AOSL 10-K & 10-Q changes, risk factors and insider trading

•Our China subsidiaries’ current corporate structure and business operations may be affected by the Foreign Investment Law of the PRC.PRC and the New Company Law (defined below).

A significant amount of our revenue is derived from sales of products in the PC markets such as notebooks, motherboards and notebook battery packs. Our revenue from the PC markets accounted for approximatelya 46.6%,significant 43.0% and 35.2%portion of our total revenue forin therecent years ended June 30, 2025, 2024 and 2023, respectively.years. The increasing popularity of smaller, mobile computing devices such as tablets and smart phones with touch interfaces is rapidly changing the PC markets both in the United States and abroad. In the past we experienced a significant reduction in the demand for our products due to the declining PC markets, which negatively impacted our revenue, profitability and gross margin. WhileFor we experienced a surge ofexample, demand in thefor PC market as a result of the COVID-19 pandemic and related events, such demand has returned to normal level and declined due to an industry-wide inventory correction and the ensuing downturn in the semiconductor industry from late 2022 to the end of 2023 and early 2024. While we believe the negative impact of inventory correction has gradually subsided since mid-2024 and early 2025, wein the first half of 2026, the semiconductor industry experienced a severe constraint in memory supplies (DRAM and NAND flash) driven by data center AI infrastructure demand, which adversely affected the demand in the PC market. We cannot predict howwhen the current memory constraint will end and whenwhether the PC market will bereturn fullyto recovered.a more normalized level. We have implemented measures and strategies to mitigate the effect of such a downturn. These measures and strategies may not be sufficient or successful, in which case our operating results may be adversely affected.

As part of the growth strategy to diversify our product portfolio and in response to the decline of the PC markets, we have been developing new technologies and products designed to penetrate into other markets and applications, including merchant power supplies, power supplies, flat panel TVs, smart phones, tablets, AI datacenters, servers, graphics cards, gaming consoles, lighting, datacom, telecommunications, home appliancesappliances, power tools, and industrial motor controls. However, there is no guarantee that these diversification efforts will be successful. As a new entrant to some of these markets, we may face intense competition from existing and more established providers and encounter other unexpected difficulties, any of which may hinder or delay our efforts to achieve success. In addition, our new products may have long design and sales cycles. Therefore, if our diversification efforts fail to keep pace with the declining PC markets, we may not be able to alleviate its negative impact on our results of operations.

Geopolitical conflicts and tensions between the United States and China have threatened trading relationships and economic activities between the two countries. Because we have significant operations in both countries, such conflicts and tensions may negatively impact our business. At various times during recent years, the United States and China have had disagreements over political and economic issues, including, but not limited to, the recent imposition of tariffs by the U.S. on goods imported from China or sourced from China and imposition of retaliatory tariffs and other countermeasures (like government investigations, sanctions, etc.) by China, as well as the U.S. government’s efforts to restrict transfer and sharing of technologies, including semiconductor technologies, between the two countries. In addition, the U.S. government may enact new and more restrictive export control regulations that may reduce our ability to ship and sell products to certain customers in China and Asia and increase our cost to implement additional measures to comply with such new regulations. In addition, disagreementsDisagreements between the United States and China with respect to their political, military or economic policies toward Taiwan may contribute to further controversies. These controversies and trade frictions could have a material adverse effect on our business by, among other things, making it more difficult for us to coordinate our operations between the United States and China, causing a reduction in the demand for our products by customers in the United States or China, and reducing our profitability due to increasing cost of compliance.

As of June 30, 2026, our equity interest in the JV Company was approximately 18.9%. Because we no longer have a controlling interest in the JV Company, the JV Company is operating and will continue to operate more independently, and our influence on all aspects of the JV Company’s business operations will be diminished. Accordingly, we might not be able to prevent the JV Company from taking actions adverse to our interests. For example, while we remain a major customer of the JV Company, the JV Company may decide to enter into business relationships with other customers and allocate foundry capacities to such customers, which may prevent us from securing a desirable or sufficient level of manufacturing capacity for our products. Although the JV Company has agreed to provide us with a specified level of monthly wafer production capacity, there is no guarantee that such capacity will be sufficient, which may adversely affect our results of operations.

In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to make, strategic acquisitions, mergers, partnership, joint ventures and alliances that involve significant risks and uncertainties. Successful acquisitions and alliances in the semiconductor industry are difficult to accomplish because they require, among other factors, efficient integration and aligning of product offerings and manufacturing operations and coordination of sales, marketing and research and development efforts. We may also seek to establish partnerships, joint ventures and acquisition of assets in various foreign jurisdictions where we may not have significant operating experience. In addition, we may encounter unanticipated challenges and difficulties, including regulatory and compliance issues, lack of local support and geopolitical tensions. The difficulties of integration and alignment may be increased by the necessity of coordinating geographically separated organizations, the complexity of the technologies being integrated and aligned and the necessity of integrating personnel with dissimilar business backgrounds. Furthermore, there is no guarantee that we will be able to identify viable targets for strategic acquisition. Also we may incur significant costs in efforts that may not result in a successful acquisitions.acquisition.

Our operations of one wholly-owneda packaging and testing facility are subject to risks that could adversely affect our business and financial results.

Our success depends upon the continuing services of members of our senior management team and various engineering and other technical personnel. In particular, our engineers and other sales and technical personnel are critical to our future technological and product innovations. Our industry is characterized by high demand and intense competition for talent and the pool of qualified candidates is limited. In addition, we have dedicated significant resources and effort to retain and recruit talents in the semiconductor industry, but there is no guarantee that we will be able to successfully compete with our peer companies in attracting qualified talents. We have entered into employment agreements with certain senior executives, but we do not have employment agreements with most of our employees. Many of these employees could leave our company with little or no prior notice and would be free to work for a competitor. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all and other senior management may be required to divert attention from other aspects of our business. In addition, we do not have “key person” life insurance policies covering any member of our management team or other key personnel. The loss of any of these individuals or our inability to attract or retain qualified personnel, including engineers and others, could adversely affect our product introductions, overall business growth prospects, results of operations and financial condition.

We have research and development facilities located in Taiwan and the Silicon Valley in Northern California. Historically, these regions have been vulnerable to natural disasters and other risks, such as earthquakes, fires and floods, which may disrupt the local economy and pose physical risks to our property. We also have sales offices located in Taiwan and Japan where similar natural disasters and other risks may disrupt the local economy and pose physical risks to our operations. We are not currently covered by insurance against business disruption caused by earthquakes. In addition, we have manufacturing facilities in Oregon and Shanghai, which may be subject to disruption due to natural disasters such as flood and fire. In August 2026, our packaging and testing facilities in Shanghai were flooded due to a strong typhoon, which caused us to suspend production temporarily, and we also incurred additional costs relating to cleanup and outsourcing packaging capacity. We currently do not have redundant, multiple site capacity in the event of a natural disaster or other catastrophic event.event, and we may not be able to locate suitable replacement capacity in the event we suspend production. In the event of such an occurrence, our business and financial performance would suffer.be adversely affected.

We conduct our business in multiple jurisdictions, including Hong Kong, Macau, the U.S., China, Taiwan, South Korea, Japan, India, the United Kingdom and Germany. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. Any of these jurisdictions may assert that we have unpaid taxes. Our effective tax rate was 31.0%,(21.0)%, 31.0% and (138.1)% and 30.1% for the fiscal years ended June 30, 2025,2026, 20242025 and 2023,2024, respectively.

In December 2017, the European Union (“EU”) identified certain jurisdictions (including Bermuda and Cayman Islands) which it considered had a tax system that facilitated offshore structuring by attracting profits without commensurate economic activity. In order to avoid EU “blacklisting”, both Bermuda and Cayman Islands introduced new legislation in December 2018, which came into force on January 1, 2019. These newenacted laws that require Bermuda and Cayman companies carrying on one or more “relevant activity” (including: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property or holding company) to maintain a substantial economic presence in Bermuda and Cayman Islands in order to comply with the economic substance requirements. Effective from December 31, 2019, we have structured our activities to comply with the new law. However, there is no experience yet as to how the Bermuda and Cayman Islands authorities will interpret and enforce these new rules. The legislation remains subject to further clarification and interpretation by Bermuda and Cayman Islands authorities and, accordingly, there is no guarantee that we will be deemed to be compliant. Furthermore, this legislation may require us to make additional changes to the activities we carry on in Bermuda or Cayman Islands, which could increase our costs either directly in those locations or indirectly as a result of increased costs related to moving our operations to other jurisdictions. As a result, we are not able to determine the impact on our operations and net income as of the current period.

The U.S. recentlyhas proposedimplemented, theproposed, implementationand ofcontinues ato rangeevaluate ofchanges newto tariffs and significantother increasesinternational totrade existingmeasures tariffs.affecting imports and exports. Although the tariffs imposed in 2025 under the International Emergency Economic Powers Act (IEEPA) on U.S. imports from virtually all countries were ultimately invalidated by the U.S. Supreme Court in 2026, a global tariff regime was largely preserved through alternative tariff authorities, including Section 122 and Section 301 of the Trade Act of 1974. In response to such tariffs announced by the U.S., acertain numberU.S. oftrading partners including Japan, Taiwan, and Korea, have entered into agreements with the U.S. establishing revised tariff frameworks, while negotiations with other countries, including Japan and Korea, entered into new trade deals with the United States, which set certain reduced tariff rates. The specific terms of these deals still need to be further defined and implemented. Other countries, like China, areremain still in ongoing negotiations with the U.S. regarding tariffs,ongoing, and it is unclear what the final tariff rate may be. Additionally,The thereU.S. ishas aalso pendingundertaken investigationactions inunder Section 232 of the UnitedTrade StatesExpansion intoAct therelating nationalto security impact ofsemiconductor imports ofand continues to evaluate additional trade measures affecting semiconductors and semiconductor manufacturing equipment, whichthe may result in tariffs on such imports from all countries. There is thus still significant uncertainty about future U.S. tariff rates,scope and weimpact cannotof predictwhich whether,remain and to what extent, current tariffs will continue or U.S. trade policies will change in the future.uncertain. Such uncertainties and risks may negatively affect our ability to enter into new business transactions with partners, vendors and customers because of the lack of clarity on the economic benefits of such transactions. Significant increase in U.S. tariffs may increase the costs of materials, goods and components that we purchase from suppliers from other countries for the manufacturing and distribution of our products, which may adversely affect our financial performance. Also, we may not be able to mitigate the impact of tariffs by identifying and securing alternative sources in the U.S. for similar materials, goods and components at comparable qualities or more favorable prices. Furthermore, tariffs, or the threat of tariffs or increased tariffs, could have a significant negative impact on our business relationships with customers, suppliers and partners in Asia, including China, Hong Kong, Taiwan, Korea and Japan. In addition to tariffs, evolving export controls, import restrictions, sanctions, licensing requirements and other trade measures may increase compliance costs, disrupt supply chains, restrict customer access or otherwise adversely affect our business. Any significant changes in trade policies and tariffs may also affect the business operations of our customers, suppliers and partners, which may cause them to take actions or make decisions that adversely affect our business operations and results of operations.

On March 15, 2019, the National People’s Congress of the PRC promulgated the Foreign Investment Law, which took effect on January 1, 2020, and replaced the existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies a PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The Foreign Investment Law establishes the basic framework for the access, promotion, protection and administration of foreign investments in China in view of investment protection and fair competition. For example, treatment of foreign investors on a national level will be no less favorable than the treatment received by domestic investors unless such investments fall within a “negative list”. Crucially, the five-year transitional period mandated by the Foreign Investment Law for foreign-invested enterprises (FIEs) to rectify and align their corporate governance structures with the domestic company law officially expired on December 31, 2024. Consequently, all FIEs in China must now fully comply with the new PRC Company Law (the “New Company Law”), which came into effect on July 1, 2024.

TheUnder this unified regime, FIEs face dual layers of compliance friction. First, the PRC Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities. As the Negative List is updated from time to time, there can be no assurance that the China government will not change its policies in a manner that would render part or all of our business to fall within the restricted or prohibited categories. Second, under the New Company Law, FIEs are subject to rigorous new corporate governance and capital maintenance mandates.

If future laws, administrative regulations or provisionsprovisions, particularly evolving statutory interpretations under the New Company Law or foreign investment information reporting obligations, mandate further actions to be taken by companies with respect to our business operation, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the Ministry of Commerce (“MOC”) be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOCState Administration for Market Regulation (“SAMR”), the anti-monopoly enforcement agency of the PRC, shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, under the securityMeasures reviewfor rulesthe Security Review of Foreign Investments jointly issued by the MOCNDRC thatand becamethe effectiveMOC, inany Septemberforeign 2011investment, specify thatincluding mergers and acquisitionsacquisitions, byjoint foreignventures, investorsor greenfield investments, that raise “national defense and security” concernsconcerns, andor mergers and acquisitionsthose through which foreign investors may acquire de facto control over domestic enterprises in key sectors (such as critical technology and semiconductors) that raise “national security” concernsconcerns, are subject to strict review by the MOC,working andmechanism office led by the NDRC. These rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. On July 1, 2015, the National Security Law of China took effect, which provided that China would establish rules and mechanisms to conduct national security review of foreign investments in China that may impact national security. China’s Foreign Investment Law, which became effective in January 2020, reiterates that China will establish a security review system for foreign investments. On December 19, 2020, the NDRC and the MOC jointly issued the Measures for the Security Review of Foreign Investments (the “New FISR Measures”), which was made according to the National Security Law and the Foreign Investment Law of China and became effective on January 18, 2021. The New FISR Measures further expand the scope of national security review on foreign investment compared to the existing rules, while leaving substantial room for interpretation and speculation. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOCcompetent Chinese authorities or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

Taiwan has a unique international political status. China does not recognize the sovereignty of Taiwan. Although significant economic and cultural relations have been established during recent years between Taiwan and China, relations have often been strained. A substantial number of our key customers and some of our essential sales and engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China. Therefore, factors affecting military, political or economic relationship between China and Taiwan could have an adverse effect on our business, financial condition and operating results.

We are a designer, developer, and global supplier of a broad range of discrete power devices, wide band gap power devices, power management ICs and modules, including a wide portfolio of Power MOSFET, SiC, IGBT, IPM, TVS, HV Gate Drivers, Power IC, and Digital Power products. Our portfolio of power semiconductors includes approximately 2,8002,900 products, and has grown with the introduction of over 10070 new products in the fiscal year ended June 30, 2025,2026, and over 100 and 60 new products in the fiscal years ended June 30, 20242025 and 2023,2024, respectively. Our teams of scientists and engineers have developed extensive intellectual properties and technical knowledge that encompass major aspects of power semiconductors, which we believe enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics. We have an extensive patent portfolio that consists of 949961 patents and 6478 patent applications in the United States as of June 30, 2025.2026. We also have a total of 961991 foreign patents, which primarily were based on our research and development efforts through June 30, 2025.2026. We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for computers, servers and telecommunications equipment. During fiscal year 2025,2026, we accelerated the development of new technology platforms which allowed us to introduce 3320 medium and high voltage MOSFET products, targeting primarily the power supply markets and industrial markets, as well as 118 low voltage MOSFET products primarily for the communication market.market, Inas addition,well weas introduced 3832 Power IC new products for computing applications,applications communication and consumer markets.market.

On March 29, 2016, we formed a joint venture (the “JV Company”) with two investment funds owned by the Municipality of Chongqing (the “Chongqing Funds”), for the purpose of constructing and operating a power semiconductor packaging, testing and 12-inch wafer fabrication facility (“Fab”) in the LiangJiang New Area of Chongqing, China.China Asin of December 1, 2021,which we initially owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. TheFrom jointDecember venture2021 wasto accountedJune under the provisions of the consolidation guidance since2025, we hadcompleted controllingseveral financialtransactions to sell additional equity interests until December 1, 2021. In December 2021, we sold a portion of our equity interest in the JV Company to a third-party investor,investors, pursuant to which we reduced our ownership from 50.9% to 48.8% of outstanding equity of the JV Company, and reduced our representation on the board of directors of the JV Company. As a result,while the JV Company wasalso deconsolidatedissued fromadditional equity interests to new investors that diluted our consolidatedownership financialinterest. statements effectiveAccordingly, as of DecemberJune 2,30, 2021.2025, the percentage of outstanding JV equity interest beneficially owned by us was further reduced to 39.2%.

WeOn expectJuly 14, 2025, we entered into an equity transfer agreement with a strategic investor to receivesell approximately 20.3% of outstanding equity interest in the JV Company held by us for an aggregate cash consideration of $150 million to be paid in four installments, subject to satisfaction of certain conditions. On August 29, 2025, the amended Shareholders’ agreement for the JV Company was signed, which reduced our equity interest in the JV Company by 20.3% to an ownership percentage of 18.9%. As of June 30, 2026, all fourof the conditions were satisfied, and we received all installment payments and close the transaction prior to the end of calendar year 2025.payments. We believe this sale will provideprovides additional and significant capital for us to continue investment in technology, R&Dnew projectsproduct development and acquisition of assets complementary to our business operations, which will facilitate and accelerate our efforts to develop and distribute innovative and diverse power semiconductor products to customers worldwide.

In addition, the JV Company will continue to provide us with a significant level of foundry and packaging capacity to enable us to develop and manufacture our products. Pursuant to an agreement with the JV Company and other shareholders of the JV Company, the JV Company is committed to provideproviding us with a specified level of monthly wafer production capacity.

Manufacturing costs and capacity availability: Our gross margin is affected by a number of factors including our manufacturing costs, utilization of our manufacturing facilities, the product mixes of our sales, pricing of wafers from third party foundries and pricing of semiconductor raw materials. Capacity utilization affects our gross margin because we have certain fixed costs at our Shanghai facilities and our Oregon Fab. If we are unable to utilize our manufacturing facilities at a desired level, our gross margin may be adversely affected. In addition, from time to time, we may experience wafer capacity constraints, particularly at third party foundries, that may prevent us from meeting fully the demand of our customers. While we can mitigate these constraints by increasing and re-allocating capacity at our own fab, we may not be able to do so quickly or at sufficient level, which could adversely affect our financial conditions and results of operations. We also rely on third parties to provide foundry capacity to manufacture our products, including the JV Company, therefore it is important that we maintain continuous access to such capacity, which may not be available at sufficient level or at pricing terms favorable. If these third-party foundries, including the JV Company, take actions or make decisions that prevent us from accessing required capacity, our operations may be adversely affected.

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and provided 24-months of engineering and development services for a total fee of $45.0 million. The license and development fee required significant integration to create a combined output to the customer and was determined to be one performance obligation and was recognized over the 24 months during which we performed the engineering and development services. We use the input method to measure progress and recognize revenue, based on the effort expended relative to the estimated total effort to satisfy the performance obligation. During the fiscal years ended June 30, 2025, 2024 and 2023, we recorded $13.8 million, $21.2 million and $9.9 million of license and development revenue, respectively. As of June 30, 2025, all revenue has been recognized and all consideration has beenwas received associated with the license agreement, therefore we no longer have any obligations under the license agreement. We also entered into an accompanying supply agreement to provide limited wafer supply toDuring the customer.fiscal years ended June 30, 2026, 2025 and 2024, we recorded $0.0 million, $13.8 million and $21.2 million of license and development revenue, respectively.

On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. This includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. The key provisions include allowing immediate expensing of domestic research and experimental expenditures, new limitations on interest expense deductibility, reinstatement of 100% bonus depreciation for qualified assets placed in service in the United States after January 19, 2025 as well as changes to the calculation of taxable income resulting from the foreign derived intangible income deduction. ASC 740 Income Taxes requires the effects of changes in tax rates and laws to be recognized in the period in which the relevant legislation is enacted. The OBBB was enacted after the June 30, 2025 year end. As of June 30, 2025, we are continuing to assess the potential impact of the OBBB.

We use the equity method of accounting when we have the ability to exercise significant influence, but we do not have control, as determined in accordance with generally accepted accounting principles, over the operating and financial policies of the company. Effective December 2, 2021, we reduced our equity interest in the JV Company below 50% of outstanding equity ownership and experienced a loss of control of the JV Company. As a result, we record our investment under equity method of accounting. Since we are unable to obtain accurate financial information from the JV Company in a timely manner, we record our share of earnings or losses of thesuch JV Companyaffiliate on a one quarter lag.

On July 14, 2025, we entered into an equity transfer agreement (“Agreement”) with the investor to sell approximately 20.3% of outstanding equity interest in the JV Company for an aggregate cash consideration of $150 million. We identified the negotiations of the equity transfer agreement throughout the fourth quarter of fiscal year 2025 as an impairment indicator and performed a quantitative impairment test as of June 30, 2025. Based on the implied valuation of the JV Company per the transaction price in the equity transfer agreement, the fair value of the equity method investment was determined to be lower than its carrying value, and a $76.8 million other-than-temporary impairment of the equity method investment was recognized as of June 30, 2025. The impairment loss is recorded within equity method investment loss in the consolidated statement of operations for the fiscal year ended June 30, 2025. There was no impairment loss of the equity method investment recorded during the fiscal year ended June 30, 2026.

A discussion of our results of operations for the fiscal year ended June 30, 20252026 as compared to June 30, 20242025 is included below. For a discussion and comparison of the results of our operations for the fiscal year ended June 30, 20242025 with the fiscal year ended June 30, 2023,2024, refer to “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Form 10-K for the fiscal year ended June 30, 20242025 filed with the SEC on August 23,28, 2024.2025.

Total revenue was $678.9 million for fiscal year 2026, a decrease of $17.2 million, or 2.5%, as compared to $696.2 million for fiscal year 2025, an increase of $38.9 million, or 5.9%, as compared to $657.3 million for fiscal year 2024.2025. The increasedecrease was primarily due to ana increasedecrease of $23.4 million and $24.1$11.7 million in sales of power discrete products and power IC products, respectively, offset by a decrease of $1.2$13.8 million in license and development services, offset by an increase of $3.9 million in sales of power IC products and an increase of $4.4 million in sales of packaging and testing services and other,other. asThe well as anet decrease of $7.4 million in license and development services. The increase incombined power discrete and power IC product sales was primarily due to a 17.1%3.0% increasedecrease in unit shipments, offset by ana 8.0%2.0% decreaseincrease in average selling price as compared to last fiscal year due to a shift in product mix. The decreaseincrease in revenue from packaging and testing services and other for fiscal year 20252026 as compared to the last fiscal year was primarily due to decreasedincreased demand. The decrease in license and development services for the fiscal year 20252026 was related to the license agreement with a customer to license our proprietary SiC technology and provided 24-month engineering and development services, which was completed in February 2025.

Cost of goods sold was $527.4 million for fiscal year 2026, a decrease of $7.8 million, or 1.5%, as compared to $535.2 million for fiscal year 2025, an increase of $49.8 million, or 10.3%, as compared to $485.4 million for fiscal year 2024.2025. The increasedecrease was primarily due to 5.9%2.5% increasedecrease in revenue.revenue as a result of less unit shipments. Gross margin decreased by 3.10.8 percentage points to 22.3% for fiscal year 2026, as compared to 23.1% for fiscal year 2025, as compared to 26.2% for fiscal year 2024.2025. The decrease in gross margin was primarily due to average selling pricing erosion, higher material costs and lesslower favorableunit product mixshipment during fiscal year ended June 30, 2025.2026. We expect our gross margin to continue to fluctuate in the future as a result of variations in our product mix, semiconductor wafer and raw material pricing, manufacturing labor cost and general economic and PC market conditions.

Research and development expenses were $103.9 million for fiscal year 2026, an increase of $9.6 million, or 10.2%, as compared to $94.3 million for fiscal year 2025, an increase of $4.3 million, or 4.8%, as compared to $89.9 million for fiscal year 2024.2025. The increase was primarily attributable to a $2.9 million increase in share-based compensation as a result of a modification of market-based restricted stock units in August 2024, a $0.9$9.0 million increase in employee compensation and benefitpersonnel expenserelated expenses mainly due to increasedour headcount,focused higherinvestment medicalin insurance expenses and higher severance expenses,R&D, a $0.3$3.7 million increase in product prototyping engineering expense as a result of increased engineering activities, a $0.5 million increase in recruiting fees and a $2.1 million increase in allocation, partially offset by a $1.1 million decrease in share-based compensation as a result of the change in estimated achievement of the performance conditions associated with the MSUs granted in December 2021, as well as a $0.1$4.4 million increasedecrease in officeamortization rentexpense expenses.as a result of certain software licenses having been fully amortized in June 2025. We continue to evaluate and invest resources in developing new technologies and products utilizing our own fabrication and packaging facilities. We believe the investment in research and development is important to meet our strategic objectives.

Other loss,income (loss), net increased by $0.9$5.4 million in fiscal year 20252026 as compared to the last fiscal year primarily due to an increase in foreign currency exchange lossgain as a result of the appreciation of RMB andagainst TaiwanUSD, dollaras againstwell as income of $1.9 million from certain services provided by the U.S.Company dollar.to the JV Company.

Interest income decreased by $0.9$0.3 million in fiscal year 20252026 as compared to fiscal year 20242025 primarily due to a result of lower interest rate and lower cash balance during fiscal year 2025.2026.

Interest expenses decreased by $1.3$1.9 million in fiscal year 20252026 as compared to fiscal year 20242025 primarily due to lesslower outstanding loan balance during fiscal year 2025.2026.

Income tax expense (benefit)

In September 2021, Jireh Semiconductor Incorporated (“Jireh”), one of the Company’s wholly-owned subsidiaries, entered into a financing arrangement agreement with a company (“Lender”) for the lease and purchase of a machinery equipment manufactured by a supplier. This agreement hasincludes a payment term of five (5) yearsyears, pursuant to which Jireh commenced payments of interest and principal to the Lender in September 2022 when the final installation and acceptance of the equipment were completed. After the end of such payment term, after which Jireh has the option to purchase the equipment for $1. The implied interest rate was 4.75% per annum,annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes, until the final installation and acceptance of the equipment.Notes. The total purchase price of this equipment was Euroeuro 12.0 million. In April 2021, Jireh made a down payment of Euroeuro 6.0 million, representing 50% of the total purchase price of the equipment, to the supplier. In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for Euroeuro 4.8 million, to the supplier on behalf of Jireh. In September 2022, Lender paid the remaining 10% payment for the total purchase price and reimbursed Jireh for the 50% down payment, after the installation and configuration of the equipment. The title of the equipment was transferred to Lender following such payment. The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million. The financing arrangement is secured by this equipment and other equipment at Jireh, which had a carryingnet amountbook value of $12.1$10.5 million as of June 30, 2025.2026. As of June 30, 2025,2026, the outstanding balance of this debt financing was $6.5$3.6 million.

On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the “Bank”) in an amount up to $45.0 million for the purpose of expanding and upgrading the Company’s fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company. The agreement has a 5.5-year term of 5.5 years and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on the SOFR plus the applicable margin based on the outstanding balance of the loan. This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of June 30, 2025, Jireh was in compliance with these covenants and the outstanding balance of this loan was $20.3 million. In August 2025, the Company paid the outstanding balance in full. As of June 30, 2026, there was no outstanding balance.

On August 9, 2019, one of the Company’sCompany's wholly-owned subsidiaries (the “Borrower”) entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its accounts receivable with recourse. This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on the Secured Overnight Financing Rate (“SOFR”), plus 2.01% per annum. The Company is the guarantor for this agreement. The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date. On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. In August 2025, this factoring agreement was terminated. As of June 30, 2025,2026, there was no outstanding balance for this loan.balance.

We believe that our current cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs, including working capital and capital expenditures, for at least the next twelve months. In the long-term, we may require additional capital due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash is insufficient to meet our needs, we may seek to raise capital through equity or debt financing. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. If we decide to raise capital through equity financing, the issuance of additional equity may result in dilution to our shareholders. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all.

For the fiscal year ended June 30, 2025,2026, the $4.0$46.0 million increasedecrease in cash provided by operating activities compared to the fiscal year ended June 30, 20242025 was primarily due to ana increasedecrease of net loss of $85.9$54.7 million and ana increasedecrease of non-cash expenses of $78.3$83.8 million, aan decreaseincrease of $18.6$17.8 million in inventory purchases,purchase, ana increasedecrease of accounts payable of $15.7$25.4 million primarily due to timing of payment, anand increasea decrease of $6.9$9.2 million in accruedpayable andrelated otherto liabilities,equity an increase of $2.9 million in deferred revenue, an increase of $1.6 million in income tax payable,investee, offset by ana increasedecrease of $32.1$14.2 million in accounts receivable due to timing of billings and collection of payments, anda an increasedecrease of $2.4$1.9 million in other current and long term assets due to increasedecrease in advance payments to suppliers.suppliers, an increase of $2.0 million in income tax payable, an increase of $3.3 million in deferred revenue, and an increase of $14.1 million in accrued and other liabilities.

For the fiscal year ended June 30, 2025,2026, the $0.7$122.5 million increase in cash usedprovided inby investing activities compared to the fiscal year ended June 30, 20242025 was primarily due to a $0.1$147.7 million in the proceeds of sales of equity interest in the JV Company and $0.3 million in the proceeds of sale of privately-held investment, offset by a $14.6 million increase in purchases of property and equipment, a $0.3$0.6 million decreaseincrease in the proceedspurchases of salesintangible of property and equipment, as well asassets, a $0.3$0.5 million decrease in government grants related to equipment.equipment, and $9.7 million increase of a loan issued to a supplier.

For the fiscal year ended June 30, 2025,2026, the $5.6$26.3 million increase in cash used in financing activities compared to the fiscal year 20242025 was primarily due to $2.3$18.2 million of payment for repurchases of common shares and $11.5 million of repayment of loan borrowings, offset by $3.2 million decrease in withholding tax paid on behalf of employees for net share settlement, and $0.2 million increase in proceeds from exercise of stock options and the Employee Share Purchase Plan (“ESPP”), and $3.0 million increase in withholding tax paid on behalf of employees for net share settlement.Plan.

We evaluate our inventory for salability, obsolescence and other available applicable information. When evaluating the adequacy of our provision for excess and obsolete inventory, we identify excess and obsolete products and also analyze historical usage, forecasted demand, projected and current economic trends. Demand for our products can fluctuate significantly from period to period. A significant decrease in demand could result in an increase in the amount of excess inventory on hand. In addition, our industry is characterized by frequent new product development and technological changes that could result in an increase in the amount of obsolete inventory quantities on hand. AlsoAlso, our estimates of forecasted demand and judgement to determine excess inventory may prove to be inaccurate, in which case we may have understated or overstated the reduction to the total carrying value of our inventory for excess and obsolete inventory. If actual economic trends are less favorable than those forecasted, additional future inventory write-downs may be required, which could adversely affect our operating results. Inventory adjustments, once established, are not reversed until the related inventory has been sold or scrapped. If actual economic trends are more favorable than expected and the products that have previously been written down are sold, our gross margin would be favorably impacted.

Item 1A of Part I of our Annual Report on2025 Form 10-K for the year ended June 30, 2025,10-K, filed with the SEC on August 28, 2025, contains risk factors identified by the Company. Except as set forth below, there have been no material changes to those risk factors.

On July 14, 2025, we entered into an equity transfer agreement with a third-party strategic investor to sell approximately 20.3% of outstanding equity interest in the JV Company for an aggregate cash consideration of $150 million to be paid in four installments, subject to satisfaction of certain conditions. Such conditions include, among other things, shareholder approval by the JV Company and certain registrations, approvals by government authorities and closing of additional investment by the strategic investor in the JV Company’s equity, which are outside of our control. For a more detailed description of the installment payments and related conditions, please see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview. On August 29, 2025, we received the first installment payment of RMB 676 million (approximately $94.5 million based on the exchange rate on August 29, 2025). In addition, we received $11.1 million for the second installment payment during the three months ended December 31, 20252025, for the second installment payment. In January 2026, we also receivedand $30.3 million for the third installment.installment payment during the three months ended March 31, 2026. We expect to receive the remaining installment payment of approximately $15.8 million and close the transaction in the near future. We cannot be certain that the conditions for the remaining installments will be satisfied on a timely basis, including those conditions that are outside of our control. If these conditions are not met by the deadlines as set forth in the equity transfer agreement, we may not be able to receive a portion or the cash proceeds from the sale, which may adversely affect our ability to continue investment in technology, R&D projects and acquisition of assets complimentary to our business operations. Furthermore, failure to meet these conditions may require the parties to terminate and unwind the transaction, which will adversely affect our reputation, business operations and stock price.

Except for the historical information contained herein, the matters addressed in this Item 2 constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements include information set forth under the heading “Other Factors Affectingaffecting Ourour Performance.” Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by the Company’s management. The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the Act. The Company undertakes no obligation to publicly release the results of any revisions to its forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words “AOS,” the “Company,” “we,” “us” and “our” refer to Alpha and Omega Semiconductor Limited and its subsidiaries.

Management’s discussion should be read in conjunction with management’s discussion included in the Company’s Annual Report on2025 Form 10-K for the fiscal year ended June 30, 2025,10-K, filed with the Securities and Exchange Commission (the “SEC”) on August 28, 2025.

We are a designer, developer, and global supplier of a broad range of discrete power devices, wide band gap power devices, power management ICs and modules, including a wide portfolio of Power MOSFET, SiC, IGBT, IPM, TVS, HV Gate Drivers, Power IC, and Digital Power products. Our portfolio of power semiconductors includes approximately 2,800 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2025, and over 100 and 60 new products in the fiscal years ended June 30, 2024 and 2023, respectively. During the sixnine months ended DecemberMarch 31, 2025,2026, we introduced 3748 new products. Our teams of scientists and engineers have developed extensive intellectual properties and technical knowledge that encompass major aspects of power semiconductors, which we believe enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics. We have an extensive patent portfolio that consists of 953956 patents and 7174 patent applications in the United States as of DecemberMarch 31, 2025.2026. We also have a total of 1,0801,087 foreign patents, which primarily were based on our research and development efforts through DecemberMarch 31, 2025.2026. We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for computers, servers and telecommunications equipment.

During the fiscal quarter ended DecemberMarch 31, 2025,2026, we continued our product diversification program by developing new silicon and packaging platforms to expand our serviceable available market, or SAM, and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, and power IC product portfolio also expanded.

On July 14, 2025, we entered into an equity transfer agreement with a strategic investor to sell approximately 20.3% of outstanding equity interest in the JV Company held by us for an aggregate cash consideration of $150 million to be paid in four installments, subject to satisfaction of certain conditions. On August 29, 2025, the amended Shareholders’ agreement for the JV Company was signed, which reduced our equity interest in the JV Company by 20.3% to an ownership percentage of 18.9%. As of August 29, 2025, all of the conditions for the first installment were satisfied, and we received our first installment payment of RMB 676 million (or $94.5 million based on the currency exchange rate between RMB and U.S. Dollar on August 29, 2025). In addition, we received $11.1 million for the second installment payment during the three months ended December 31, 20252025, for the second installment payment. In January 2026, we also receivedand $30.3 million for the third installment.installment payment during the three months ended March 31, 2026. We expect to receive the remaining installment payment of approximately $15.8$15.6 million and close the transaction in the near future. We believe this sale provides additional and significant capital for us to continue investment in technology, R&D projects and acquisition of assets complementary to our business operations, which will facilitate and accelerate our efforts to develop and distribute innovative and diverse power semiconductor products to customers worldwide.

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and provided 24-months of engineering and development services for a total fee of $45.0 million. The license and development fee required significant integration to create a combined output to the customer and was determined to be one performance obligation and was recognized over the 24 months during which we performed the engineering and development services. We use the input method to measure progress and recognize revenue, based on the effort expended relative to the estimated total effort to satisfy the performance obligation. As of June 30, 2025, all revenue has been recognized and all consideration has been received associated with the license agreement, therefore we no longer have any obligations under the license agreement. During the three and sixnine months ended DecemberMarch 31, 2025,2026, we recorded nil of license and development revenue, respectively. During the three and sixnine months ended DecemberMarch 31, 20242025 we recorded $5.4$2.8 million and $11.0$13.8 million of license and development revenue, respectively. We also entered into an accompanying supply agreement to provide limited wafer supply to the customer.

The following tables set forth statements of loss, also expressed as a percentage of revenue, for the three and sixnine months ended DecemberMarch 31, 20252026 and 2024.2025. Our historical results of operations are not necessarily indicative of the results for any future period.

Three and SixNine Months Ended DecemberMarch 31, 20252026 and 20242025

Total revenue was $162.3$163.8 million for the three months ended DecemberMarch 31, 2025,2026, a decrease of $10.9$0.8 million, or 6.3%0.5% as compared to $173.2$164.6 million for the same quarter last year. The decrease was primarily due to a decrease of $12.0$7.7 million in sales of power discreteIC products and a decrease of $5.4$2.8 million in license and development services, partially offset by an increase $5.1of $8.2 million in sales of power ICdiscrete products and an increase of $1.4 million in packaging and testing services and other. The net decreaseincrease in power discrete products and power IC products sales was primarily due to a 5.7%4.1% decreaseincrease in unitaverage shipment,selling price, partially offset by a 1.7%3.6% increasedecrease in averageunit selling priceshipment as compared to same quarter last year due to a shift in product mix. TheSuch net decreaseincrease in revenues was primarily driven by an increase in communication markets, particularly in battery products, offset by a decrease in power supply and industrial markets, particularly in power tools products and quick chargers products, as well as a decrease in consumer markets, particularly in gaming products, partially offset by an increase in the computing markets, particularly in notebook products. The increase in revenue of packaging and testing services and other for the three months ended DecemberMarch 31, 2025,2026, as compared to same quarter last year, was primarily due to increased demand. The decrease in license and development services for the three months ended DecemberMarch 31, 20252026 was related to the license agreement with a customer to license our proprietary SiC technology and provided 24-month engineering and development services, which was completed during the three months ended March 31, 2025.

Total revenue was $344.8$508.6 million for the sixnine months ended DecemberMarch 31, 2025,2026, a decrease of $10.3$11.1 million, or 2.9%2.1% as compared to $355.0$519.7 million for the same period last year. The decrease was primarily due to a decrease of $25.9$17.7 million in sales of power discrete products, as well as a decrease of $11.0$13.8 million in license and development services, partially offset by an increase of $24.9$17.2 million in sales of power IC products and an increase of $1.8$3.2 million in packaging and testing services and other. The net decrease in power discrete products and power IC products sales was primarily due to a 2.5%2.9% decrease in unit shipment, partially offset by a 2.3%2.9% increase in average selling price as compared to same period last year due to a shift in product mix. TheSuch net decrease in revenues was primarily driven by a decrease in consumer markets, particularly in home appliances and gaming products, and a decrease in power supply and industrial markets, particularly in power tools products and quick chargers products, as well as a decrease in communication market, particularly in battery products, partially offset by an increase in the computing markets, particularly in notebook. The increase in revenue from packaging and testing services and other for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to same period last year, was primarily due to increased demand. The decrease in license and development services for the sixnine months ended DecemberMarch 31, 20252026 was related to the license agreement with a customer to license our proprietary SiC technology and provided 24-month engineering and development services, which was completed during the three months ended March 31, 2025.

Cost of goods sold was $127.4$129.3 million for the three months ended DecemberMarch 31, 2025,2026, a decrease of $5.7$0.2 million or 4.3%,0.2%, as compared to $133.1$129.5 million for the same quarter last year. The decrease was primarily due to 6.3%0.5% decrease in sales. Gross margin decreased by 1.60.3 percentage points to 21.5%21.1% for the three months ended DecemberMarch 31, 2025,2026, as compared to 23.1%21.4% for the same quarter last year. The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the three months ended DecemberMarch 31, 2025.2026.

Cost of goods sold was $396.4 million for the nine months ended March 31, 2026, a decrease of $3.6 million, or 0.9%, as compared to $400.0 million for the same period last year. The decrease was primarily due to 2.1% decrease in sales. Gross margin decreased by 1.30.9 percentage points to 22.5%22.1% for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to 23.8%23.0% for the same period last year. The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the current periods.

Research and development expenses were $25.2$26.1 million for the three months ended DecemberMarch 31, 2025,2026, an increase of $1.2$2.7 million, or 5.2%,11.3%, as compared to $24.0$23.4 million for the same quarter last year. The increase was primarily attributable to ana $1.7 million increase ofin employee compensation and benefit expense mainly due to higher bonus expense, increased headcount and merit salary increases.increases, a $1.3 million increase in product prototyping engineering expense as a result of increased engineering activities, a $0.5 million increase in consulting and recruiting fees and $0.8 million increase in allocation, partially offset by a $1.1 million decrease in depreciation expenses and a $0.7 million decrease in share-based compensation expense as a result of the change in estimated achievement of the performance conditions associated with the MSUs granted in December 2021.

Research and development expenses were $49.4$75.4 million for the sixnine months ended DecemberMarch 31, 2025,2026, an increase of $2.9$5.6 million, or 6.3%,8.0%, as compared to $46.4$69.8 million for the same period last year. The increase was primarily attributable to ana $4.6 million increase in employee compensation and benefitsbenefit expense,expense mainly due to higher bonus expense, increased headcount and merit salary increases.increases, a $2.6 million increase in product prototyping engineering expense as a result of increased engineering activities, a $0.7 million increase in consulting and recruiting fees and $1.4 million increase in allocation, partially offset by a $3.3 million decrease in depreciation expenses and a $0.6 million decrease in share-based compensation expense as a result of the change in estimated achievement of the performance conditions associated with the MSUs granted in December 2021.

Selling, general and administrative expenses were $23.2$22.5 million for the three months ended DecemberMarch 31, 2025,2026, an increase of $1.2$0.1 million, or 5.6%,0.4%, as compared to $22.0$22.4 million for the same quarter last year. The increase was primarily due to a $0.3$0.5 million increase in employee compensation and benefitsbenefit expenses primarily due to merit salary increases and higher medical insurancebonus expense, a $0.5$0.4 million increase in legal expensesexpenses, $0.3 million increase in design-win commission and a $0.3$0.1 million increase in audit and tax professional service fees.fees, offset by $1.4 million decrease in share-based compensation expense as a result of the change in estimated achievement of the performance conditions associated with the MSUs granted in December 2021. In addition, during the three months ended March 31, 2026, we identified one purchased manufacturing equipment, for which we were unable to meet our production process requirements. Because the equipment had no alternative uses, we recorded an impairment of $0.3 million related to such equipment.

Selling, general and administrative expenses were $46.5$69.0 million for the sixnine months ended DecemberMarch 31, 2025,2026, an increase of $2.2$2.3 million, or 5.0%,3.5%, as compared to $44.3$66.7 million for the same period last year. The increase was primarily due to a $1.2$1.7 million increase in employee compensation and benefits expenses primarily due to merit salary increases and higher medical insurancebonus expense, a $0.6$0.9 million increase in legal expensesexpenses, and a $0.5$0.6 million increase in audit and tax professional service fees.fees, offset by a $1.0 million decrease in share-based compensation expense as a result of the change in estimated achievement of the performance conditions associated with the MSUs granted in December 2021. and $0.1 million decrease in design-win commission expense. In addition, during the nine months ended March 31, 2026, we recorded an impairment of $0.3 million related to an equipment.

Other income (loss), net increased in the three months ended DecemberMarch 31, 2025,2026, as compared to the same periodsquarter last year primarily due to an increase in foreign currency exchange gain as a result of the appreciation of RMB against USD.

Other income (loss), net increased in the sixnine months ended DecemberMarch 31, 2025,2026, as compared to the same periods last year primarily due to an increase in foreign currency exchange gain as a result of the appreciation of RMB against USD, as well as $1.9 million of certain services were provided by the Company to the JV Company.

Interest income decreasedincreased in the three and six months ended DecemberMarch 31, 2025,2026, as compared to the same periodsquarter last year primarily due to lowerhigher interestcash ratesbalances in the current periods.quarter.

Interest expense decreased in the three and sixnine months ended DecemberMarch 31, 20252026 as compared to the same periodsperiod last year primarily due to lower outstanding loan balance in the current periods.

Equity method investment income increased in the sixnine months ended DecemberMarch 31, 2025,2026, as compared to the same period last year as a result of the gain from the sales of 20.3% outstanding equity interest in the JV Company in August 2025, as well as an income recorded from the equity method investment during the sixnine months ended DecemberMarch 31, 2025,2026, compared to the equity method investment loss in the same periodsperiod last year.

We recognized income tax expense of approximately $1.5$1.0 million and $1.2$0.7 million for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. The income tax expense of $1.5$1.0 million for the three months ended DecemberMarch 31, 20252026 included a $0.1 million discrete tax expense. The income tax expense of $1.2$0.7 million for the three months ended DecemberMarch 31, 20242025 included a $0.1 million discrete tax expense. Excluding the discrete income tax items, the income tax expense for the three months ended DecemberMarch 31, 20252026 and 20242025 was $1.4$0.9 million and $1.2$0.6 million, respectively, and the effective tax rate for the three months ended DecemberMarch 31, 20252026 and 20242025 was (12.07.4)% and (22.1%5.8%), respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current period and the same period of last year.

We recognized income tax expense of approximately $3.4$4.4 million and $2.3$2.9 million for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. The income tax expense of $3.4$4.4 million for the sixnine months ended DecemberMarch 31, 20252026 included a $0.1$0.2 million discrete tax expense. The income tax expense of $2.3$2.9 million for the sixnine months ended DecemberMarch 31, 20242025 included a $0.1$0.2 million discrete tax expense. Excluding the discrete income tax items, the income tax expense for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was $3.3$4.2 million and $2.1$2.7 million, respectively, and the effective tax rate for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was (27.317.0)% and (31.4%16.1%), respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year, including reporting $0.7 million of income tax expense related to the Company’s income from its investment in CQJV for the sixnine months ended DecemberMarch 31, 20252026 versus ana $0.2 million tax benefit for the sixnine months ended DecemberMarch 31, 2024.2025. In addition, income tax payable increased by $10.4 million and deferred tax liability decreased by $10.5 million as a result of the sale of approximately 20.3% of the Company’s equity interest in the JV company for $150 million during the nine months ended March 31, 2026 . We made income tax payments of approximately $0.7 million and $9.3 million during the three and nine months ended March 31, 2026, respectively, as a result of the sale transaction.

WeThe fileCompany ourfiles its income tax returns in the United States and in various foreign jurisdictions. The tax years 2004 to 2025 remain open to examination by U.S. federal and state tax authorities. The tax years 2019 to 2025 remain open to examination by foreign tax authorities.

Our income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of DecemberMarch 31, 2025,2026, the gross amount of unrecognized tax benefits was approximately $10.8$10.9 million, of which $7.5 million, if recognized, would reduce the effective income tax rate in future periods. If ourthe Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when wethe Company determine the liabilities are no longer necessary. We do not anticipate any material changes to its uncertain tax positions during the next twelve months.

In September 2021, Jireh Semiconductor Incorporated (“Jireh”), one of the wholly-owned subsidiaries, entered into a financing arrangement agreement with a company (“Lender”) for the lease and purchase of a machinery equipment manufactured by a supplier. This agreement includes a payment term of five (5) years, pursuant to which Jireh commenced payments of interestsinterest and principal to the Lender in September 2022 when the final installation and acceptance of the equipment were completed. After the end of such payment term, Jireh has the option to purchase the equipment for $1. The implied interest rate was 4.75% per annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes. The total purchase price of this equipment was euro 12.0 million. In April 2021, Jireh made a down payment of euro 6.0 million, representing 50% of the total purchase price of the equipment, to the supplier. In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for euro 4.8 million, to the supplier on behalf of Jireh. In September 2022, Lender paid the remaining 10% payment for the total purchase price and reimbursed Jireh for the 50% down payment, after the installation and configuration of the equipment. The title of the equipment was transferred to Lender following such payment. The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million. The financing arrangement is secured by this equipment and other equipment at Jireh, which had thea net book value of $11.3$10.9 million as of DecemberMarch 31, 2025.2026. As of DecemberMarch 31, 2025,2026, the outstanding balance of this debt financing was $5.1$4.4 million.

On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the “Bank”) in an amount up to $45.0 million for the purpose of expanding and upgrading our fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by us. The agreement has a 5.5 year5.5-year term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted SOFR plus the applicable margin based on the outstanding balance of the loan. This agreement contains customary restrictive covenants and includes certain financial covenants that we are required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of June 30, 2025, Jireh was in compliance with these covenants and the outstanding balance of this loan was $20.3 million. In August 2025, the Companywe paid the outstanding balance in full and this agreement was terminated. As of DecemberMarch 31, 2025,2026, there was no outstanding balance.

On August 9, 2019, one of our wholly-owned subsidiaries (the "“Borrower"”) entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its accounts receivable with recourse. This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on the Secured Overnight Financing Rate ("“SOFR"”), plus 2.01% per annum. We are the guarantor for this agreement. We are accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date. On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. In August 2025, this factoring agreement was terminated. As of DecemberMarch 31, 2025,2026, there was no outstanding balance.

As of DecemberMarch 31, 20252026 and June 30, 2025, we had $196.8$190.7 million and $153.5 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consist of cash on hand, restricted cash, and short-term bank deposits with original maturities of three months or less. Of the $196.8$190.7 million and $153.5 million cash, cash equivalents and restricted cash, $89.4$81.2 million and $40.7 million, respectively, are deposited with financial institutions outside the United States.

For the sixnine months ended DecemberMarch 31, 2025,2026, the $23.1$38.8 million decrease in cash provided by operating activities compared to the same period last year was primarily due to an increase of net loss of $6.3$9.3 million, a decrease of non-cash expenses of $11.3$15.9 million, which includes an increase of $8.7$8.1 million in deferred income tax, netnet, a decrease of $4.2 million in depreciation and amortization, and an increase of $2.9$2.5 million in equity method investment gain due to the 20.3% equity method investment sale and income recorded from the equity method investment in current period, compared to a loss recorded from the equity method investment in the same period last year, an increase of $22.4$17.0 million in inventory purchase, a decrease of accounts payable of $8.5$20.9 million primarily due to timing of payment, and a decrease of $3.3$5.1 million in net payable, equity investee, and increase of $0.4 million in other current and long-term assets.investee. These sources of cash were offset by a decrease of $12.3 million in accounts receivable, $4.0 million increase in deferred revenue, an increase of $2.5$11.5 million in accrued and other liabilities, and an increase of $2.6 million in income tax payable primarily due to the sale of the 20.3% interest in the equity method investment, a decrease of $13.1 million in accounts receivable, a decrease of $8.5 million in contract assets, and an increase of $4.6 million in deferred revenue.investment.

For the sixnine months ended DecemberMarch 31, 2025,2026, the $88.6$110.4 million increase in cash provided by investing activities compared to the same period last year was primarily due to $103.2$133.5 million of proceeds from sale of equity interest in the JV Company, net with transaction costs, partially offset by $10.3$14.0 million of more purchases of property and equipment, $3.5$8.0 million of a loan issued to a supplier, and $0.5$0.6 million of more purchase of intangible assets, as well a $0.3$0.5 million less government grant related to equipment in the sixnine months ended DecemberMarch 31, 20252026 compared to the same period last yearyear.

For the sixnine months ended DecemberMarch 31, 2025,2026, the $29.5$28.3 million increase in cash used in financing activities compared to the same period last year was primarily due to $15.9$13.7 million of repayment of loan borrowings and $14.0$18.2 million of payment for repurchases of common shares, partially offset by $0.3$3.5 million of withholding tax on restricted stock units.

There were no material changes outside of our ordinary course of business in our contractual obligations from those disclosed in our Annual Report on2025 Form 10-K for the fiscal year ended June 30, 2025.10-K.