $24.8 million, respectively. For the years December 31, 2023,*2022 and2021, the capitalized interest was $0 million, $0.2 million, and $0.9 million, respectively.

As of* December 31, 2023*, the Company concluded that its continued loss history constitutes a triggering event as described in ASC360-10-35-21, 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 thereforeno impairment charge was recorded.

F-18

NOTE I—INTANGIBLE ASSETS

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

For the years ended* December 31, 2023,*2022 and2021, amortization expense for intangible assets, included in general and administrative expenses on the income statement, was $0.7 million, $0.6 million and $0.5 million, respectively. The remaining weighted average amortization period for intangible assets is approximatelysix years.

At* December 31, 2023*, future amortization expense for intangible assets is estimated to be (in thousands):

NOTE J—FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents a summary of the Company’s financial instruments measured at fair value on a recurring basis as of* December 31, 2023* (in thousands):

F-19

The following table presents a summary of the Company’s financial instruments measured at fair value on a recurring basis as of * December 31, 2022*(in thousands):

NOTE K—NOTES PAYABLE AND LONG-TERM DEBT

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

The current portion of long-term debt is the amount payable withinone year of the balance sheet date of* December 31, 2023*.

F-20

On* November 16, 2022,the Company entered into a Loan Security and Guarantee Agreement (the “Credit Facility”) with CIT Northbridge Credit, LLC, as agent for secured parties. The Credit Facility provided the Company with athree-year, $27.78 million revolving line of credit. Borrowings under the Credit Facility were to be used to repay senior debt with Truist Bank and for working capital needs, capital expenditures, and other corporate purposes. The Company's obligations under the Credit Facility were secured by the Company's inventory, accounts receivable, instruments, equipment, intellectual property, and all business assets with the exception of real estate and all foreign assets. Borrowings were to bear interest at a rate equal to the Secured Overnight Financing Rate (SOFR) plus 3.75%, while monthly average usage was less than50%* of the Credit Facility, otherwise SOFR plus 4.75%. The Credit Facility was to become due at the earlier date of either* November 16, 2025or91* days prior to the maturity of the2024 Notes. On* August 16, 2023,the Company delivered a termination notice to CIT to terminate the Credit Facility. As a result of the Company's delivery of such termination notice, the Credit Facility was terminated effective as of November 17, 2023*and was fully repaid.

On* May 24, 2019,the Company’s China subsidiary, Global, entered into afive-year revolving credit line agreement, totaling 180,000,000 RMB (the “SPD Credit Line”), or approximately $25.4 million, and a mortgage security agreement (the “Security Agreement”), with Shanghai Pudong Development Bank Co., Ltd ("SPD"). Borrowing under the SPD Credit Line will be used for general corporate and capital investment purposes, including the issuance of bank acceptance notes to Global’s vendors. The total SPD Credit Line of180* million RMB is inclusive of all credit facilities previously entered into with SPD including: a 30 million RMB credit facility entered into on* May 7, 2019;and a 9.9 million RMB credit facility entered into on April 30, 2019and $2 million credit facility entered into on May 8, 2019.Global maydraw upon the SPD Credit Line on an as-needed basis at any time during the5*-year term; however, draws under the SPD Credit Line* maybecome due and repayable to SPD at SPD’s discretion due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition. Each draw will bear interest equal to SPD’s commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the SPD Credit Line will be secured by real property owned by Global and mortgaged to the Bank under the terms of the Security Agreement. As of December 31, 2023,*$12.6 million was outstanding under the SPD Credit Line and the outstanding balance of bank acceptance notes issued to vendors was $12.5 million.

On* June 7, 2022,the Company's China Subsidiary, Global, entered a security agreement with China Zheshang Bank in Ningbo City, China ("CZB") for afive-year credit line agreement, totaling 200,000,000 RMB (the"¥200M* Credit Facility"), or approximately $29.9 million. Global* maydraw upon the¥200M* Credit Facility between* June 7, 2022and June 6, 2027 ("**¥200M* Credit Period"). During the*¥200M* Credit Period, Global* mayrequest to draw upon the¥200M* Credit Facility on an as-needed basis; however, draws under the*¥200M* Credit Facility* maybecome due and repayable to CZB at CZB’s discretion due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition. Each draw will be facilitated by a separate credit agreement specifying the terms of each draw and will bear interest equal to CZB's commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the¥200M* Credit Facility will be secured by real property owned by Global and mortgaged to CZB under the terms of the Real Estate Security Agreement. On* December 21, 2023,Global entered into an asset pool business cooperation agreement ("Asset Pool Agreement") and an asset pool pledge contract ("Pledge Contract") (referred to collectively as the Pledge Asset Line"), with CZB, which supplements the existing¥200M* Credit Facility. The Pledge Asset Line doesnot constitute a new credit line or an increase to the existing credit limits. Global* maydraw upon the Pledge Asset Line between December 21, 2023and December 21, 2025 ("Asset Pool Period"). During the Asset Pool Period, Global mayrequest to draw upon the Pledge Asset Line on an as-needed bases; however, amount of available credit under the Pledge Asset Line and approval of each draw maybe reduced or declined by CZB due to changes in Chinese government regulations and/or changes in Global's financial and operational condition. Each draw will be facilitated by a separate credit agreement specifying the terms of each draw and will bear interest equal to CZB's commercial banking interest rate effective on the day of the applicable draw. Global's obligations under the Pledge Asset Line will be secured by certain financial assets, including butnot* limited to, deposit receipts, domestic accounts receivable and electronic commercial paper. As of* December 31, 2023,$10.6 million was outstanding under the¥200M* Credit Facility and the outstanding balance of bank acceptance notes issued to vendors was $2.9 million.

As of* December**31,* 2023 and* December 31, 2022,*the Company had $22.5 million and $13.3 million of unused borrowing capacity, respectively.

As of* December 31, 2023and December 31, 2022,*there was $9.7 million and $9.9 million of restricted cash, investments or security deposits associated with the loan facilities, respectively.

F-21

NOTE L—Convertible Senior Notes

On* March 5, 2019,the Company issued $80.5 million of 5% convertible senior notes due2024* (the*“2024* Notes”). On* December 5, 2023,the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due2026* (the*"2026* Notes"), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its2024 Notes to exchange or repurchase approximately $80.2 million principal amount of the2024 Notes for aggregate consideration consisting of approximately $81.1 million in cash, which included accrued interest on the2024 Notes, and approximately 466,368 shares of the Company's common stock, par value $0.001 per share.

The2026 Notes were issued pursuant to an Indenture, dated as of* December 5, 2023, (the "Indenture"), between the Company and Computershare Trust Company, N.A., as trustee. The2026* Notes will bear interest at a rate of5.250% per year and will pay interest semi-annually in arrears on* June 15and December 15of each year, beginning on June 15, 2024.The2026* Notes will mature on* December 15, 2026,*unless earlier converted, redeemed or repurchased in accordance with their terms.

The following table presents the carrying value of the2026 Notes for the periods indicated (in thousands):

The conversion rate for the2026 Notes is 65.6276 shares of the Company’s common stock per $1,000 principal amount of the2026 Notes (which is equivalent to a conversion price of approximately $15.24 per share of the Company’s common stock, representing a premium of approximately 15% over the last reported sale price of the Company’s common stock on* November 30, 2023of $13.25 per share), subject to adjustment. Before September 15, 2026,holders of the2026* Notes will have the right to convert their2026 Notes only upon the occurrence of certain events. From and after* September 15, 2026,holders of the2026* Notes* mayconvert their2026* Notes at any time at their election until the close of business on thesecond scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election, based on the applicable conversion rate(s).

Initially there areno guarantors of the2026 Notes, but the2026 Notes will be fully and unconditionally guaranteed, on a senior, unsecured basis by certain of the Company’s future domestic subsidiaries. The2026 Notes are the Company’s senior, unsecured obligations and are equal in right of payment with existing and future senior, unsecured indebtedness, senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the2026 Notes and effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness. The Note Guarantee (as defined in the Indenture) of each future guarantor, if any, will be such guarantor’s senior, unsecured obligations and is equal in right of payment with existing and future senior, unsecured indebtedness, senior in right of payment to such future guarantor’s existing and future indebtedness that is expressly subordinated to the2026 Notes and effectively subordinated to such future guarantor’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.

The Indenture contains covenants that limit the Company’s ability and the ability of our subsidiaries to, among other things: (i) incur or guarantee additional indebtedness or issue disqualified stock; and (ii) create or incur liens.

The2026 Notes will be redeemable, in whole or in part (subject to certain limitations described in the Indenture), at the Company’s option at any time, and from time to time, on or after* December 15, 2024and on or before the40th* scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether ornot consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date it sends such notice.

In addition, the2026 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or before the40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of a holder of2026 Notes as of the close of business on a record date to receive the related interest payment on the corresponding interest payment date), if the Company completes the "Specified Divestiture" of (x)one or more of its manufacturing facilities located in the People’s Republic of China and/or (y) significant assets located in the People’s Republic of China which relate to the Company’s transceiver business and multi-channel optical sub-assembly products (or any substantially related assets), for aggregate consideration in cash to the Company ofnot less than the U.S. Dollar equivalent of $150,000,000 (measured at the time of completion).

Calling any Convertible Note for redemption will constitute a “Make-whole fundamental change” (as defined in the Indenture) with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption.

In addition, if the Specified Divestiture is completed, then each holder of2026 Notes will have the right to require the Company to repurchase its2026 Notes for cash on a date of the Company’s choosing, which must be a business day that isno more than35, nor less than20, business days after we send the related notice of Specified Divestiture. The repurchase price for a note tendered for such repurchase will be equal to the principal amount of the2026 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date (subject to the right of a holder of2026 Notes as of the close of business on a record date to receive the related interest payment on the corresponding interest payment date).

Moreover, if the Company undergoes a fundamental change, as described in the Indenture, holders of the2026 Notes* mayrequire the Company to repurchase for cash all or part of their2026* Notes at a repurchase price equal to 100% of the principal amount of the2026 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the required repurchase date.

Additionally, the2026 Notes are subject to customary events of default.No sinking fund is provided for the2026 Notes.

Pursuant to the guidance in ASC815-40, Contracts in Entity’s Own Equity, the Company evaluated whether the conversion feature of the note needed to be bifurcated from the host instrument as a freestanding financial instrument. Under ASC815-40, to qualify for equity classification (or non-bifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s own stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the conversion option is indexed to its own stock and also met all the criteria for equity classification contained in ASC815-40-25-7 and815-40-25-10. Accordingly, the conversion option isnot required to be bifurcated from the host instrument as a freestanding financial instrument. Since the conversion feature meets the equity scope exception from derivative accounting, the Company then evaluated whether the conversion feature needed to be separately accounted for as an equity component under ASC470-20, Debt with Conversion and Other Options. The Company determined that notes should be accounted for in their entirety as a liability.

F-22

The following table sets forth interest expense information related to the2024 Notes (in thousands):

NOTE M—ACCRUED LIABILITIES

Accrued liabilities consisted of the following for the periods indicated (in thousands):

NOTE N—OTHER INCOME AND EXPENSE

Other income and expense consisted of the following for the periods indicated (in thousands):

NOTE O—INCOME TAXES

The sources of the Company’s loss from operations before income taxes were as follows (in thousands):

F-23

The provision for income tax expense (benefit) for the years ended* December 31,*was as follows (in thousands):

Deferred income tax assets and liabilities result principally from net operating losses, different methods of recognizing depreciation, reserves for doubtful accounts and inventory, research and development credits and foreign tax credits. At* December**31,* the net deferred tax assets and liabilities are comprised of the following approximate amounts (in thousands):

The Company has a U.S. net operating loss carry forward of approximately $112 million, $32.7 million of which, if unused, expires between2026 and2032 and $79.3 million of which, can be carried forward indefinitely. The Company has U.S. and state research and development tax credits of $11 million, which, if unused, expire between2028 and2043. In addition, the Company has foreign tax credits of $4.6 million, which, if unused, will expire in2028. Utilization of U.S. net operating losses and tax credit carry forwards are subject to an annual limitation due to the ownership change limitations set forth in Internal Revenue Code Section382. As of* December 31, 2023,the Company had Taiwan net operating loss carry forwards of approximately $73.7 million and China net operating loss carry forwards of approximately $66.9 million. The carryforward period for the Taiwan net operating loss carry forwards isten years, and the expiration period begins2028.* The carryforward period for China net operating loss carry forwards isten years, and the expiration period begins2029.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over thethree-year period ended* December 31, 2023.*Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, as of* December 31, 2023and December 31, 2022,a valuation allowance of $78.1 million and $69.7 million, respectively, has been recorded to recognize only the portion of the deferred tax asset that is more likely thannot* to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses isno longer present and additional weight is given to subjective evidence such as our projections for growth.

F-24

The following table shows the change in the deferred tax valuation allowance as follows:

A reconciliation of the U.S. federal income tax rate of 21% for the years ended* December 31, 2023,*2022 and2021, respectively, to the Company’s effective income tax rate follows (in thousands):

The Company's provision for income taxes in2023 was higher than2022 primarily due to state taxes and foreign taxes.

The Company's provision for income taxes in2022 was lower than2021 primarily due to state taxes.

The Company’s wholly owned subsidiary, Prime World is a tax-exempt entity under the Income Tax Code of the British Virgin Islands.

The Company’s wholly owned subsidiary, Global Technology, Inc., has enjoyed preferential tax concessions in China as a national high-tech enterprise. In* March 2007,China’s parliament enacted the PRC Enterprise Income Tax Law, or the EIT Law, under which, effective January**1,* 2008, China adopted a uniform income tax rate of 25% for all enterprises including foreign invested enterprises. However, Global Technology, Inc. has been recognized as a National high-tech enterprise since2008 and entitled to a 15% reduced tax rate. In* December 2023,Global Technology, Inc. again renewed its National high-tech enterprise certificate and therefore extended itsthree*-year tax preferential status until* December 2026.This tax holiday reduced its2023,* 2022 and2021 income tax provision by approximately $0.0 million, $0.0 million, and $0.0 million, respectively. This tax holiday reduced its fiscal2023, 2022, and2021 diluted earnings per share by approximately$0.00, $0.00, and $0.00 respectively. Effective* January 1, 2016,*China expanded the scope of the National high-tech enterprise to include additional deductions for qualifying research and development.

As of* December 31, 2023,*2022 and2021, the total amount of unrecognized tax benefit was $0.2 million, $0.2 million, and $0.2 million, respectively. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

F-25

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, it hasnot accrued penalties or interest during2023 as a result of net operating losses. During2022 or2021, the Company also accruedno penalties or interest.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company’s open tax years subject to examination in the U.S. federal and state jurisdictions are 2020 through 2023. To the extent allowed by law, the taxing authorities* may*have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or tax credit carryforward. The Company is subject to examination for tax years 2018 forward for various foreign jurisdictions.

In response to the COVID-19 pandemic, the CARES Act was signed into law on* March 27, 2020.The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (“QIP”). On December 27, 2020,the Taxpayer Certainty and Disaster Tax Relief Act of2020* was enacted as part of the Consolidated Appropriations Act,2021, followed by the American Rescue Plan Act on* March 1, 2021.These laws, among many other provisions, expand and extend the Paycheck Protection Program (“PPP”), refundable employee retention tax credits previously made available under the CARES Act and allow a full deduction for business meals for the2021* and2022 tax years. During2021, the Company recognized a tax benefit of $1.3 million on the non-taxable forgiveness of the PPP loan. However, the legislation hadno material impact to income tax expense on the Company’s financial statements as a result of our valuation allowance.

On* August 9, 2022,the Creating Helpful Incentives to Produce Semiconductors and Science Act, (the “CHIPS Act”) was signed into law. Among other things, the CHIPS Act provides for refundable tax credits and certain other financial incentives to further investments in domestic manufacturing. There wasno* material impact of this Act in2023, and the Company has determined that any future impacts will depend on the extent to which the Company expands its semiconductor manufacturing operations in accordance with the requirements of the Act.

On* August 16, 2022,legislation commonly known as the Inflation Reduction Act was signed into law. Among other things, the Inflation Reduction Act includes a1%* excise tax on corporate stock repurchases, applicable to repurchases after* December 31, 2022,and also a new minimum tax based on book income. We donot* currently expect the Inflation Reduction Act to have a material impact on our effective tax rate.

The Company expects any earnings of foreign subsidiaries to be indefinitely invested outside the United States. As of* December 31, 2023,however, the Company doesnot* have any accumulated undistributed earnings generated by foreign subsidiaries and has estimated that its tax basis in foreign subsidiaries exceeds its book basis. The Company has concluded thatno deferred tax asset (DTA) should be recorded because at the present time it doesnot expect that the temporary book-tax basis difference that would create this DTA will reverse in the foreseeable future.

F-26

NOTE P—SHARE-BASED COMPENSATION

Equity Plans

The Company’s board of directors and stockholders approved the following equity plans:

The Company issued stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. Stock option awards generally vest over afour year period and have a maximum term often years. Stock options under these plans have been granted with an exercise price equal to the fair market value on the date of the grant. Nonqualified and Incentive Stock Options, RSAs and RSUs* maybe granted from these plans. Prior to the Company’s initial public offering in September 2013,the fair market value of the Company’s stock had been historically determined by the board of directors and from time to time with the assistance ofthird* party valuation specialists.

Stock Options

Options have been granted to the Company’s employees under the2013 Plan and generally become exercisable as to 25% of the shares on thefirst anniversary date following the date of grant and 12.5% on a semi-annual basis thereafter. All options expireten years after the date of grant.

The following is a summary of option activity (in thousands, except per share data):

As of* December 31, 2023*, there wasno unrecognized stock option expense.

F-27

Performance Based Incentive Plan

The Company approved to grant restricted performance stock units (“PSUs”) to senior executives as a part of our long-term equity compensation program starting from* June 2021.The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 0% to 200% of the number granted and is determined based on certain performance criteria over athree*-year measurement period. The performance criteria for the PSUs are based on a combination of the performance of our stock price and the Total Shareholder Return (“TSR”) for the performance period compared with the TSR of certain peer companies or index for the performance period. PSUs granted vest 100% on thethird anniversary of their grant, assuming achievement of the applicable performance criteria. We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized ratably over the explicit service period. The Company recognized PSU expense for thetwelve months ended* December 31, 2023and2022* was $3 million and $1.7 million, respectively. The following is a summary of PSU activity (in thousands, except per share data):

As of* December 31, 2023,*there was $6.6 million of unrecognized compensation expense related to these PSUs. This expense is expected to be recognized over 2.1 years.

Restricted Stock Units

Restricted stock units are issued to employees through a vesting plan and distribution schedule after employee remains with the Company for a particular length of time. The following is a total summary of RSU activity (in thousands, except per share data):

As of* December 31, 2023*, there was $12.1 million of unrecognized compensation expense related to these RSUs. This expense is expected to be recognized over 2.41 years.

Share-Based Compensation

The Company recognizes compensation expense on a straight-line basis over the applicable vesting term of the award and expense is adjusted as forfeitures occur.

In2014, the Company ceased issuing stock options and began issuing RSUs and RSAs as share-based compensation to employees. The Company estimates the fair value of RSUs and RSAs at the fair market value on the grant date.

Employee share-based compensation expenses recognized for the years ended* December**31,* were as follows (in thousands):

Share-Based compensation - by expense type:

F-28

NOTE Q—STOCKHOLDERS’ EQUITY

Common Stock

The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of up to 80,000,000 shares of common stock, all of which have been designated voting common stock.

Preferred Stock

The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock.

Public Offerings of Common Stock

On* January 5, 2023,the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission, which was declared effective on March 21, 2023,providing for the public offer and sale of certain securities of the Company from time to time, at our discretion, up to an aggregate amount of $185 million. Pursuant to Rule415*(a)(6) under the Securities Act, the securities registered pursuant to this registration statement include unsold securities previously registered for sale pursuant to our previously filed Registration Statement on Form S-3, which became effective on* January 9, 2020.*

On* March 24, 2023,we entered into an Equity Distribution Agreement (the "Agreement") with Raymond James & Associates (the "Sales Agent") pursuant to which the Company mayissue and sell shares of the Company’s common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $35 million (the "ATM Offering"), from time to time through the Sales Agent. Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales, if any, of the Shares will be made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule415* of the Securities Act of1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agent. In the placement notice, the Company will designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales are requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that* maybe sold in anyone* day. Subject to the terms and conditions of the Agreement, the Sales Agent will use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice. The Company hasno obligation to sell any Shares under the Agreement and* may*at any time suspend offers and sales of the Shares under the Agreement.

The Agreement provides that the Sales Agent will be entitled to compensation of up to 2% of the gross sales price of the Shares sold through the Sales Agent from time to time. The Company has also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc.,not to exceed $10,000 in the aggregate, and any associated application fees incurred. Additionally, if the Agreement is terminated under certain circumstances, and the Company fails to sell a minimum amount of the Shares as set forth in the Agreement, then the Company has agreed to reimburse the Sales Agent for reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel incurred by the Sales Agent, up to a maximum of $30,000 in the aggregate. The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent* may*be required to make because of any of those liabilities.

On* September 12, 2023,we entered into AmendmentNo.* 1 to the Agreement with the Sales Agent, to increase the aggregate offering price from $35 million to $70 million. In* November, 2023,*we completed sales under the ATM Offering.

The details of the shares of common stock sold through the ATM Offering through* December 31, 2023*are as follows (in thousands, except shares and weighted average per share price):

F-29

NOTE R—SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates inone reportable segment. The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker, manages the Company’s operations as a whole and reviews financial information presented on a consolidated basis, accompanied by information about product revenue, for purposes of evaluating financial performance and allocating resources.

The following tables set forth the Company’s revenue and asset information by geographic region. Revenue is classified based on the location of where the product is manufactured. Long-lived assets in the tables below comprise only property, plant, equipment and intangible assets (in thousands):

The Company servesfour primary markets, the internet data center, CATV, telecom and FTTH markets. Of the Company’s total revenues in2023, the Company earned $141.2 million, or 64.9%, from the internet data center market, $59.9 million, or 27.5%, from the CATV market, $13.8 million, or 6.4%, from the telecom market and $0.1 million, or 0.0%, from the FTTH market. Of the Company’s total revenues in2022, the Company earned $118.2 million, or 53.0%, from the CATV market, $77.1 million, or 34.6%, from the internet data center market, $24.7 million, or 11.1%, from the telecom market and $0.1 million, or 0.1%, from the FTTH market. Of the Company’s total revenues in2021, the Company earned $94.3 million, or 44.6%, from the CATV market, $97.5 million, or 46.1%, from the internet data center market, $16.2 million, or 7.7%, from the telecom market and $2.7 million, or 1.2%, from the FTTH and Other markets.

F-30

NOTE S—EMPLOYEE BENEFIT PLANS

Employees of Global participate in a state-mandated social security program in China. Under this program, pension costs are recorded on the basis of required monthly contributions to employees’ individual accounts during their service periods. Under the regulations of the People’s Republic of China, Global is required to make fixed contributions to a fund, which is under the administration of the local labor departments. Pension expense for Global was $1.7 million, $1.0 million, and $1.0 million for the years ended* December 31, 2023,*2022 and2021, respectively.

Employees of Prime World’s Taiwan branch participate in a pension program under the Taiwan Labor Pension Act. Pension expense for the Prime World’s Taiwan branch was $0.5 million, $0.5 million, and $0.7 million for the years ended* December 31, 2023,*2022 and2021, respectively.

NOTE T—COMMITMENTS AND CONTINGENCIES

Employment Agreements and Consultancy Agreements

The Company has entered into employment and indemnification agreements with our CEO. The agreement provides that if his employment is terminated as a result of a change of control of the Company, or if his employment is terminated for certain other reasons set forth in the agreements, the Company will be required to pay a severance payment in an amount equal to his annual base salary, and other additional compensation due under the terms of the agreements.

The Company has also entered into employment and indemnification agreements withfour other named executive officers. These agreements provide that if their employment is terminated as a result of a change of control of the Company, the Company will be required to pay a severance payment in an amount equal to their annual base salary and other additional compensation due under the terms of the agreements.

Contingencies

From time to time, the Company* maybe subject to legal proceedings and litigation arising in the ordinary course of business, including, butnot* limited to, inquiries, investigations, audits and other regulatory proceedings, such as described below. The Company records a loss provision when it believes it is both probable that a liability has been incurred and the amount can be reasonably estimated. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceeding described below.

Arbitration filed by Yuhan Optoelectronic Technology (Shanghai) Co., Ltd.

On* September 12, 2023,the Company delivered notice of termination with respect to that certain Agreement for the Sale and Purchase of a New Company to be Established in Hong Kong Special Administrative Region of the People’s Republic of China (the “Purchase Agreement”), dated September 15, 2022,with Prime World International Holdings Ltd. (the “Seller”) and Yuhan Optoelectronic Technology (Shanghai) Co., Ltd. (the “Purchaser”), pursuant to which the Seller would divest its manufacturing facilities located in the People's Republic of China and certain assets related to its transceiver business and multichannel optical sub-assembly products for the internet data center, FTTH and telecom markets. The termination, in accordance with the terms of the Purchase Agreement, was a result of the Purchaser's failure to satisfy certain of its material obligations under the Purchase Agreement. In terminating the Purchase Agreement, we also asserted the right to recover a break-up fee from the Purchaser. On December 22, 2023,the Purchaser filed for arbitration in Hong Kong with the Hong Kong International Arbitration Centre (“HKIAC”) challenging the validity of our termination notice and seeking specific performance with respect to the transactions contemplated in the Purchase Agreement, which in any case remain subject to regulatory approvals. On January 22, 2024,the Company filed its response, generally denying the Purchaser’s allegations and asserting counterclaims for recovery of a break-up fee. While the Company doesnot* believe the Purchaser’s claims have merit and intends to vigorously defend this matter, it isnot able to determine the outcome of this dispute or the likelihood or amount of the Company’s loss or recovery, if any, arising from this matter. If specific performance is granted by HKIAC, the transaction contemplated by the Purchase Agreement would still have to be approved by the Committee on Foreign Investment in the United States prior to its consummation. A hearing date for the arbitration hasnot been set.

Other Contingencies

None.

NOTE U—SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were issued.