APPLIED OPTOELECTRONICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note1. Description of Business​

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Business Overview

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

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

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Interim Financial Statements

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The accompanying unaudited condensed consolidated financial statements of the Company as of* June 30, 2026* and* December 31, 2025* and for thethree andsix months ended* June 30, 2026* and* June 30, 2025*, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim information and with the instructions on Form10-Q and Rule10-01 of Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In accordance with those rules and regulations, the Company has omitted certain information and notes required by GAAP for annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, necessary for the fair statement of the Company’s financial position and results of operations for the periods presented. The year-end condensed balance sheet data was derived from audited financial statements. These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form10-K ("Annual Report") for the fiscal year ended* December 31, 2025*. The results of operations for thethree andsix months ended* June 30, 2026* arenot necessarily indicative of the results expected for the entire fiscal year. All significant inter-company accounts and transactions have been eliminated.

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Use of Estimates

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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 materially from those estimates in the consolidated financial statements and accompanying notes. Significant estimates and assumptions that impact these financial statements and the accompanying notes relate to, among other things, revenue recognition, allowance for credit losses, inventory reserve, valuation of long-lived assets, service and product warranty costs, share-based compensation expense, estimated useful lives of tangible and intangible assets, and taxes.

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Note2. Significant Accounting Policies

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There have beenno changes in the Company’s significant accounting policies for thethree andsix months ended* June 30, 2026*, as compared to the significant accounting policies described in its2025 Annual Report.

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Recent Accounting Pronouncements Adopted

In* July 2025,the FASB issued ASU2025*-05—Financial Instruments—Credit Losses (Topic326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which added a practical expedient that assumes that current conditions as of the balance sheet date donot change for the remaining life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. The guidance is effective for annual periods beginning after* December 15, 2025.We have adopted this ASU and this ASU didnot* have a material impact on the Company's financial statements.

Recent Accounting PronouncementsNot* Yet Adopted*

In* November 2024,the Financial Accounting Standard Board ("FASB") issued Accounting Standard Update ("ASU")2024-03 "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 annual financial statements and related disclosures.

In* November 2024,the FASB issued ASU2024*-04, Debt-Debt with Conversion and Other Options (Subtopic470-20): Induced Conversions of Convertible Debt Instruments. The amendments clarify the accounting for certain induced conversions of convertible debt instruments. The Company is currently evaluating the impact that adoption of this guidance* mayhave on its consolidated financial statements and related disclosures. Because the Company has outstanding convertible debt instruments, the guidance mayaffect the accounting for future conversions, exchanges, or settlements of such instruments. The Company doesnot* currently expect the adoption of ASU2024-04 to have a material impact on is consolidated statements.

In* May 2025,the FASB issued ASU2025*-04 "Share-Based Consideration Payable to a Customer". The standard is effective for our2026 annual period, and our interim periods beginning in2027. The Company is currently evaluating the impact of this ASU on its annual financial statements and related disclosures.

In* September 2025,the FASB issued ASU2025*-06—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic350-40): Targeted Improvements to the Accounting for Internal-Use Software, which removed the language around project stages that was used to assess when costs could be capitalized for an internal-use software. The update also requires internal-use software to be disclosed under the ASC360 Property, Plant, and Equipment guidance. The guidance is effective for annual periods beginning after* December 15, 2027.*The Company is currently assessing the impact of this ASU on the Company’s accounting policies and the financial statements.

In* December 2025,the FASB issued ASU2025*-10 to establish the accounting for a government grant received 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 ASU2025*-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 thesecond quarter of2026 that are of significance or potential significance to us.

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Note3. Revenue Recognition

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Disaggregation of Revenue

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Revenue is classified based on the location where the product is manufactured. For additional information on the disaggregated revenues by geographical region, see Note17, "Segment and Geographic Information."

All of the Company's contracts have original expected durations ofone year or less, and therefore the Company doesnot disclose remaining performance obligations.

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

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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 Warrant was estimated using the following assumptions:

For thesix months ended* June 30, 2026*, the Company recognized approximately $2.1 million related reduction to $84.8 million revenue associated with customer arrangements that included the issuance of warrants. As of* December 31, 2025*, the Company recorded other current asset of $1.0 million and other noncurrent asset of $15.0 million. As of* June 30, 2026*, the Company recorded other current assets of $3.7 million and other noncurrent assets of $12.6 million, representing the aggregate grant-date fair value of 1,324,233 warrant shares vested at issuance.

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Note4. Leases

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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 includes 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* 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 same 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 54,086 square feet of the property which was previously excluded in the lease 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* March 31, 2026,and expiring approximately126* months thereafter, unless earlier terminated in accordance with the lease. Coleman 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. The total undiscounted lease payments over the initial lease term are approximately $18.5 million. As of* June 30, 2026,*we recorded an $11.3 million ROU asset and $12.2 million in lease liability related to this agreement.

On* February 23, 2026,the Company entered into a Lease Agreement with Blue Ridge Commerce Center West LLC ("Blue Ridge"), pursuant to which the Company will lease approximately 153,928 square feet of space in Building#3,* located at16851 Blue Ridge Commerce Drive, Houston, Texas77489. The leased premises* maybe used for office, warehouse and light manufacturing and assembly purposes. The leased term is 130 months, commencing February 10, 2026.Blue Ridge agreed to provide improvement allowance in the amount of $3,078,560. Base rent is abated for thefirst* five months of the term. For months6 through10, monthly base rent is $5.16 per rentable square foot on an annualized basis (approximately $66,189 per month). Beginning in month11, base rent increases to $10.32 per rentable square foot on an annualized basis (approximately $132,378 per month) and escalates periodically throughout the remainder of the term, reflecting an average annual increase of approximately 3.5%. These scheduled increases culminate in base rent of $14.56 per rentable square foot on an annualized basis (approximately $186,732 per month) during the final10 months of the term (months121 through130). The Company was required to pay (i) prepaid rent of $163,164 to be applied against theeleventh month’s rent and (ii) an initial security deposit of $2 million, which accrues interest and is subject to partial reductions during the lease term if specified payment-performance conditions are satisfied. The lease provides for scheduled reductions of the security deposit of $0.5 million after40 months, $0.5 million after70 months, and $0.34 million after100 months, subject to the Companynot being in default and other conditions set forth in the Lease. The total undiscounted lease payments over the initial lease term are approximately $19.5 million. As of* June 30, 2026,*we recorded a $12.3 million ROU asset and $13.0 million in lease liability related to this agreement.

On* May 8, 2026,the Company entered intothree* separate Lease Agreements with Hightower Phase I Owner, LLC ("Hightower"), pursuant to which the Company will leasethree industrial buildings, located at6000 McHard Road, Houston, Texas77053 ("Building1"),6100 McHard Road, Houston, Texas77053 ("Building2") and17255 Chimney Rock Road, Houston, Texas77053 ("Building3"). The leased premises* maybe used for manufacturing, warehouse and office use. Each lease has a term of123* full calendar months, plus any partial month from the commencement date to the end of the calendar month in which the commencement date occurs. The commencement date will be the earliest of: (i) the date on which the Company occupies any portion of the applicable premises and begins conducting business therein, (ii) the date on which Hightower’s work is substantially completed, or (iii) the date on which such work would have been substantially completed but for any tenant delay days. Under each lease agreement, the Company is entitled to an initial rent abatement period during thefirst three months. Commencing in thefourth month, base rent escalates periodically throughout the term. Building1 consists of approximately 163,930 rentable square feet, together with approximately 3.34-acre adjacent unimproved tract. Monthly basic rent starts at $104,915.20 in month four, escalating periodically to $146,127.30 during months112 through123. Monthly basic rent for the adjacent unimproved tract starts at $6,680.00 in month four, escalating periodically to $9,303.99 during months112 through123. Building2 consists of approximately 343,332 rentable square feet. Monthly basic rent starts at $205,999.20 in month four, escalating periodically to $286,918.45 during months112 through123. Building3 consists of approximately 228,954 rentable square feet. Monthly basic rent starts at $146,530.56 in month four, escalating periodically to $204,089.73 during months112 through123. Each lease agreement includes a purchase and sale agreement granting the Company an option to purchase Building1, Building2 and Building3, together with the land on which such buildings are located. The purchase and sale agreements provide for an aggregate purchase price of $102,250,000 and require earnest money of $1,758,750. As of* June 30, 2026,the Company hadnot* recorded any ROU asset nor lease liability related to this agreement as the Company hasnot met the commencement criteria.

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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 was included in general and administrative expenses and totaled $2.5 million and $0.8 million for thethree months ended* June 30, 2026and2025*, respectively. Total lease expense was $4.7 million and $1.3 million for thesix months ended* June 30, 2026and2025*, 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* June 30, 2026* (in thousands):

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

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

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Note5. Cash, Cash Equivalents and Restricted Cash

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

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Restricted cash includes guarantee deposits for customs duties, a China government subsidy fund, and deposits as collateral in order to secure bank acceptance notes issued to vendors. As of* June 30, 2026and December 31, 2025,there were $6.9 million and $8.7 million of restricted cash required for bank acceptance notes issued to vendors, respectively. There were $2.1 million and $1.2 million guarantee deposits for customs duties as of June 30, 2026and December 31, 2025,*respectively.

Note6. Earnings (Loss) Per Share

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Basic net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share has been computed using the weighted-average number of shares of common stock and dilutive potential common shares from stock options, restricted stock units and senior convertible notes outstanding during the period. In periods with net losses, normally dilutive shares become anti-dilutive. Therefore, basic and diluted loss per share are the same. On* March 13, 2025,the Company issued 7,945,399 stock warrants to a subsidiary of Amazon, and 1,324,233 warrants have been vested upon signing the warrant agreement. For thethree* andsix months ended* June 30, 2026*, such warrants are both in the money and are considered dilutive instruments.

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The following table sets forth 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 the diluted net loss per share as their effect would have been antidilutive (in thousands):

Note7. Inventories

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Inventories, net consist of the following for the periods indicated (in thousands):​

For thethree months ended* June 30, 2026and2025*, the inventory reserve adjustment expensed for inventory was $(1.3) million and $1.9 million, respectively. For thesix months ended* June 30, 2026and2025*, the inventory reserve adjustment expensed for inventory was $1.1 million and $3.7 million, respectively.

For thethree months ended* June 30, 2026and2025*, the direct inventory write-offs related to scrap, discontinued products and damaged inventories were $3.6 million and $0.9 million, respectively. For thesix months ended* June 30, 2026and2025*, the direct inventory write-offs related to scrap, discontinued products and damaged inventories were $6.0 million and $2.0 million, respectively.

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Note8. Property, Plant & Equipment

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

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Capital Equipment Prepayments

Other assets, net primarily consist of long-term prepayments made in connection with the Company's capital expansion projects. As of* June 30, 2026,other assets, net was $324.0 million, compared to $50.9 million as of December 31, 2025.*The increase was primarily attributable to advance payments for equipment and facility related capital expenditures associated with the Company's manufacturing expansion initiatives. These amounts are expected to be reclassified to property, plant and equipment as the related assets are received and placed into service.

For thethree months ended* June 30, 2026and2025*, the depreciation expense of property, plant and equipment was $10.4 million and $6.3 million, respectively. For thesix months ended* June 30, 2026and2025*, the depreciation expense of property, plant and equipment was $19.5 million and $11.9 million, respectively.

Note9. Intangible Assets, net

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

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For thethree months ended* June 30, 2026and2025*, amortization expense for intangible assets, included in general and administrative expenses on the statement of operations, was $0.1 million and $0.2 million, respectively. For thesix months ended* June 30, 2026and2025*, amortization expense for intangible assets, included in general and administrative expenses on the statement of operations, was $0.2 million and $0.3 million, respectively. The remaining weighted average amortization period for intangible assets is approximately 7.4 years.

On* June 30, 2026*, future amortization expenses for intangible assets for future periods are estimated to be (in thousands):

Note10. Fair Value of Financial Instruments​

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The carrying value amounts of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses, notes receivable and other current assets, accounts payable, accrued expenses, bank acceptance payable and other current liabilities approximate fair value because of the short-term maturity of these instruments. The Company believes that the interest rates in effect at each period end represent the current market rates for similar borrowings.

The Company's accounts receivable was $314.0 million as of* June 30, 2026.Of this amount, $211.0 million was due from Digicomm International Inc. For thethree* months ended* June 30, 2026and2025*, our topten customers represented 99% and 98% of our revenue, respectively. For thethree months ended* June 30, 2026*, our topthree customers represented 42%,26% and 24% of our revenue, respectively. For thethree months ended* June 30, 2025*, our topthree customers represented 54%,34% and 6% of our revenue, respectively. For thesix months ended* June 30, 2026*, our topthree customers represented 43%,26% and 24% of our revenue, respectively. For thesix months ended* June 30, 2025*, our topthree customers represented 59%,30% and 5% of our revenue, respectively.

The fair value of convertible senior notes is measured for disclosure purposes only. The fair value and carrying amount of our convertible senior notes as of* June 30, 2026* was $445.1 million and $129.1 million, respectively. As of* December 31, 2025*, the fair value and carrying amount of our convertible senior notes was $145.2 million and $129.8 million, respectively. The fair value is based on observable market prices for this debt, which is traded in less active markets and is therefore classified as a Level2 fair value measurement. The significant increase in the fair value of the convertible senior notes relative to their carrying amount as of* June 30, 2026*is primarily attributable to a substantial increase in the market price of the Company's common stock during the quarter, which increased the value of the conversion feature embedded in the notes.

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Note11. Notes Payable and Long-Term Debt

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

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SPD Credit Line

On* July 29, 2025,Global entered into afive-year revolving credit line agreement with Shanghai Pudong Development Bank Co., Ltd. in Ningbo City, China ("SPD"), totaling250,000,000* RMB (the"¥250M SPD Credit Line"), or approximately $34.9 million at that time, and a mortgage contract. The¥250M SPD Credit Line is included in the prior 82,000,000 RMB credit facility entered into by Global on* July 18, 2025.*

On* June 11, 2026,Global entered into aone-year revolving credit line agreement with SPD increasing the¥250M SPD Credit Line to 500,000,000 RMB (the"¥500M SPD Credit Line"), or approximately $73.8 million at that time. Borrowing under the¥500M SPD Credit Line will be used for general corporate and capital investment purposes. Global's obligation under the¥500M SPD Credit Line will be secured by certain real property owned by Global. As of June 30, 2026,$21.1 million was outstanding under the¥500M SPD Credit Line, and the outstanding balance of bank acceptance notes under this bank issued to vendors was $9.5 million. The unused credit as of June 30, 2026*was $45.7 million.

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 June 30, 2026,there was $14.7 million outstanding under the CCB Credit Line. The outstanding balance of bank acceptances notes under this bank issued to vendors was $20.2 million as of June 30, 2026.The unused credit as of June 30, 2026*was $5.9 million.

NBCB Loan

On* June 23, 2025,Global entered into afive-year credit facility with Bank of Ningbo, in Ningbo City, China, totaling 20,000,000 RMB (the "NBCB Credit Facility"), or approximately $2.8 million at that time. On December 19, 2025,the parties entered into an amendment to the NBCB Credit Facility, increasing the credit limit to 50,000,000 RMB, or approximately $7.1 million at that time (the "NBCB Credit Line"). As of June 30, 2026,there was $0.7 million outstanding under the NBCB Credit Line. The outstanding balance of bank acceptance notes issued to vendors under this bank was $4.3 million as of June 30, 2026.The unused credit as of June 30, 2026*was $2.3 million.

CZB Loan

On* December 26, 2025,Global entered into an asset pooling cooperation agreement with China Zheshang Bank in Ningbo City, China totaling 40,000,000 RMB (the "CZB Credit Line"), or approximately $5.7 million at that time. As of June 30 2026,there was $1.5 million outstanding under the CZB Credit Line. The unused credit as of June 30, 2026*was $1.5 million.

BOC Loan

On* April 29, 2026,Global entered into aone-year credit facility with Bank of China in Ningbo City, China, totaling 100,000,000 RMB (the "BOC Credit Line"), or approximately $14.7 million at that time. As of June 30, 2026,there was $14.7 million outstanding under the BOC Credit Line. The unused credit as of June 30, 2026*was $0.

BOKF Loan

On* July 31, 2025,the Company entered into a Loan and Security Agreement with BOKF, NA dba BOK Financial, as agent for secured parties (the "BOKF Credit Facility"). 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* June 30, 2026,*$0 was outstanding under the BOKF Credit Facility.

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"), or approximately $3.1 million at that time, 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 enter into foreign exchange hedging transactions. As of June 30, 2026,*the $3.1 million was outstanding under the NT$100M Credit Line and the US$2M Credit Line was unutilized.

FCB Loan

On* January 2, 2026,Prime World entered into a credit facility with First Commercial Bank in Taiwan, consisting of a NT$100,000,000 line of credit (the "FCB Credit Facility"), or approximately $3.1 million at that time. As of June 30, 2026,*there was $3.1 million outstanding under the FCB Credit Facility.

CTBC Loan

On* June 11, 2026,Prime World entered into a credit facility with CTBC Bank Co., Ltd. in Taiwan, consisting of a NT$100,000,000 line of credit and a NT$180,000,000 equipment term loan (collectively, the "CTBC Credit Facility"), or approximately a total of $8.8 million at that time. As of June 30, 2026,*the CTBC Credit Facility was unutilized.

Covenants

As of* June 30, 2026,*we were in compliance with the covenants in the lending arrangements.

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Unused Borrowing Capacity

As of * June 30, 2026* and * December 31, 2025* , the Company had $106.5 million and $60.7 million of unused borrowing capacity, respectively.

As of* June 30, 2026* and* December 31, 2025*, therewas $6.9 million and $8.7 million of restricted cash, investments or security deposits associated with the loan facilities, respectively.

Note12. Convertible Senior Notes

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On* December 18, 2024,the Company entered into exchange agreements with certain holders of its 5.25% senior convertible notes due2026* (the*“2026* 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,and 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 2.75% 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.

During thethree months ended* June 30, 2026,a holder of the2030* Notes exercised its conversion right with respect to $75,000 in aggregate principal amount of2030 Notes. The Company settled the conversion by delivering 1,731 shares of Common Stock and $84 in cash to the converting holder based on the applicable conversion rate of 23.0884 shares per*$1,000* principal amount. Following this conversion, the aggregate principal amount of2030 Notes outstanding was approximately $124.9 million as of* June 30, 2026.*

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

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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.

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.

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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 is converted 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.

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The following table sets forth interest expense information related to the2026 Notes and2030 Notes (in thousands):

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Note13. Accrued Liabilities​

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

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Note14. Other Income and Expense

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

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Note15. Share-Based Compensation

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Equity Plans

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

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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.

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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 applicablethree-year performance period. The Company recognized stock-based compensation expense for the PSUs for thethree months ended* June 30, 2026and2025* of $2.1 million and $1.2 million, respectively. The Company recognized stock-based compensation expense for the PSUs for thesix months ended* June 30, 2026and2025* of $3.9 million and $2.1 million, respectively.

The following is a summary of PSU activity for thesix months ended* June 30, 2026:*

As of* June 30, 2026*, there was $16.8 million of unrecognized stock-based compensation expense related to outstanding PSUs, which expense is expected to be recognized over 2.4 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 summary of RSU activity:

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As of* June 30, 2026*, there was $24.7 million of unrecognized compensation expense related to these RSUs. This expense is expected to be recognized over 3.0 years.

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Share-Based Compensation

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Employee share-based compensation expenses recognized for the periods indicated (in thousands):

Note16. Income Taxes

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For thethree months ended* June 30, 2026*, the Company recorded an income tax expense of $1.3 million, compared withno income tax expense or benefit for thethree months ended* June 30, 2025*. For thesix months ended* June 30, 2026*, the Company recorded an income tax expense of $2.3 million, compared withno income tax expense or benefit for thesix months ended* June 30, 2025*. The income tax expense for the current period was primarily attributable to income in China, as well as the impact of valuation allowances and discrete items.

For thethree months ended* June 30, 2026and2025*, the effective tax rates were (6.0)% and 0.0%, respectively. For thesix months ended* June 30, 2026and2025*, the effective tax rates were (6.7)% and 0.0%, respectively. The effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to the impact of valuation allowances recorded against deferred tax assets ("DTA") in the United States and Taiwan, and the China R&D Super Deduction.

The Company assesses the realizability of its DTAs, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely thannot” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s US and Taiwan net deferred tax assets remains appropriate as of* June 30, 2026.*

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.

Recent Tax Legislation

The Company continues to evaluate the provisions of the One Big Beautiful Bill Act ("OBBBA"), which was enacted on* July 4, 2025.Consistent with its prior assessment, the Company doesnot* expect the provisions related to domestic research and development expenditures, bonus depreciation, business interest expense limitations, or clean energy tax credits to have a material impact on its income tax provision or effective tax rate.

Note17. Segment and Geographic Information

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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.

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. The following table is in thousands.

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.

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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 property, plant, equipment, land use rights, right of use assets and intangible assets (in thousands):

Note18. Commitments and Contingencies

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Litigation

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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.

The Company believes that there areno claims or actions pending or threatened against it, the ultimate disposition of which would have a material adverse effect on it.

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 the Company’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.

On* February 20, 2026,the United States Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Following this ruling, the U.S. Court of International Trade issued an order directing U.S. Customs and Border Protection ("CBP") to establish a process for the submission and review of refund claims related to affected IEEPA tariffs. On April 20, 2026,CBP launched an online portal through which companies maysubmit IEEPA tariff refund requests. On April 29, 2026,the Company submitted refund claims totaling $5.7 million. The Company received payments of approximately $0.2 million and $1.2 million on May 20and May 27, 2026,*respectively.

Note19. Subsequent Events

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On* July 6, 2026,subsequent to the end of the reporting period, the Company received the remaining payment of approximately $4.5 million in connection with the IEEPA tariff refund claims. In the aggregate, the Company received approximately $5.9 million, consisting of the entire $5.7 million of duties claimed plus applicable interest. Accordingly, the Company's duty recovery under CAPE1* is fully complete, andno refund claims or amounts remaining outstanding under Phase1.

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