Document
P60DP30D29700000false--06-30Q1202100013874672000000.000.0020.00210000000010000000031944000320210002530500025383000P5YP5YP5Y00.0020.00210000000100000000000006639000663800000 0001387467 2020-07-01 2020-09-30 0001387467 2020-10-23 0001387467 2020-09-30 0001387467 2020-06-30 0001387467 2019-07-01 2019-09-30 0001387467 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001387467 us-gaap:TreasuryStockMember 2019-09-30 0001387467 us-gaap:ParentMember 2020-07-01 2020-09-30 0001387467 us-gaap:TreasuryStockMember 2020-09-30 0001387467 us-gaap:ParentMember 2020-06-30 0001387467 us-gaap:ParentMember 2019-07-01 2019-09-30 0001387467 us-gaap:TreasuryStockMember 2020-06-30 0001387467 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0001387467 us-gaap:ParentMember 2020-09-30 0001387467 us-gaap:RetainedEarningsMember 2020-06-30 0001387467 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001387467 us-gaap:NoncontrollingInterestMember 2020-07-01 2020-09-30 0001387467 us-gaap:CommonStockMember 2020-06-30 0001387467 us-gaap:CommonStockMember 2019-06-30 0001387467 us-gaap:CommonStockMember 2019-09-30 0001387467 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001387467 us-gaap:NoncontrollingInterestMember 2019-07-01 2019-09-30 0001387467 us-gaap:TreasuryStockMember 2019-06-30 0001387467 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0001387467 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0001387467 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001387467 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0001387467 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001387467 us-gaap:NoncontrollingInterestMember 2019-09-30 0001387467 2019-06-30 0001387467 2019-09-30 0001387467 us-gaap:ParentMember 2019-09-30 0001387467 us-gaap:CommonStockMember 2020-09-30 0001387467 us-gaap:NoncontrollingInterestMember 2019-06-30 0001387467 us-gaap:TreasuryStockMember 2020-07-01 2020-09-30 0001387467 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001387467 us-gaap:RetainedEarningsMember 2019-09-30 0001387467 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001387467 us-gaap:NoncontrollingInterestMember 2020-09-30 0001387467 us-gaap:NoncontrollingInterestMember 2020-06-30 0001387467 us-gaap:RetainedEarningsMember 2019-06-30 0001387467 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001387467 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-01 2019-09-30 0001387467 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0001387467 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0001387467 us-gaap:RetainedEarningsMember 2020-09-30 0001387467 us-gaap:ParentMember 2019-06-30 0001387467 aosl:FacilityinLiangjiangNewAreaofChongqingtheJointVentureMember 2020-09-30 2020-09-30 0001387467 aosl:ChongqingFundsMember aosl:FacilityinLiangjiangNewAreaofChongqingtheJointVentureMember 2020-09-30 2020-09-30 0001387467 srt:ParentCompanyMember aosl:FacilityinLiangjiangNewAreaofChongqingtheJointVentureMember 2020-09-30 2020-09-30 0001387467 us-gaap:EmployeeStockMember 2019-07-01 2019-09-30 0001387467 aosl:StockOptionsAndRestrictedStockUnitsRsusMember 2020-07-01 2020-09-30 0001387467 aosl:StockOptionsAndRestrictedStockUnitsRsusMember 2019-07-01 2019-09-30 0001387467 us-gaap:EmployeeStockMember 2020-07-01 2020-09-30 0001387467 aosl:CustomerMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-07-01 2020-09-30 0001387467 aosl:CustomerBMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2019-09-30 0001387467 aosl:CustomerBMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-07-01 2020-09-30 0001387467 aosl:CustomerMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2019-09-30 0001387467 aosl:CustomerEMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-06-30 2020-06-30 0001387467 aosl:CustomerFMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-06-30 2020-06-30 0001387467 aosl:CustomerGMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-06-30 2020-06-30 0001387467 aosl:CustomerHMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-06-30 2020-06-30 0001387467 aosl:CustomerBMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-09-30 2020-09-30 0001387467 aosl:CustomerCMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-06-30 2020-06-30 0001387467 aosl:CustomerMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-09-30 2020-09-30 0001387467 aosl:CustomerCMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-09-30 2020-09-30 0001387467 aosl:HuaweiMember srt:MaximumMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-05-01 2019-12-31 0001387467 aosl:HuaweiMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0001387467 aosl:HuaweiMember srt:MinimumMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-05-01 2019-12-31 0001387467 srt:MaximumMember 2020-07-01 2020-09-30 0001387467 srt:MinimumMember 2020-07-01 2020-09-30 0001387467 us-gaap:MachineryAndEquipmentMember 2020-06-30 0001387467 us-gaap:ComputerEquipmentMember 2020-06-30 0001387467 us-gaap:MachineryAndEquipmentMember 2020-09-30 0001387467 aosl:EquipmentAndToolingMember 2020-06-30 0001387467 us-gaap:LandMember 2020-06-30 0001387467 us-gaap:FurnitureAndFixturesMember 2020-06-30 0001387467 us-gaap:LandMember 2020-09-30 0001387467 us-gaap:BuildingMember 2020-09-30 0001387467 us-gaap:ComputerEquipmentMember 2020-09-30 0001387467 us-gaap:FurnitureAndFixturesMember 2020-09-30 0001387467 us-gaap:LeaseholdImprovementsMember 2020-09-30 0001387467 aosl:EquipmentAndToolingMember 2020-09-30 0001387467 us-gaap:LeaseholdImprovementsMember 2020-06-30 0001387467 us-gaap:BuildingMember 2020-06-30 0001387467 aosl:CustomerAAndCustomerBMember 2020-09-30 0001387467 us-gaap:CustomerRelationshipsMember 2020-09-30 0001387467 us-gaap:CustomerRelationshipsMember 2020-06-30 0001387467 us-gaap:TradeNamesMember 2020-09-30 0001387467 us-gaap:TradeNamesMember 2020-06-30 0001387467 aosl:PatentsAndPatentedTechnologyMember 2020-09-30 0001387467 aosl:PatentsAndPatentedTechnologyMember 2020-06-30 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember 2019-12-01 2019-12-31 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheTwoMember us-gaap:LoansPayableMember 2020-06-30 0001387467 country:CN aosl:BankOfCommunicationsLimitedMember us-gaap:BaseRateMember 2019-10-01 2019-10-31 0001387467 aosl:LoanAgreementDecemberFourTwoThousandEighteenMember aosl:ChinaMerchantBankAndChongqingLiangJiangNewDistrictChinaMerchantsGroupLimitedCompanyMember 2018-12-04 0001387467 aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember 2018-05-09 0001387467 aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember 2017-08-15 0001387467 country:CN aosl:BankOfCommunicationsLimitedMember us-gaap:BaseRateMember 2019-10-31 0001387467 us-gaap:SecuredDebtMember aosl:ChinaDevelopmentBankAgriculturalBankofChinaChinaMerchantBankandChongqingRuralCommercialBankMember aosl:ChinaOneYearLoanPrimeRateMember 2020-04-26 2020-04-26 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyMember us-gaap:LoansPayableMember 2020-04-15 0001387467 aosl:IndustrialAndCommercialBankofChinaMember us-gaap:ForeignLineOfCreditMember 2020-09-30 0001387467 aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember 2020-09-30 0001387467 aosl:LoanAgreementSeptemberTwentyThirdTwoThousandNineteenMember aosl:ChinaEverbrightBankMember us-gaap:ForeignLineOfCreditMember 2019-09-23 2019-09-23 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheTwoMember us-gaap:LoansPayableMember 2020-04-01 2020-06-30 0001387467 us-gaap:SecuredDebtMember aosl:TheBankMember 2020-09-30 0001387467 aosl:ExportImportBankOfChinaMember 2019-03-12 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheThreeMember us-gaap:LoansPayableMember 2020-06-30 0001387467 aosl:ChinaDevelopmentBankMember us-gaap:SecuredDebtMember 2019-12-31 0001387467 us-gaap:SecuredDebtMember aosl:ChinaDevelopmentBankAgriculturalBankofChinaChinaMerchantBankandChongqingRuralCommercialBankMember 2020-04-01 2020-04-30 0001387467 aosl:LoanAgreementSeptemberTwentyThirdTwoThousandNineteenMember aosl:ChinaEverbrightBankMember us-gaap:ForeignLineOfCreditMember 2019-09-23 0001387467 aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember 2018-01-01 2018-01-31 0001387467 aosl:ChinaDevelopmentBankMember us-gaap:SecuredDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-01 2019-12-31 0001387467 aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember aosl:ChinaFiveYearLoanPrimeRateMember 2020-06-28 0001387467 aosl:AccountsReceivableFactoringAgreementAugustNinthTwoThousandNineteenMember aosl:HongkongAndShanghaiBankingCorporationLimitedMember us-gaap:SecuredDebtMember 2020-09-30 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheFourMember us-gaap:LoansPayableMember 2020-09-30 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember 2019-03-12 2019-03-12 0001387467 aosl:LoanAgreementsNovemberTwentyNineAndDecemberFourTwoThousandEighteenMember aosl:ChinaMerchantBankAndChongqingLiangJiangNewDistrictChinaMerchantsGroupLimitedCompanyMember 2020-09-30 0001387467 aosl:ChinaDevelopmentBankMember us-gaap:SecuredDebtMember 2020-09-30 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheOneMember us-gaap:LoansPayableMember 2020-04-01 2020-06-30 0001387467 country:CN aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember us-gaap:BaseRateMember 2018-05-09 2018-05-09 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheThreeMember us-gaap:LoansPayableMember 2020-04-01 2020-06-30 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember 2019-03-12 0001387467 srt:MinimumMember aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2017-08-15 2017-08-15 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyMember us-gaap:LoansPayableMember 2020-09-30 0001387467 us-gaap:SecuredDebtMember aosl:TheBankMember 2018-05-01 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember 2019-03-01 2019-03-31 0001387467 aosl:IndustrialAndCommercialBankofChinaMember us-gaap:ForeignLineOfCreditMember 2018-11-16 0001387467 aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember aosl:ChinaFiveYearLoanPrimeRateMember 2020-06-28 2020-06-28 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheTwoAndThreeMember us-gaap:LoansPayableMember 2020-07-01 2020-09-30 0001387467 us-gaap:SecuredDebtMember aosl:ChinaDevelopmentBankAgriculturalBankofChinaChinaMerchantBankandChongqingRuralCommercialBankMember 2020-09-30 0001387467 aosl:LoanAgreementNovemberTwentyNineTwoThousandEighteenMember aosl:ChinaMerchantBankAndChongqingLiangJiangNewDistrictChinaMerchantsGroupLimitedCompanyMember 2018-11-29 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheOneMember us-gaap:LoansPayableMember 2020-06-30 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyCollateralizedBorrowingsInUSDollarsMember us-gaap:LoansPayableMember 2020-04-15 0001387467 aosl:AccountsReceivableFactoringAgreementAugustNinthTwoThousandNineteenMember aosl:HongkongAndShanghaiBankingCorporationLimitedMember us-gaap:SecuredDebtMember 2019-08-09 0001387467 aosl:BankOfCommunicationsLimitedMember 2020-09-30 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyTrancheFourMember us-gaap:LoansPayableMember 2020-07-01 2020-09-30 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember 2020-06-24 2020-06-24 0001387467 aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember 2020-09-30 0001387467 aosl:LoanAgreementAprilFifteenTwoThousandTwentyWorkingCapitalBorrowingInChineseYuanMember us-gaap:LoansPayableMember 2020-04-15 0001387467 country:CN aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember us-gaap:BaseRateMember 2018-05-09 0001387467 aosl:BankOfCommunicationsLimitedMember 2019-10-31 0001387467 aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember 2018-07-01 2018-07-31 0001387467 srt:MaximumMember aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2017-08-15 2017-08-15 0001387467 us-gaap:SecuredDebtMember aosl:ChinaDevelopmentBankAgriculturalBankofChinaChinaMerchantBankandChongqingRuralCommercialBankMember 2020-04-26 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember aosl:ChinaFiveYearLoanPrimeRateMember 2020-06-24 2020-06-24 0001387467 aosl:ExportImportBankOfChinaMember 2020-09-30 2020-09-30 0001387467 aosl:AccountsReceivableFactoringAgreementAugustNinthTwoThousandNineteenMember aosl:HongkongAndShanghaiBankingCorporationLimitedMember us-gaap:SecuredDebtMember 2020-07-01 2020-09-30 0001387467 aosl:LoanAgreementsNovemberTwentyNineAndDecemberFourTwoThousandEighteenMember aosl:ChinaMerchantBankAndChongqingLiangJiangNewDistrictChinaMerchantsGroupLimitedCompanyMember 2018-12-31 0001387467 aosl:AccountsReceivableFactoringAgreementAugustNinthTwoThousandNineteenMember aosl:HongkongAndShanghaiBankingCorporationLimitedMember us-gaap:SecuredDebtMember 2019-08-09 2019-08-09 0001387467 aosl:LoanAgreementSeptemberTwentyThirdTwoThousandNineteenMember aosl:ChinaEverbrightBankMember us-gaap:ForeignLineOfCreditMember 2020-09-30 0001387467 us-gaap:SecuredDebtMember aosl:ExportImportBankOfChinaMember 2019-10-01 2019-12-31 0001387467 aosl:LeaseFinancingMember aosl:YinHaiLeasingCompanyandChinaImportExportBankMember 2018-05-09 2018-05-09 0001387467 aosl:TermLoanMember aosl:VariableInterestRateTermLoanMaturingAugust2022Member aosl:TheBankMember us-gaap:SecuredDebtMember 2017-08-15 2017-08-15 0001387467 us-gaap:SecuredDebtMember aosl:TheBankMember 2018-05-01 2018-05-01 0001387467 aosl:PerformanceBasedRestrictedStockUnitsPRSUsMemberMember 2020-09-30 0001387467 aosl:PerformanceBasedRestrictedStockUnitsPRSUsMemberMember 2020-06-30 0001387467 aosl:PerformanceBasedRestrictedStockUnitsPRSUsMemberMember 2019-07-01 2020-06-30 0001387467 aosl:PerformanceBasedRestrictedStockUnitsPRSUsMemberMember 2020-07-01 2020-09-30 0001387467 2019-07-01 2020-06-30 0001387467 aosl:MarketbasedRestrictedStockUnitsMSUMember 2019-07-01 2019-09-30 0001387467 2010-10-21 2020-09-30 0001387467 aosl:TreasuryStockReissuedMember 2010-10-21 2020-09-30 0001387467 aosl:MarketbasedRestrictedStockUnitsMSUMember 2020-07-01 2020-09-30 0001387467 aosl:MarketbasedRestrictedStockUnitsMSUMember 2018-07-01 2018-09-30 0001387467 aosl:PerformanceBasedRestrictedStockUnitsPRSUsMemberMember 2020-09-01 2020-09-30 0001387467 aosl:PerformanceBasedRestrictedStockUnitsPRSUsMemberMember 2019-07-01 2019-09-30 0001387467 us-gaap:ResearchAndDevelopmentExpenseMember 2020-07-01 2020-09-30 0001387467 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-07-01 2020-09-30 0001387467 us-gaap:CostOfSalesMember 2019-07-01 2019-09-30 0001387467 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-07-01 2019-09-30 0001387467 us-gaap:CostOfSalesMember 2020-07-01 2020-09-30 0001387467 us-gaap:ResearchAndDevelopmentExpenseMember 2019-07-01 2019-09-30 0001387467 aosl:TimebasedRestrictedStockUnitsTRSUMember 2020-07-01 2020-09-30 0001387467 aosl:TimebasedRestrictedStockUnitsTRSUMember 2019-07-01 2020-06-30 0001387467 aosl:TimebasedRestrictedStockUnitsTRSUMember 2020-06-30 0001387467 aosl:TimebasedRestrictedStockUnitsTRSUMember 2020-09-30 0001387467 us-gaap:EmployeeStockMember 2020-07-01 2020-09-30 0001387467 2020-01-01 2020-03-31 0001387467 aosl:AlteraCorp.V.CommissionerMember 2015-07-27 2020-09-30 0001387467 country:CN 2020-07-01 2020-09-30 0001387467 aosl:OtherCountriesMember 2020-07-01 2020-09-30 0001387467 aosl:OtherCountriesMember 2019-07-01 2019-09-30 0001387467 country:CN 2019-07-01 2019-09-30 0001387467 country:US 2019-07-01 2019-09-30 0001387467 country:HK 2020-07-01 2020-09-30 0001387467 country:HK 2019-07-01 2019-09-30 0001387467 country:KR 2020-07-01 2020-09-30 0001387467 country:US 2020-07-01 2020-09-30 0001387467 country:KR 2019-07-01 2019-09-30 0001387467 aosl:PowerIcMember 2019-07-01 2019-09-30 0001387467 aosl:PowerDiscreteMember 2019-07-01 2019-09-30 0001387467 aosl:PackagingAndTestingServicesMember 2020-07-01 2020-09-30 0001387467 aosl:PowerIcMember 2020-07-01 2020-09-30 0001387467 aosl:PowerDiscreteMember 2020-07-01 2020-09-30 0001387467 aosl:PackagingAndTestingServicesMember 2019-07-01 2019-09-30 0001387467 country:US 2020-09-30 0001387467 country:CN 2020-09-30 0001387467 country:CN 2020-06-30 0001387467 aosl:OtherCountriesMember 2020-06-30 0001387467 country:US 2020-06-30 0001387467 aosl:OtherCountriesMember 2020-09-30 0001387467 aosl:InventoriesAndServicesMember 2020-09-30 0001387467 us-gaap:CapitalAdditionsMember 2020-09-30 0001387467 us-gaap:IndemnificationGuaranteeMember 2020-09-30 0001387467 us-gaap:CapitalAdditionsMember 2020-06-30 0001387467 aosl:InventoriesAndServicesMember 2020-06-30 0001387467 us-gaap:IndemnificationGuaranteeMember 2020-06-30 xbrli:pure utreg:Rate iso4217:USD xbrli:shares aosl:Segment iso4217:CNY xbrli:shares iso4217:USD
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM              TO             
Commission file number 001-34717
__________________________
Alpha and Omega Semiconductor Limited

(Exact name of Registrant as Specified in its Charter)
Bermuda
77-0553536
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification Number)
Clarendon House, 2 Church Street
Hamilton HM 11, Bermuda
(Address of Principal Registered
Offices including Zip Code)
(408830-9742
(Registrant's Telephone Number, Including Area Code)
__________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
 
 
 
 
(Do not check if a smaller reporting company)
 
Smaller reporting company
Emerging growth company
 
 
 
 
 
 
 
 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares
AOSL
The NASDAQ Global Select Market


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Number of common shares outstanding as of October 23, 2020: 25,487,415




Alpha and Omega Semiconductor Limited
Form 10-Q
Fiscal First Quarter Ended September 30, 2020
TABLE OF CONTENTS
 
 
 
Page
Part I.
 
    Item 1.
 
 
 
 
 
 
    Item 2.
    Item 3.
    Item 4.
Part II.
 
    Item 1.
    Item 1A.
    Item 2.
    Item 3.
    Item 4.
    Item 5.
    Item 6.
 






PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except par value per share)
 
September 30,
2020
 
June 30,
2020
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
154,698

 
$
158,536

Restricted cash
2,274

 
2,190

Accounts receivable, net
26,317

 
13,272

Inventories
137,700

 
135,528

Other current assets
10,479

 
8,807

Total current assets
331,468

 
318,333

Property, plant and equipment, net
421,642

 
412,340

Operating lease right-of-use assets, net
32,407

 
32,948

Intangible assets, net
15,930

 
16,770

Deferred income tax assets
4,774

 
4,766

Restricted cash - long-term
2,054

 
1,978

Other long-term assets
3,473

 
5,804

Total assets
$
811,748

 
$
792,939

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
87,604

 
$
86,181

Accrued liabilities
55,875

 
54,986

Income taxes payable
2,100

 
1,360

Short-term debt
32,746

 
30,114

Finance lease liabilities
15,844

 
15,258

Operating lease liabilities
4,095

 
4,159

Total current liabilities
198,264

 
192,058

Long-term debt
99,970

 
99,775

Income taxes payable - long-term
912

 
903

Deferred income tax liabilities
521

 
496

Finance lease liabilities - long-term
23,913

 
26,842

Operating lease liabilities - long-term
29,813

 
30,254

Other long-term liabilities
9,133

 
10,723

Total liabilities
362,526

 
361,051

Commitments and contingencies (Note 10)

 

Equity:
 
 
 
Preferred shares, par value $0.002 per share:
 
 
 
Authorized: 10,000 shares; issued and outstanding: none at September 30, 2020 and June 30, 2020

 

Common shares, par value $0.002 per share:
 
 
 
Authorized: 100,000 shares; issued and outstanding: 32,021 shares and 25,383 shares, respectively at September 30, 2020 and 31,944 shares and 25,305 shares, respectively at June 30, 2020
64

 
64

Treasury shares at cost: 6,638 shares at September 30, 2020 and 6,639 shares at June 30, 2020
(66,171
)
 
(66,184
)
Additional paid-in capital
248,967

 
246,103

Accumulated other comprehensive loss
(2,146
)
 
(5,127
)
Retained earnings
128,394

 
118,833

Total Alpha and Omega Semiconductor Limited shareholder's equity
309,108

 
293,689


1

Table of Contents

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except par value per share)



Noncontrolling interest
140,114

 
138,199

Total equity
449,222

 
431,888

Total liabilities and equity
$
811,748

 
$
792,939


See accompanying notes to these condensed consolidated financial statements.

2

Table of Contents

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share data)

 

 
Three Months Ended September 30,
 
2020
 
2019
Revenue
$
151,551

 
$
117,802

Cost of goods sold
109,028

 
90,870

Gross profit
42,523

 
26,932

Operating expenses
 
 
 
Research and development
14,691

 
12,368

Selling, general and administrative
17,505

 
15,185

Total operating expenses
32,196

 
27,553

Operating income (loss)
10,327

 
(621
)
Interest expense and other income (loss), net
(549
)
 
(827
)
Income (loss) before income taxes
9,778

 
(1,448
)
Income tax expense
1,011

 
410

Net income (loss) including noncontrolling interest
8,767

 
(1,858
)
Net loss attributable to noncontrolling interest
(807
)
 
(2,867
)
Net income attributable to Alpha and Omega Semiconductor Limited
$
9,574

 
$
1,009

Net income per common share attributable to Alpha and Omega Semiconductor Limited
 
 
 
Basic
$
0.38

 
$
0.04

Diluted
$
0.36

 
$
0.04

Weighted average number of common shares attributable to Alpha and Omega Semiconductor Limited used to compute net income per share
 
 
 
Basic
25,340

 
24,538

Diluted
26,314

 
25,130


See accompanying notes to these condensed consolidated financial statements.


3

Table of Contents
ALPHA AND OMEGA SEMICONDUCTOR LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)



 
Three Months Ended September 30,
 
2020
 
2019
Net income (loss) including noncontrolling interest
$
8,767

 
$
(1,858
)
Other comprehensive income (loss), net of tax
 
 
 
Foreign currency translation adjustment
5,703

 
(6,151
)
Comprehensive income (loss)
14,470

 
(8,009
)
Less: Noncontrolling interest
1,915

 
(5,835
)
Comprehensive income (loss) attributable to Alpha and Omega Semiconductor Limited
$
12,555

 
$
(2,174
)


See accompanying notes to these condensed consolidated financial statements.


4

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in thousands)

 
 
Common Shares

 
Treasury Stock

 
Additional Paid-In Capital

 
Accumulated Other Comprehensive Income (Loss)

 
Retained Earnings

 
Total AOS Shareholders' Equity
 
Noncontrolling Interest
 
Total Equity
Balance, June 30, 2020
 
$
64

 
$
(66,184
)
 
$
246,103

 
$
(5,127
)
 
$
118,833

 
$
293,689

 
$
138,199

 
$
431,888

Reissuance of treasury stock upon exercise of common stock options and release of restricted stock units
 

 
13

 

 

 
(13
)
 

 

 

Withholding tax on restricted stock units
 

 

 
(412
)
 

 

 
(412
)
 

 
(412
)
Share-based compensation
 

 

 
2,276

 

 

 
2,276

 

 
2,276

Restricted stock units settlement in connection with service
 

 

 
1,000

 

 

 
1,000

 

 
1,000

Net income (loss)
 

 

 

 

 
9,574

 
9,574

 
(807
)
 
8,767

Cumulative translation adjustment
 

 

 

 
2,981

 

 
2,981

 
2,722

 
5,703

Balance, September 30, 2020
 
$
64

 
$
(66,171
)
 
$
248,967

 
$
(2,146
)
 
$
128,394

 
$
309,108

 
$
140,114

 
$
449,222

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Shares

 
Treasury Stock

 
Additional Paid-In Capital

 
Accumulated Other Comprehensive Income (Loss)

 
Retained Earnings

 
Total AOS Shareholders' Equity
 
Noncontrolling Interest
 
Total Equity
Balance, June 30, 2019
 
$
62

 
$
(66,240
)
 
$
234,410

 
$
(2,693
)
 
$
125,485

 
$
291,024

 
$
152,265

 
$
443,289

Reissuance of treasury stock upon exercise of common stock options and release of restricted stock units
 

 
13

 

 

 
(13
)
 

 

 

Withholding tax on restricted stock units
 

 

 
(96
)
 

 

 
(96
)
 

 
(96
)
Share-based compensation
 

 

 
2,369

 

 

 
2,369

 

 
2,369

Net income (loss)
 

 

 

 

 
1,009

 
1,009

 
(2,867
)
 
(1,858
)
Cumulative translation adjustment
 

 

 

 
(3,183
)
 

 
(3,183
)
 
(2,968
)
 
(6,151
)
Balance, September 30, 2019
 
$
62

 
$
(66,227
)
 
$
236,683

 
$
(5,876
)
 
$
126,481

 
$
291,123

 
$
146,430

 
$
437,553

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


See accompanying notes to these condensed consolidated financial statements.


5

Table of Contents
ALPHA AND OMEGA SEMICONDUCTOR LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)



 
Three Months Ended September 30,
 
2020
 
2019
Cash flows from operating activities
 
 
 
Net income (loss) including noncontrolling interest
$
8,767

 
$
(1,858
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
12,489

 
10,904

Share-based compensation expense
2,876

 
2,369

Deferred income taxes, net
17

 
(32
)
Loss on disposal of property and equipment
47

 
36

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(13,044
)
 
(15,033
)
Inventories
(2,172
)
 
(5,823
)
Other current and long-term assets
(1,011
)
 
3,756

Accounts payable
1,930

 
753

Income taxes payable
749

 
47

Accrued and other liabilities
(800
)
 
3,654

Net cash provided by (used in) operating activities
9,848

 
(1,227
)
Cash flows from investing activities
 
 
 
Purchases of property and equipment excluding JV Company
(7,944
)
 
(8,292
)
Purchases of property and equipment in JV Company
(3,393
)
 
(7,506
)
Net cash used in investing activities
(11,337
)
 
(15,798
)
Cash flows from financing activities
 
 
 
Withholding tax on restricted stock units
(412
)
 
(96
)
Proceeds from borrowings
11,300

 
2,790

Repayments of borrowings
(11,085
)
 
(2,085
)
Principal payments on finance leases
(3,989
)
 
(1,691
)
Net cash used in financing activities
(4,186
)
 
(1,082
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
1,997

 
(805
)
Net decrease in cash, cash equivalents and restricted cash
(3,678
)
 
(18,912
)
Cash, cash equivalents and restricted cash at beginning of period
162,704

 
124,295

Cash, cash equivalents and restricted cash at end of period
$
159,026

 
$
105,383

 
 
 
 
Supplemental disclosures of non-cash investing and financing information:
 
 
 
Property and equipment purchased but not yet paid
$
6,877

 
$
8,334


See accompanying notes to these condensed consolidated financial statements.

6

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. The Company and Significant Accounting Policies
The Company

Alpha and Omega Semiconductor Limited and its subsidiaries (the “Company”, "AOS", "we" or "us") design, develop and supply a broad range of power semiconductors. The Company's portfolio of products targets high-volume applications, including personal and portable computers, graphic cards, flat panel TVs, home appliances, smart phones, battery packs, quick chargers, home appliances, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. The Company conducts its operations primarily in the United States of America (“USA”), Hong Kong, China, and South Korea.
Basis of Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission Regulation S-X, as amended. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included in the interim periods. Operating results for the three months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021 or any other interim period. The condensed consolidated balance sheets at June 30, 2020 is derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Joint Venture

On March 29, 2016, the Company entered into a joint venture contract (the “JV Agreement”) with two investment funds owned by the Municipality of Chongqing (the “Chongqing Funds”), pursuant to which the Company and the Chongqing Funds formed a joint venture, (the “JV Company”), for the purpose of constructing and operating a power semiconductor packaging, testing and 12-inch wafer fabrication facility in the Liangjiang New Area of Chongqing, China (the “JV Transaction”). The fab is being built in phases.  As of September 30, 2020, the Company owns 51%, and the Chongqing Funds own 49% of the equity interest in the JV Company. The Joint Venture is accounted under the provisions of the consolidation guidance since the Company has controlling financial interest. If both parties agree that the termination of the JV Company is the best interest of each party or the JV Company is bankrupt or insolvent where either party may terminate early, after paying the debts of the JV Company, the remaining assets of the JV Company shall be paid to the Chongqing Funds to cover the principal of its total paid-in contributions plus interest at 10% simple annual rate prior to distributing the balance of the JV Company's assets to the Company. The JV Company has reached its targeted production of assembly and testing and is currently ramping up its Phase I of the 12-inch wafer fabrication.

Certain Significant Risks and Uncertainties Related to Outbreak of Coronavirus Disease 2019 (“COVID-19”)

The COVID-19 pandemic has had and continues to have a negative impact on business and economic activities across the globe. As a result of the COVID-19 pandemic and the global economic downturn and changing consumer behaviors due to various restrictions imposed by governments, the Company has experienced shifting market trends, including an increasing demand in the markets for notebooks, PCs and gaming devices and decreasing demand for mobile phone and industrial products, as more consumers are staying at and working from home. While the Company has recently benefited from the increasing demand of PC related products, there is no guarantee that this trend will continue, and such increasing demand may discontinue or decline as government authorities relax COVID-19 related restrictions. Furthermore, as the COVID-19 pandemic continues and global economic downturn and high unemployment persists, consumer spending may slow down substantially, in which case the Company may experience a significant decline of customer orders for its products, including those designed for PC-related applications, and such decline will adversely affect its financial conditions and results of operations. The extent to which the COVID-19 pandemic may impact the Company's business will depend on future

7

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

developments which are uncertain, such as the duration of the outbreak, travel restrictions, governmental mandates issued to mitigate the spread of the disease, business closures, economic disruptions, and the effectiveness of actions taken to contain and treat the virus. Accordingly, the COVID-19 pandemic may have a negative impact on the Company's sales and results of operations, the size and duration of which is difficult to predict.

Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. To the extent there are material differences between these estimates and actual results, the Company's condensed consolidated financial statements will be affected. On an ongoing basis, the Company evaluates the estimates, judgments and assumptions including those related to stock rotation returns, price adjustments, allowance for doubtful accounts, inventory reserves, warranty accrual, income taxes, leases, share-based compensation, recoverability of and useful lives for property, plant and equipment and intangible assets, as well as economic implications of the COVID-19 pandemic.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, current operating lease liabilities and long-term operating lease liabilities on the Company's condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, finance lease liabilities and long-term finance leases liabilities on the condensed consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease expense is generally recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred and are not included within the operating lease ROU asset and lease liability calculation. The Company does not record leases on the condensed consolidated balance sheet with a term of one year or less.

Revenue recognition

The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied. The Company recognizes revenue when product is shipped to the customer, net of estimated stock rotation returns and price adjustments to certain distributors.

Packaging and testing services revenue is recognized upon shipment of serviced products to the customer.
Share-based Compensation Expense

The Company maintains an equity-settled, share-based compensation plan to grant restricted share units and stock options. The Company recognizes expense related to share-based compensation awards that are ultimately expected to vest based on estimated fair values on the date of grant. The fair value of restricted share units is based on the fair value of the Company's common share on the date of grant. For restricted stock awards subject to market conditions, the fair value of each restricted stock award is estimated at the date of grant using the Monte-Carlo pricing model. The fair value of stock options is estimated on the date of grant using the Black-Scholes option valuation model. Share-based compensation expense is recognized on the accelerated attribution basis over the requisite service period of the award, which generally equals the vesting period.

8

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Restricted Cash

As a condition of the loan agreement, the Company is required to keep a compensating balance at the issuing bank (see Note 5). In addition, the Company maintains restricted cash in connection with cash balances temporarily restricted for regular business operations including the possibility of a dispute with a vendor. These balances have been excluded from the Company’s cash and cash equivalents balance and are classified as restricted cash in the Company’s condensed consolidated balance sheets. As of September 30, 2020 and June 30, 2020, the amount of restricted cash was $4.3 million and $4.2 million, respectively.
Fair Value of Financial Instruments

The fair value of cash equivalents is based on observable market prices which have been categorized in Level 1 in the fair value hierarchy. Cash equivalents consist primarily of short-term bank deposits. The carrying values of financial instruments such as cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to their short-term maturities. The carrying value of the company's debt is considered a reasonable estimate of fair value which is estimated by considering the current rates available to the Company for debt of the same remaining maturities, structure and terms of the debts.

Government Grants

The Company occasionally receives government grants that provide financial assistance for certain eligible expenditures in China. These grants include reimbursements on interest expense on bank borrowings, payroll tax credits, credit for property, plant and equipment in a particular geographical location, employment credits, as well as business expansion credits. Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to it, and that the grant will be received. The Company records such grants either as a reduction of the related expense, a reduction of the cost of the related asset, or as other income depending upon the nature of the grant. As a result of such grants, during the three months ended September 30, 2020, the Company reduced interest expense and operating expenses by $0.8 million and $1.9 million, respectively. During the three months ended September 30, 2019, the Company reduced interest expense by $2.3 million.

Long-lived Assets

The Company evaluates its long-lived assets for impairment whenever events or changes indicate that the carrying amount of such assets may not be recoverable. Due to the COVID-19 pandemic, the Company assessed the changes in circumstances that occurred since the March 2020 quarter. These factors included operating losses, a decrease in the Company's share price in February and March of 2020, which reduced its market capitalization, expectation of lower business growth for the coming quarters, increased and prolonged economic and regulatory uncertainty in the global economies, and the expectation of higher supply chain costs and increased competition. Therefore, the Company performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows of its long-lived assets to their carrying amount as of June 30, 2020. Some of the more significant assumptions used in the estimated future cash flows include net sales, cost of goods sold, operating expenses, working capital, capital expenditures, income tax rates, and long-term growth rates that appropriately reflects the risks inherent in the future cash flow stream. The Company selected the assumptions used in the financial forecasts by referencing to historical data, supplemented by current and anticipated market conditions, estimated product growth rates and management's plans. These estimated future cash flows were consistent with those the Company uses in its internal planning. The result of the recoverability test indicated that the sum of the expected future cash flows (undiscounted and without interest charges) was greater than the carrying amount of the long-lived assets. Therefore, the Company concluded that the carrying amount of the long-lived assets is recoverable as of June 30, 2020. As of September 30, 2020, the Company performed a qualitative assessment and concluded that indicators of potential impairment did not exit. Therefore, there was no impairment of long-lived assets as of September 30, 2020.

Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company's accumulated other comprehensive income (loss) consists of cumulative foreign currency translation adjustments. Total comprehensive income (loss) is presented in the condensed consolidated statements of comprehensive income (loss).

9

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Recent Accounting Pronouncements
    
Recently Issued Accounting Standards not yet adopted

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher shareholder’s rights, and (3) whether collateral is required. In addition, the ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.
  
This ASU may be applied on a full retrospective of modified retrospective basis. This ASU is effective January 1, 2022 and interim periods presented. Early adoption of the ASU is permitted by the Company effective January 1, 2021. The Company is in the process of assessing the adoption of the ASU on the Company’s financial statements.

In January 2020, the FASB issued ASU No. 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU No. 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12") by removing certain exceptions to the general principles. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company is currently evaluating the impacts of adoption of the new guidance to its consolidated financial statements.

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-15 “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract". These amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contact with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. ASU 2018-15 had no material impact on the Company's consolidated financial statements.


10

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13”). ASU 2018-13 amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 had no material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326). Topic 326 adds to U.S. GAAP the current expected credit loss ("CECL") model, a measurement model based on expected losses rather than incurred losses. Under this new standard, an entity recognizes its estimate of expected credit losses as an allowance. The new standard is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit loss models that entities use to account for debt instruments. The new guidance significantly changes the accounting for credit losses. The Company adopted ASU 2016-13 using the modified-retrospective approach in the first quarter of fiscal 2021 with no impact to its condensed consolidated financial statements.

The adoption of Topic 326 did not significantly change the Company's approach to the valuation of trade receivables. The Company determines whether there is an expected loss on its accounts receivable by reviewing all available data, including its customers' latest available financial statements, their credit standing and historical collection experience, as well as current and future market and economic conditions. As of September 30, 2020 and June 30, 2020, the allowance for credit losses on the Company's trade receivables remained immaterial.

2. Net Income Per Common Share Attributable to Alpha and Omega Semiconductor Limited
The following table presents the calculation of basic and diluted net income per share attributable to common shareholders:
 
Three Months Ended September 30,
 
2020
 
2019
 
(in thousands, except per share data)
Numerator:
 
 
 
Net income attributable to Alpha and Omega Semiconductor Limited
$
9,574

 
$
1,009

 
 
 
 
Denominator:
 
 
 
Basic:
 
 
 
Weighted average number of common shares used to compute basic net income per share
25,340

 
24,538

Diluted:
 
 
 
Weighted average number of common shares used to compute basic net income per share
25,340

 
24,538

Effect of potentially dilutive securities:
 
 
 
Stock options, RSUs and ESPP shares
974

 
592

Weighted average number of common shares used to compute diluted net income per share
26,314

 
25,130

Net income per share attributable to Alpha and Omega Semiconductor Limited:
 
 
 
Basic
$
0.38

 
$
0.04

Diluted
$
0.36

 
$
0.04



11

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following potential dilutive securities were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive:
 
Three Months Ended September 30,
 
2020
 
2019
 
(in thousands)
Employee stock options and RSUs
124

 
338

ESPP
233

 
961

Total potential dilutive securities
357

 
1,299



3. Concentration of Credit Risk and Significant Customers
The Company manages its credit risk associated with exposure to distributors and direct customers on outstanding accounts receivable through the application and review of credit approvals, credit ratings and other monitoring procedures. In some instances, the Company also obtains letters of credit from certain customers.
Credit sales, which are mainly on credit terms of 30 to 60 days, are only made to customers who meet the Company's credit requirements, while sales to new customers or customers with low credit ratings are usually made on an advance payment basis. The Company considers its trade accounts receivable to be of good credit quality because its key distributors and direct customers have long-standing business relationships with the Company and the Company has not experienced any significant bad debt write-offs of accounts receivable in the past. The Company closely monitors the aging of accounts receivable from its distributors and direct customers, and regularly reviews their financial positions, where available.

In the past, the Company shipped its product indirectly to Huawei and its affiliates (collectively, “Huawei”) through distributors. Typically, the Company sold its products to distributors who then sold to original design manufacturers (“ODMs”) that incorporated our products into end applications that were then shipped to Huawei. While distributor point of sale reports summarize distributor sales to ODMs, the Company must make certain assumptions and estimates in order to determine the amount of revenues attributed to indirect shipment to Huawei.  During the fiscal year ended June 30, 2019, the estimated revenues attributed to indirect shipments to Huawei were approximately 2% of total revenues. During the period from May 2019 to December 2019, estimated revenues earned by the Company from shipments indirectly made to Huawei were in the range of $11 million to $13 million. The Company has not shipped any products to Huawei after December 31, 2019. See Note 10.
Summarized below are individual customers whose revenue or accounts receivable balances were 10% or higher than the respective total consolidated amounts:
 
Three Months Ended September 30,
Percentage of revenue
2020
 
2019
Customer A
28.8
%
 
28.8
%
Customer B
33.1
%
 
35.1
%


 
September 30,
2020
 
June 30,
2020
Percentage of accounts receivable
 
Customer A
10.5
%
 
*

Customer B
18.8
%
 
*

Customer C
25.6
%
 
29.8
%
Customer E
*

 
20.1
%
Customer F
*

 
10.4
%
Customer G
*

 
10.3
%
Customer H
*

 
10.9
%

* Less than 10%

12

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
4. Balance Sheet Components
Accounts receivable, net
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
Accounts receivable
$
57,876

 
$
43,394

Less: Allowance for price adjustments
(31,529
)
 
(30,092
)
Less: Allowance for doubtful accounts
(30
)
 
(30
)
Accounts receivable, net
$
26,317

 
$
13,272



Inventories
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
Raw materials
$
54,949

 
$
55,377

Work in-process
67,033

 
61,863

Finished goods
15,718

 
18,288

 
$
137,700

 
$
135,528



Other current assets
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
VAT receivable
$
1,255

 
$
1,639

Other prepaid expenses
2,432

 
1,900

Prepaid insurance
2,761

 
1,520

Prepaid maintenance
923

 
587

Prepayment to supplier
1,266

 
938

Prepaid income tax
1,790

 
1,991

Customs deposit
23

 
163

Other receivables
29

 
69

 
$
10,479

 
$
8,807






13

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Property, plant and equipment, net:
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
Land
$
4,877

 
$
4,877

Building
61,008

 
58,875

Manufacturing machinery and equipment
477,461

 
447,079

Equipment and tooling
25,931

 
25,398

Computer equipment and software
39,212

 
38,779

Office furniture and equipment
3,595

 
3,529

Leasehold improvements
71,298

 
68,224

Land use rights
8,828

 
8,502

 
692,210

 
655,263

Less: accumulated depreciation
(306,956
)
 
(291,515
)
 
385,254

 
363,748

Equipment and construction in progress
36,388

 
48,592

Property, plant and equipment, net
$
421,642

 
$
412,340



Intangible assets, net:
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
Patents and technology rights
$
18,037

 
$
18,037

Trade name
268

 
268

Customer relationships
1,150

 
1,150

 
19,455

 
19,455

Less: accumulated amortization
(3,794
)
 
(2,954
)
 
15,661

 
16,501

Goodwill
269

 
269

Intangible assets, net
$
15,930

 
$
16,770



Estimated future minimum amortization expense of intangible assets is as follows (in thousands):
Year ending June 30,
 
2021 (Remaining)
$
2,520

2022
3,360

2023
3,286

2024
3,249

2025
3,246

 
$
15,661



14

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Other long-term assets:
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
Prepayments for property and equipment
$
482

 
$
2,242

Investment in a privately held company
100

 
100

Customs deposit
1,076

 
1,662

Other long-term deposits
880

 
850

Office leases deposits
771

 
766

Other
164

 
184

 
$
3,473

 
$
5,804


Accrued liabilities:
 
September 30,
2020
 
June 30,
2020
 
(in thousands)
Accrued compensation and benefits
$
22,625

 
$
19,968

Warranty accrual
707

 
709

Stock rotation accrual
3,743

 
3,358

Accrued professional fees
3,712

 
5,868

Accrued inventory
776

 
775

Accrued facilities related expenses
2,157

 
1,831

Accrued property, plant and equipment
10,327

 
11,039

Other accrued expenses
7,129

 
8,017

Customer deposit
2,777

 
2,813

ESPP payable
1,922

 
608

 
$
55,875

 
$
54,986


The activities in the warranty accrual, included in accrued liabilities, are as follows:
 
Three Months Ended September 30,
 
2020
 
2019
 
(in thousands)
Beginning balance
$
709

 
$
623

Additions
71

 
21

Utilization
(73
)
 
(3
)
Ending balance
$
707

 
$
641


The activities in the stock rotation accrual, included in accrued liabilities, are as follows:
 
Three Months Ended September 30,
 
2020
 
2019
 
(in thousands)
Beginning balance
$
3,358

 
$
1,921

Additions
3,016

 
2,565

Utilization
(2,631
)
 
(1,869
)
Ending balance
$
3,743

 
$
2,617



15

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Other long-term liabilities:
 
September 30,
2020
 
June 30,
2020
 
 
(in thousands)
 
Customer deposits
$
6,000

*
$
8,000

*
Computer software liabilities
1,431

 
1,897

 
Deferred payroll taxes
1,702

 
826

 
Other long-term liabilities
$
9,133

 
$
10,723

 


* Customer deposits are from Customer A and Customer B for securing future product shipments from the Company. The Company reclassified $2.0 million of the customer deposit to short term accrued liabilities during the three months ended September 30, 2020 since the repayment of this amount is due within a year.

16

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5. Bank Borrowings

Short-term borrowings

On April 15, 2020, the JV Company entered into a one-year loan agreement with China Everbright Bank in China to borrow a maximum of Chinese Renminbi (RMB) 100 million (approximately $14.3 million based on the currency exchange rate between RMB and U.S. Dollar on April 15, 2020), in the amount in RMB or USD. Interest payments are due on the 20th of each month, and the entire principal is due on April 16, 2021. The loan consists of RMB 20 million for working capital borrowing in Chinese yuan and RMB 80 million for borrowing in US dollars that is collateralized by eligible accounts receivable. During the three months ended June 30, 2020, the JV Company borrowed RMB 20 million, or $2.8 million based on the currency exchange rate between RMB and U.S. Dollar, at a fixed interest rate of 5.1375% per annum under the working capital loan. The JV Company also borrowed $7.1 million and $1.9 million at a fixed interest rate of 2.7% and 2.8% per annum, respectively, during the same period under the accounts receivable collateralized loan. During the three months ended September 30, 2020, the JV Company repaid $9.0 million and borrowed $11.3 million at a fixed interest rate of 2.7% per annum under the accounts receivable collateralized loan. As of September 30, 2020, the total outstanding balance under the loan was $14.2 million.

In October 2019, the Company's subsidiary in China entered into a line of credit facility with Bank of Communications Limited in China. This line of credit matures on February 14, 2021 and is based on the China Base Rate multiplied by 1.05, or 4.99% on October 31, 2019. The purpose of the credit facility is to provide short-term borrowings. The Company could borrow up to approximately RMB 60.0 million or $8.5 million based on the currency exchange rate between the RMB and the U.S. Dollar on October 31, 2019. As of September 30, 2020, there was no outstanding balance under the loan.

On September 23, 2019, the JV Company entered into a short-term revolving loan agreement with China Everbright bank in China. The JV Company can borrow up to RMB 50.0 million, or $7.1 million based on the currency exchange rate between RMB and U.S. Dollar on September 23, 2019, at varying interest rates, in RMB or USD. Interest payments with the entire principal were due no later than 90 days from each borrowing date. As of September 30, 2020, there was no outstanding balance under the loan.

On November 29 and December 4, 2018, the JV Company entered into two, one-year loan agreements with China Merchant Bank and Chongqing LiangJiang New District China Merchants Group Limited Company in China to provide loans for RMB 80 million and RMB 20 million, respectively, or $14.5 million in total based on the currency exchange rate between RMB and U.S. Dollar on December 31, 2018, at varying interest rates. On January 20, 2020, the JV Company renewed the loan agreements with the same terms. Interest payments are due monthly and quarterly with the entire principal due not later than January 21, 2021. As of September 30, 2020, there was no outstanding balance under the loan.

On November 16, 2018, the Company's subsidiary in China entered into a line of credit facility with Industrial and Commercial Bank of China, which expired on September 30, 2019. The purpose of the credit facility was to provide short-term borrowings. The Company could borrow up to approximately RMB 72.0 million or $10.3 million based on currency exchange rate between RMB and U.S. Dollar on November 16, 2018. In October 2019, this line of credit was renewed with the same terms and a maturity date of September 30, 2020. On September 30, 2020, there was no outstanding balance under the line of credit and the line of credit expired.

Accounts Receivable Factoring Agreement

On August 9, 2019, one of the Company'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 one month London Interbank Offered Rate ("LIBOR") plus 1.75% 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. The Borrower was in compliance with these covenants as of September 30, 2020. During the three months ended September 30, 2020, the Company borrowed $29.7 million and repaid this amount in full. As of September 30, 2020, there was no outstanding balance and the Company had unused credit of approximately $30.0 million.

17

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Credit Facilities

On May 9, 2018 (the “Effective Date”), the JV Company entered into a lease finance agreement and a security agreement (the “Agreements”) with YinHai Leasing Company and China Import/Export Bank (the “Lenders”).  Pursuant to the Agreements, the Lenders agreed to provide an aggregate of RMB 400.0 million, or $62.8 million based on the currency exchange rate between RMB and U.S. Dollar on the Effective Date, of financing to the JV Company (the “Lease Financing”). In exchange for the Lease Financing, the JV Company agreed to transfer title of its assembly and testing equipment to the Lenders, and the Lenders leased such equipment to the JV Company under a five-year lease arrangement, pursuant to which the JV Company makes quarterly lease payments to the Lenders consisting of principal and interest based on a repayment schedule mutually agreed by the parties.  The interest under the Lease Financing is accrued based on the China Base Rate multiplied by 1.15, or 5.4625% on the Effective Date.  Under the Agreements, at the end of the five-year lease term, the Lenders agree to sell such equipment back to the JV Company for a nominal amount (RMB 1).  The JV Company’s obligations under the Lease Financing are secured by the land and building owned by the JV Company (the “Collateral”).  The proceeds from the Lease Financing were used primarily for the acquisition and installation of the 12-inch fabrication equipment and other expenses of the JV Company relating to the completion of the fabrication facility located in Chongqing. The Agreements contain customary representation, warranties and covenants, including restrictions on the transfer of the Collateral. The Agreements also contain customary events of default, including but not limited to, failure to make payments and breach of material terms under the Agreements. The Agreements include certain customary closing conditions, including the payment of deposit by the JV Company. On June 28, 2020, the parties entered into a modification to this agreement, pursuant to which the interest rate was changed to be the five-year loan prime rate in China plus 0.8125%, or 5.4625%. Other terms of this agreement remain the same. As of September 30, 2020, the outstanding balance of the Lease Financing of 271.0 million RMB (equivalent of $39.8 million based on the currency exchange rate as of September 30, 2020) was recorded under short-term and long-term finance lease liabilities.

See future minimum lease payment table for finance lease liabilities in Note 6.

Long-term debt

On April 26, 2020, the JV Company entered into a loan agreement with China Development Bank, Agricultural Bank of China, China Merchants Bank and Chongqing Rural Commercial Bank (collectively, "the Banks") in the aggregate principal amount of RMB 250 million (approximately $35.7 million based on the currency exchange rate between RMB and U.S. Dollar on April 26, 2020). The obligation under the loan agreement is secured by certain assets of the JV Company. Beginning December 18, 2020, the JV Company is required to make consecutive semi-annual payments of principal until December 8, 2024. Interest payment is due on March 20, June 20, September 20 and December 20 of each year based on China one-year loan prime rate ("LPR") plus 1.3%. The JV Company drew down RMB 250 million (approximately $35.3 million based on the currency exchange rate between RMB and U.S. Dollar on June 30, 2020) in April 2020. As of September 30, 2020, the outstanding balance of the loan was $36.7 million.

In December 2019, the JV Company entered into a loan agreement with China Development Bank in the amount of $24.0 million. The obligation under the loan agreement is secured by certain assets of the JV Company. Beginning December 18, 2020, the JV Company will make consecutive semi-annual payments of principal until December 8, 2024. The interest is accrued based on the LIBOR rate plus 2.8%. The interest is required to be paid on March 21 and September 21 each year. As of September 30, 2020, the outstanding balance of the loan was $24.0 million.

On March 12, 2019, the JV Company entered into a loan agreement with The Export-Import Bank of China in the aggregate principal amount of RMB 200 million (approximately $29.8 million based on currency exchange rate between RMB and U.S. Dollar on March 31, 2019). The loan will mature on February 20, 2025. The JV Company drew down RMB 190 million and RMB 10 million in March 2019 and December 2019, respectively. The loan withdraw window expired on February 28, 2020. The interest is accrued based on the China Base Rate multiplied by 1.1, or 5.39%. The loan requires quarterly interest payments. The principal payments are required to be paid every 6 months over the term of loan commencing in October 2019. This loan is secured by the buildings and certain equipment owned by the JV Company. As a condition of the loan arrangement, 14 million RMB (approximately $2.0 million) of cash is held as restricted cash by the JV Company as a compensating balance at the bank until the principal is paid. On June 24, 2020, a modification of this loan was signed, pursuant to which the interest rate was changed to be based on the five-year loan prime rate in China plus 0.74%, or 5.39%. Other terms of this loan remain the same. During the three months ended December 31, 2019, the JV Company paid 6.0 million RMB

18

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

under this agreement. As of September 30, 2020, the outstanding balance of the loan was 194 million RMB (equivalent of $28.5 million based on the currency exchange rate as of September 30, 2020).

On May 1, 2018, Jireh Semiconductor Incorporated ("Jireh"), a wholly-owned subsidiary of the Company, entered into a loan agreement with a financial institution (the "Bank") that provided a term loan in the amount of $17.8 million. The obligation under the loan agreement is secured by certain real estate assets of Jireh and guaranteed by the Company.  The loan has a five-year term and matures on June 1, 2023. Beginning June 1, 2018, Jireh made consecutive monthly payments of principal and interest to the Bank. The outstanding principal accrues interest at a fixed rate of 5.04% per annum on the basis of a 360-day year. The loan agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios. The Company was in compliance with these covenants as of September 30, 2020. As of September 30, 2020, the outstanding balance of the term loan was $15.7 million.

On August 15, 2017, Jireh entered into a credit agreement with the Bank that provided a term loan in an amount up to $30.0 million for the purpose of purchasing certain equipment for the Company's fabrication facility located in Oregon.  The obligation under the credit agreement is secured by substantially all assets of Jireh and guaranteed by the Company.  The credit agreement has a five-year term and matures on August 15, 2022. In January 2018 and July 2018, Jireh drew down the loan in the amount of $13.2 million and $16.7 million, respectively. Beginning in October 2018, Jireh was required to pay to the Bank on each payment date, the outstanding principal amount of the loan in monthly installments.  The loan accrues interest based on an adjusted LIBOR as defined in the credit agreement, plus a specified applicable margin in the range of 1.75% to 2.25%, based on the outstanding balance of the loan.  The credit agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios and fixed charge coverage ratio. The Company was in compliance with these covenants as of September 30, 2020. As of September 30, 2020, the outstanding balance of the term loan was $14.9 million.

Maturities of short-term debt and long-term debt were as follows (in thousands):
Year ending June 30,
 
 
 
2021 (Remaining)
 
 
$
31,157

2022
 
 
26,890

2023
 
 
37,579

2024
 
 
23,352

2025
 
 
15,017

Total principal of debts
 
 
133,995

Less: debt issuance costs
 
 
(1,279
)
Total principal of debt, less debt issuance costs
 
 
$
132,716

 
 
 
 
 
Short-term Debt
 
Long-term Debt
Principal amount
$
33,243

 
$
100,752

Less: debt issuance costs
(497
)
 
(782
)
Total debt, less debt issuance costs
$
32,746

 
$
99,970




19

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6. Leases

The Company evaluates contracts for lease accounting at contract inception and assesses lease classification at the lease commencement date. Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liabilities and operating lease liabilities - long-term on the Company's condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, finance lease liabilities and finance lease liabilities-long-term on the condensed consolidated balance sheets. The Company recognizes a ROU asset and corresponding lease obligation liability at the lease commencement date where the lease obligation liability is measured at the present value of the minimum lease payments. As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate at lease commencement. The Company uses an interest rate commensurate with the interest rate to borrow on a collateralized basis over a similar term with an amount equal to the lease payments. Operating leases are primarily related to offices, research and development facilities, sales and marketing facilities, and manufacturing facilities. In addition, long-term supply agreements to lease gas tank equipment and purchase industrial gases are accounted for as operating leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. For operating leases, the amortization of the ROU asset and the accretion of its lease obligation liability result in a single straight-line expense recognized over the lease term. The finance lease is related to the RMB 400.0 million of lease financing of the JV Company with YinHai Leasing Company and The Export-Import Bank of China. See Note 5 - Bank Borrowings for details. The Company does not record leases on the condensed consolidated balance sheets with a term of one year or less.
The components of the Company’s operating and finance lease expenses are as follows for the periods presented (in thousands):

 
Three Months Ended September 30,
 
2020
 
2019
Operating Leases:
 
 
 
     Fixed rent expense
$
1,688

 
$
1,281

     Variable rent expense
203

 
207

Finance Lease:
 
 
 
     Amortization of equipment
559

 
1,093

     Interest
615

 
740

Short-term leases
 
 
 
     Short-term lease expenses
58

 
75

               Total lease expenses
$
3,123

 
$
3,396




20

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Supplemental balance sheets information related to the Company’s operating and finance leases is as follows (in thousands, except lease term and discount rate):

 
September 30,
2020
 
June 30,
2020
Operating Leases:
 
 
 
     ROU assets associated with operating leases
$
32,407

 
$
32,948

Finance Lease:
 
 
 
     Property, plant and equipment, gross
$
108,387

 
$
104,374

     Accumulated depreciation
(90,251
)
 
(86,540
)
          Property, plant and equipment, net
$
18,136

 
$
17,834

 
 
 
 
Weighted average remaining lease term (in years)
 
 
 
     Operating leases
9.46

 
9.57

     Finance lease
2.47

 
2.72

 
 
 
 
Weighted average discount rate
 
 
 
     Operating leases
4.83
%
 
4.45
%
     Finance lease
5.46
%
 
5.46
%


Supplemental cash flow information related to the Company’s operating and finance lease is as follows (in thousands):

 
Three Months Ended September 30,
 
2020
 
2019
Cash paid from amounts included in the measurement of lease liabilities:
 
 
 
     Operating cash flows from operating leases
$
1,642

 
$
1,160

     Operating cash flows from finance lease
$
615

 
$
740

     Financing cash flows from finance lease
$
3,989

 
$
1,691



Future minimum lease payments are as follows as of September 30, 2020 (in thousands):

 
Operating Leases
 
Finance Leases
The remainder of 2021
$
4,216

 
$
13,366

2022
5,401

 
17,059

2023
4,481

 
12,365

2024
4,001

 

2025
3,563

 

Thereafter
21,041

 

Total minimum lease payments
42,703

 
42,790

Less amount representing interest
(8,795
)
 
(3,033
)
Total lease liabilities
$
33,908

 
$
39,757





21

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7. Shareholders' Equity and Share-based Compensation
Share Repurchase

In September 2017, the Board of Directors approved a repurchase program (the “Repurchase Program”) that allowed the Company to repurchase its common shares from the open market pursuant to a pre-established Rule 10b5-1 trading plan or through privately negotiated transactions up to an aggregate of $30.0 million. The amount and timing of any repurchases under the Repurchase Program depend on a number of factors, including but not limited to, the trading price, volume and availability of the Company's common shares. Shares repurchased under this program are accounted for as treasury shares and the total cost of shares repurchased is recorded as a reduction of shareholders' equity. From time to time, treasury shares may be reissued as part of the Company's share-based compensation programs. Gains on re-issuance of treasury stock are credited to additional paid-in capital; losses are charged to additional paid-in capital to offset the net gains, if any, from previous sales or re-issuance of treasury stock. Any remaining balance of the losses is charged to retained earnings.

During the three months ended September 30, 2020, the Company did not repurchase any shares pursuant to the Repurchase Program. Since the inception of the program, the Company repurchased an aggregate of 6,784,648 shares for a total cost of $67.3 million, at an average price of $9.92 per share, excluding fees and related expenses.  No repurchased shares have been retired. Of the 6,784,648 repurchased shares, 146,928 shares with a weighted average repurchase price of $10.30 per share, were reissued at an average price of $5.25 per share pursuant to option exercises and vested restricted share units ("RSU"). As of September 30, 2020, approximately $13.4 million remained available under the Repurchase Program.
Time-based Restricted Stock Units ("TRSU")
The following table summarizes the Company's TRSU activities for the three months ended September 30, 2020:
 
Number of Restricted Stock
Units
 
Weighted Average
Grant Date Fair
Value Per Share
 
Weighted Average
Remaining
Contractual
Term (Years)
 
Aggregate Intrinsic Value
Nonvested at June 30, 2020
932,138

 
$
11.36

 
1.66
 
$
10,141,661

Granted
109,425

 
$
12.91

 
 
 
 
Vested
(110,495
)
 
$
13.51

 
 
 
 
Forfeited
(4,625
)
 
$
10.86

 
 
 
 
Nonvested at September 30, 2020
926,443

 
$
11.29

 
1.49
 
$
11,876,999


Market-based Restricted Stock Units ("MSUs")

During the quarter ended September 30, 2018, the Company granted 1.3 million market-based restricted stock units ("MSUs") to certain personnel. The number of shares to be earned at the end of performance period is determined based on the Company’s achievement of specified stock prices and revenue thresholds during the performance period from January 1, 2019 to December 31, 2021 as well as the recipients remaining in continuous service with the Company through such period. The MSUs vest in four equal annual installments after the end of each performance period. The Company estimated the grant date fair values of its MSUs using a Monte-Carlo simulation model. On August 31, 2020, the Compensation Committee of the Board approved a modification of the terms of MSU to extend the performance period through December 31, 2022 and change the commencement date for the four-year time-based service period January 1, 2023. The fair value of these MSUs was recalculated to reflect the change as of August 31, 2020 and the unrecognized compensation amount was adjusted to reflect the increase in fair value. The incremental expenses for the three months ended September 30, 2020 was immaterial. The Company recorded approximately $0.2 million and $0.2 million of expenses for MSUs during the three months ended September 30, 2020 and 2019, respectively.

Performance-based Restricted Stock Units ("PRSUs")

In March each year since year 2017, The Company granted performance-based RSUs (“PRSUs”) to certain personnel. The number of shares to be earned under the PRSUs is determined based on the level of attainment of predetermined financial goals. The PRSUs vest in four equal annual installments from the first anniversary date after the grant date if certain predetermined financial

22

ALPHA AND OMEGA SEMICONDUCTOR LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

goals were met. The Company recorded approximately $0.4 million and $0.2 million of expense for these PRSUs during the three months ended September 30, 2020 and 2019, respectively.

During the three months ended June 30, 2019, the Company announced an incentive program. Under this program, each participant’s award is denominated in stock and subject to achievement of certain objective goals within certain timelines. In June 2020, the Company believed it was most likely that predetermined goal measures would be met. Therefore, started June 2020 quarter the Company recorded $0.6 million of non-cash compensation expense each quarter for these awards. The expense was reported in the other current liabilities line on the condensed consolidated balance sheets as the amount of bonus is to be settled in variable number of RSU’s at the completion of the objective goals. Such non-cash compensation expense was recorded as part of share-based compensation expense in the condensed consolidated statements of operations. In September 2020, the Company granted RSUs total valued at $1.0 million to participants, which were fully vest immediately due to achievement of certain objective measures.
The following table summarizes the Company's PRSUs activities for the three months ended September 30, 2020:

 
Number of Performance-based Restricted Stock
Units
 
Weighted Average
Grant Date Fair
Value Per Share
 
Weighted Average
Remaining
Contractual Term
(Years)
 
Aggregate Intrinsic Value
Nonvested at June 30, 2020
342,775

 
$
12.38

 
1.60
 
$
3,729,392

Forfeited
(1,500
)
 
$
16.67

 
 
 
 
Nonvested at September 30, 2020
341,275

 
$
12.36

 
1.34
 
$
4,375,146

Stock Options
The Company did not grant any stock options during the three months ended September 30, 2020 and 2019. The following table summarizes the Company's stock option activities for the three months ended September 30, 2020:

<