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.

F-8

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 and bank acceptance notes 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.

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 $24.5 million and $28.5 million at* December 31, 2025and2024*, 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, 2025*, approximately $190.5 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 deposits as collateral in order to secure bank acceptance notes issued to vendors.

The Company carries its accounts receivable at the net amount that it estimates to be collectible. We have established an allowance for credit losses to estimate the risk of loss associated with our accounts receivable balances. The Company estimates its allowance for the credit losses based on historical collection, the age of outstanding receivables of the customer, existing economic conditions and reasonable forecasts. Different assumptions or changes in economic circumstances could result in changes to the allowance.

F-9

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. In2025, 2024 and2023, its topfive customers represented 95.2%,92.9% and 85.6% of its revenue, respectively. In2025, Digicomm and Microsoft represented 53.1% and 28.8% of its revenue, respectively. In2024, Microsoft, Digicomm and Oracle represented 43.7%,35.1% and 12.4% of its revenue, respectively.

Thefive largest receivable balances for customers represented an aggregate of 94.0% and 95.5% of total accounts receivable at* December 31, 2025and2024*, respectively. As of* December 31, 2025*, Digicomm represented 71.6% of total accounts receivable and Microsoft represented 13.9% of total accounts receivable. As of* December 31, 2024,Digicomm represented 66.6% of total accounts receivable and Microsoft represented 16.8% of total accounts receivable.No other customer represented greater thanten* percent of revenue in2025 or2024 had greater thanten percent of total accounts receivable at* December 31, 2025or2024.*

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 for 50 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.*

F-10

Intangible assets consist of intellectual property that is stated at cost less accumulated amortization. As of* December 31, 2025*, the Company had 349 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.

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 in2025,2024 or2023.

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.

F-11

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, 2025and2024*, the amount of accrued warranty was $0.48 million and $0.28 million, respectively. Changes in products warranty were as follows (in thousands):

Advertising costs are charged to operations as incurred and amounted to approximately $1.9 million, $1.1 million and $0.8 million for the years ended* December 31, 2025,*2024 and2023, respectively.

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.

The Company receives incentives from local governments in China that encourage us to establish, maintain, or increase investment, employment, or production in the region. Because there isno direct applicable U.S. GAAP guidance that addresses the recognition and measurement of government assistance received by a business entity, U.S. GAAP allows for the adoption of other analogous accounting guidance under ASC958-605 (Not-for-Profit Entities – Revenue Recognition). The Company accounts for the grant as other income based on the substance of the incentive received when the conditions associated with the grant are substantially met and collection is reasonably assured.

F-12

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, 2025,** December**31,* 2024, and* December 31, 2023,*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 in2025

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. We adopted this ASU on a prospective basis effective January 1, 2025.*Refer to Note O, Income Taxes for the inclusion of new disclosures required.

Recent Accounting Pronouncements Yet to be Adopted

In* November 2024,the FASB issued ASU2024*-03, Income Statement: Reporting Comprehensive Income/Expense Disaggregation Disclosures (Subtopic220-40), to improve the disclosures about an entity's expenses. Upon adoption, we will be required to disclose in the notes a disaggregation of certain expense categories included within the expense captions of the income statement. The standard is effective for our2027 annual period, and our interim periods beginning in2028. The Company is currently evaluating the impact of the new standard will have on its financial statements and related disclosures.

In* September 2025,the FASB issued ASUNo.* 2025-06, Intangibles—Goodwill and Other—Internal-Use Software, which modernizes the accounting for internal-use software and clarifies capitalization criteria. The updated standard is effective for us beginning with our interim and annual reporting periods of fiscal2029. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our Consolidated Financial Statements.

In* December 2025,the FASB issued ASU2025*-10 to establish the accounting for a government grant rece ived by a business entity including guidance for (1) a grant related to an asset and (2) a grant related to income. For public business entities, the provisions of ASU2025-10 are effective for fiscal years beginning after* December 15, 2028.Early adoption is permitted. Management is currently evaluating the requirements under this new standard and doesnot* expect the adoption to have a material impact on the Company's results of operations or financial condition.

In* December 2025,the FASB issued ASUNo.* 2025-11, Interim Reporting (Topic270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after* December 15, 2027.Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and donot* expect this ASU to have a material impact on our consolidated financial statements.

In* December 2025,the FASB issued ASUNo.* 2025-12, Codification Improvements. The ASU addressesthirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update arenot intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after* December 15, 2026.The adoption method of this ASU mayvary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and donot* expect this ASU to have a material impact on our consolidated financial statements.

There have beenno other recent accounting pronouncements or changes in accounting pronouncements during fiscal2025 that are of significance or potential significance to us.

F-13

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.

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.

F-14

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.

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):

Customer Warrant

On* March 13, 2025,the Company issued a warrant (the "Customer Warrant") to a wholly-owned subsidiary of Amazon.com, Inc. to purchase up to an aggregate of 7,945,399 shares of the Company's common stock ("Warrant Shares") at an exercise price of $23.6956 per share. The Customer Warrant has a contractual term of 10 years. At the time of the issuance, the Customer Warrant is exercisable to purchase 1,324,233 Warrant Shares. The remaining 6,621,166 Warrant Shares mayvest over the next10* years, dependent on aggregate purchases by or on behalf of Amazon and its affiliates of $4 billion of the Company's products over this time period. The Company accounts for the Customer Warrant as an equity classified share-based consideration to a customer and will recognize the grant-date fair value of the Customer Warrant as a reduction of revenue from Amazon as the related goods or services are transferred. The grant date fair value of the Customer Warrant was determined to be $12.64 per share, using the Black-Scholes-Merton option pricing model.

The per share grant date fair value of the Customer Warranty was estimated using the following assumptions:

For the year ended* December 31, 2025,the Company recognized approximately $33.1 million of revenue associated with customer arrangements that included the issuance of warrants. The impact of these arrangements on the Company's consolidated financial statements wasnot* material for the periods presented. As of* December 31, 2025,*the Company recorded other current asset of $1.0 million and other noncurrent asset of $15.0 million, representing the aggregate grant-date fair value of 1,324,233 Warrant Shares vested at the issuance.

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. The Company determines if an arrangement is or contains a lease at contract inception. 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 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 thanone-year and therefore, the Company has elected the practical expedient to exclude these short-term leases from its ROU asset and lease liabilities.

On* October 7, 2024,Prime World entered into a Land and Building Lease Agreement with San Ho Enterprise Co., Ltd. ("San Ho Enterprise"), under which Prime World will lease approximately 38,072 square feet oftwo* adjoining parcels of land, in New Taipei City. The lease also included a building on these parcels, totaling approximately 36,662 square feet. The lease term is forfifteen years, commencing on* December 1, 2024,and ending on November 30, 2039.Atwo*-month renovation period from* October 1to November 30, 2024,preceded the lease term, during whichno* rent was charged by San Ho Enterprise. During the lease term, the monthly rent will increase bythree percent (3%) everythree years.

On* June 7, 2025,Prime World entered into a Land and Building Lease Agreement with San Ho Electric Machinery Industry Co., Ltd. ("San Ho Electric") in Taoyuan City. On August 20, 2025,*Prime World terminated the lease with San Ho Electric and agreed to pay a termination fee in full settlement of rent, fees, damages and other amounts arising from the early termination of the lease.

On* September 1, 2025,Prime World entered into a Lease Agreement with International Games System Co., Ltd., under which Prime World will lease a parcel of land with a total area of approximately 65,580 square feet, in New Taipei City. The lease includes a building on the parcel, totaling approximately 346,212 square feet, excluding approximately 54,086 square feet of the leased property which, at the time, had previously been leased to an existing tenant. The lease term is forfifteen years, commencing November 1, 2025,and ending October 31, 2040.Atwo*-month renovation period from* September 1to October 1, 2025,preceded the lease term, during whichno* rent was charged. During the lease term, the monthly rent will increase bythree percent (3%) everyfive years. On* October 28, 2025,Prime World entered into a lease to include thefirst* floor which was previously excluded in the leased entered into on* September 1, 2025.*

On* September 19, 2025,the Company entered into a Lease Agreement with Coleman Logistics Assets LLC ("Coleman"), pursuant to which the Company will lease approximately 209,665 square feet of space located at1111* Gillingham Lane, Sugar Land, Texas77478. The leased premises will be used by the Company primarily for manufacturing and related operations. The lease has a term of 126 months, commencing on the earlier of (i) the date the Company commences manufacturing operations within the leased premises, (ii) the date on which the leasehold improvements are substantially completed, or (iii)* March 31, 2026,and expiring approximately126* months thereafter, unless earlier terminated in accordance with the lease. Coleman has agreed to provide a construction allowance toward the cost of leasehold improvements in an amount equal to the lesser of (i) the actual aggregate cost of such improvements or (ii) $1,886,985. Base rent under the lease is abated for thefirst seven months of the term and thereafter increases on a scheduled basis through the end of the term, reflecting an average annual escalation of approximately 3.5%. Beginning in theeighth month of the term, base rent will be $7.44 per rentable square foot on an annual basis (approximately $129,992 per month), escalating periodically to $10.49 per rentable square foot on an annual basis (approximately $183,367 per month) during the finalsix months of the term.

Although the lease agreement was executed prior to* December 31, 2025,the lease hadnot* yet commenced as of that date, as Coleman is currently completing required improvements to the leased premises. The lease will commence in2026, at which time the Company will recognize a ROU asset and a corresponding lease liability on its consolidated balance sheet. The total undiscounted lease payments over the initial lease term are approximately $21.9 million, which will be recognized upon lease commencement. No ROU asset or lease liability related to this agreement has been recorded as of* December 31, 2025.*

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.

F-16

Lease expense is included under general and administrative expenses and was $4.0 million, $1.4 million and $1.2 million for the years ended* December 31, 2025,*2024 and2023, 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):

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):

F-17

Restricted cash includes guarantee deposits for customs duties, China government subsidy fund, anddeposits as collateral in order to secure bank acceptance notes issued to vendors, see Note K for details. As of* December 31, 2025and2024*, there was $8.7 million and $8.5 million of restricted cash required for bank acceptance notes issued to vendors, respectively. There were $1.2 million and $0.7 million guarantee deposits for customs duties as of* December 31, 2025* and* December 31, 2024*.

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. Convertible senior notes are included in the denominator as if it were converted at the beginning of the period or, if issued during the period, at the time of issuance. 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):

NOTE G—INVENTORIES

At* December 31, 2025and2024*, inventories consisted of the following (in thousands):

For the years2025, 2024 and2023, the inventory reserve adjustment expensed for inventory was$7.8million, $3.4 million and $8.7 million, respectively. For the years* December 31, 2025,*2024 and2023, the direct inventory write-offs related to scrap, discontinued products, and damaged inventories were $9.3 million, $3.7 million and $10.6 million, respectively.

F-18

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, 2025,2024 and2023, depreciation expense of property, plant and equipment was $27.2 million, $20.2 million and $19.7 million, respectively. For the years ended December 31, 2025,*2024 and2023, there wasno capitalized interest.

As of* December 31, 2025*, 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.

NOTE I—INTANGIBLE ASSETS

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

For the years ended* December 31, 2025,*2024 and2023, amortization expense for intangible assets, included in general and administrative expenses on the income statement, was $0.4 million, $0.4 million and $0.7 million, respectively. The remaining weighted average amortization period for intangible assets is approximately 8.7 years.

F-19

At* December 31, 2025*, 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, 2025* (in thousands):

The following table presents a summary of the Company’s financial instruments measured at fair value on a recurring basis as of * December 31, 2024*(in thousands):

F-20

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, 2025*.

SPD Credit Line

On* May 24, 2024,Global entered into afive-year revolving credit line with Shanghai Pudong Development Bank Co., Ltd. ("SPD"), totaling 170,000,000 RMB (the "SPD Credit Line") or approximately $23.9 million at that time. On June 18, 2025,Global used the CCB Credit Facility, as described hereinbelow, to repay certain amounts outstanding under the SPD Credit Line. Upon repayment, Global terminated the SPD Credit Line effective June 18, 2025.*

On* July 18, 2025,Global entered into aone-year credit facility with SPD, totaling 82,000,000 RMB (the"¥82M* Credit Facility"), or approximately $11.4 million at that time. Borrowing under the¥82M Credit Facility was used to repay the Company’s outstanding loans with China Zheshang Bank Co., Ltd., and for general corporate and capital investment purposes.

On* July 29, 2025,Global entered into afive-year revolving credit line agreement with SPD in Ningbo City, China, totaling250,000,000* RMB (the"¥250M SPD Credit Line"), or approximately $34.9 million at that time, and a mortgage contract. Borrowing under the¥250M SPD Credit Line will be used for general corporate and capital investment purposes. Any credit previously extended by SPD will be applied against the available amount under the¥250M SPD Credit Line, inclusive of the¥82M Credit Facility. Global's obligation under the¥250M SPD Credit Line is secured by certain real property owned by Global. As of* December 31, 2025,$20.2 million was outstanding under the¥250M SPD Credit Line, and the outstanding balance of bank acceptance notes issued to vendors was$19.7 million. The unused credit was $1.5 million as of December 31, 2025.*

CZB Loan

On* June 7, 2022,Global entered into a security agreement with China Zheshang Bank in Ningbo City, China ("CZB") for afive-year credit line agreement, totaling200,000,000* RMB (the"¥200M Credit Facility"), or approximately $29.9 million at that time. On* July 23, 2025,Global used the¥82M Credit Facility, as described hereinabove, to repay certain amounts outstanding under the¥200M Credit Facility. Upon repayment, Global terminated the¥200M Credit Facility effective July 23, 2025.As of December 31,2025, the outstanding balance of bank acceptance notes issued to vendors was $2.8 million. The unused credit was $0.7 million as of December 31, 2025.*

F-21

CCB Loan

On* June 12, 2025,*Global entered into aone-year credit facility with China Construction Bank Co., Ltd., in Ningbo, City, China ("CCB"), totaling 96,800,000 RMB (the "CCB Credit Facility"), or approximately $13.5 million at that time.

On* June 26, 2025,Global entered into afive-year revolving credit line agreement with CCB, totaling 162,260,000 RMB (the "CCB Credit Line"), or approximately $22.7 million at that time. The amount available under the CCB Credit Line is inclusive of the CCB Credit Facility previously granted by CCB on June 12,2025.On * December 19, 2025,the CCB Credit Line was increased to 250,000,000 RMB. Global's obligation under the CCB Credit Line is secured by certain real property owned by Global. As of December 31, 2025,$13.8 million outstanding under the CCB Credit Line, and the outstanding balance of bank acceptances notes issued to vendors was $10.8 million. The unused credit was $13.2 million as of December 31, 2025.

Taishin Loan

On* November 27, 2025,Prime World entered into a credit facility with Taishin International Bank in Taiwan, consisting of a NT$100,000,000 line of credit (the"NT$100M* Credit Line") and a US$2,000,000 line of credit (the*"US$2M* Credit Line"), collectively, with theNT$100M Credit Line, the "Taishin Credit Facility").

Prime World* mayutilize the Taishin Credit Facility from November 27, 2025through October 31, 2026.Borrowings under theNT$100M* Credit Line* maybe drawn as short-term loans, while theUS$2M* Credit Line is a derivatives-based facility and* maybe used by Prime World to entered into foreign exchange hedging transactions. As of December 31, 2025,*$0 was outstanding under the Taishin Credit Facility.

BOKF Loan

On* July 31, 2025,the Company entered into a Loan and Security Agreement (the "BOKF Credit Facility") with BOKF, NA dba BOK Financial, as agent for secured parties. The BOKF Credit Facility provides the Company with athree-year, $35 million revolving line of credit, with the ability to request additional lender commitments in an aggregate amountnot* to exceed $40 million (for a total aggregate amount of $75 million) pursuant to certain conditions. As of* December 31, 2025,*$0 was outstanding under the BOKF Credit Facility.

As of* December**31,* 2025 and* December 31, 2024,*the Company had $60.7 million and $24.8 million of unused borrowing capacity, respectively.

As of* December 31, 2025and December 31, 2024,*there was $8.7 million and $8.5 million of restricted cash, investments or security deposits associated with the loan facilities, respectively.

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. The Company paid off the remaining $0.29 million of the2024 Notes on* March 15, 2024.*

The2026 Notes bears 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.

F-22

On* December 18, 2024,the Company entered into exchange agreements with certain holders of the2026* Notes to exchange approximately $76.7 million principal amount of the2026 Notes for aggregate consideration consisting of (i) $125.0 million aggregate principal amount of 2.75% Convertible Senior Notes due2030 (the*"2030* Notes"), (ii)1,487,874 shares of the Company’s common stock, par value $0.001 per share (the "Common Stock") and (iii) approximately $89.6 thousands of cash in aggregate, representing accrued and unpaid interest on the2026 Notes and the value of fractional shares of Common Stock (such transactions, collectively, the "Exchanges"). The Exchanges closed on* December 23, 2024.We recorded a debt extinguishment loss of $112.0 million due to these Exchanges. There was $3.5 million principal amount for the2026* Notes remaining. On* July 30, 2025,the Company retired the final $3.5 million principal and accrued and unpaid interest on the2026* Notes by exchanging such outstanding principal for 239,404 shares of the Company's common stock and by paying the accrued and outstanding interest in cash.

The2030 Notes were issued pursuant to an Indenture, dated as of* December 23, 2024 (the "Indenture"), between the Company, as issuer, and Computershare Trust Company, N.A., as trustee. The2030* Notes bear interest at a rate of 2.750% per year and will pay interest semiannually in arrears on* January 15and July 15of each year, beginning on July 15, 2025.The2030* Notes will mature on* January 15, 2030,*unless earlier converted, redeemed or repurchased in accordance with their terms.

The following table presents the carrying value of the2026 Notes and the2030 Notes for the periods indicated (in thousands):

The conversion rate for the2030 Notes is 23.0884 shares of Common Stock per*$1,000* principal amount of the2030 Notes (which is equivalent to a conversion price of approximately $43.31 per share of Common Stock, representing a premium of approximately 27.50% over the last reported sale price of the Common Stock on* December 18, 2024of $33.97 per share), subject to adjustment. Before October 15, 2029,holders of the2030* Notes will have the right to convert their2030 Notes only upon the satisfaction of a common stock sale price condition or a note trading price condition (each, as described in the Indenture) or upon the occurrence of certain events (including the occurrence of a Fundamental Change, Make-Whole Fundamental Change or Common Stock Change Event (each as defined in the Indenture). From and after* October 15, 2029,holders of the2030* Notes* mayconvert their2030* 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).

The2030 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* January 15, 2027and on or before the40th* scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the2030 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 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.

F-23

In addition, the2030 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 the2030 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of a holder of2030 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 “Specified Divestiture” (as defined in the Indenture) is completed.

Calling any2030 Note for redemption will constitute a "Make-Whole Fundamental Change" (as defined in the Indenture) with respect to that2030 Note, in which case the conversion rate applicable to the conversion of that2030 Note will be increased in certain circumstances if it isconverted after it is called for redemption.

In addition, if the Specified Divestiture is completed, then unless the Company has previously elected to redeem all of the2030 Notes, each holder of2030 Notes will have the right to require the Company to repurchase its2030 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 the date the Company’s sends the related notice of Specified Divestiture. The repurchase price for a note tendered for such repurchase will be equal to the principal amount of the2030 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date (subject to the right of a holder of2030 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 the2030 Notes* mayrequire the Company to repurchase for cash all or part of their2030* Notes at a repurchase price equal to 100% of the principal amount of the2030 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the required repurchase date.

Additionally, the2030 Notes are subject to customary events of default. The2030 Notes donot restrict the Company’s ability to incur debt or liens.No sinking fund is provided for the2030 Notes. There areno guarantors of the2030 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. Accordingly, the conversion option isnot required to be bifurcated from the host instrument as a derivative.

Pursuant to ASC815-15, the Company further determined that the contingent redemption features in the2030 Notes arenot required to be bifurcated from the host contract and accounted for separately. Additionally, 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, and determined that the additional premium wasnot substantial. Accordingly, that amount was recognized as a premium on the2030 Notes.

The following table sets forth interest expense information related to the2026 Notes and the2030 Notes for the periods indicated (in thousands):

F-24

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 for the periods indicated (in thousands):

F-25

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 $250.6 million, $33.6 million of which, if unused, expires between2026 and2032 and $217.0 million of which, can be carried forward indefinitely. The Company has U.S. and state research and development tax credits of $14.9 million, which, if unused, expire between2028 and2044. 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, 2025,the Company had Taiwan net operating loss carry forwards of approximately $86.2 million and China net operating loss carry forwards of approximately $40.4 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, 2025.*Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

F-26

On the basis of this evaluation, as of* December 31, 2025and December 31, 2024,a valuation allowance of $95.8 million and $95.0 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.

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

The expense (benefit) for income taxes differs from the amount that would result by applying the applicable federal income tax rate to income before income taxes, as follows (in thousands):

*State and Local taxes includes the effects of changes in valuation allowance.No individual state made up the majority of the tax effect in this category.

F-27

As previously disclosed for the years ended* December 31, 2024and2023,* prior to adoption of ASU2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows (in thousands):

The Company’s provision for income taxes in2025 was lower than2024 primarily due to the release of Valuation Allowance on the deferred tax assets of the Company’s wholly owned subsidiary, Global Technology, Inc. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of* December 31, 2025,in part because in the current year we achievedthree* years of cumulative pretax income in China, management determined that there is sufficient positive evidence to conclude that it is more likely thannot that additional deferred taxes of $7.6 million are realizable. It therefore reduced the valuation allowance accordingly.

The Company's provision for income taxes in2024 was higher than2023 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 its2025,* 2024 and2023 income tax provision by approximately $0.0 million, $0.0 million, and $0.0 million, respectively. This tax holiday reduced its fiscal2025, 2024, and2023 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, 2025,*2024 and2023, 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):

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 during2025 as a result of net operating losses. During2024 or2023, the Company also accruedno penalties or interest.

F-28

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 2022 through2024. 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 2020 forward for various foreign jurisdictions.

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. At least a portion of our current and future capital expenditures and research and development costs will qualify for this credit, which benefits us by allowing us to net the credit received against our costs. This credit is accounted for outside of ASC740* as a reduction to the depreciable basis of the assets used in operations and willnot have an impact on our effective tax rate.

On* July 4, 2025,legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. Among other things, the OBBBA suspends the requirement to capitalize and amortize domestic research and development (R&D) expenditures for amounts paid or incurred in taxable years beginning after December 31, 2024and before January 1, 2030.The OBBBA also permits taxpayers to elect to accelerate deductions for the remaining unamortized domestic R&D expenditures paid or incurred between January 1, 2022and December 31, 2024over aone*- ortwo-year period. The Company elected to accelerated deductions with respect to unamortized domestic R&D expenditures capitalized in2022, 2023, and2024 as a deduction in2025.

In addition, the OBBBA preserves a significant portion of the Inflation Reduction Act (IRA) clean energy tax credit framework but introduces certain limitations and additional diligence obligations for developers, investors, lenders, and credit purchasers, including a phaseout of the Clean Electricity Tax Credits and placed-in-service deadlines for certain wind and solar projects (Internal Revenue Code Sections45Y and48E). Based on the Company’s business profile and the limited applicability of these provisions to the Company, we donot currently expect these changes to have a material impact on our income tax provision or ETR. The OBBBA permanently extends100% bonus depreciation for qualifying property placed in service after* January 19, 2025.The Company doesnot* intend to elect bonus depreciation and, as a result, doesnot expect this provision to have a material impact on the Company’s income tax provision or effective tax rate. For tax years beginning after* December 31, 2024,the OBBBA permanently restores the EBITDA-based calculation of adjusted taxable income (ATI) for purposes of the Section163*(j) business interest expense limitation (i.e., allowing addbacks for depreciation, amortization, and depletion in computing ATI). This change generally increases the amount of business interest expense that can be deducted and* may*reduce the amount of interest subject to carryforward.

The Company expects any earnings of foreign subsidiaries to be indefinitely invested outside the United States. As of* December 31, 2025,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.

NOTE P—SHARE-BASED COMPENSATION

Equity Plans

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

The Company has 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* may*be granted from these plans.

F-29

Stock Options

In the years ended* December 31, 2025and2024,* the Company grantedno stock options under its equity plans. As of* December 31, 2025,there wasno unrecognized stock-based compensation expense related to stock options. In the years ended December 31, 2025,*2024, and2023, the intrinsic value of stock options was $0, $0, and $0.2 million, respectively.

Performance Based Incentive Plan

Starting in2021, certain senior executives were granted performance stock units ("PSUs") under our2021 Plan, which generally vest over athree-year period subject to achievement of certain pre-established performance metrics. The number of shares of common stock that would ultimately be issued to settle PSUs granted ranged from 0% to 200% of the target number of shares granted. We estimate the fair value of the PSUs on the date of grant using a Monte Carlo simulation model, with stock-based compensation expense recognized ratably over the appliablethree-year performance period. The Company recognized stock-based compensation expense for the PSUs for thetwelve months ended* December 31, 2025,*2024 and2023 of $4.4 million, $3.0 million and $1.7 million, respectively.

On* May 9, 2025,the Compensation Committee certified the Company exceeded the maximum performance level for each of the performance targets set for the PSUs granted June, 2022 (the"2022* PSUs"). Therefore, applicable employees were entitled to payment of the2022 PSUs at 200% of the target shares granted under the2021 Plan. The following is a summary of PSU activity (in thousands, except per share data):

As of* December 31, 2025,there was $5.1 million of unrecognized stock-based expense related to outstanding PSUs. This expense is expected to be recognized over 1.7 years. For the years ended December 31, 2025,2024 and2023, the weighted-average grant value for PSUs was $6.94, $16.40 and $8.89 per share, respectively. The intrinsic values of PSUs exercised were $14.4 million, $2.9 million and $3.6 million for the years ended December 31, 2025,2024 and2023, respectively. The total fair value of shares vested for PSUs during years ended December 31, 2025,*2024 and2023 were $4.5 million, $4.0 million and $0 million, respectively

F-30

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, 2025*, there was $10.6 million of unrecognized compensation expense related to these RSUs. This expense is expected to be recognized over 2.2 years. For the years ended* December 31, 2025,2024 and2023, the weighted-average grant value for RSUs are $12.74, $10.73 and $6.15 per share, respectively. The intrinsic values of RSUs exercised are $30.4 million, $19.0 million and $7.8 million for the years ended December 31, 2025,2024 and2023, respectively. The total fair value of shares vested for RSUs during years ended December 31,*2025, 2024 and2023 are $7.2 million, $8.1 million and $8.6 million, respectively.

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.

The Company issues RSUs as share-based compensation to employees. The Company estimates the fair value of RSUs 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:

NOTE Q—STOCKHOLDERS’ EQUITY

Common Stock

The Company’s Restated Certificate of Incorporation authorizes the issuance of up to 120,000,000 shares of common stock, all of which have been designated voting common stock.

F-31

Preferred Stock

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

Public Offerings of Common Stock

On* December 18, 2024,the Company filed an automatic shelf registration statement on Form S-3ASR (Registration FileNo.* 333-283905) with the Securities and Exchange Commission, which became effective immediately upon filing.

On* February 28, 2025,the Company entered into an Equity Distribution Agreement with Raymond James & Associates ("Raymond James") pursuant to which the Company could issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $100 million (the "First ATM Offering"), from time to time through Raymond James. On April 8, 2025,*the Company completed the First ATM Offering and sold approximately 5.7 million shares at a weighted average price of $17.71 per share, providing proceeds of approximately $98 million, net of expenses and underwriting discounts and commissions.

On* May 28, 2025,the Company entered into an Equity Distribution Agreement with Raymond James and Needham & Company, LLC (collectively, the "Sales Agents" and each, a "Sales Agent") pursuant to which the Company could issue and sell shares of the Company’s common stock having an aggregate offering price of up to $100 million (the "Second ATM Offering"), from time to time through the Sales Agents. On June 18, 2025,*the Company completed the Second ATM Offering and sold approximately 5.7 million shares at a weighted average price of $17.46 per share, providing proceeds of approximately $98 million, net of expenses and underwriting discounts and commissions.

On* August 27, 2025,the Company entered into an Equity Distribution Agreement with the Sales Agents pursuant to which the Company could issue and sell shares of the Company’s common stock having an aggregate offering price of up to $150 million (the "Third ATM Offering"), from time to time through the Sales Agents. On September 22, 2025,*the Company completed the Third ATM Offering and sold approximately 5.7 million shares at a weighted average price of $26.41 per share, providing proceeds of approximately $147 million, net of expenses and underwriting discounts and commissions.

On* November 7, 2025,the Company entered into another Equity Distribution Agreement (the "Agreement") with the Sales Agents pursuant to which the Company could issue 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 $180 million (the "Fourth ATM Offering"), from time to time through the Sales Agents. Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were made through the Sales Agents 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 Agents. In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agents, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in anyone day. Subject to the terms and conditions of the Agreement, the Sales Agents would use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.

The Agreement provided that each of the Sales Agents would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through such Sales Agent from time to time. The Company also agreed to reimburse the Sales Agents 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. The Company agreed to indemnify the Sales Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agents could be required to make because of any of those liabilities.

On* December 23, 2025,*the Company completed the Fourth ATM Offering and sold approximately 6.698 million shares at a weighted average price of $26.87 per share, providing proceeds of $176.4 million, net of expenses and underwriting discounts and commissions.

F-32

The details of the shares of common stock sold through the First ATM Offering, the Second ATM Offering, the Third ATM Offering and the Fourth ATM Offering through* December 31, 2025*are as follows (in thousands, except shares and weighted average per share price):

Registered Direct Offering

On* December 23, 2024,the Company issued an aggregate of 1,036,458 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $33.97 per share, in a registered direct offering (the "Registered Direct Offering"). The Registered Direct Offering was made pursuant to the Automatic Shelf Registration Statement. The Registered Direct Offering closed on December 23, 2024.*

Raymond James and Associates, Inc. acted as the sole placement agent (the "Placement Agent") for the Company in connection with the Registered Direct Offering. Pursuant to that certain Placement Agency Agreement, dated as of* December 18, 2024,*between the Company and the Placement Agent, the Placement Agent is entitled to a fee equal to an aggregate of 3% of the aggregate principal amount of the Registered Direct Offering.

The Registered Direct Offering generated proceeds of approximately $33.7 million, after deducting placement agent fees and other estimated offering expenses payable by us. The Company intends to use the net proceeds from the Registered Direct Offering for general corporate purposes, which* mayinclude among other things, capital expenditures and working capital. The Company mayalso use such proceeds to fund acquisitions of businesses, technologies or product lines that complement its current business; however the Company hasno* present plans, agreements or commitments with respect to any potential acquisition.

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 ("CODM"), 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. Our CEO is the functional head of all operations and manufacturing. Our Board, in conjunction with our CODM, considers our consolidated performance and doesnot have individual financial or operating goals for each location, nor for any other subset of the Company's operations. As such, the Company has determined it operates asone reportable segment.

F-33

Our CODM uses net income or loss to allocate resources and assess performance. The CODM regularly reviews the consolidated net income or loss to make strategic decisions, such as capital expenditure plan, production plan and manpower allocation.

We exclude share-based compensation and related expense, certain legal expenses associated with litigation and otherone-time expenses from adjusted research and development, adjusted sales and marketing and adjusted general and administrative expenses.

Other segment items include share-based compensation expense, interest expense, interest income, certain legal expenses associated with litigation and otherone-time items.

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):

F-34

The Company servesfour primary markets, the internet data center, CATV, telecom and FTTH markets. Of the Company’s total revenues in2025, the Company earned $245.1 million, or 53.8%, from the CATV market, $195.7 million, or 42.9%, from the internet data center market, $13.7 million, or 3.0%, from the telecom market and $1.2 million, or 0.3%, from the FTTH and other markets. Of the Company’s total revenues in2024, the Company earned $148.5 million, or 59.5%, from the internet data center market, $87.7 million, or 35.2%, from the CATV market, $11.0 million, or 4.4%, from the telecom market and $2.1 million, or 0.9%, from the FTTH and other 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.

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 $2.5 million, $1.7 million and $1.7 million for the years ended* December 31, 2025,*2024 and2023, 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 $0.7 million, $0.5 million, and $0.5 million for the years ended* December 31, 2025,*2024 and2023, 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.

F-35

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. This matter was settled on January 27, 2025,*with the Company paying only its own legal fees and expenses.

Other Contingencies

On* August 9, 2021,the Company received a Taxes Notification of Audit Result ("Notice") from the Texas Comptroller’s Office (the "Comptroller"), for fiscal years between2016* and2019, informing the Company that the Comptroller believes the Company didnot qualify for certain sales and use tax exemptions on various Research and Development purchases and accordingly the Company is liable for Sale and Use Tax in the amount of approximately $1.0 million including interest charges. The Company paid $0.4 million for the tax notice in* May 2021,but challenged the remaining tax assessments and vigorously defended its position. The Comptroller’s office exhausted its redetermination period and therefore moved AOI’s case to the hearing process.No hearing date has yet been scheduled, and as a result the Company isnot* able to determine the outcome of this sales tax dispute or the likelihood or amount of the Company’s loss, if any, arising from this matter.

NOTE U—SUBSEQUENT EVENTS

On* February 13, 2026,the Compensation Committee of the Board of Directors of the Company approved an amendment to each of the Employment Agreements, dated as of August 5, 2016,*by and between the Company and (i) Stefan J. Murry, Chief Financial Officer and Chief Strategy Officer, (ii) Hung-Lun (Fred) Chang, Senior Vice President and North America General Manager, (iii) Shu-Hua (Joshua) Yeh, Senior Vice President and Asia General Manager, and (iv) David C. Kuo, Senior Vice President, Chief Legal Officer, Chief Compliance Officer and Corporate Secretary to provide for enhanced severance payments and benefits.

On* February 23, 2026,the Company entered into a Lease Agreement with Blue Ridge Commerce Center West LLC to lease approximately153,928* rentable square feet of space in Building*#3,* located at16851 Blue Ridge Commerce Dr., Houston, Texas77489. The premises* may*be used for office, warehouse, and light manufacturing and assembly.