Alpha and Omega Semiconductor Limited Annual Report 2024

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________ FORM 10-K _________________________________ (MARK ONE) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2024 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) (408) 830-9742 (Registrant's Telephone Number, Including Area Code) __________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Shares, $0.002 par value per share AOSL The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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 and posted 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 such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting shares held by non-affiliates of the registrant as of December 31, 2023 was approximately $607 million based on the closing price of the registrant's common share as reported on the NASDAQ Global Select Market on December 31, 2023 (the last business day of the registrant's most recently completed second fiscal quarter). The common shares of the registrant held by each executive officer and director and certain affiliated shareholders who beneficially owned 10% or more of the outstanding common stock of the registrant have been excluded in such calculation as such persons and entities may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes. There were 28,973,288 shares of the registrant's common shares outstanding as of July 31, 2024. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement for the registrant's 2024 Annual General Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K to the extent stated herein. The Definitive Proxy Statement is expected to be filed within 120 days of the registrant's fiscal year ended June 30, 2024. Alpha and Omega Semiconductor Limited Form 10-K For the Year Ended June 30, 2024 TABLE OF CONTENTS Page Part I. Item 1. Business 1 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 36 Item 1C. Cybersecurity 37 Item 2. Properties 39 Item 3. Legal Proceedings 40 Item 4. Mine Safety Disclosures 40 Part II. 41 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 41 Item 6. [Reserved] 42 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61 Item 8. Financial Statements and Supplementary Data 62 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 62 Item 9A. Controls and Procedures 62 Item 9B. Other Information 64 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 64 Part III. 65 Item 10. Directors, Executive Officers and Corporate Governance 65 Item 11. Executive Compensation 65 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 65 Item 13. Certain Relationships and Related Transactions, and Director Independence 65 Item 14. Principal Accountant Fees and Services 65 Part IV. 66 Item 15. Exhibits and Financial Statement Schedules 66 Signatures 114 (This page intentionally left blank.) PART I Item 1. Business Forward Looking Statements This Annual Report on Form 10-K and the documents incorporated herein by reference contain 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, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “intend,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Annual Report on Form 10-K in greater detail in Item 1A.“Risk Factors.” Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Annual Report on Form 10-K in its entirety and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Overview We are a designer, developer and global supplier of a broad portfolio of power semiconductors. Our portfolio of power semiconductors includes approximately 2,700 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2024, and over 60 and 130 new products in the fiscal years ended June 30, 2023 and 2022, 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 930 issued patents and 52 pending patents in the United States as of June 30, 2024. We also have a total of 1,025 foreign patents, which were based primarily on our research and development efforts through June 30, 2024. 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, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. During the fiscal year ended June 30, 2024, we continued our diversification strategy 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, portfolio expanded significantly across a full range of voltage applications. We also developed new technologies and products designed to penetrate into markets beyond our MOSFET computing base, including the consumer, communications and industrial markets, Insulated Gate Bipolar Transistors, or IGBTs for the home appliance market, as well as power ICs for next generation computing and gaming applications. Our business model leverages global resources, including research and development and manufacturing in the United States and Asia. Our sales and technical support teams are localized in several growing markets. We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon, or the Oregon Fab, which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. For assembly and test, we primarily rely upon our in-house facilities in China. In addition, we utilize subcontracting partners for industry standard packages. We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time. On March 29, 2016, we 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”). As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1%, of the equity interest in the JV Company. The Joint Venture was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 1 2021. As of December 2, 2021, we ceased having control over the JV Company. Therefore, we deconsolidated the JV Company as of that date. Subsequently, we have accounted for its investment in the JV Company using the equity method of accounting. As of June 30, 2023, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2%. Such reduction reflects (i) the sale by the Company of approximately 2.1% of the outstanding JV equity interest which resulted in the deconsolidation of the JV Company, (ii) additional sale by the Company of approximately 1.1% of outstanding JV equity interest in December 2021, (iii) the adoption of an employee equity incentive plan and the issuance of additional equity interest equivalent to 3.99% of the JV Company to investors in exchange for cash in December 2021, and (iv) issuance of additional equity interest of the JV to investors in January 2022. In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased our percentage of equity ownership in the JV Company by 0.54%. As of June 30, 2024, the percentage of outstanding JV equity interest beneficially owned by us was 42.8%. While we no longer control the JV Company, the JV Company continued to provide us with significant level of foundry capacity to enable us to develop and manufacture our products, including a commitment to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level. We were incorporated in Bermuda on September 27, 2000 as an exempted limited liability company. The address of our registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The address of our U.S. office is Alpha and Omega Semiconductor Incorporated, 475 Oakmead Parkway, Sunnyvale, CA 94085. The telephone number of our U.S. office is (408) 830-9742. We have incorporated various wholly-owned subsidiaries in different jurisdictions. Please refer to Exhibit 21.1 to this Form 10-K for a complete list of our subsidiaries. Our industry Semiconductors are electronic devices that perform a variety of functions, such as converting or controlling signals, processing data and delivering or managing power. The functionality and performance of semiconductors have generally increased over time, while size and cost have generally decreased. These advances have led to a proliferation of more complex semiconductors being used in a wide variety of consumer, computing, communications and industrial markets and have contributed to the growth of the semiconductor industry. Regulations governing energy efficiency have accelerated this process in many applications. Analog semiconductors The semiconductor industry is segmented into analog and digital. Analog semiconductors process light, sound, motion, radio waves and electrical currents and voltages. In contrast, digital semiconductors process binary signals represented by a sequence of ones and zeros. As a result of these fundamental differences, the analog semiconductor industry is distinct from the digital semiconductor industry in terms of the complexity of design and the length of product cycle. Improper interactions between analog circuit elements can potentially render an electronic system inoperable. Experienced engineers engaged in the design process are necessary because computer-aided design cannot fully model the behavior of analog circuitry. Therefore, experienced analog engineers with requisite knowledge are in great demand but short supply worldwide. In addition, analog semiconductors tend to have a longer product life cycle because original design manufacturers, or ODMs and original equipment manufacturers, or OEMs typically design the analog portions of a system to span multiple generations of products. Once designed into an application, the analog portion is rarely modified because even small changes to the analog portion can trigger unanticipated consequences in other components, resulting in system instability. Power semiconductors Power semiconductors are a subset of the analog semiconductor sector with their own set of characteristics unique to system power architecture and function. Power semiconductors transfer, manage and switch electricity to deliver the appropriate amount of voltage or current to a broad range of electronic systems and also protect electronic systems from damage resulting from excessive or inadvertent electrical charges. Power semiconductors can be either discrete devices, which typically comprise only a few transistors or diodes, or ICs, which incorporate a greater number of transistors. The function of power discrete devices is power delivery by switching, transferring or converting electricity. Power transistors comprise the largest portion of the power discrete device market. Power ICs, sometimes referred to as power management ICs, perform power delivery and power management functions, such as controlling and regulating voltage and current and controlling power discrete devices. The power semiconductor market has been driven by several key factors in recent years. The proliferation of computer and consumer electronics, such as notebooks, tablets, smart phones, flat panel displays and portable media players created the need for sophisticated power management that increases power efficiency and extends battery life. The evolution of these 2 products is characterized by increased functionality, thinner and smaller form factors and decreasing prices. Our Power IC and low voltage (5V-40V) MOSFET products address these markets. In the area of AC-DC power supplies for electronic equipment, data centers and servers, the market is characterized by a continuous demand for energy conservation through higher efficiency, which drives the market for our medium voltage (40V-400V) and high voltage (500V- 1000V) MOSFET products. The increased application of power semiconductors to control motors in white goods and industrial applications is driving demand for Insulated Gate Bipolar Transistors, or IGBTs. IGBTs are also being used in renewable energy and automotive applications. The evolution toward smaller form factors and complex power requirements in the low voltage areas has driven further integration in power semiconductors, resulting in power ICs that incorporate the functionalities of both power management and power delivery in a single device. Power ICs can be implemented by incorporating all necessary power functions either on one piece of silicon or multiple silicon chips encapsulated into a single device. Additionally, advancements in semiconductor packaging technology enable increased power density and shrinking form factors. Our business and operational model is based on achieving a balance between technological advancement and cost effectiveness by using a dedicated in- house technology research and development team to drive rapid new product developments, while utilizing both in-house and third-party foundry capacity for our products. This is particularly important in the development of power semiconductor products due to the unique nature of their technology. While digital technologies are highly standardized in leading foundries, power semiconductor technologies tend to be more unique as they seek to accommodate a wider range of voltage applications. Accordingly, third-party foundries, which are primarily designed and established for digital technologies, may have limited capabilities when it comes to the development of new power semiconductor technologies. Our strategies AOS seeks to advance our position as a designer, developer and global supplier of a broad portfolio of power semiconductors. We have adopted strategies that allow us to balance the development of proprietary technology at in-house fabrication and packaging facilities and also utilize the capacity and manufacturing capability of third-party foundries and subcontractors. This enables us to bring new products to market faster, and improve our financial performance in the long run. This model also allows us to respond more quickly to our customer demands, enhances relationships with strategic customers, provides flexibility in capacity management, and enables geographic diversification of our wafer supply chain. Our in-house manufacturing capability allows us to retain a higher level of control over the development and application of our proprietary process technology, thereby reducing certain supply chain and operational risks. In addition, we enhanced the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding factory facilities, which we expect will have a positive impact on our future new product development and revenue. We intend to continue exploring opportunities to expand our manufacturing capabilities, including acquisition of existing facilities, formation of joint ventures or partnerships with third parties or applying for government funding or grants available in the semiconductor industry. Although our largest end-market is the personal computing (“PC”) market, we have successfully diversified our business by expanding into other markets, including consumer, communications, and power supply and industrial markets. While we have made progress in our diversification and expansion into additional applications, we continue to support and grow our PC business by expanding bill-of-material content, gaining market share, and acquiring new customers. We plan to further expand the breadth of our product portfolio to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. Our product portfolio currently consists of approximately 2,700 products and we have introduced over 100 new products in this past fiscal year. We will continue to leverage our expertise to further increase our product lines, including higher performance power ICs, IGBTs and high, medium and low voltage MOSFETs, in order to broaden our addressable market and improve our margin profile. This includes expanding our power IC portfolio with multiphase controllers and smart power stages to address advanced System on Chip (SoC) products used in personal computing, graphics cards, and gaming. Leverage our power semiconductor expertise to drive new technology platforms We believe that the ever-increasing demand for power efficiency in power semiconductors requires expertise in and a deep understanding of the interrelationship among device physics, process technologies, design and packaging. We also believe that engineers with experience and understanding of these multiple disciplines are in great demand but short supply. Within this context, we believe that we are well positioned to be a leader in providing total power management solutions because of our extensive pool of experienced scientists and engineers and our strong IP portfolio. Accordingly, we intend to leverage our expertise to increase the number of power discrete technology platforms and power IC designs, including future digital power controller products that are currently under development, to expand our product offerings and deliver complete 3 power solutions for our targeted applications. In addition, our ability to develop new technology is enhanced by the operation of our own manufacturing facilities in Oregon and our close partnership with the JV. Increase direct relationships and product penetration with OEM and ODM customers We have developed direct relationships with key OEMs that are responsible for branding, designing and marketing a broad array of electronic products, as well as ODMs that have traditionally been responsible for manufacturing these products. We are also focusing on developing and solidifying relationships with certain Tier 1 customers, whose reputation, resources and market share may enable us to generate more significant sales and design wins. While OEMs typically focus design efforts on flagship products, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products which are sold directly to consumers. We intend to strengthen our existing relationships and form new ones with both OEMs and ODMs by aligning our product development efforts with their product requirements, thereby increasing the number of our products used within their systems, and leveraging relationships to penetrate other products. In addition, we are focusing our research and development efforts to respond more directly to market demand by designing and developing new products based on feedback from our customers, which also allows us to reduce time-to-market and sales cycles. Leverage global business model for cost-effective growth We intend to continue to leverage our global resources and regional strengths. We will continue to deploy marketing, sales and technical support teams in close proximity to our end customers. We will further expand and align our technical marketing and application support teams along with our sales team to better understand and address the needs of end customers and end-market applications, in particular for those with the new technology platforms developed in this past year and in the future. This will assist us in identifying and defining new technology trends and products and to help us gain additional design wins. While we no longer retain a controlling interest in the JV Company, we continue our strong relationship with the JV Company to support our manufacturing capacity. Also, we entered into an agreement with the JV Company, pursuant to which the JV Company agrees to provide us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified levels. In addition, we continue to seek potential partners and collaborators to develop new technologies and products, as well as to explore other strategic transactions that will enable us to expand our manufacturing capacity and establish a global footprint. Our products We have created a broad product portfolio consisting of two major categories: power discretes and power ICs that serve the large and diverse analog market for power semiconductors. Our power discrete products consist of low, medium and high voltage power MOSFETs. Our low voltage MOSFET series is based on our proprietary silicon and package technologies, with deep application know-how in various markets. We have precisely defined technology platforms to address different requirements from various applications. Our medium voltage MOSFETs provide optimized performance with high efficiency, high robustness and high reliability, and are widely used in applications such as TV backlighting, telecom power supplies, and industrial applications. We expanded our high voltage 600V and 700V MOSFET portfolio based on our aMOS5 technology platform in order to address demanding consumer and industrial applications. Our high-voltage portfolio includes our proprietary insulated-gate bipolar transistor ("IGBT") technology, which we provide highly robust and easy-to-use solutions for industrial motor control and white goods applications. We have also deployed our 1200V SiC (Silicon carbide) products based on our AlphaSiC platform, designed to address high efficiency, high density industrial applications such as solar inverters, UPS, and battery management systems. Our power ICs deliver power as well as control and regulate the power management variables, such as the flow of current and level of voltage. Our DrMOS and smart power stage (SPS) family of products continue to grow as we paired our latest high performance MOSFET silicon with our latest Driver IC and smart driver technologies. We continue to expand our EZBuck power IC family with products that feature lower on-resistance, less power consumption, smaller footprint and thermally enhanced packages as well. Our smart load switch products have expanded beyond basic load switched to include specialized applications like Type C and eFuse. Success has been driven by increased power density and protection to discrete solutions. Sale of power ICs continued to gain traction during the past years especially with the expansion of our driver and multiphase controller product lines. We introduced higher voltage drivers to expand success beyond PCs to motor drive applications such as power tools and garden equipment. We have also made a major investment in R&D to enter the multiphase controller market in 2020 with the introduction of the Intel IMVP 9.1 controller for notebooks. Since then, AOS has released or is designing in several multiphase controller families serving Intel, AMD and Nvidia. Introduction of these 4 multiphase controllers has enabled AOS to become a complete solution level provider, across multiple compute platforms from PCs, graphics cards to AI and datacenter. The following table lists our product families and the principal end uses of our products: Product Family Description Product Categories within Product Type Typical Application Power Discretes Low on-resistance switch used for routing current and switching voltages in power control circuits High power switches used for power circuits DC-DC for CPU/GPU DC-AC conversion AC-DC conversion Load switching Motor control Battery protection Power factor correction Smart phone chargers, battery packs, notebooks, desktop and servers, data centers, base stations, graphics card, game boxes, TVs, AC adapters, power supplies, motor control, power tools, E- vehicles, white goods and industrial motor drives, UPS systems, solar inverters and industrial welding Power ICs Integrated devices used for power management and power delivery DC-DC Buck conversion DC-DC Boost conversion Smart load switching DrMOS power stage Flat panel displays, TVs, Notebooks, graphic cards, servers, DVD/Blu-Ray players, set-top boxes, and networking equipment Analog power devices used for circuit protection and signal switching Transient voltage protection Analog switch Electromagnetic interference filter Notebooks, desktop PCs, tablets, flat panel displays, TVs, smart phones, and portable electronic devices Power discrete products Power discretes are used across a wide voltage and current spectrum, requiring high efficiency and reliability under harsh conditions. Due to the diverse nature of end-market applications, we market both general purpose MOSFETs that are used in multiple applications as well as application specific MOSFETs. Our current power discrete product line includes industry standard trench MOSFETs, SRFETs, XSFET, electrostatic discharge, protected MOSFETs, high and mid-voltage MOSFETs and IGBTs. Power IC products In addition to the traditional monolithic or single chip design, we employ a multi-chip approach for the majority of our power ICs. This multi-chip technique leverages our proprietary MOSFET and advanced packaging technologies to offer integrated solutions to our customers. This allows us to update product portfolios by interchanging only the MOSFETs without changing the power management IC, thereby reducing the time required for new product introduction and providing optimal solutions to our customers. We believe that our power IC products improve our competitive position by enabling us to provide higher power density solutions to our end customers than some of our competitors. The incorporation of both power delivery and power management functions tends to make power ICs more application specific because these two functions have to be properly matched to a particular end product. We have local technical marketing and applications engineers who closely collaborate with our end customers to help ensure that power IC specifications are properly defined at the beginning of the design stage. New Product Introduction We introduced several new products based on our proprietary technology platform and continue to expand our product families. During the fourth quarter of fiscal year of 2024, we expanded our package portfolio options available for the second generation 650V to 1200V αSiC MOSFETs. These new package selections give designers the added flexibility of multiple system optimization options to further maximize system efficiency while streamlining their manufacturing process. We introduced industry’s lowest quiescent power multiphase Vcore solution for computing systems. This new Vcore solution 5 offers low quiescent power in all power states to maximize battery life. Also, we introduced innovatively designed, space-saving half-bridge MOSFET for DC-DC applications. In addition, we introduced ultra-low capacitance TVS diode series. This is ideal to protect high-speed serial interfaces that are used in a broad range of electronic systems. Moreover, we introduced a 20V, 7A type-C sourcing protection switch designed to enhance USB type-C efficiency and safety. During the third quarter of fiscal year of 2024, we introduced XSPairFET™ Buck-Boost MOSFET for higher power USB PD 3.1 EPR applications. This reduces board space and improves power density to achieve the high-efficiency performance goals designers have set for this widely adopted USB-PD Type C application. Also, we announced application-specific EZBuck™ regulator to power intel meteor lake and arrow lake platforms. We launched 3-phase driver IC to increase battery life of cordless power tools and E-mobility. In addition, we announced innovatively designed double-sided cooling DFN 5x6 package to meet a wide variety of high-performance application requirements. Moreover, we released αMOS5™ 600V FRD 95mohm and 125mohm super junction MOSFET which are designed to meet the high efficiency and high-density needs of servers, workstations, telecom rectifiers, solar Inverters, EV charging, motor drives and industrial power applications. During the second quarter of fiscal year of 2024, we released our state-of-the-art automotive TO-leadless (TOLL) package for the company’s automotive grade 80V and 100V MOSFETs. This TOLL package helps designers meet the ongoing trend to electrify vehicles with the latest battery technology to meet clean energy zero-emission goals. During the first quarter of fiscal year of 2024, we announced ultra-low reverse working voltage TVS diodes for USB4 and thunderbolt 4 ESD protection. This feature can provide a faster response time compared to conventional snap-back devices, enabling it to absorb ESD energy extremely quickly to avoid damage to the IC and surrounding components. Also, we introduced MRigidCSP™ package technology strengthening our battery management MOSFETs. In addition, we announced application-specific EZBuck™ regulator to power 5V system rails. Distributors and customers We have established direct relationships with key OEMs, including Dell Inc., Hewlett-Packard Company, Samsung Group, and Stanley Black & Decker, Inc., most of whom we serve through our distributors and ODMs. In addition, based on our historical design win activities, our power semiconductors are also incorporated into products sold to many other leading OEMs. Through our distributors, we provide products to ODMs who traditionally are contract manufacturers for OEMs. As the industry has evolved, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for the OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products, which they sell directly to consumers. Our ODM customers include Compal Electronics, Inc., Foxconn, Quanta Computer Incorporated, Wistron Corporation and Delta Electronics. In order to take advantage of the expertise of end-customer fulfillment logistics and shorter payment cycles, we sell most of our products through distributors. In general, under our agreements with distributors, they have limited rights to return unsold merchandise, subject to time and volume limitations. As of June 30, 2024, 2023 and 2022, our two largest distributors were WPG Holdings Limited, or WPG, and Promate Electronic Co. Ltd., or Promate. Sales to WPG and Promate accounted for 46.0% and 25.0% of our revenue, respectively, for the fiscal year ended June 30, 2024, 35.6% and 21.6% of our revenue, respectively, for the fiscal year ended June 30, 2023, and 39.7% and 24.6% of our revenue, respectively, for fiscal year ended June 30, 2022, respectively. Sales and marketing Our marketing division is responsible for identifying high growth markets and applications where we believe our technology can be effectively deployed. We believe that the technical background of our marketing team, including application engineers, helps us better define new products and identify potential end customers and geographic and product market opportunities. For example, as part of our market diversification strategy, we have deployed and plan to recruit more, field application engineers, or FAEs, for our new product offerings, providing real-time and local response to our end customers' needs. FAEs work with our end customers to understand their requirements and resolve technical problems. FAEs also strive to anticipate future customer needs and facilitate the design-in of our products into the end products of our customers. We believe this strategy increases our share of revenue opportunities within the applications we currently serve, as well as in new end-market applications. Our sales team consists of sales personnel, field application engineers, customer service representatives and customer quality engineers who are responsible for key accounts. We strategically position our team near our end customers through our offices in Taipei, Hong Kong, Shenzhen, Shanghai, Qingdao, Suzhou, Tokyo, Seoul, Heilbronn, and Sunnyvale, California, complemented by our applications centers in Sunnyvale and Shanghai. In addition, our distributors and sales representatives 6 assist us in our sales and marketing efforts by identifying potential customers, creating additional demand and promoting our products, in which case we may pay a sales commission. Our sales cycle varies depending on the types of products and can range from six to eighteen months. In general, our traditional power discrete products in PC and TV applications progress more rapidly through the customer's design and marketing processes, and therefore they generally have a shorter sales cycle. In contrast, our newer Power IC and IGBT products, used mostly in the power supply, home appliance and industrial applications, require a more extended design and marketing timeline and thus have a longer sales cycle. Typically, our sales cycle for all products comprises the following steps: • identification of a customer design opportunity; • qualification of the design opportunity by our FAEs through comparison of the power requirements against our product portfolio; • delivery of a product sample to the end customer to be included in the customer's pre-production model with the goal of being included in the final bill of materials; and • placement by the customer, or through its distributor, of a full production order as the end customer transitions to full volume production. Competition The power semiconductor industry is characterized by fragmentation with many competitors. We compete with different power semiconductor suppliers, depending on the type of product lines and geographical area. Our key competitors in power discretes and power ICs are primarily headquartered in the United States, Japan, Europe, China and Taiwan. Our major competitors in power discretes include Infineon Technologies AG, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc. Our major competitors for our power ICs include Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc. and Vishay Intertechnology, Inc. Our ability to compete depends on a number of factors, including: • success in expanding and diversifying our serviceable markets, and our ability to develop technologies and product solutions for these markets; • capability to quickly develop and introduce proprietary technology and best-in-class products; • performance and cost-effectiveness of our products relative to that of our competitors; • ability and capacity to manufacture, package and deliver products in large volume on a timely basis at a competitive price; • success in utilizing new and proprietary technologies to offer products and features previously not available in the marketplace; • ability to recruit and retain analog semiconductor designers and application engineers; and • ability to protect our intellectual property. Some of our competitors have longer operating histories, more brand recognition, and significantly greater financial, technical, research and development, sales and marketing, manufacturing and other resources. However, we believe that we can compete effectively through our integrated and innovative technology platform and design capabilities, including our strong and extensive patent portfolio, strategic global business model, expanding suites of new products, diversified and broad customer base, and excellent on-the-ground support and quick time to market for our products. Seasonality As we provide power semiconductors used in consumer electronic products, our business is subject to seasonality. Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market trends and conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel 7 inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. Backlog Our sales are made primarily pursuant to standard purchase orders from distributors and direct customers. The amount of backlog to be shipped during any period depends on different factors, and all orders are subject to cancellation or modification, usually with no penalty to customers. The quantities actually purchased by customers, as well as shipment schedules, are frequently revised to reflect changes in both the customers’ requirements and in manufacturing availability. Therefore, our backlog at any point in time is not a reliable indicator of our future revenue. Research and development We view technology as a competitive advantage, and we invest significant time and capital in research and development to address the technology-intensive needs of our end customers. Our research and development expenditures for the fiscal years of 2024, 2023 and 2022 were $89.9 million, $88.1 million and $71.3 million, respectively. Our research and development expenditures primarily consist of salaries, bonuses, benefits, share-based compensation expense, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by outside contractors and consultants, amortization of software and design tools, depreciation of equipment and overhead costs. We continue to invest in developing new technologies and products utilizing our own fabrication and packaging facilities as it is critical to our long-term success. We also evaluate appropriate investment levels and stay focused on new product introductions to improve our competitiveness. We have research and development teams in Silicon Valley (Sunnyvale, California), Oregon, Texas, Arizona, Korea, Taiwan, and China. We believe that these diverse research and development teams enable us to develop leading edge technology platforms and new products. Our areas of research and development focus include: Packaging technologies: Consumer demand for smaller and more compact electronic devices with higher power density is driving the need for advanced packaging technology. Our group of dedicated packaging engineers focuses on smaller form factors, and higher power output with efficient heat dissipation and cost-effectiveness. We have invested resources in developing and enhancing our proprietary packaging technologies, including the establishment of our in-house packaging and testing facilities. Our efforts to develop innovative packaging technologies continues to provide new and cost-effective solutions with higher power density to our customers. During the fiscal year ended June 30, 2024, we continued our diversification strategies by developing new silicon and packaging platforms to expand our SAM and offer higher performance products. Process technology and device physics: We focus on specialized process technology in the manufacturing of our products, including vertical DMOS, Shielded Gate Trench, Trench field stop IGBTs, charge-balance high voltage MOSFETs, Schottky Diode and BCDMOS processes. Our process engineers work closely with our design team to deploy and implement our proprietary manufacturing processes at our Oregon Fab, the Chongqing Fab as well as the third-party foundries that fabricate our wafers. To improve our process technology, we continue to develop and enhance our expertise in device physics in order to better understand the physical characteristics of materials and the interactions among these materials during the manufacturing process. New products and new technology platforms: We invest significantly in the development of new technology platforms and introduction of new products. Because power management affects all electronic systems, we believe that developing a wide portfolio of products enables us to target new applications in addition to expanding our share of power management needs within existing applications. As a technology company, we will continue our significant investment in research and development in our low voltage, medium voltage, and high voltage power discretes, IGBT and power modules and power ICs by developing new technology platforms and new products that allow for improved product performance, higher efficiency packages and higher levels of integration. Operations The manufacture of our products is divided into two major steps: wafer fabrication and packaging and testing. Wafer fabrication Our Oregon Fab allows us to accelerate the development of our technology and products, as well as to provide better service to our customers. We allocate our wafer production between our in-house facility and third-party foundries. During the 8 past three years, we have gradually reduced our reliance on third-party foundries and increased allocation of capacity to our Oregon Fab and Chongqing JV Fab. On July 12, 2022, we entered into an agreement with the JV Company for the Chongqing Fab, pursuant to which the JV Company committed to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level. Currently our main third-party foundry is Shanghai Hua Hong Grace Electronic Company Limited, ("HHGrace") located in Shanghai. HHGrace has been manufacturing wafers for us since 2002. HHGrace manufactured 3.8%, 9.6% and 10.3% of the wafers used in our products for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. Packaging and testing Completed wafers from the foundries are sent to our in-house packaging and testing facilities or to our subcontractors, where the wafers are cut into individual die, soldered to lead frames, wired to terminals and then encapsulated in protective packaging. After packaging, all devices are tested in accordance with our specifications and substandard or defective devices are rejected. We have established quality assurance procedures that are intended to control quality throughout the manufacturing process, including qualifying new parts for production at each packaging facility, conducting root cause analysis, testing for lots with process defects and implementing containment and preventive actions. The final tested products are then shipped to our distributors or customers. Our in-house and wholly-owned packaging and testing facilities are located in Shanghai, China which handle most of our packaging and testing requirements for our products. In addition, the JV Company handles a portion of our packaging and testing requirement. We continuously increase the outsourcing portion of our packaging and testing requirements to other contract manufacturers to improve our ability to respond to changes in market demand. Our facilities have the combined capacity to package and test over 600 million parts per month and have available floor space for new package introductions. We believe our ability to package and test our products internally represents a strategic advantage as it protects our proprietary packaging technology, increases the rate of new package introductions, reduces operating expenses and ultimately improves our profit margins. Quality assurance Our quality assurance practices aim to consistently provide our end customers with products that are reliable, durable and free of defects. We strive to do so through design for manufacturing, and continuous improvement in our product design and manufacturing and close collaboration with our manufacturing partners. Our manufacturing operations in China and our manufacturing facility in Oregon are certified to the ISO9001 and IATF16949:2016. These Quality Management System certifications represent a recognition of our high quality assurance standards. Both ISO9001 and IATF16949:2016 are sets of criteria and procedures established by the International Organization of Standardization for developing a fundamental quality management system and focusing on continuous improvement, defect prevention and the reduction of variation and waste. Our products are also in compliance with Restrictions on the use of Hazardous Substances, or RoHS 3.0. We maintain a supplier management and process engineering team in Shanghai that works with our third-party foundries and packaging and testing subcontractors to monitor the quality of our products, which is designed to ensure that manufacturing of our products is in strict compliance with our process controls, monitoring procedures and product requirements. We also conduct periodic reviews and annual audits to ensure supplier performance. For example, we examine the results of statistical process control systems, implement preventive maintenance, verify the status of quality improvement projects and review delivery time metrics. In addition, we rate and rank each of our suppliers every quarter based on factors such as their quality and performance. Our facility in Oregon integrates manufacturing process controls through our manufacturing execution system, coupled with wafer process controls that include monitoring procedures, preventative maintenance, statistical process control, and testing to ensure that finished wafers delivered will meet and exceed quality and reliability requirements. All materials used to manufacture wafers are controlled through a strict qualification process. Our manufacturing processes use many raw materials, including silicon wafers, gold, copper, molding compound, petroleum and plastic materials and various chemicals and gases. We obtain our raw materials and supplies from a large number of sources. Although supplies for raw materials used by us are currently adequate, shortages could occur in various essential materials due to interruption of supply or increased demand in the industry. Intellectual property rights Intellectual property is a critical component of our business strategy, and we intend to continue to invest in the growth, maintenance and protection of our intellectual property portfolio. We own significant intellectual property in many aspects of power semiconductor technology, including device physics and structure, wafer processes, circuit designs, packaging, modules and subassemblies. We have also entered into intellectual property licensing agreements with other companies to use selected 9 third-party technology for the development of our products, although we do not believe our business is dependent to any significant degree on any individual third-party license agreement. In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24- months of engineering and development services for a total fee of $45 million, consisting of fees of $18.0 million, $6.8 million and $9.0 million paid to us in the March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones. While we focus our patent efforts in the United States, we file corresponding foreign patent applications in other jurisdictions, such as China and Taiwan, when filing is justified by cost and strategic importance. The patents are increasingly important to remain competitive in our industry, and a strong patent portfolio will facilitate the entry of our products into new markets. As of June 30, 2024, we had 930 patents issued in the United States, of which 927 were based on our research and development efforts and 3 were acquired, and these patents are set to expire between 2024 and 2042. We also had a total of 1,025 foreign patents, including 468 Chinese patents, 506 Taiwanese patents, 27 Korean patents, 4 Hong Kong patents, 5 Philippine patents, 8 Japanese patents, 3 Europe patent and 4 India patent as of June 30, 2024. Substantially all of our foreign patents were based on our research and development efforts. These foreign patents will expire in the years between 2024 and 2042. In addition, as of June 30, 2024, we had a total of 159 patent applications, of which 52 patents were pending in the United States, 79 patents were pending in China, 23 patents were pending in Taiwan and 5 patents were pending in other countries. As our technologies are deployed in new applications and as we diversify our product portfolio based on new technology platforms, we may be subject to new potential infringement claims. Patent litigation, if and when instituted against us, could result in substantial costs and a diversion of our management's attention and resources. However, we are committed to vigorously defending and protecting our investment in our intellectual property. Therefore, the strength of our intellectual property program, including the breadth and depth of our portfolio, will be critical to our success in the new markets we intend to pursue. In addition to patent protection, we also rely on a combination of trademark, copyright (including mask work protection), trade secret laws, contractual provisions and similar laws in other jurisdictions. We also enter into confidentiality and invention assignment agreements with our employees, consultants, suppliers, distributors and customers and seek to control access to, and distribution of, our proprietary information. Human Capital Resources As of June 30, 2024, we had 2,332 employees, of whom 745 were located in the United States, 1,409 were located in China, and 178 were located in other parts of the world. None of our employees is represented by a collective bargaining agreement. Notwithstanding our global footprint and various geographical locations, we have created an integrated workforce where employees worldwide work and collaborate as a team to advance our common business objectives, while retaining local and regional practices and cultures. We are committed to providing a work environment in which our employees can realize fully their talents and develop successful careers. As our strength is in our people, we invest significantly in our employees by providing a wide range of training and development opportunities, including mentoring, coaching, tuition reimbursement, attendance at external seminars and professional conferences, and regular in-house training sessions on specific topics. We train our managers to become good stewards for our employees, balancing the need for quality of life with performance results. We believe that these efforts contribute to the growth and well-being of our employees, as more than 50% of our managerial positions are filled through promotions of existing employees. We also keep our employees engaged and informed by providing periodic all-staff communications, and semi-annual performance reviews to ensure that efforts and results are aligned with our business and strategic corporate objectives. We value feedback from our employees and promote an open-door policy which encourages employees to have regular conversations with their managers to share feedback and express concerns. We also solicit employee feedback informally through regular employee interactions such as one on one or functional team staff meetings. In addition, we conduct employee satisfaction surveys at certain locations to help management identify areas that may require improvement. As part of the AOS tradition, we organize regular and seasonal social events, such as team building activities, annual appreciation picnics, and holiday parties, inviting both employees and their families to join. We believe these efforts enable us to build a strong and solid group of dedicated and happy employees who form the core of our human capital resource. We are committed to providing an environment where employees from all walks of life are treated with respect, care and dignity. We adhere strictly to the Company’s Code of Business Conduct and Ethics and other policies, and ensure that our employment practices respect human rights and comply with national, state and local regulatory requirements at all locations where we conduct business. To recruit new talent, we reach out to a broad range of sources, including employee referrals, on-line advertising, recruitment agencies, and other social media platforms to seek out the best qualified candidates regardless of their backgrounds. We are also focused on ensuring a diverse workforce, including our management team. Our Nominating 10 and Corporate Governance Committee leads the effort in recruiting qualified directors to serve on our Board. Our employees appreciate and value the strength of our people-oriented culture and the benefits our workplace diversity brings. We commit to a fair and living wage for all employees. We offer competitive compensation and benefits packages for our employees that include a combination of base salary, annual bonus, discretionary bonus for outstanding achievements, an employee stock purchase plan, time-based and performance-based long-term equity compensation. Our equity related compensation programs are designed to motivate and incentivize our employees and align their rewards to financial and other business performance goals, while increasing our shareholder value. We have an established Employee Recognition Award program which is regularly utilized to recognize the outstanding achievements of employees and teams that go above and beyond to achieve AOS business goals. In addition, we have engaged nationally-recognized outside independent compensation consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executives and other officers and to provide benchmarks for executive compensation as compared to peer companies. Environmental matters The semiconductor production process, including the semiconductor wafer manufacturing and packaging process, generates air emissions, liquid wastes, waste water and other industrial wastes. We have installed various types of pollution control equipment for the treatment of air emissions and liquid waste and equipment for recycling and treatment of water in our packaging and testing facilities in China and wafer manufacturing facility in Oregon, USA. Waste generated at our manufacturing facilities, including but not limited to acid waste, alkaline waste, flammable waste, toxic waste, oxide waste and self-igniting waste, is collected and sorted for proper disposal. Our operations in China are subject to regulation and periodic monitoring by China’s State Environmental Protection Bureau, as well as local environmental protection authorities, including those under the Shanghai Municipal Government, which may in some cases establish stricter standards than those imposed by the State Environmental Protection Bureau. Our operation in Oregon is subject to Oregon Department of Environmental Regulations, Federal Environmental Protection Agency laws and regulations, and local jurisdictional regulations. We believe that we have been in material compliance with applicable environmental regulations and standards and have not had a material or adverse effect on our results of operations from complying with these regulations. We have implemented an ISO 14001 environmental management system in our manufacturing facilities in China and Oregon. We also require our subcontractors, including foundries and assembly houses, to meet ISO 14001 standards. We believe that we have adopted pollution control measures for the effective maintenance of environmental protection standards consistent with the requirements applicable to the semiconductor industry in China and the U.S. Our products sold in worldwide are subject to RoHS in Electrical and Electronic Equipment, which requires that the products do not contain more than agreed levels of lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl and polybrominated diphenyl ether flame retardants. Our manufacturing facilities in China also obtained QC080000 certification, which is an IECQ Certificate of Conformity Hazardous Substance Process Management for European Directive 2002/95/EC requirements and a Certificate of Green Partner for Sony Green Partner Program. We avoid using these restricted materials to the extent possible when we design our products. We are also subject to SEC rules that require diligence, disclosure and reporting on whether certain minerals and metals, known as conflict minerals, used in our products originate from the Democratic Republic of Congo and adjoining countries. As of June 30, 2024, 2023 and 2022, we were in compliance with the related conflict minerals rule. Export Control We are subject to export and import control laws, trade regulations and other trade requirements that limit which products we sell and where and to whom we sell our products. Because we are committed to complying with all applicable export control laws, regulations, and requirements, we have reviewed and revised our processes and procedures to ensure that our shipments to our customers remain compliant with applicable export laws. As part of the enhanced process, we have also conducted extensive risk assessment on export control compliance and implemented training programs for our employees. Executive Officers The following table lists the names, ages and positions of our executive officers as of August 15, 2024. There are no family relationships between any executive officers, except that Mr. Stephen C. Chang is a son of Dr. Mike F. Chang. 11 Name Age Position Stephen C. Chang 47 Chief Executive Officer and Director Mike F. Chang, Ph.D. 79 Executive Chairman and Chairman of the Board Yifan Liang 60 Chief Financial Officer and Corporate Secretary Wenjun Li, Ph.D. 55 Chief Operating Officer Bing Xue, Ph.D. 60 Executive Vice President of Worldwide Sales and Business Development Stephen C. Chang has served as our Chief Executive Officer since March 2023 and as a director since November 2022. Mr. Chang previously served as the Company’s President from January 2021 to February 2023. Prior to that, Mr. Chang served in various management positions, including Executive Vice President of Product Line Management, Senior VP of Marketing, VP of the MOSFET Product Line, and Senior Director of Product Marketing. Mr. Chang has over 20 years of industry experience and leads the Company’s business strategies, product and technology development, sales and marketing functions, manufacturing operation and supply chain management, and other managerial responsibilities. Mr. Chang received his B.A. in Electrical Engineering from University of California, Berkeley, and M.B.A. from Santa Clara University. Mike F. Chang, Ph.D., is the founder of our company and serves as our Executive Chairman. Dr. Chang served as Chief Executive Officer since the founding of our company until March 2023. Prior to establishing our company, Dr. Chang served as the Executive Vice President at Siliconix Incorporated, a subsidiary of Vishay Intertechnology Inc., a global manufacturer and supplier of discrete and other power semiconductors, or Siliconix, from 1998 to 2000. Dr. Chang also held various management positions at Siliconix from 1987 to 1998. Earlier in his career, Dr. Chang focused on product research and development in various management positions at General Electric Company from 1974 to 1987. Dr. Chang received his B.S. in electrical engineering from National Cheng Kung University, Taiwan, and M.S. and Ph.D. in electrical engineering from the University of Missouri. Yifan Liang has been serving as our Chief Financial Officer since August 2014 and Corporate Secretary since November 2013. Mr. Liang served as our Interim Chief Financial Officer from November 2013 to August 2014, our Chief Accounting Officer since October 2006, and our Assistant Corporate Secretary from November 2009 to November 2013. Mr. Liang became our company's corporate controller in August 2004. Prior to joining us, Mr. Liang held various positions at PricewaterhouseCoopers LLP, or PwC, from 1995 to 2004, including Audit Manager in PwC’s San Jose office. Mr. Liang received his B.S. in management information system from the People's University of China and M.A. in finance and accounting from the University of Alabama. Wenjun. Li, Ph.D., has been serving as our Chief Operating Officer since August 2021. Prior to that, Dr. Li served in various management positions in our Company since 2012, including Executive Vice President of World-Wide Manufacturing, Senior Vice President of World-Wide Manufacturing, Vice President of Front-End Operation, the director of Process Integration and Senior Manager of Process Integration. Dr. Li holds a B.S. in Chemistry and a M.S. in Chemical Engineering from Taiyuan University of Technology, and a Ph.D. in Microelectronics & Solid-State Electronics from the Research Institute of Micro-Nanometer Technology at Shanghai Jiao Tong University. Bing Xue, Ph.D., has been serving as our Executive Vice President of Worldwide Sales and Business Development since January 2021. Prior to that, Dr. Xue held various managerial positions in our company since 2003, including Senior Vice President of Global Sales, Vice President of Global Sales, Vice President of Worldwide Manufacturing, and General Manager of China Operation. Prior to joining us, Dr. Xue served as the Director of Engineering in Dowslake Microsystem from 2001 to 2003. Dr. Xue received his B.S. in Physics from Xiamen University, and Ph.D. in Physical Chemistry from University of Pennsylvania. Available Information Our filing documents and information with the Securities and Exchange Commission (the “SEC”) are available free of charge electronically through our Internet website, www.aosmd.com. as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy statements, and other information that we file electronically. 12 Item 1A. Risk Factors Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Risk Factor Summary Risks Related to Our Business • We may be adversely affected by the macroeconomic conditions and cyclicality of the semiconductor industry. • The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations. • Our strategy of diversification into different market segments may not succeed according to our expectations. • Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance. • Geopolitical and economic conflicts between United States and China may adversely affect our business. • Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. • We may not be able to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner. • We may not win sufficient designs, or our design wins may not generate sufficient revenue for us to maintain or expand our business. • Our success depends upon the ability of our OEM end customers to successfully sell products incorporating our products. • The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations. • Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share. • If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition. • We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. • Our reliance on third-party semiconductor foundries to manufacture our products subjects us to risks. • Our lack of control over the JV Company may adversely affect our operations. • Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks. • We have made and may continue to make strategic acquisitions of other companies, assets or businesses and these acquisitions introduce significant risks and uncertainties. • If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. • We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results. • Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results. • We may be adversely affected by any disruption in our information technology systems. • We depend on the continuing services of our senior management team and other key personnel. • Failure to protect our patents and our other proprietary information could harm our business and competitive position. 13 • Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products. • The DOC government investigation and evolving export control regulations may adversely affect our financial performance and business operations. • Global or regional economic, political and social conditions could adversely affect our business and operating results. • Our business operations could be significantly harmed by natural disasters or global epidemics. • Our insurance may not cover all losses, including losses resulting from business disruption or product liability claims. • Our international operations subject our company to risks not faced by companies without international operations. • If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. • We are subject to the risk of increased income taxes and changes in existing tax rules. • Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default. • The imposition of U.S. corporate income tax on our Bermuda parent and non-U.S. subsidiaries could adversely affect our results of operations. • We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. • The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins. Risks Related to Doing Business in China • China’s economic, political and social conditions, as well as government policies, could affect our business and growth. • Changes in China’s laws, legal protections or government policies on foreign investment in China may harm our business. • The continuing trade tensions between the U.S. and China may result in increased tariffs on imported goods from China could adversely affect our business operations. • Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. • Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business. • China's currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China. • The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. • Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S. dollar and Chinese Yuan, or RMB. • PRC labor laws may adversely affect our results of operations. • Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. Risks Related to Our Corporate Structure and Our Common Shares • Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all. 14 • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. • Anti-takeover provisions in our bye-laws could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management. • We are a Bermuda company and the rights of shareholders under Bermuda law may be different from U.S. laws. Risks Related to Our Business Our operating results and financial conditions are affected by downturns in the semiconductor industry, changes in end-market demand and other macro- economic trends. The semiconductor industry periodically experiences significant economic downturns characterized by diminished product and end-market demand, production overcapacity, excess inventory, which can result in rapid significant decline in shipment and sales, which may harm our operating results and financial condition. The semiconductor market is also highly cyclical and is characterized by constant and rapid technological change such as product obsolescence and price erosion, evolving standards, uncertain product life cycles and wide fluctuations in product supply and demand. Since mid-2022, we have experienced an industry-wide decline of customer demand for semiconductor products due primarily to the build-up of excess inventory prior to the cessation of the COVID-19 pandemic. This decline has negatively affected our recent financial performance in 2023. While we expect some recovery of the macroeconomic trend by the end of 2023 and early 2024, there is no guarantee that it will occur and a prolonged and extended downturn in the semiconductor industry will have a substantial impact on our operating results and financial conditions. The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations. 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 approximately 43.0%, 35.2% and 44.5% of our total revenue for the years ended June 30, 2024, 2023 and 2022, respectively. 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. While we experienced a surge of demand in the 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 in mid-2024, we cannot predict how and when the market will be fully recovered. 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. Our strategy of diversification into different market segments may not succeed according to our expectations and may expose us to new risks and place significant strains on our management, operational, financial and other resources. 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, gaming consoles, lighting, datacom, telecommunications, home appliances 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. Our diversification into different market segments may place a significant strain on our management, operational, financial and other resources. To manage this diversification effectively, we will need to take various actions, including: • enhancing management information systems, including forecasting procedures; • further developing our operating, administrative, financial and accounting systems and controls; 15 • managing our working capital and sources of financing; • maintaining close coordination among our engineering, accounting, finance, marketing, sales and operations organizations; • retaining, training and managing our employee base; • enhancing human resource operations and improving employee hiring and training programs; • realigning our business structure to more effectively allocate and utilize our internal resources; • improving and sustaining our supply chain capability; and • managing both our direct and distribution sales channels in a cost-efficient and competitive manner. Our failure to execute any of the above actions successfully or timely may have an adverse effect on our business and financial results. Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance. Our periodic operating results may fluctuate as a result of a number of factors, many of which are beyond our control. These factors include, among others: • a deterioration in general demand for electronic products, particularly the PC market, as a result of global or regional financial crises and associated macro-economic slowdowns, and/or the cyclicality of the semiconductor industry; • a deterioration in business conditions at our distributors and /or end customers; • adverse general economic conditions in the countries where our products are sold or used; • the emergence and growth of markets for products we are currently developing; • our ability to successfully develop, introduce and sell new or enhanced products in a timely manner and the rate at which our new products replace declining orders for our older products; • the anticipation, announcement or introduction of new or enhanced products by us or our competitors; • changes in the selling prices of our products and in the relative mix in the unit shipments of our products, which have different average selling prices and profit margins; • the amount and timing of operating costs and capital expenditures, including expenses related to the maintenance and expansion of our business operations and infrastructure; • the announcement of significant acquisitions, disposition or partnership arrangements; • changes in the utilization of our in-house manufacturing capacity and the availability of manufacturing capacity at third-party foundries and the JV Company; • supply and demand dynamics and the resulting price pressure on the products we sell; • the unpredictable volume and timing of orders, deferrals, cancellations and reductions for our products, which may depend on factors such as our end customers' sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors; • changes in laws and regulations affecting our business operations; • changes in costs associated with manufacturing of our products, including pricing of wafer, raw materials and assembly services; • announcement of significant share repurchase programs; • our concentration of sales in consumer applications and changes in consumer purchasing patterns and confidence; and • the adoption of new industry standards or changes in our regulatory environment. Any one or a combination of the above factors and other risk factors described in this section may cause our operating results to fluctuate from period to period, making it difficult to predict our future performance. Therefore, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. 16 Geopolitical and economic conflicts between United States and China may adversely affect our business Geopolitical conflicts and tensions between the United States and China have threatened and destabilized 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 and to 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, disagreements 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. Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. Demand for our products from our end customers fluctuates depending on their sales outlooks and market and economic conditions. Accordingly, our distributors place purchase orders with us based on their forecasts of end customer demand. Because these forecasts may not be accurate, channel inventory held at our distributors may fluctuate significantly due to the difference between the forecasts and actual demand. As a result, distributors adjust their purchase orders placed with us in response to changing channel inventory levels, as well as their assessment of the latest market demand trends. A significant decrease in our distributors’ channel inventory in one period may lead to a significant rebuilding of channel inventory in subsequent periods, or vice versa, which may cause our quarterly revenue and operating results to fluctuate significantly. In addition, because our power semiconductors are used in consumer electronics products, our revenue is subject to seasonality. Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. In recent year, broad fluctuations in the semiconductor markets and the global economic conditions, in particular the decline of the PC market conditions, as well as the COVID-19 pandemic, have had a more significant impact on our results of operations, than seasonality, and have made it difficult to assess the impact of seasonal factors on our business. If we are unable to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner, it may harm our business, financial position and operating results. Our success depends upon our ability to develop and introduce new and enhanced products that meet or are compatible with our customer’s specifications, performance standards and other product requirements in a timely manner. The development of new and enhanced products involves highly complex processes, and at times we have experienced delays in the introduction of new products. Successful product development and introduction of new products depends on a number of factors, including the accurate product specification; timely completion of design; achievement of manufacturing yields; timely response to changes in customer’s product requirements; quality and cost-effective production; and effective marketing. Since many of our products are designed for specific applications, we must frequently develop new and enhanced products jointly with our customers. In the past, we have encountered product compatibility issues with a major OEM that has negatively impacted our financial results, and although we have resolved fully such issues with the OEM, there is no guarantee that the same compatibility issues will not occur in the future with other OEMs. If we are unable to develop or acquire new products that meet or are compatible with our customer’s specification and other product requirements in a timely manner, we may lose revenue or market share with our customers, which could have a material adverse effect on our business, financial position and operating results. We may not win sufficient designs, or our design wins may not generate sufficient revenue for us to maintain or expand our business. We invest significant capital and resources to compete with other power semiconductor companies to win competitive bids for our products in selection processes, known as “design wins.” Our effort to obtain design wins may detract from or delay the completion of other important development projects, impair our relationships with existing end customers and negatively impact sales of products under development. In addition, we cannot be assured that these 17 efforts would result in a design win, that our product would be incorporated into an end customer's initial product design, or that any such design win would lead to production orders and generate sufficient revenue. Furthermore, even after we have qualified our products with a customer and made sales, subsequent changes to our products, manufacturing processes or suppliers may require a new qualification process, which may result in delay and excess inventory. If we cannot achieve sufficient design wins in the future, or if we fail to generate production orders following design wins, our ability to grow our business and improve our financial results will be harmed. Our success depends upon the ability of our OEM end customers to successfully sell products incorporating our products. The consumer end markets, in particular the PC market, in which our products are used are highly competitive. Our OEM end customers may not successfully sell their products for a variety of reasons, including: • general global and regional economic conditions; • late introduction or lack of market acceptance of their products; • lack of competitive pricing; • shortage of component supplies; • excess inventory in the sales channels into which our end customers sell their products; • changes in the supply chain; and • changes as a result of regulatory restrictions applicable to China-exported products. Our success depends on the ability of our OEM end customers to sell their products incorporating our products. In addition, we have expanded our business model to include more OEMs in our direct customer base. The failure of our OEM end customers to achieve or maintain commercial success for any reason could harm our business, results of operations, and financial condition and prospects. The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations. The operation of the Oregon Fab requires significant fixed manufacturing cost. In order to manage the capacity of the wafer fabrication facility efficiently, we must perform a forecast of long-term market demand and general economic conditions for our products. Because market conditions may vary significantly and unexpectedly, our forecast may change significantly at any time, and we may not be able to make timely adjustments to our fabrication capacity in response to these changes. During periods of continued decline in market demand, in particular the decline of the PC market, we may not be able to absorb the excess inventory and additional costs associated with operating the facility at higher capacity, which may adversely affect our operating results. Similarly, during periods of unexpected increase in customer demand, we may not be able to ramp up production quickly to meet these demands, which may lead to the loss of significant revenue opportunities. The manufacturing processes of a fabrication facility are complex and subject to interruptions. We may experience production difficulties, including lower manufacturing yields or products that do not meet our or our customers’ specifications, and problems in ramping production and installing new equipment. These difficulties could result in delivery delays, quality problems and lost revenue opportunities. Any significant quality problems could also damage our reputation with our customers and distract us from the development of new and enhanced product which may have a significant negative impact on our financial results. Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share, and we may face warranty and product liability claims arising from defective products. Our products are complex and must meet stringent quality requirements. Products as complex as ours may contain undetected errors or defects, especially when first introduced or when new versions are released. Errors, defects or poor performance can arise due to design flaws, defects in raw materials or components or manufacturing anomalies, which can affect both the quality and the yield of the product. It can also be potentially dangerous as defective power components, or improper use of our products by customers, may lead to power overloads, which could result in explosion or fire. Any actual or perceived errors, defects or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts in order to address or remedy any defects 18 and increases in customer service and support costs, all of which could have a material adverse effect on our business and operations. Furthermore, as our products are typically sold at prices much lower than the cost of the equipment or other devices incorporating our products, any defective, inefficient or poorly performing products, or improper use by customers of power components, may give rise to warranty and product liability claims against us that exceed any revenue or profit we receive from the affected products. We could incur significant costs and liabilities if we are sued and if damages are awarded against us. There is no guarantee that our insurance policies will be available or adequate to protect against such claims. Costs or payments we may make in connection with warranty and product liability claims or product recalls may adversely affect our financial condition and results of operations. The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins. As is typical in the semiconductor industry, the average selling price of a particular product has historically declined significantly over the life of the product. In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors. We expect that we will have to similarly reduce prices in the future for older generations of products. Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product. If not offset by sales of other products with higher gross margins, our overall gross margins may be adversely affected. Our business, results of operations, financial condition and prospects will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales volumes, reducing our costs and developing new or enhanced products on a timely basis, with higher selling prices or gross margins. If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition. We manufacture our products according to our estimates of customer demand. This process requires us to make numerous forecasts and assumptions relating to the demand of our end customers, channel inventory, and general market conditions. Because we sell most of our products to distributors, who in turn sell to our end customers, we have limited visibility as to end customer demand. Furthermore, we do not have long-term purchase commitments from our distributors or end customers, and our sales are generally made by purchase orders that may be cancelled, changed or deferred without notice to us or penalty. As a result, it is difficult to forecast future customer demand to plan our operations. The utilization of our manufacturing facilities and the provisions for inventory write-downs are important factors in our profitability. If we overestimate demand for our products, or if purchase orders are canceled or shipments delayed, we may have excess inventory, which may result in adjustments to our production plans. These adjustments to our productions may affect the utilization of our own wafer fabrication and packaging facilities. If we cannot sell certain portions of the excess inventory, it will affect our provisions for inventory write-downs. Our inventory write-down provisions are subject to adjustment based on events that may not be known at the time the provisions are made, and such adjustments could be material and impact our financial results negatively. If we underestimate demand, we may not have sufficient inventory to meet end-customer demand, and we may lose market share and damage relationships with our distributors and end customers and we may have to forego potential revenue opportunities. Obtaining additional supply in the face of product shortages may be costly or impossible, particularly in the short term, which could prevent us from fulfilling orders in a timely manner or at all. In addition, we plan our operating expenses, including research and development expenses, hiring needs and inventory investments, based in part on our estimates of customer demand and future revenue. If customer demand or revenue for a particular period is lower than we expect, we may not be able to proportionately reduce our fixed operating expenses for that period, which would harm our operating results. We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. 19 The power semiconductor industry is highly competitive and fragmented. If we do not compete successfully against current or potential competitors, our market share and revenue may decline. Our main competitors are primarily headquartered in the United States, Japan, Taiwan and Europe. Our major competitors for our power discretes include Infineon Technologies AG, Magnachip Semiconductor Corporation, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc. Our major competitors for our power ICs include Global Mixed-mode Technology Inc., Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc. and Vishay Intertechnology, Inc. We expect to face competition in the future from our competitors, other manufacturers, designers of semiconductors and start-up semiconductor design companies. Many of our competitors have competitive advantages over us, including: • significantly greater financial, technical, research and development, sales and marketing and other resources, enabling them to invest substantially more resources than us to respond to the adoption of new or emerging technologies or changes in customer requirements; • greater brand recognition and longer operating histories; • larger customer bases and longer, more established relationships with distributors or existing or potential end customers, which may provide them with greater reliability and information regarding future trends and requirements that may not be available to us; • the ability to provide greater incentives to end customers through rebates, and marketing development funds or similar programs; • more product lines, enabling them to bundle their products to offer a broader product portfolio or to integrate power management functionality into other products that we do not sell; • greater ability and more resources to influence and participate in the regulatory and legislative process for more favorable laws and regulations; and • captive manufacturing facilities, providing them with guaranteed access to manufacturing facilities in times of global semiconductor shortages. In addition, the semiconductor industry has experienced increased consolidation over the past several years that may adversely affect our competitive position. Consolidation among our competitors could lead to a less favorable competitive landscape, capabilities and market share, which could harm our business and results of operations. If we are unable to compete effectively for any of the foregoing or other reasons, our business, results of operations, and financial condition and prospects will be harmed. Our reliance on third-party semiconductor foundries to manufacture our products subject us to risks. The allocation of our wafer production between in-house facility and third-party foundries may fluctuate from time to time. We expect to continue to rely in part on third party foundries to meet our wafer requirements. Although we use several independent foundries, our primary third-party foundry is HHGrace, which manufactured 3.8%, 9.6% and 10.3% of the wafers used in our products for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. If any third-party foundry does not provide competitive pricing or is not able to meet our required capacity for any reason, we may not be able to obtain the required capacity to manufacture our products timely or efficiently. From time to time, third party suppliers may extend lead-times, limit supplies or increase prices due to capacity constraints or other factors, and we may experience a shortage of capacity on an industry-wide basis that may last for an extended period of time. There are no assurances that we will be able to maintain sufficient capacity to meet the full demand from our customers, and failure to do so will adversely affect our results of operations. If we cannot maintain sufficient capacity or control pricing with our existing third-party foundries, we may need to increase our own manufacturing capacity, and there is no assurance that we can ramp up the production of the Oregon Fab timely to meet the increased demand. If not, we may need to seek alternative foundries, which may not be available on commercially reasonable terms, or at all. In addition, the process for qualifying a new foundry is time consuming, difficult and may not be successful, particularly if we cannot integrate our proprietary process technology with the process used by the new foundry. Using a foundry with which we have no established relationship could expose us to potentially unfavorable pricing, unsatisfactory quality or insufficient capacity allocation. 20 We also rely on third-party foundries to effectively implement certain of our proprietary technology and processes and also require their cooperation in developing new fabrication processes. Any failure to do so may impair our ability to introduce new products and on time delivery of wafers for our existing products. In order to maintain our profit margins and to meet our customer demand, we need to achieve acceptable production yields and timely delivery of silicon wafers. As is common in the semiconductor industry, we have experienced, and may experience from time to time, difficulties in achieving acceptable production yields and timely delivery from third-party foundry vendors. Minute impurities in a silicon wafer can cause a substantial number of wafers to be rejected or cause numerous die on a wafer to be defective. Low yields often occur during the production of new products, the migration of processes to smaller geometries or the installation and start up of new process technologies. We face a number of other significant risks associated with outsourcing fabrication, including: • limited control over delivery schedules, quality assurance and control and production costs; • discretion of foundries to reduce deliveries to us on short notice, allocate capacity to other customers that may be larger or have long-term customer or preferential arrangements with foundries that we use; • unavailability of, or potential delays in obtaining access to, key process technologies; • limited warranties on wafers or products supplied to us; • damage to equipment and facilities, power outages, equipment or materials shortages that could limit manufacturing yields and capacity at the foundries; • potential unauthorized disclosure or misappropriation of intellectual property, including use of our technology by the foundries to make products for our competitors; • financial difficulties and insolvency of foundries; and • acquisition of foundries by third parties. Any of the foregoing risks could delay shipment of our products, result in higher expenses and reduced revenue, damage our relationships with customers and otherwise adversely affect our business and operating results. Our lack of control over the JV Company may adversely affect our operations. We formed the JV Company in 2016 which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing. The JV Company is our subcontractor that provides us with foundry capacity to develop and manufacture our products and to enhance our market position in China. While we retained control over the JV Company from inception of 2021, we lost control over the JV Company in December 2021 as our equity interest in the JV Company has been diluted through the issuances of additional equity securities by the JV Company and other transactions. 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 previously agreed to provide us with a guaranteed capacity on a monthly basis, such guarantee has expired and we are in the process of negotiating a new arrangement with the JV Company to provide us with capacity. There is no guarantee that we will be successful in renewing the capacity agreement, and even if we do, there is no guarantee that we will obtain favorable pricing or service terms, or that such capacity will be sufficient, which may adversely affect our results of operations. Our lack of control over the JV Company may also make it more difficult for us to execute our broader business strategies in China, including our R&D, sales and marketing, product innovation efforts and protection of intellectual property rights, because the JV Company may decide not to cooperate with us in these matters. In addition, while we expect to achieve a financial return for our investment in the JV Company as a result of the China IPO, the China IPO process is complex, time-consuming and subject to a number of risks and there is no guarantee that the China IPO will be completed in a timely manner, or at all, and the JV Company’s failure to close the China IPO will negatively affect our investment in the JV Company. In order to fund its capital expenditures and cost of operation, the JV Company has incurred a significant amount of indebtedness from third-party lenders under several loan and lease financing agreements, some of which are secured by substantially all of the assets of the JV Company. If the JV Company is not able to generate sufficient cash flow to make 21 payments under these loans, the JV Company may be in default, which will adversely affect its ability to continue operations and provide foundry services to us. In addition, the JV Company requires additional funding to continue its operations and to refinance its existing indebtedness. There is no guarantee that the JV Company will be able to obtain financing on favorable terms, or at all, and any such failure may negatively impact our ability to access its wafer manufacturing capacity. Any of the foregoing risks could materially reduce the expected return of our investment in the JV Transaction and adversely affect our business operations, our financial performance and the trading price of our shares. Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks. We sell a substantial portion of our products to distributors, who in turn sell to our end customers. Our distributors typically offer power semiconductor products from several different companies, including our direct competitors. The distributors assume collection risk and provide logistical services to end customers, including stocking our products. Two distributors, WPG and Promate, collectively accounted for 71.0%, 57.2% and 64.3% of our revenue for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. We currently have effective agreements with Promate and WPG to serve as our distributors, and such agreement is renewed automatically for one-year period continuously unless terminated earlier pursuant to the terms of such agreements. We believe that our success will continue to depend upon these distributors. Our reliance on distributors subjects us to a number of risks, including: • write-downs in inventories associated with stock rotation rights and increases in provisions for price adjustments granted to certain distributors; • potential reduction or discontinuation of sales of our products by distributors; • failure to devote resources necessary to sell our products at the prices, in the volumes and within the time frames that we expect; • focusing their sales efforts on products of our competitors; • dependence upon the continued viability and financial resources of these distributors, some of which are small organizations with limited working capital and all of which depend on general economic conditions and conditions within the semiconductor industry; • dependence on the timeliness and accuracy of shipment forecasts and resale reports from our distributors; • management of relationships with distributors, which can deteriorate as a result of conflicts with efforts to sell directly to our end customers; and • our agreements with distributors which are generally terminable by either party on short notice. If any significant distributor becomes unable or unwilling to promote and sell our products, or if we are not able to renew our contracts with the distributors on acceptable terms, we may not be able to find a replacement distributor on reasonable terms or at all and our business could be harmed. We have made and may continue to make strategic acquisitions of other companies, assets or businesses or form joint ventures with partners to advance our business objectives. These acquisitions and joint ventures involve significant risks and uncertainties. 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 and 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. 22 In addition, we may also issue equity securities to pay for future acquisitions or alliances, which could be dilutive to existing shareholders. We may also incur debt or assume contingent liabilities in connection with acquisitions and alliances, which could impose restrictions on our business operations and harm our operating results. If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. Our fabrication and packaging processes depend on raw materials such as silicon wafers, gold, copper, molding compound, petroleum and plastic materials and various chemicals and gases. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. If the prices of these raw materials rise significantly, we may be unable to pass on the increased cost to our customers. Our results of operations could be adversely affected if we are unable to obtain adequate supplies of raw materials in a timely manner or at reasonable price. In addition, from time to time, we may need to reject raw materials because they do not meet our specifications or the sourcing of such materials do not comply with our conflict mineral policies, resulting in potential delays or declines in output. Furthermore, problems with our raw materials may give rise to compatibility or performance issues in our products, which could lead to an increase in customer returns or product warranty claims. Errors or defects may arise from raw materials supplied by third parties that are beyond our detection or control, which could lead to additional customer returns or product warranty claims that may adversely affect our business and results of operations. We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results. We sell a majority of our products to distributors under arrangements allowing price adjustments and returns under stock rotation programs, subject to certain limitations. As a result, we are required to estimate allowances for price adjustments and stock rotation for our products as inventory at distributors at each reporting period end. Our ability to reliably estimate these allowances enables us to recognize revenue upon delivery of goods to distributors instead of upon resale of goods by distributors to end customers. We estimate the allowance for price adjustment based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products. Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $41.7 million and $40.0 million at June 30, 2024 and 2023, respectively. Our accruals for stock rotation are estimated based on historical returns and individual distributor agreement, and stock rotation rights, which are recorded as accrued liabilities on our consolidated balance sheets, are contractually capped based on the terms of each individual distributor agreement. Our estimated liabilities for stock rotation at June 30, 2024 and 2023 were $4.7 million and $5.6 million, respectively. Our estimates for these allowances and accruals may be inaccurate. If we subsequently determine that any allowance and accrual based on our estimates is insufficient, we may be required to increase the size of our allowances and accrual in future periods, which would adversely affect our results of operations and financial condition. Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results. We have two wholly-owned packaging and testing facilities located in Shanghai, China that handle most of our packaging and testing requirements. The operation of high-volume packaging and testing facilities and implementation of our advanced packaging technology are complex and demand a high degree of precision and may require modification to improve yields and product performance. We have committed substantial resources to ensure that our packaging and testing facilities operate efficiently and successfully, including the acquisition of equipment and raw materials, and training and management of a large number of technical personnel and employees. Due to the fixed costs associated with operating our own packaging and testing facilities, if we are unable to utilize our in- house facilities at a desirable level of production, our gross margin and results of operations may be adversely affected. For example, a significant decline in our market share or sales orders may negatively impact our factory utilization and reduce our ability to achieve profitability. In addition, the operation of our packaging and testing facilities is subject to a number of risks, including the following: 23 • unavailability of equipment, whether new or previously owned, at acceptable terms and prices; • facility equipment failure, power outages or other disruptions; • shortage of raw materials, including packaging substrates, copper, gold and molding compound; • failure to maintain quality assurance and remedy defects and impurities; • changes in the packaging requirements of customers; • compliance with local and regional legal and regulatory requirements; and • operation stoppage due to the city-wide lockdown in response to public health emergencies or pandemics. Any of the foregoing risks could adversely affect our capacity to package and test our products, which could delay shipment of our products, result in higher expenses, reduce revenue, damage our relationships with customers and otherwise adversely affect our business, results of operations, financial condition and prospects. Our business operations and financial conditions may be adversely affected by any disruption in our information technology systems, including any cyberattacks and breaches. Our operations are dependent upon our information technology systems, which encompass all of our major business functions across offices internationally. We rely upon such information technology systems to manage and replenish inventory, complete and track customer orders, coordinate sales activities across all of our products and services, maintain vital data and information, perform financial and accounting tasks and manage and perform various administrative and human resources functions. A substantial disruption in our information technology systems for any extended time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer service and relationships. Our systems might be damaged or interrupted by natural or man−made events or by computer viruses, physical or electronic break−ins, cyber-attacks and similar disruptions affecting the global Internet. In the past we have experienced cybersecurity incidents and threats against our information technology systems. While these incidents and attacks did not have a material adverse effect on our business operation or results of operations, they caused temporary disruptions and interfered with our operations. Any cybersecurity breach and financial loss may also have a negative impact on our internal control over financial reporting. While we have implemented additional measures to enhance our security protocol to protect our system and intend to do so in response to any threats, there is no guarantee that future attacks would be thwarted or prevented. We also expect to incur additional costs and expenses to upgrade our information technology system and establish additional protective measures to prevent future breaches. Furthermore, despite our efforts to investigate, improve and remediate the capability and performance of our information technology system, we may not be able to discover all weaknesses, breaches and vulnerabilities, and failure to do so may expose us to higher risk of data loss and adversely affect our business operations and results of operations. We depend on the continuing services of our senior management team and other key personnel, and if we lose a member of our senior management or are unable to successfully retain, recruit and train key personnel, our ability to develop and market our products could be harmed. 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. 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. Failure to protect our patents and our other proprietary information could harm our business and competitive position. 24 Our success depends, in part, on our ability to protect our intellectual property. We rely on a combination of patent, copyright (including mask work protection), trademark and trade secret laws, as well as nondisclosure agreements, license agreements and other methods to protect our intellectual property rights, which may not be sufficient to protect our intellectual property. As of June 30, 2024, we owned 930 issued U.S. patents expiring between 2024 and 2042 and had 52 pending patent applications with the United States Patent and Trademark Office. In addition, we own patents and have filed patent applications in several jurisdictions outside of the U.S, including China, Taiwan, Japan and Korea. Our patents and patent applications may not provide meaningful protection from our competitors, and there is no guarantee that patents will be issued from our patent applications. The status of any patent or patent application involves complex legal and factual determinations and the breadth of a claim is uncertain. In addition, our efforts to protect our intellectual property may not succeed due to difficulties and risks associated with: • policing any unauthorized use of or misappropriation of our intellectual property, which is often difficult and costly and could enable third parties to benefit from our technologies without paying us; • others independently developing similar proprietary information and techniques, gaining authorized or unauthorized access to our intellectual property rights, disclosing such technology or designing around our patents; • the possibility that any patent or registered trademark owned by us may not be enforceable or may be invalidated, circumvented or otherwise challenged in one or more countries may limit our competitive advantages; • uncertainty as to whether patents will be issued from any of our pending or future patent applications with the scope of the claims sought by us, if at all; and • intellectual property laws and confidentiality laws may not adequately protect our intellectual property rights, including, for example, in China where enforcement of China intellectual property-related laws have historically been less effective, primarily because of difficulties in enforcement and low damage awards. We also rely on customary contractual protection with our customers, suppliers, distributors, employees and consultants, and we implement security measures to protect our trade secrets. We cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our suppliers, employees, distributors or consultants will not assert rights to intellectual property arising out of such contracts. In addition, we have a number of third-party patent and intellectual property license agreements, one of which requires us to make ongoing royalty payments. In the future, we may need to obtain additional licenses, renew existing license agreements or otherwise replace existing technology. We are unable to predict whether these license agreements can be obtained or renewed or the technology can be replaced on acceptable terms, or at all. Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products. As is typical in the semiconductor industry, we or our customers have received and may continue to receive claims of infringement from time to time or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties that may cover some of our technology, products and services or those of our end customers. The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights which has resulted in protracted and expensive arbitration and litigation for many companies. Patent litigation has increased in recent years due to increased assertions made by intellectual property licensing entities or non-practicing entities and increasing competition and overlap of product functionality in our markets. Any litigation or arbitration regarding patents or other intellectual property could be costly and time consuming and could divert our management and key personnel from our business operations. We have in the past and may from time to time in the future become involved in litigation that requires our management to commit significant resources and time. In addition, as part of our strategy to diversify our serviceable markets, we launched several key product families and technologies to enable high efficiency power conversion solutions and we plan to develop and commercialize new products in other power semiconductor markets. Our entry into the commercial markets for high-voltage power semiconductors and other markets as a result of our diversification strategy may subject us to additional and increased risk of disputes or litigation relating to these products. 25 Because of the complexity of the technology involved and the uncertainty of litigation generally, any intellectual property arbitration or litigation involves significant risks. Any claim of intellectual property infringement against us may require us to: • incur substantial legal and personnel expenses to defend the claims or to negotiate for a settlement of claims; • pay substantial damages or settlement to the party claiming infringement; • refrain from further development or sale of our products; • attempt to develop non-infringing technology, which may be expensive and time consuming, if possible at all; • enter into costly royalty or license agreements that might not be available on commercially reasonable terms or at all; • cross-license our technology with a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; and • indemnify our distributors, end customers, licensees and others from the costs of and damages of infringement claims by our distributors, end customers, licensees and others, which could result in substantial expenses for us and damage our business relationships with them. Any intellectual property claim or litigation against us harm our business, results of operations, financial condition and prospects. The current government investigation by Department of Commerce (“DOC”) and evolving export control regulations may adversely affect our business operations. As previously disclosed, the Company has continued to respond to inquiries and requests for documents and information from Department of Commerce (“DOC”) in connection with an investigation into the Company’s export control practices and DOC is currently reviewing this matter. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review. The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks. We expect to incur significant costs and expenses, including legal fees, in connection with our effort to respond to the government investigation. Furthermore, the management has diverted its resources and time in response to the investigation, and might not be able to fully engage with the core operation and objectives of our business activities. Finally, while we are fully cooperating with the government in the investigation, we are not able to predict its timing and outcome. In the event that the government decides to bring enforcement action or impose fines against us, it will result in a material adverse effect on our business operations, our financial conditions and our reputation. We also expect that the U.S. export control regulations to evolve and change in response to the political and economic tension between the U.S. and China, including potential new export control regulations that may impose additional restrictions on our ability to continue to do business with certain customers in China and Asia. If such changes occur, we may be required to reduce shipments to certain Asian customers, adjust our business practices and incur additional costs to implement new export control compliance procedures, policies and programs, each of which will adversely affect our financial conditions and results of operations. Global or regional economic, political and social conditions could adversely affect our business and operating results. External factors such as potential terrorist attacks, acts of war, financial crises, such as the global or regional economic recession, or geopolitical and social turmoil in those parts of the world that serve as markets for our products could have significant adverse effect on our business and operating results in ways that cannot presently be predicted. Any future economic downturn or recession in the global economy in general and, in particular, on the economies in China, Taiwan and other countries where we market and sell our products, will have an adverse effect on our results of operations. Our business operations could be significantly harmed by natural disasters or global epidemics. 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 26 to our operations. We are not currently covered by insurance against business disruption caused by earthquakes. In addition, we currently do not have redundant, multiple site capacity in the event of a natural disaster or other catastrophic event. In the event of such an occurrence, our business would suffer. Our business could be adversely affected by natural disasters such as epidemics, outbreaks or other health crisis. An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis similar to the COVID-19 pandemic could adversely affect the economies and financial markets of many countries, particularly in Asia. Moreover, any related disruptions to transportation or the free movement of persons could hamper our operations and force us to close our offices temporarily. The occurrence of any of the foregoing or other natural or man-made disasters could cause damage or disruption to us, our employees, operations, distribution channels, markets and customers, which could result in significant delays in deliveries or substantial shortages of our products and adversely affect our business results of operations, financial condition or prospects. Our insurance may not cover all losses, including losses resulting from business disruption or product liability claims. We have limited product liability, business disruption or other business insurance coverage for our operations. In addition, we do not have any business insurance coverage for our operations to cover losses that may be caused by litigation or natural disasters. Any occurrence of uncovered loss could harm our business, results of operations, financial condition and prospects. Our international operations subject our company to risks not faced by companies without international operations. We have adopted a global business model under which we maintain significant operations and facilities through our subsidiaries located in the U.S., China, Taiwan and Hong Kong. Our main research and development center is located in Silicon Valley, and our manufacturing and supply chain is located in China. We also have sales offices and customers throughout Asia, the U.S. and elsewhere in the world. Our international operations may subject us to the following risks: • economic and political instability, including trade tension between the U.S. and China; • costs and delays associated with transportations and communications; • coordination of operations through multiple jurisdictions and time zones; • fluctuations in foreign currency exchange rates; • trade restrictions, changes in laws and regulations relating to, amongst other things, import and export tariffs, taxation, environmental regulations, land use rights and property; and • the laws of, including tax laws, and the policies of the U.S. toward, countries in which we operate. If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. We are required to maintain proper internal control over our financial reporting and adequate controls related to our disclosures. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of the Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. If we fail to maintain adequate controls, our business, the results of operations, financial condition and/or the value of our stock may be adversely impacted. In addition, if we identify material weakness in our internal control process, we may be required to incur additional costs to implement remedial measures, and public disclosure of material weaknesses may adversely affect the investors’ confidence in the quality of our financial disclosures, which may negatively impact trading price of our stock. We are subject to the risk of increased income taxes and changes in existing tax rules. We conduct our business in multiple jurisdictions, including Hong Kong, Macau, the U.S., China, Taiwan, South Korea, Japan, India 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 (138.1)%, 30.1% and 7.9% for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. 27 Any tax rate changes in the tax jurisdictions in which we operate could result in adjustments to our deferred tax assets, if applicable, which would affect our effective tax rate and results of operations. We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by tax authorities and to possible changes in law, which may have a retroactive effect. In particular, various proposals over the years have been made to change certain U.S. tax laws relating to foreign entities with U.S. connections. In addition, the U.S. government has proposed various other changes to the U.S. international tax system, certain of which could adversely impact foreign-based multinational corporate groups, and increased enforcement of U.S. international tax laws. It is possible that these or other changes in the U.S. tax laws, foreign tax laws, or proposed actions by international bodies such as the Organization of Economic Cooperation and Development (OECD) could significantly increase our U.S. or foreign income tax liability in the future, including as described further below in this risk factor. 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 new laws 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, 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. In addition, our subsidiaries provide products and services to, and may from time to time undertake certain significant transactions with, us and other subsidiaries in different jurisdictions. We have adopted transfer pricing arrangements for transactions among our subsidiaries. Related party transactions are generally subject to close review by tax authorities, including requirements that transactions be priced at arm's length and be adequately documented. If any tax authorities were successful in challenging our transfer pricing policies or other tax judgments, our income tax expense may be adversely affected and we could also be subject to interest and penalty charges which may harm our business, financial condition and operating results. Further, the U.S. Congress, the EU, the OECD, and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One example is the OECD’s initiative in the area of “base erosion and profit shifting,” or “BEPS”. Many countries have implemented or begun to implement legislation and other guidance to align their international tax rules with the OECD’s BEPS recommendations. In addition, the OECD has been working on an extension of the BEPS project, being referred to as “BEPS 2.0”, which focuses on two “pillars” of reform. Pillar 1 is focused on global profit allocation and changing where large multinational corporations pay taxes, and pillar 2 includes a global minimum tax rate. The OECD published detailed blueprints of its proposals for pillar 1 and pillar 2 on October 14, 2020. In 2021, the OECD announced that more than 140 member jurisdictions (including the United States and Bermuda) have politically committed to potential changes to the international corporate tax system, including enacting a minimum tax rate of at least 15% as part of the OECD's "Pillar Two" initiative. During December 2022, the European Union reached agreement on the introduction of a minimum tax directive requiring member states to enact local legislation. We will continue to monitor countries' laws with respect to the OECD model rules and the Pillar Two global minimum tax. We do not believe Pillar Two has any material effect on us at this time, and the effects of any future legislation in this area are not yet reasonably estimable, but if such legislation is enacted in the future, it could have a material effect on our provision for income taxes, our financial results, and our earnings and cash flows. As a result of the focus on the taxation of multinational corporations, the tax laws in the countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect us. Our parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, the Company is not subject to any income or capital gains taxes in Bermuda. As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after January 1, 2025. In particular, the CIT applies to multinational companies with annual revenue of 750 million Euros or more in the consolidated financial 28 statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply. The Company is not in a position to determine whether the annual revenues may meet and/or cross the 750 million Euro threshold for at least two of the four fiscal years immediately preceding the fiscal year when CIT may apply. The Company continues to monitor and assess if and when it may be within the scope of the CIT. If we become subject to the Bermuda CIT, we may be subject to additional income taxes, which may adversely affect our financial position, results of operations and our overall business. Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default. We have entered into various debt agreements with certain financial institutions, which generally require us to maintain certain financial covenants that have the effect of limiting our ability to take certain actions, including actions to incur debt, repurchase stock, make certain investments and capital expenditures. As we continue to grow our business and expand our operations, we expect to incur additional indebtedness, including loan agreement or equipment leases, in order to fund such capital expenditures. These restrictions may limit our ability to pursue business and financial opportunities that are available or beneficial to us in response to changing and competitive economic environment, which may have an adverse effect on our financial conditions. In addition, a breach of any of these financial covenants, if not waived by the lenders, could trigger an event of default under the debt agreements, which may result in the acceleration of our indebtedness or the loss of our collateral used to secure such indebtedness. The imposition of U.S. corporate income tax on our Bermuda parent and non-U.S. subsidiaries could adversely affect our results of operations. We believe that our Bermuda parent and non-U.S. subsidiaries each operate in a manner that they would not be subject to U.S. corporate income tax because they are not engaged in a trade or business in the United States. Nevertheless, there is a risk that the U.S. Internal Revenue Service may assert that our Bermuda parent and non-U.S. subsidiaries are engaged in a trade or business in the United States. If our Bermuda parent and non-U.S. subsidiaries were characterized as being so engaged, we would be subject to U.S. tax at the regular corporate rates on our income that is effectively connected with U.S. trade or business, plus an additional 30% “branch profits” tax on the dividend equivalent amount, which is generally effectively connected income with certain adjustments, deemed withdrawn from the United States. Any such tax could materially and adversely affect our results of operations. We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a PFIC, for U.S. federal income tax purposes for the foreseeable future. However, we must make a separate determination for each taxable year as to whether we are a PFIC after the close of each taxable year and we cannot assure you that we will not be a PFIC for our June 30, 2024 taxable year or any future taxable year. Under current law, a non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets, generally based on an average of the quarterly values of the assets during a taxable year, is attributable to assets that produce or are held for the production of passive income. PFIC status depends on the composition of our assets and income and the value of our assets, including, among others, a pro rata portion of the income and assets of each subsidiary in which we own, directly or indirectly, at least 25% by value of the subsidiary's equity interests, from time to time. Because we currently hold and expect to continue to hold a substantial amount of cash or cash equivalents, and because the calculation of the value of our assets may be based in part on the value of our common shares, which may fluctuate considerably given that market prices of technology companies historically often have been volatile, we may be a PFIC for any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. holder held common shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder. Changes in our United States federal income tax classification, or that of our subsidiaries, could result in adverse tax consequences to our 10% or greater U.S. shareholders. The Tax Act may have changed the consequences to U.S. shareholders that own, or are considered to own, as a result of the attribution rules, 10% or more of the voting power or value of the stock of a non-U.S. corporation (a 10% U.S. shareholder) under the U.S. Federal income tax law applicable to owners of U.S. controlled foreign corporations, or CFCs. 29 Prior to the Tax Act, we did not believe that we, or any of our non-U.S. subsidiaries, were considered a CFC, which is a determination made daily based on whether the 10% U.S. shareholders together own, or are considered to own under the attribution rules, more than 50% of the voting power or value of a non-U.S. corporation. Under the Tax Act, however, because our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries may be classified as CFCs with respect to any single 10% U.S. shareholder, even without regard to whether 10% U.S. shareholders together own, directly or indirectly, more than 50% of the voting power or value of the Company. Our 10% or greater U.S. shareholders should consult their individual tax advisors for advice regarding the Tax Act’s revision to the U.S. Federal tax law applicable to owners of CFCs. Risks Related to Doing Business in China China's economic, political and social conditions, as well as government policies, could affect our business and growth. Our financial results have been, and are expected to continue to be, affected by the economy in China. If China’s economy is slowing down, it may negatively affect our business operation and financial results. The China economy differs from the economies of most developed countries in many respects, including: • higher level of government involvement; • early stage of development of a market-oriented economy; • rapid growth rate; • higher level of control over foreign currency exchange; and • less efficient allocation of resources. The Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the China government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of corporate governance in business enterprises, the China government continues to retain significant control over the business and productive assets in China. Any changes in China's government policy or China's political, economic and social conditions, or in relevant laws and regulations, may adversely affect our current or future business, results of operations or financial condition. These changes in government policy may be implemented through various means, including changes in laws and regulations, implementation of anti-inflationary measures, change of basic interest rate, changes in the tax rate or taxation system and the imposition of additional restrictions on currency conversion and imports. Furthermore, given China's largely export-driven economy, any changes in the economies of China's principal trading partners and other export-oriented nations may adversely affect our business, results of operations, financial condition and prospects. Our ability to successfully expand our business operations in China depends on a number of factors, including macroeconomic and other market conditions, and credit availability from lending institutions. In response to the recent global and Chinese economic recession, the China government has promulgated several measures aimed at expanding credit and stimulating economic growth. We cannot assure you that the various macroeconomic measures, monetary policies and economic stimulus package adopted by the China government to guide economic growth will be effective in maintaining or sustaining the growth rate of the Chinese economy. If measures adopted by the China government fail to achieve further growth in the Chinese economy, it may adversely affect our growth, business strategies and operating results. In addition, changes in political and social conditions of China may adversely affect our ability to conduct our business in the region. For example, geopolitical disputes and increased tensions between China and its neighboring countries in which we conduct business could make it more difficult for us to coordinate and manage our international operations in such countries. Changes in China's laws, legal protections or government policies on foreign investment in China may harm our business. Our business and corporate transactions, including our operations through the JV Company, are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises. These laws and regulations frequently change, and their interpretation and enforcement involve uncertainties that could limit the legal protections available to us. Regulations and rules on foreign investments in China impose restrictions on the means that a foreign investor like us may apply to facilitate corporate transactions we may undertake. 30 In addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. If any of our past operations are deemed to be non-compliant with Chinese law, we may be subject to penalties and our business and operations may be adversely affected. For instance, under Special Administrative Measures (Negative List) for Foreign Investment Access, some industries are categorized as sectors which are restricted or prohibited for foreign investment. As the Negative List is updated every year, 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. If we cannot obtain approval from relevant authorities to engage in businesses which become prohibited or restricted for foreign investors, we may be forced to sell or restructure a business which has become restricted or prohibited for foreign investment. Furthermore, the China government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. If we are forced to adjust our corporate structure or business as a result of changes in government policy on foreign investment or changes in the interpretation and application of existing or new laws, our business, financial condition, results of operations and prospects may be harmed. Moreover, uncertainties in the Chinese legal system may impede our ability to enforce contracts with our business partners, customers and suppliers, or otherwise pursue claims in litigation to recover damages or loss of property, which could adversely affect our business and operations. The continuing trade tensions between the U.S. and China may result in increased tariffs on imported goods from China that could adversely affect our business operations. Since 2018, U.S. and China trade tensions led to higher and increasing tariffs imposed by both countries on the import of goods from the other country. The U.S. government used various authorities to implement tariffs on a variety of Chinese goods and materials, which, absent exemptions, include products and applications, including consumer electronics, that incorporate our power discrete and power IC products. In response, China has imposed tariffs on certain American products, and warned of additional actions if the U.S. imposes new or increased tariffs. The continuing trade tensions could have significant adverse effects on world trade and the world economy. While the two countries have negotiated and entered into agreements to gradually reduce certain tariffs, it’s unclear whether those agreements will significantly reduce the tariffs affecting our business operations. The ultimate level of tariffs, the ultimate scope of them, and whether or how any proposed additional tariffs will impact our business is uncertain. We believe that the imposition of additional tariffs by the U.S. government on products incorporating our power semiconductors could deter our customers from purchasing our products originating from China. If so, this would reduce demand for our power semiconductor products or result in pricing adjustments that would lower our gross margin, which could have a material adverse effect on our business and results of operations. Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business 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”. On June 28, 2018, the National Development and Reform Commission (the “NDRC”) and the Ministry of Commerce of the PRC (the “MOC”) published the Special Administrative Measures for Market Access of Foreign Investment (Negative List) (2018 Edition), which identifies specific sectors where foreign investors will be subject to special administrative measures. The Negative List has been updated three times in June 2019, June 2020 and December 2021. The current effective Negative List (2021 Edition) took effect on January 1, 2022. Since the Foreign Investment Law was newly enacted, uncertainties still exist in relation to its interpretation and implementation. For example, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within a five-year transition period, which means that we may be required to adjust the structure and corporate governance of certain of our China subsidiaries in such transition period. Failure to take timely and appropriate 31 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. In addition, under the newly enacted Foreign Investment Law, foreign investors or the foreign invested enterprise should report investment information on the principle of necessity. Any company found to be non-complaint with such investment information reporting obligation might be potentially subject to fines or administrative liabilities. Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business. The transfer of funds from us to our China subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to registration with or approval by the China's governmental authorities, including the State Administration of Foreign Exchange, (SAFE), the State Administration for Market Regulation (SAMR), and/or the relevant examination and approval authority. Our subsidiaries may also experience difficulties in converting our capital contributions made in foreign currencies into RMB due to changes in the China's foreign exchange control policies. Therefore, it may be difficult to change capital expenditure plans once the relevant funds have been remitted from us to our China subsidiaries. These limitations and the difficulties our China subsidiaries may experience on the free flow of funds between us and our China subsidiaries could restrict our ability to act in response to changing market situations in a timely manner. China's currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China. A significant portion of our business is conducted in China where the currency is the Renminbi. Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interest and dividends. Accordingly, our Chinese subsidiaries may use Renminbi to purchase foreign exchange for settlement of such “current account” transactions without pre-approval. However, pursuant to applicable regulations, foreign‑invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. A Chinese company must pay 10% of its annual after-tax profits into the statutory reserve fund to fund the statutory reserve fund unless it has reached 50% of the registered capital of the company. Where the accumulative amount of the company’s statutory reserve is not enough to make up for the losses of the previous year, the current year’s profits must first be used to make up for the losses before the statutory reserve is accrued. Other transactions that involve conversion of Renminbi into foreign currency are classified as “capital account” transactions; examples of “capital account” transactions include repatriations of investment by or loans to foreign owners, or direct equity investments in a foreign entity by a China domiciled entity. “Capital account” transactions require prior approval from, or registration with China's State Administration of Foreign Exchange (SAFE) or its provincial branch or its authorized banks to convert a remittance into a foreign currency, such as U.S. dollars, and transmit the foreign currency outside of China. As a result of these and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their ability to transfer a portion of their net assets to the parent. Such restricted portion amounted to approximately $93.5 million, or 10.5% of our total consolidated net assets attributed to the Company as of June 30, 2024. We have no assurance that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of our China subsidiaries to purchase foreign currencies and transfer such funds to us to meet our liquidity or other business needs. Any inability to access funds in China, if and when needed for use by the Company outside of China, could have a material and adverse effect on our liquidity and our business. The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. 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 MOC shall be 32 notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the 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 MOC 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. Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S. dollar and Chinese Yuan, or RMB. While U.S. dollars is our main functional currency and our revenue and a significant portion of our operating expenses are denominated in U.S. dollars, we are required to maintain local currencies, primarily the RMB, in our cash balances in connection with the funding of our overseas operations. As a result, our costs and operating expenses may be exposed to adverse movements in foreign currency exchange rates between the U.S. dollar and RMB. We also do not utilize any financial instruments to hedge or reduce potential losses due to the fluctuation of foreign currency exchange rates. In general, any appreciation of U.S. dollars against a weaker RMB could reduce the value of our cash and cash equivalent balance, which could increase our operating expenses and negatively affect our cash flow, income and profitability. The value of RMB against the U.S. dollars may fluctuate and is affected by many factors outside of our control, including changes in political and economic conditions, implementation of new monetary policies by the Chinese government and changes in banking regulations, and there is no guarantee that we will be able to mitigate or recoup any losses due to a significant fluctuation in the U.S. dollar/RMB exchange rates. PRC labor laws may adversely affect our results of operations. The PRC government promulgated the Labor Contract Law of the PRC, effective on January 1, 2008, which was amended on December 28, 2012 and the amended law became effective on July 1, 2013, to govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of and the amendment to employment contracts. The Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s decision to reduce its workforce. Further, it requires that certain termination decisions be based upon seniority and not merit. In the event our subsidiaries decide to significantly change or decrease their workforce in China, the Labor Contract Law could adversely affect their ability to effect such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations. In recent years, compensation in various industries in China has increased and may continue to increase in the future. In order to attract and retain skilled personnel, we may need to increase the compensation of our employees. Compensation may, also, increase as inflationary pressure increases in China. In addition, under the Regulations on Paid Annual Leave for Employees, which became effective on January 1, 2008, employees who have served more than one year for a specific employer are entitled to a paid vacation ranging from 5 to 15 days, depending on length of service. Employees who waive such vacation time at the request of employers must be compensated for three times their normal salaries for each waived vacation day. This mandated paid-vacation regulation, coupled with the trend of increasing compensation, may result in increase in our employee-related costs and expenses and decrease in our profit margins. Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. 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 33 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. Risks Related to Our Corporate Structure and Our Common Shares Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all. Limited trading volumes and liquidity of our common shares on the NASDAQ Global Select Market may limit the ability of shareholders to purchase or sell our common shares in the amounts and at the times they wish. In addition, the financial markets in the United States and other countries have experienced significant price and volume fluctuations, and market prices of technology companies have been and continue to be extremely volatile. The trading price of our common shares on The NASDAQ Global Select Market ranged from a low of $19.55 to high of $37.38 from July 1, 2023 to June 30, 2024. At July 31, 2024, the trading price of our common shares was $41.40. Volatility in the price of our shares may be caused by factors outside our control and may be unrelated or disproportionate to our operating results. The market price for our common shares may be volatile and subject to wide fluctuations in response to factors, including: • actual or anticipated fluctuations in our operating results; • general economic, industry, regional and global market conditions, including the economic conditions of specific market segments for our products, including the PC markets; • our failure to meet analysts' expectations, including expectation regarding our revenue, gross margin and operating expenses; • changes in financial estimates and outlook by securities research analysts; • our ability to increase our gross margin; • announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments; • announcements of technological or competitive developments; • announcement of acquisition, partnership and major corporate transactions; • regulatory developments in our target markets affecting us, our customers or our competitors; • our ability to enter into new market segments, gain market share, diversify our customer base and successfully secure manufacturing capacity; • announcements regarding intellectual property disputes or litigation involving us or our competitors; • changes in the estimation of the future size and growth rate of our markets; • announcement of significant legal proceedings, litigation or government investigation; • additions or departures of key personnel; • repurchase of shares under our repurchase program; • announcement of sales of our securities by us or by our major shareholders; • general economic or political conditions in China and other countries in Asia; and • other factors. In the past, securities class action litigation has often been brought against a company following periods of volatility in such company's share price. This type of litigation could result in substantial costs and divert our management's attention and resources which could negatively impact our business and financial conditions. See Item 3. Legal Proceeding. If securities or industry analysts adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. 34 The market price of our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business. There is no guarantee that these analysts will understand our business and results, or that their reports will be accurate or correctly predict our operating results or prospects. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price of our common shares or its trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrade our common shares or if our operating results or prospects do not meet their expectations, the market price of our common shares could decline significantly. Anti-takeover provisions in our bye-laws could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management. Certain provisions in our bye-laws may delay or prevent an acquisition of us or a change in our management. In addition, by making it more difficult for shareholders to replace members of our board of directors, these provisions also may frustrate or prevent any attempts by our shareholders to replace or remove our current management because our board of directors is responsible for appointing the members of our management team. These provisions include: • the ability of our board of directors to determine the rights, preferences and privileges of our preferred shares and to issue the preferred shares without shareholder approval; • advance notice requirements for election to our board of directors and for proposing matters that can be acted upon at shareholder meetings; and • the requirement to remove directors by a resolution passed by at least two-thirds of the votes cast by the shareholders having a right to attend and vote at the shareholder meeting. These provisions could make it more difficult for a third-party to acquire us, even if the third-party's offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares. We are a Bermuda company and the rights of shareholders under Bermuda law may be different from U.S. laws. We are a Bermuda limited liability exempted company. As a result, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions, including the U.S. For example, some of our directors are not residents of the United States, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the U.S. or to enforce in the U.S. judgments obtained in U.S. courts against us or those persons based on civil liability provisions of the U.S. securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the U.S., against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions. 35 Item 1B. Unresolved Staff Comments None. 36 Item 1C Cybersecurity Risk Management and Strategy We recognize the importance of managing cybersecurity threats and risks related to our business, and we have adopted a multi-faceted and proactive strategy to identify, evaluate, address, respond and neutralize cybersecurity threats and attacks. We employ a combination of technical solutions, security policies and procedures, employee training programs, and regular security audits to enhance and fortify our defenses. We utilize advanced monitoring tools and anomaly detection systems to swiftly identify any suspicious activities or deviations from normal operation. Our security infrastructure includes firewalls, intrusion detection systems, encryption protocols, and access controls to protect our systems and data from unauthorized access or malicious attacks. In the event of a security incident, we have established incident response procedures to contain the threat, minimize the impact, and restore normal operations as quickly as possible. We also conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect our information systems that are vulnerable to such cybersecurity threats. Our cybersecurity team plays a critical role in managing our cybersecurity risk. They oversee security controls and orchestrate our response to incidents on a day-to-day basis, including threats arising internally or from our vendors, suppliers or other third parties that we conduct business with. In addition, we have developed and implemented information security policies, standards, procedures and security guidelines that are based on industry standards, particularly the National Institute of Standards and Technology (NIST) Cybersecurity Framework. Furthermore, we have implemented and maintained employee policies design to reduce risk of cyber-attacks and educate employees on protocol in the event of a potential cybersecurity incident. We use third-party service providers in various functions throughout our business. We have implemented stringent processes to oversee and manage cybersecurity risk with these third parties, which includes risk assessment activities, enforcement of policies to ensure compliance with current cybersecurity standards and monitoring activities, and periodic review of potential cyber breaches announcements made by the third-party service providers. Currently we are not aware of any risks from cybersecurity threats that have materially affected our business strategy, results of operations or financial condition or are reasonably likely to have a material effect. However, cyber-attacks are increasing in frequency, sophistication and intensity, and despite our ongoing efforts we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents. Please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K for more information on the risks posed to us by cybersecurity threats. Governance Our management team, including our cybersecurity team, are responsible for day-to-day implementation, assessment, and management of our cybersecurity risk management processes. Our cybersecurity team includes Vice President of Information Technology and Information Security Officer with a team of eight full-time information technology professionals and several outside security vendors to manage our information security program. Our Vice President of Information Technology and Information Security Officer have served in various roles in information technology and information security, and together they have over 55 years of experience in this field. The cybersecurity management team has primary responsibility for our overall cybersecurity risk management program, including monitoring the prevention, detection, mitigation, and remediation of cybersecurity incidents, and works in partnership with our other business leaders, including our Chief Executive Officer and Chief Financial Officer, as well as our Board of Directors. Our Board of Directors (the “Board”) plays an active role in overseeing and managing the Company’s cybersecurity risks. The Audit Committee of the Board has established a Cybersecurity Subcommittee for the purpose of assessing, analyzing and managing the Company’s key cybersecurity and information technology risks, and to ensure that our systems are adequate to protect against security breach and effectively safeguard the Company’s IT infrastructure, assets, intellectual property, and data. The roles and responsibilities of the Cybersecurity Subcommittee are determined, from time to time, by the Audit Committee. The Cybersecurity Subcommittee meets quarterly with our management team to discuss various matters relating to IT and cybersecurity risks, and our senior management team communicates and coordinates directly with the Cybersecurity Subcommittee in the event of any cybersecurity incident. The Cybersecurity Subcommittee is given the following responsibilities: • Oversight of policies, procedures, plans, and execution intended to provide security, confidentiality, availability, and integrity of the information. • Oversight of the quality and effectiveness of the Company’s policies and procedures with respect to its IT systems; • Review and oversight on policies and procedures of the Company in preparation for responding to cybersecurity incidents. • Oversight of risks related to IT systems and processes, including privacy, network security and data security, and any internal audits of such systems and processes. 37 • Review and oversight of preparation of the Company’s public disclosures, including SEC filings, relating to the Company’s IT systems, including privacy, network security, and data security, and • Report to the Audit Committee and the Board of significant and material cybersecurity incidents. 38 Table of Contents Item 2. Properties As of July 31, 2024, our primary U.S. facility, which houses our research and design function, as well as elements of marketing and administration, is located in Sunnyvale, California. We conduct our manufacturing, research and development, sales and marketing and administration in Asia and North America. We lease all properties used in our business except the wafer fabrication facility in Oregon acquired in January 2012. The following table sets forth the location, size and primary use of our principal properties that are material to our business operations: Location Square Footage Primary Use 475 Oakmead Parkway Sunnyvale, California, USA 94085 57,000 Research and development, marketing, sales and administration 3131 Northeast Brookwood Parkway Hillsboro, Oregon, USA 97124 252,950 Wafer fabrication facility Building 1/2 and 8/9, No. 91, Lane 109, Rongkang Road, Songjiang District, Shanghai, China 201614 221,301 Packaging and testing, manufacturing support Building 1,2,3 No.135 Rongkang Road, Songjiang Export Process Zone, Area B, Songjiang, Shanghai,China 201614 250,198 Packaging and testing, manufacturing support We believe that our current facilities are adequate and that additional space will be available on commercially reasonable terms for the foreseeable future. 39 Item 3. Legal Proceedings As previously disclosed, the Company continues to cooperate with the Department of Commerce (“DOC”) in connection with its ongoing investigation of the Company’s export control practices. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review. We have in the past, and may from time to time in the future, become involved in legal proceedings arising from the normal course of business activities. The semiconductor industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. Irrespective of the validity of such claims, we could incur significant costs in the defense thereof or could suffer adverse effects on its operations. Item 4. Mine Safety Disclosures Not Applicable. 40 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares have traded on the NASDAQ Global Select Market since April 29, 2010 under the symbol AOSL. As of July 31, 2024, there were approximately 144 holders of record of our common shares, not including those shares held in a street or nominee name. Dividend Policy We have never declared or paid cash dividends on our common shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common share in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this report regarding information about securities authorized for issuance under our equity compensation plans. Share Performance Graph The following graph compares the total cumulative shareholder return on our common shares with the total cumulative return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index for the last five fiscal years ended June 30, 2024, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends. The comparisons in the graph below are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common shares. The above Share Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing. Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the fourth quarter of fiscal year 2024, the Company did not repurchase any common shares. 41 Item 6. [Reserved] 42 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion of the financial condition and results of our operations in conjunction with our consolidated financial statements and the notes to those statements included elsewhere in this annual report. Our consolidated financial statements contained in this annual report are prepared in accordance with U.S. GAAP. Overview 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 2,700 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2024, and over 60 and 130 new products in the fiscal years ended June 30, 2023 and 2022, 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 930 patents and 52 patent applications in the United States as of June 30, 2024. We also have a total of 1,025 foreign patents, which primarily were based on our research and development efforts through June 30, 2024. 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, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. During fiscal year 2024, we accelerated the development of new technology platforms which allowed us to introduce 36 medium and high voltage MOSFET products, targeting primarily the industrial markets and computing marketing, as well as 17 low voltage MOSFET products primarily for the computing market. In addition, we introduced 37 Power IC new products for computing applications, communication and consumer markets. Our business model leverages global resources, including research and development and manufacturing in the United States and Asia. Our sales and technical support teams are localized in several growing markets. We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon, or the Oregon Fab, which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. For assembly and test, we primarily rely upon our in-house facilities in China. In addition, we utilize subcontracting partners for industry standard packages. We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time. 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. As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The Joint Venture was accounted under the provisions of the consolidation guidance since we had controlling financial interests until December 1, 2021. On December 1, 2021 (the “Effective Date”), Alpha & Omega Semiconductor (Shanghai) Ltd. (“AOS SH”) and Agape Package Manufacturing (Shanghai) Limited (“APM SH” and, together with AOS SH, the “Sellers”), each a wholly-owned subsidiary of the Company, entered into a share transfer agreement ("STA") with a third-party investor to sell a portion of the Company's equity interest in the JV Company which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing, China (the “Transaction”). The Transaction closed on December 2, 2021 (the “Closing Date”), which reduced the Company’s equity interest in the JV Company from 50.9% to 48.8%. Also, the Company’s right to designate directors on the board of JV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction. As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company. The JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date. On December 24, 2021, we entered into a share transfer agreement with another third-party investor, pursuant to which the Company sold to this investor 1.1% of outstanding equity interest held by the Company in the JV Company. In addition, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company in exchange for cash. As a result of these two transactions, the Company owned 45.8% of the equity interest in the JV Company as of December 31, 2021. On January 26, 2022, the JV Company completed a financing transaction pursuant to a corporate investment agreement (the “Investment Agreement”) between the JV Company and certain third-party investors (the “New Investors”). Under the Investment Agreement, the New Investors purchased newly issued equity interest of the JV Company, representing approximately 7.82% of post-transaction outstanding equity interests of the JV Company, for a total purchase price of RMB 43 509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”). Following the closing of the January 26, 2022 Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2% at June 30, 2022. In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased the Company’s percentage of equity ownership in the JV Company by 0.54%. As of June 30, 2024, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.8%. We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion. The JV Company is also contemplating an eventual listing on the Science and Technology Innovation Board, or STAR Market, of the Shanghai Stock Exchange. The reduction of our ownership assists the JV Company in meeting certain regulatory listing requirements. A potential STAR Market listing may take several years to consummate and there is no guarantee that such listing by the JV Company will be successful or will be completed in a timely manner, or at all. In addition, the JV Company will continue to provide us with significant level of foundry capacity to enable us to develop and manufacture our products. On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company committed to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level. Other Factors Affecting Our Performance The global, regional economic and PC market conditions: Because our products primarily serve consumer electronic applications, any significant changes in global and regional economic conditions could materially affect our revenue and results of operations. A significant amount of our revenue is derived from sales of products in the PC markets, such as notebooks, motherboards and notebook battery packs. Therefore, a substantial decline in the PC market could have a material adverse effect on our revenue and results of operations. The PC markets have experienced a modest global decline in recent years due to continued growth of demand in tablets and smart phones, worldwide economic conditions and the industry inventory correction which had and may continue to have a material impact on the demand for our products. A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures. We have executed and continue to execute strategies to diversify our product portfolio, penetrate other market segments, including the consumer, communications and industrial markets, and improve gross margins and profit by implementing cost control measures. While making efforts to reduce our reliance on the computing market, we continue to support our computing business and capitalize on the opportunities in this market with a more focused and competitive PC product strategy to gain market share. 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 the JV Company to provide foundry capacity to manufacture our products, therefore it is critical that we maintain continuous access to such capacity, which may not be available at sufficient level or at a pricing terms favorable to us because of lack of control over the JV Company’s operation. We continue to maintain a business relationship with the JV Company to ensure uninterrupted supply of manufacturing capacity. Because we continue to rely on the JV Company to provide us with manufacturing capacity, if the JV Company take actions or make decisions that prevents us from accessing required capacity, our operations may be adversely affected. Erosion and fluctuation of average selling price: Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of our existing products to decline in the future. However, in the normal course of business, we seek to offset the effect of declining average selling price by introducing new and higher value products, expanding existing products for new applications and new customers and reducing the manufacturing cost of existing products. These strategies may cause the average selling price of our products to fluctuate significantly from time to time, thereby affecting our financial performance and profitability. Product introductions and customers’ product requirements: Our success depends on our ability to introduce products on a timely basis that meet or are compatible with our customers' specifications and performance requirements. Both factors, timeliness of product introductions and conformance to customers' requirements, are equally important in securing design wins 44 with our customers. As we accelerate the development of new technology platforms, we expect to increase the pace at which we introduce new products and seek and acquire design wins. If we were to fail to introduce new products on a timely basis that meet customers’ specifications and performance requirements, particularly those products with major OEM customers, and continue to expand our serviceable markets, then we would lose market share and our financial performance would be adversely affected. Distributor ordering patterns, customer demand and seasonality: Our distributors place purchase orders with us based on their forecasts of end customer demand, and this demand may vary significantly depending on the sales outlook and market and economic conditions of end customers. Because these forecasts may not be accurate, channel inventory held at our distributors may fluctuate significantly, which in turn may prompt distributors to make significant adjustments to their purchase orders placed with us. As a result, our revenue and operating results may fluctuate significantly from quarter to quarter. In addition, because our products are used in consumer electronics products, our revenue is subject to seasonality. Our sales seasonality is affected by numerous factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. In recent periods, broad fluctuations in the semiconductor markets and the global and regional economic conditions, in particular the changing PC market conditions, have had a more significant impact on our results of operations than seasonality. Furthermore, our revenue may be impacted by the level of demand from our major customers due to factors outside of our control. If these major customers experience significant decline in the demand of their products, encounter difficulties or defects in their products, or otherwise fail to execute their sales and marketing strategies successfully, it may adversely affect our revenue and results of operations. Principal line items of statements of operations The following describes the principal line items set forth in our consolidated statements of operations: Revenue We generate revenue primarily from the sale of power semiconductors, consisting of power discretes and power ICs. Historically, a majority of our revenue has been derived from power discrete products. Because our products typically have three-year to five-year life cycles, the rate of new product introduction is an important driver of revenue growth over time. We believe that expanding the breadth of our product portfolio is important to our business prospects, because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our in-house facilities. Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period. At our discretion or upon our direct negotiations with the original design manufacturers (“ODMs”) or original equipment manufacturers (“OEMs”), we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In certain situations, we will grant price adjustments to the distributors reflecting such special pricing. We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products. In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million. We received payments of such fees in the amount of $18.0 million, $6.8 million and $9.0 million in March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones. The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services. We use the input method to measure progression of the transfer of services. During the fiscal years ended June 30, 2024 and 2023, we recorded $21.2 million and $9.9 million of license and development revenue, respectively. We also entered an accompanying supply agreement to provide limited wafer supply to the customer. Cost of goods sold Our cost of goods sold primarily consists of costs associated with semiconductor wafers, packaging and testing, personnel, including share-based compensation expense, overhead attributable to manufacturing, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories. As the volume of sales 45 increases, we expect cost of goods sold to increase. While our utilization rates cannot be immune to the market conditions, our goal is to make them less vulnerable to market fluctuations. We believe our market diversification strategy and product growth will drive higher volume of manufacturing which will improve our factory utilization rates and gross margin in the long run. Operating expenses Our operating expenses consist of research and development, and selling, general and administrative expenses. We expect our operating expenses as a percentage of revenue to fluctuate from period to period as we continue to exercise cost control measures in response to the declining PC market as well as align our operating expenses to the revenue level. Research and development expenses. Our research and development expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by outside contractors and consultants, amortization of software and design tools, depreciation of equipment and overhead costs. We continue to invest in developing new technologies and products utilizing our own fabrication and packaging facilities as it is critical to our long-term success. We also evaluate appropriate investment levels and stay focused on new product introductions to improve our competitiveness. We expect that our research and development expenses will fluctuate from time to time. Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, product promotion costs, occupancy costs, travel expenses, expenses related to sales and marketing activities, amortization of software, depreciation of equipment, maintenance costs and other expenses for general and administrative functions as well as costs for outside professional services, including legal, audit and accounting services. We expect our selling, general and administrative expenses to fluctuate in the near future as we continue to exercise cost control measures. Income tax expense We are subject to income taxes in various jurisdictions. Significant judgment and estimates are required in determining our worldwide income tax expense. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally. We establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more likely than not to be realized upon settlement with a taxing authority. If the actual tax outcome of such exposures is different from the amounts that were initially recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Changes in the location of taxable income (loss) could result in significant changes in our income tax expense. We record a valuation allowance against deferred tax assets if it is more likely than not that a portion of the deferred tax assets will not be realized, based on historical profitability and our estimate of future taxable income in a particular jurisdiction. Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the deferred tax assets may increase or decrease, resulting in corresponding changes in income tax expense. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide profits or losses, the tax laws and regulations in each geographical region where we have operations, the availability of tax credits and carry-forwards and the effectiveness of our tax planning strategies. "U.S. Tax Cuts and Jobs Act", Enacted December 22, 2017 On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S. tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. The Company is not currently subject to the Base Erosion and Anti-Abuse (BEAT) tax, which is a tax imposed on certain entities who make payments to their non U.S. affiliates, where such payments reduce the U.S. tax base. The BEAT tax is imposed at a rate of 10% on Adjusted Taxable Income, excluding certain payments to foreign related entities. It is an 46 incremental tax over and above the corporate income tax and is recorded as a period cost. It is possible that this tax could be applicable in future periods, which would cause an increase to the effective tax rate and cash taxes. “The Chip and Science Act of 2022”, Enacted August 2, 2022 In August 2022 the U.S. enacted the Chip and Science Act of 2022 (the Chips Act). The Chips Act provides incentives to semiconductor chip manufacturers in the United States, including providing manufacturing investment credits of 25% for investments in semiconductor manufacturing property placed in service after December 31, 2022, for which construction begins before January 1, 2027. Property investments qualify for the 25% credit if, among other requirements, the property is integral to the operation of an advanced manufacturing facility, defined as having a primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment. Currently, we are evaluating the impact of the Chips Act to us. “The Inflation Reduction Act”, Enacted August 16, 2022 In August 2022 the United States enacted tax legislation through the Inflation Reduction Act (IRA). The IRA introduces a 15% corporate alternative minimum tax (CAMT) for corporations whose average annual adjusted financial statement income (AFSI) for any consecutive three-tax-year period preceding the applicable tax year exceeds $1 billion. The CAMT is effective for tax years beginning after 31 December 2022. The CAMT is currently not applicable to the Company. Bermuda Corporate Income Tax for Tax Years Beginning in 2025 The Company is subject to income tax expense or benefit based upon pre-tax income or loss reported in the consolidated statements of income (loss) and the provisions of currently enacted tax laws. The parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, the Company is not subject to any income or capital gains taxes in Bermuda. As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after January 1, 2025. In particular, the CIT applies to multinational companies with annual revenue of 750 million euros or more in the consolidated financial statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply. The Company is not in a position to determine whether the annual revenues may meet and/or cross the 750 million Euro threshold for at least two of the four fiscal years immediately preceding the fiscal year when CIT may apply. The Company continues to monitor and assess if and when it may be within the scope of the CIT. If we become subject to the Bermuda CIT, we may be subject to additional income taxes, which may adversely affect our financial position, results of operations and our overall business. Equity method investment income/loss from equity investee 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 such affiliate on a one quarter lag. We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations. Profits or losses related to intra- entity sales with the equity method investee are eliminated until realized by the investor or investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment. Instead the total equity method investment balance, including equity method goodwill, is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Operations. 47 Operating results The following tables set forth our results of operations and as a percentage of revenue for the fiscal years ended June 30, 2024, 2023 and 2022. Our historical results of operations are not necessarily indicative of the results for any future period. Year Ended June 30, 2024 2023 2022 2024 2023 2022 (in thousands) (% of revenue) Revenue $ 657,274 $ 691,321 $ 777,552 100.0 % 100.0 % 100.0 % Cost of goods sold (1) 485,356 491,785 508,996 73.8 % 71.1 % 65.5 % Gross profit 171,918 199,536 268,556 26.2 % 28.9 % 34.5 % Operating expenses: Research and development (1) 89,940 88,146 71,259 13.7 % 12.8 % 9.2 % Selling, general and administrative (1) 85,734 88,861 95,259 13.0 % 12.8 % 12.3 % Total operating expenses 175,674 177,007 166,518 26.7 % 25.6 % 21.5 % Operating income (loss) (3,756) 22,529 102,038 (0.5)% 3.3 % 13.0 % Other income (loss), net (73) (1,730) 999 — % (0.3)% 0.1 % Interest income (expense), net 1,186 (1,087) (3,920) 0.2 % (0.2)% (0.5)% Gain on deconsolidation of the JV Company — — 399,093 — % — % 51.3 % Loss on changes of equity interest in the JV Company, net — — (3,140) — % — % (0.4)% Net income (loss) before income taxes (2,643) 19,712 495,070 (0.3)% 2.8 % 63.5 % Income tax expense 3,649 5,937 39,258 0.6 % 0.9 % 5.0 % Net income (loss) before loss from equity method investment (6,292) 13,775 455,812 (0.9)% 1.9 % 58.5 % Equity method investment loss from equity investee (4,789) (1,411) (2,629) (0.7)% (0.1)% (0.3)% Net income (loss) (11,081) 12,364 453,183 (1.6)% 1.8 % 58.2 % Net income attributable to noncontrolling interest — — 20 0.0 % 0.0 % 0.0 % Net income (loss) attributable to Alpha and Omega Semiconductor Limited $ (11,081) $ 12,364 $ 453,163 (1.6)% 1.8 % 58.2 % (1) Includes share-based compensation expense as follows: Year Ended June 30, 2024 2023 2022 2024 2023 2022 (in thousands) (% of revenue) Cost of goods sold $ 3,434 $ 5,851 $ 5,125 0.5 % 0.8 % 0.7 % Research and development 5,210 9,437 7,049 0.8 % 1.4 % 0.9 % Selling, general and administrative 12,997 22,200 19,150 2.0 % 3.2 % 2.5 % $ 21,641 $ 37,488 $ 31,324 3.3 % 5.4 % 4.1 % 48 Revenue The following is a summary of revenue by product type: Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Power discrete $ 426,146 $ 458,795 $ 545,135 $ (32,649) (7.1)% $ (86,340) (15.8)% Power IC 205,778 218,620 220,882 (12,842) (5.9)% (2,262) (1.0)% Packaging and testing services and other 4,119 3,979 11,535 140 3.5 % (7,556) (65.5)% License and development services 21,231 9,927 — 11,304 113.9 % 9,927 100.0 % $ 657,274 $ 691,321 $ 777,552 $ (34,047) (4.9)% $ (86,231) (11.1)% The following is a summary of revenue by end market: Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Computing $ 282,411 $ 243,286 $ 345,855 $ 39,125 16.1 % $ (102,569) (29.7)% Consumer 106,364 180,753 160,808 (74,389) (41.2)% 19,945 12.4 % Communication 114,186 103,218 110,356 10,968 10.6 % (7,138) (6.5)% Power Supply and Industrial 128,963 150,158 149,000 (21,195) (14.1)% 1,158 0.8 % Packaging and testing services and other 4,119 3,979 11,533 140 3.5 % (7,554) (65.5)% License and development services 21,231 9,927 — 11,304 113.9 % 9,927 100.0 % $ 657,274 $ 691,321 $ 777,552 $ (34,047) (4.9)% $ (86,231) (11.1)% Fiscal 2024 vs 2023 Total revenue was $657.3 million for fiscal year 2024, a decrease of $34.0 million, or 4.9%, as compared to $691.3 million for fiscal year 2023. The decrease was primarily due to a decrease of $32.6 million and $12.8 million in sales of power discrete products and power IC products, respectively. The decrease in power discrete and power IC product sales was primarily due to a 17.3% decrease in average selling price as compared to last fiscal year due to a shift in product mix, offset by a 12.3% increase in unit shipments. The decrease in revenues was primarily driven by the decreased sales in the consumer markets, particularly in gaming products, offset by the increase in the computing market, particularly in notebook and motherboard products. The increase in revenue from packaging and testing services and other for the fiscal year 2024 as compared to last fiscal year was primarily due to increased demand. The increase in license and development services for the fiscal year 2024 was related to the license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services in February 2023. Fiscal 2023 vs 2022 Total revenue was $691.3 million for fiscal year 2023, a decrease of $86.2 million, or 11.1%, as compared to $777.6 million for fiscal year 2022. The decrease was primarily due to a decrease of $86.3 million and $2.3 million in sales of power discrete products and power IC products, respectively. The decrease in power discrete and power IC product sales was primarily due to a 30.1% decrease in unit shipments, offset by a 26.9% increase in average selling price as compared to last fiscal year due to a shift in product mix. The decrease in revenues was primarily driven by the significant decrease in the computing market, reflecting weaker demand for computers and inventory correction by our customers, in response to the industry-wide downturn in the semiconductor industry, partially offset by increased sales in the consumer markets, particularly in gaming products. The decrease in revenue from packaging and testing services for the fiscal year 2023 as compared to last 49 fiscal year was primarily due to decreased demand. The increase in license and development services for the fiscal year 2023 was related to the license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services in February 2023. Cost of goods sold and gross profit Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Cost of goods sold $ 485,356 $ 491,785 $ 508,996 $ (6,429) (1.3)% $ (17,211) (3.4)% Percentage of revenue 73.8 % 71.1 % 65.5 % Gross profit $ 171,918 $ 199,536 $ 268,556 $ (27,618) (13.8)% $ (69,020) (25.7)% Percentage of revenue 26.2 % 28.9 % 34.5 % Fiscal 2024 vs 2023 Cost of goods sold was $485.4 million for fiscal year 2024, a decrease of $6.4 million, or 1.3%, as compared to $491.8 million for fiscal year 2023. The decrease was primarily due to 4.9% decrease in revenue. Gross margin decreased by 2.7 percentage points to 26.2% for the fiscal year 2024, as compared to 28.9% for the fiscal year 2023. The decrease in gross margin was primarily due to higher material costs and less favorable product mix during the fiscal year ended June 30, 2024. 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. Fiscal 2023 vs 2022 Cost of goods sold was $491.8 million for fiscal year 2023, a decrease of $17.2 million, or 3.4%, as compared to $509.0 million for fiscal year 2022. The decrease was primarily due to 11.1% decrease in revenue. Gross margin decreased by 5.6 percentage points to 28.9% for the fiscal year 2023, as compared to 34.5% for the fiscal year 2022. The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the fiscal year ended June 30, 2023. Research and development expenses Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Research and development $ 89,940 $ 88,146 $ 71,259 $ 1,794 2.0 % $ 16,887 23.7 % Fiscal 2024 vs 2023 Research and development expenses were $89.9 million for fiscal year 2024, an increase of $1.8 million, or 2.0%, as compared to $88.1 million for fiscal year 2023. The increase was primarily attributable to a $3.0 million increase in employee compensation and benefit expense mainly due to increased headcount and higher business and medical insurance expenses as well as higher bonus expense and vacation expense, a $0.8 million increase in depreciation expenses, and a $2.1 million increase in allocation expenses, partially offset by a $4.2 million decrease in share-based compensation expense as a result of a cancellation of certain performance-based restricted stock units and an assessment of zero attainment for certain market-based restricted stock units. 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. Fiscal 2023 vs 2022 Research and development expenses were $88.1 million for fiscal year 2023, an increase of $16.9 million, or 23.7%, as compared to $71.3 million for fiscal year 2022. The increase was primarily attributable to a $3.9 million increase in employee compensation and benefit expense mainly due to increased headcount and higher medical insurance expenses, partially offset by lower vacation accrual and lower bonus accrual, a $2.4 million increase in share-based compensation expense due to an 50 increase in stock awards granted, a $3.6 million increase in depreciation expenses, a $2.2 million increase in allocation expenses, and a $4.8 million increase in product prototyping engineering expense as a result of increased engineering activities. Selling, general and administrative expenses Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Selling, general and administrative $ 85,734 $ 88,861 $ 95,259 $ (3,127) (3.5)% $ (6,398) (6.7)% Fiscal 2024 vs 2023 Selling, general and administrative expenses were $85.7 million for fiscal year 2024, a decrease of $3.1 million, or 3.5%, as compared to $88.9 million for fiscal year 2023. The decrease was primarily attributable to a $9.2 million decrease in share-based compensation expense as a result of a cancellation of certain performance-based restricted stock units and an assessment of zero attainment for certain market-based restricted stock units, partially offset by a $1.5 million increase in employee compensation and benefits expenses mainly due to increased headcount and higher bonus expense and vacation expense, offset by lower business insurance expenses, a $1.0 million increase in consulting fees, a $1.0 million increase in audit fees, a $1.8 million increase in allocation expenses and $0.7 million increase in employee business expenses. Fiscal 2023 vs 2022 Selling, general and administrative expenses were $88.9 million for fiscal year 2023, a decrease of $6.4 million, or 6.7%, as compared to $95.3 million for fiscal year 2022. The decrease was primarily attributable to a $11.3 million decrease in employee compensation and benefits expenses mainly due to lower bonus expenses accrual and lower vacation accrual, partially offset by increased headcount, higher medical and business insurance expenses, as well as a $1.5 million decrease in loss incurred in connection with a cyber security incident, partially offset by a $3.1 million increase in share-based compensation expense due to an increase in stock award granted and the incremental expenses for one of our former officers' equity shares resulting from the modification, a $1.1 million increase in legal expenses, a $0.7 million increase in recruiting and consulting fees, a $1.2 million increase in allocation expenses, and a $0.8 million increase in employee business expenses. Other income (loss), net Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Other income (loss), net $ (73) $ (1,730) $ 999 $ 1,657 (95.8)% $ (2,729) (273.2)% Other income (loss), net decreased by $1.7 million in fiscal year 2024 as compared to the last fiscal year primarily due to decrease in foreign currency exchange loss as a result of the appreciation of RMB against USD. Other income (loss), net increased by $2.7 million in fiscal year 2023 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD. Interest income (expense), net Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Interest income (expense), net $ 1,186 $ (1,087) $ (3,920) $ 2,273 (209.1)% $ 2,833 (72.3)% 51 Interest income (expense), net increased by $2.3 million in fiscal year 2024 as compared to the prior fiscal year primarily due to a $1.4 million increase in interest income as a result of higher interest rate as well as a $0.9 million decrease in interest expense as a result of a decrease in bank borrowings during the fiscal year 2024. Interest income (expense), net decreased by $2.8 million in fiscal year 2023 as compared to the fiscal year 2022 primarily due to a $3.6 million increase in interest income as a result of higher interest rate, offset by a $0.7 million increase in interest expense as a result of an increase in bank borrowings during the fiscal year 2023. Income tax expense Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Income tax expense $ 3,649 $ 5,937 $ 39,258 $ (2,288) (38.5)% $ (33,321) (84.9)% Fiscal 2024 vs 2023 Income tax expense for fiscal years 2024 and 2023 was $3.6 million and $5.9 million, respectively. Income tax expense decreased by $2.3 million, or 38.5% in fiscal year 2024 as compared to fiscal year 2023. The income tax expense of $3.6 million for the year ended June 30, 2024 included a $0.2 million discrete tax expense, and the income tax expense of $5.9 million for the year ended June 30, 2023 included a $0.1 million discrete tax expense. Excluding the discrete income tax items, the effective tax rate for the years ended June 30, 2024 and 2023 was (130.6)% and 29.4%, respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book loss of $2.6 million for the year ended June 30, 2024 as compared to a pretax book income of $19.7 million for year ended June 30, 2023 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year. Fiscal 2023 vs 2022 Income tax expense for fiscal years 2023 and 2022 was $5.9 million and $39.3 million, respectively. Income tax expense decreased by $33.3 million, or 84.9% in fiscal year 2023 as compared to fiscal year 2022. The income tax expense of $5.9 million for the year ended June 30, 2023 included a $0.1 million discrete tax expense, and the income tax expense of $39.3 million for the year ended June 30, 2022 included a $33.5 million discrete tax expense related to the Company’s $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company changed from the consolidation method of accounting to the equity method of accounting. In addition, for the year ended June 30, 2022 we recorded a tax benefit of $0.4 million from other discrete income tax items. Excluding the discrete income tax items, the effective tax rate for the years ended June 30, 2023 and 2022 was 29.4% and 6.3%, respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $19.7 million for the year ended June 30, 2023 as compared to a pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year. 52 Liquidity and Capital Resources Our principal need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to grow our business. To date, we finance our operations and capital expenditures primarily through funds generated from operations and borrowings under our term loans, financing lease and other debt agreements. In March 2024, Bank of Communications Limited in China provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 140 million or $19.3 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024 with a maturity date of March 15, 2025. As of June 30, 2024, there was no outstanding balance for this loan. In December 2023, Industrial and Commercial Bank of China provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility was to provide working capital borrowings. The Company could borrow up to approximately RMB 72.0 million, or $9.9 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024, with a maturity date of December 31, 2024. As of June 30, 2024, there was no outstanding balance for this loan. In September 2023, China Construction Bank provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 50 million or $6.9 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024 with a maturity date of September 8, 2025. As of June 30, 2024, there was no outstanding balance for this loan. On February 6, 2023, we entered into a license and engineering service agreement with a leading power semiconductor automotive supplier related to our Silicon Carbide (SiC) MOSFET and diode technology. Pursuant to the agreement, we license and provide 24-months of engineering support for our proprietary SiC technology to the supplier for a total fee of $45.0 million. We received payments of such fees in the amount of $18.0 million, $6.8 million and 9.0 million in March 2023, July 2023 and February 2024, respectively, and the remaining amount to be paid upon our achievements of specified business and product milestones. In addition, we entered an accompanying supply agreement with the supplier to provide it with limited wafer supply. 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 has a 5 years term, after which 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, until the final installation and acceptance of the equipment. 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 which had a carrying amount of $13.6 million as of June 30, 2024. As of June 30, 2024, the outstanding balance of this debt financing was $9.2 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 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 adjusted LIBOR 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, 2024, Jireh was in compliance with these covenants and the outstanding balance of this loan was $29.2 million. 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 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 53 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. The Borrower was in compliance with these covenants as of June 30, 2024. As of June 30, 2024, there was no outstanding balance of this factoring agreement. The Chinese government imposes certain currency exchange controls on cash transfers out of China. Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interests, and dividend payments. Accordingly, subject to the review and verification of the underlying transaction documents and supporting documents by the account banks in China, our Chinese subsidiaries may use Renminbi to purchase foreign exchange currency for settlement of such “current account” transactions without the pre-approval from China's State Administration of Foreign Exchange (SAFE) or its provincial branch. Pursuant to applicable regulations, foreign- invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. A Chinese company must pay 10% of its annual after-tax profits into the statutory reserve fund to fund the statutory reserve fund unless it has reached 50% of the registered capital of the company. Where the accumulative amount of the company’s statutory reserve is not enough to make up for the losses of the previous year, the current year’s profits must first be used to make up for the losses before the statutory reserve is accrued.. While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China. Transactions that involve conversion of Renminbi into foreign currency in relation to foreign direct investments and provision of debt financings in China are classified as “capital account” transactions. Examples of “capital account” transactions include repatriations of investments by foreign owners and repayments of loan principal to foreign lenders. "Capital account" transactions require prior approval from SAFE or its provincial branch or an account bank delegated by SAFE to convert a remittance into a foreign currency, such as U.S. dollars, and transmit the foreign currency outside of China. As a result of this and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their ability to transfer a portion of their net assets to us, and such restriction may adversely affect our ability to generate sufficient liquidity to fund our operations or other expenditures. As of June 30, 2024 and 2023, such restricted portion amounted to approximately $93.5 million and $93.2 million, or 10.5% and 10.5%, of our total consolidated net assets attributable to the Company, respectively. 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. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all. Cash, cash equivalents and restricted cash As of June 30, 2024 and 2023, we had $175.5 million and $195.6 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consisted of cash on hand, restricted cash and short-term bank deposits with original maturities of three months or less. Of the $175.5 million and $195.6 million cash and cash equivalents, $55.0 million and $108.2 million, respectively, were deposited with financial institutions outside the United States. 54 The following table shows our cash flows from operating, investing and financing activities for the periods indicated: Year Ended June 30, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 25,710 $ 20,473 $ 218,865 Net cash used in investing activities (35,744) (109,630) (130,822) Net cash provided by (used in) financing activities (9,903) (29,611) 21,854 Effect of exchange rate changes on cash, cash equivalents and restricted cash (126) (280) (59) Net increase (decrease) in cash, cash equivalents and restricted cash $ (20,063) $ (119,048) $ 109,838 Cash flows from operating activities Net cash provided by operating activities of $25.7 million for fiscal year 2024 resulted primarily from net loss of $11.1 million, non-cash charges of $79.4 million and net change in assets and liabilities using net cash of $42.6 million. The non-cash charges of $79.4 million included depreciation and amortization expenses of $53.8 million, share-based compensation expense of $21.6 million, equity method investment loss from equity investee of $4.8 million, the net deferred income taxes of $0.9 million, and loss on disposal of property and equipment of $0.1 million. The net change in assets and liabilities using net cash of $42.6 million was primarily due to $33.8 million decrease in accrued and other liabilities, $12.5 million increase in inventories, $2.4 million decrease in accounts payable primarily due to timing of payment, $5.5 million decrease in deferred revenue, and $2.0 million decrease in income taxes payable, partially offset by $9.9 million decrease in accounts receivable due to timing of billings and collection of payments, increase in other payable on equity investee of $1.7 million, $1.9 million decrease in other current and long-term assets primarily due to decrease in advance payments to suppliers. Net cash provided by operating activities of $20.5 million for fiscal year 2023 resulted primarily from net income of $12.4 million, non-cash charges of $80.9 million and net change in assets and liabilities using net cash of $72.8 million. The non-cash charges of $80.9 million included depreciation and amortization expenses of $43.2 million, share-based compensation expense of $37.5 million, equity method investment loss from equity investee of $1.4 million, the net deferred income taxes of $1.4 million and loss on disposal of property and equipment of $0.2 million. The net change in assets and liabilities using net cash of $72.8 million was primarily due to $45.5 million decrease in accrued and other liabilities, decrease in other payable on equity investee of $17.0 million, and $19.6 million decrease in accounts payable primarily due to timing of payment, $25.2 million increase in inventories, $18.7 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, partially offset by $43.3 million decrease in accounts receivable due to timing of billings and collection of payments, $8.1 million increase in deferred revenue, and $2.0 million increase in income taxes payable. Net cash provided by operating activities of $218.9 million for fiscal year 2022 resulted primarily from net income of $453.2 million, non-cash charges of $287.6 million and net change in assets and liabilities providing net cash of $53.3 million. The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsolidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in the JV Company of $30.0 million, equity method investment loss from equity investee of $2.6 million, and net deferred income taxes of $1.6 million. The net change in assets and liabilities providing net cash of $53.3 million was primarily due to $76.4 million increase in accrued and other liabilities, income taxes payable on deconsolidation and changes of equity interest in the JV company of $3.5 million, other payable on equity investee of $48.2 million, and $23.8 million increase in accounts payable primarily due to timing of payment, partially offset by $30.1 million increase in accounts receivable due to timing of billings and collection of payments, $57.4 million increase in inventories, $9.4 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, and $1.7 million decrease in income taxes payable. Cash flows from investing activities Net cash used in investing activities of $35.7 million for the fiscal year 2024 was primarily attributable to $37.1 million purchases of property and equipment, partially offset by $1.0 million government grant related to equipment and $0.4 million in proceeds from sale of property and equipment. 55 Net cash used in investing activities of $109.6 million for the fiscal year 2023 was primarily attributable to $110.4 million purchases of property and equipment, partially offset by $0.6 million government grant related to equipment and $0.2 million in proceeds from sale of property and equipment. Net cash used in investing activities of $130.8 million for the fiscal year 2022 was primarily attributable to $138.0 million purchases of property and equipment, and $20.7 million deconsolidation of cash and cash equivalents of the JV Company, partially offset by $1.4 million government grant related to equipment in the JV Company, $26.3 million proceeds from sale of equity interest in the JV Company and $0.1 million proceeds from sale of property and equipment. Cash flows from financing activities Net cash used in financing activities of $9.9 million for the fiscal year 2024 was primarily attributable to $7.7 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.9 million in payments of finance lease obligations, and $11.5 million in repayments of borrowings, partially offset by $10.1 million of proceeds from exercises of share options and issuance of shares under the ESPP. Net cash used in financing activities of $29.6 million for the fiscal year 2023 was primarily attributable to $6.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.8 million in payments of finance lease obligations, $26.6 million in repayments of borrowings, and $13.4 million of payments for repurchase of common shares, partially offset by $8.6 million of proceeds from borrowings and $9.0 million of proceeds from exercises of share options and issuance of shares under the ESPP. Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of finance lease obligations, and $35.7 million in repayments of borrowings. 56 Contractual Obligations Our contractual obligations as of June 30, 2024 are as follows: Payments Due by Period Less than More than Total 1 year 1-3 years 3-5years 5 years (in thousands) Recorded liabilities: Bank borrowings $ 38,415 $ 11,664 $ 26,215 $ 536 $ — Finance leases 3,624 1,144 2,289 191 — Operating leases 29,436 6,291 10,001 8,008 5,136 $ 71,475 $ 19,099 $ 38,505 $ 8,735 $ 5,136 Other: Capital commitments with respect to property and equipment $ 6,879 $ 6,879 $ — $ — $ — Purchase commitments with respect to inventories and others 100,807 100,807 — — — $ 107,686 $ 107,686 $ — $ — $ — Total contractual obligations $ 179,161 $ 126,785 $ 38,505 $ 8,735 $ 5,136 As of June 30, 2024, we had recorded liabilities of $3.0 million for uncertain tax positions and $0.5 million for potential interest and penalties, which are not included in the above table because we are unable to reliably estimate the amount of payments in individual years that would be made in connection with these uncertain tax positions. Commitments See Note 15 of the Notes to the consolidated financial statements contained in this Annual Report on Form 10-K for a description of commitments. Off-Balance Sheet Arrangements As of June 30, 2024, we had no off-balance sheet arrangements. 57 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements requires us 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, our consolidated financial statements will be affected. On an ongoing basis, we evaluate the estimates, judgments and assumptions including those related to stock rotation returns, price adjustments, allowance for doubtful accounts, valuation of inventories, warranty accrual, income taxes, leases, equity method investment, share-based compensation, recoverability of and useful lives for property, plant and equipment and intangible assets. Revenue recognition We determine 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. We recognize revenue at a point in time when product is shipped to the customer, net of estimated stock rotation returns and price adjustments to certain distributors. We present revenue net of sales taxes and any similar assessments. Our standard payment terms range from 30 to 60 days. We sell our products primarily to distributors, who in turn sell our products globally to various end customers. Our revenue is net of the effect of the variable consideration relating to estimated stock rotation returns and price adjustments that we expect to provide to certain distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of the products purchased by distributors during a specified period. We estimate provision for stock rotation returns based on historical returns and individual distributor agreements. We also provide special pricing to certain distributors primarily based on volume, to encourage resale of our products. We estimate the expected price adjustments at the time the revenue is recognized based on distributor inventory levels, forecasted future distributor selling prices, distributor margins and demand for our products. If actual stock rotation returns or price adjustments differ from our estimates, adjustments may be recorded in the period when such actual information is known. Allowance for price adjustments is recorded against accounts receivable and provision for stock rotation is recorded in accrued liabilities on the consolidated balance sheets. Our performance obligations relate to contracts with a duration of less than one year. We elected to apply the practical expedient provided in ASC 606, “Revenue from Contracts with Customers”. Therefore, we are not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. We recognize the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer. Applying the practical expedient, we recognize commissions as expense when incurred, as the amortization period of the commission asset we would have otherwise recognized is less than one year. Packaging and testing services revenue is recognized at a point in time upon shipment of serviced products to the customer. License and Development Revenue Recognition In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee of $18.0 million, $6.8 million and $9.0 million paid to us in March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones. The license and development fee is determined to be one performance obligation and is recognized over the 24 months when we perform the engineering and development services. We use the input method to measure progression, representing a faithful depiction of the transfer of services. During the fiscal years ended June 30, 2024 and 2023, we recorded $21.2 million and $9.9 million of license and development revenue. The amount of contract liability is recorded as deferred revenue on the consolidated balance sheets. In addition, we also entered an accompanying supply agreement to provide limited wafer supply to the customer. Equity method investment We use the equity method of accounting when we have the ability to exercise significant influence, but not control, as determined in accordance with general accepted accounting principles, over the operating and financial policies of the investee. Effective December 2, 2021, we reduced our equity interest in the JV Company, which resulted in deconsolidation of our investment in the JV Company. As a result, beginning December 2, 2021, we record our investment under equity method of accounting. Due to difficulties in obtaining accurate financial information from the JV Company in a timely manner, we record our share of earnings or losses of such affiliate on a one quarter lag. Therefore, our share of losses of the 58 JV Company for the period from December 2, 2021 to March 31, 2022 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2022. And our share of losses of the JV Company for the periods of April 1, 2022 to March 31, 2023 and April 1 2023 to March 31, 2024 were recorded in our Consolidated Statement of Operations for the fiscal years ended June 30, 2023 and 2024. We recognize and disclose intervening events at the JV Company in the lag period that could materially affect our consolidated financial statements. We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations. Profits or losses related to intra- entity sales with the equity method investee are eliminated until realized by the investor and investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment; instead the equity method investment is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statements of Operations. Valuation of inventories We carry inventories at the lower of cost (determined on a first-in, first-out basis) or net realizable value. Cost primarily consists of semiconductor wafers and raw materials, labor, depreciation expenses and other manufacturing expenses and overhead, and packaging and testing fees paid to third parties if subcontractors are used. Valuation of inventories is based on our periodic review of inventory quantities on hand as compared with our sales forecasts, historical usage, aging of inventories, production yield levels and current product selling prices. If actual market conditions are less favorable than those forecasted by us, additional future inventory write-downs may be required that could adversely affect our operating results. Adjustments to inventory, once established are not reversed until the related inventory has been sold or scrapped. If actual market conditions are more favorable than expected and the products that have previously been written down are sold, our gross margin would be favorably impacted. Accounting for income taxes We are subject to income taxes in a number of jurisdictions. We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as interest and penalties related to uncertain tax positions. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. We establish accruals for certain tax contingencies based on estimates of whether additional taxes may be due. While the final tax outcome of these matters may differ from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. As a result, significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period. Significant management judgment is also required in determining whether deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or foreign tax credit carryforwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized. We consider all available positive and negative evidence on a jurisdiction-by-jurisdiction basis when assessing whether it is more likely than not that deferred tax assets are recoverable. We consider evidence such as our past operating results, the existence of cumulative losses in recent years and our forecast of future taxable income. We will maintain a partial valuation allowance equal to the state research and development credit carryforwards until sufficient positive evidence exists to support reversal of the valuation allowance. We intend to reinvest the undistributed earnings of its foreign subsidiaries indefinitely, except for Alpha and Omega Semiconductor (Cayman) Ltd. and AOS International LP. As of June 30, 2024, the cumulative earnings of Alpha and Omega Semiconductor (Cayman) and AOS International LP totaled $46.2 million, and there was no deferred tax liability recorded as there is no income nor withholding tax amongst the applicable jurisdictions. As of June 30, 2024, the cumulative amount of undistributed earnings of its foreign entities considered permanently reinvested is $414.6 million. Should the Company decide to remit this income to its Bermuda parent company in a future period, its provision for income taxes may increase materially in that period. The determination of the unrecognized deferred tax liability on these earnings is not practicable due to the complexity and variety of assumptions necessary to estimate the tax. As of June 30, 2024, the Company has recorded a deferred tax liability of $26.3 million for the basis difference related to our investment in the JV Company. 59 The Financial Accounting Standards Board ("FASB") has issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management. If the ultimate resolution of tax uncertainties is different from what is currently estimated, a material impact on income tax expense could result. Our provision for income taxes is subject to volatility and could be adversely impacted by changes in earnings or tax laws and regulations in various jurisdictions. We are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our operating results and financial condition. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of changes to reserves, as well as the related net interest and penalties. Share-based compensation expense We maintain an equity-settled, share-based compensation plan to grant restricted share units and stock options. We recognize 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 our 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. The Employee Share Purchase Plan (the “ESPP”) is accounted for at fair value on the date of grant using the Black-Scholes option valuation model. Share-based compensation expense is significant to the consolidated financial statements and is calculated using our best estimates, which involve inherent uncertainties and the application of management's judgment. The Black-Scholes option valuation model requires the input of subjective assumptions, including the expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time of grant. Changes in estimated forfeitures are recognized in the period of change and impact the amount of stock compensation expenses to be recognized in future periods, which could be material if actual results differ significantly from estimates. Recently Issued Accounting Pronouncements See Note 1 of the Notes to the consolidated financial statements contained in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition. 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign currency risk We and our principal subsidiaries use U.S. dollars as our functional currency because most of the transactions are conducted and settled in U.S. dollars. All of our revenue and a significant portion of our operating expenses are denominated in U.S. dollars. The functional currency for our in-house packaging and testing facilities in China is U.S. dollars and a significant portion of our capital expenditures are denominated in U.S. dollars. However, foreign currencies are required to fund our overseas operations, primarily in Taiwan and China. Operating expenses of overseas operations are denominated in their respective local currencies. In order to minimize exposure to foreign currencies, we maintained cash and cash equivalent balances in foreign currencies, including Chinese Yuan (“RMB”) as operating funds for our foreign operating expenses. For our subsidiaries which use the local currency as the functional currency, the results and financial position are translated into U.S. dollar using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses items. The resulting translation differences are presented as a separate component of accumulated other comprehensive income (loss) and noncontrolling interest in the consolidated statements of equity. Our management believes that our exposure to foreign currency translation risk is not significant based on a 10% sensitivity analysis in foreign currencies due to the fact that the net assets denominated in foreign currencies pertaining to foreign operations, principally in Taiwan and China, are not significant to our consolidated net assets. Interest rate risk Our interest-bearing assets comprise mainly interest-bearing short-term bank balances. We manage our interest rate risk by placing such balances in instruments with various short-term maturities. Borrowings expose us to interest rate risk. Borrowings are drawn down after due consideration of market conditions and expectation of future interest rate movements. As of June 30, 2024, we had $38.4 million outstanding under our loan and $3.2 million outstanding under our financing leases, which were subject to fluctuations in interest rates. For the year ended June 30, 2024, a hypothetical 10% increase in the interest rate could result in $0.2 million additional annual interest expense. The hypothetical assumptions made above will be different from what actually occurs in the future. Furthermore, the computations do not anticipate actions that may be taken by our management should the hypothetical market changes actually occur over time. As a result, actual impacts on our results of operations in the future will differ from those quantified above. Commodity Price Risk We are subject to risk from fluctuating market prices of certain commodity raw materials, particularly gold, that are used in our manufacturing process and incorporated into our end products. Supplies for such commodities may from time-to-time become restricted, or general market factors and conditions may affect the pricing of such commodities. Over the past few years, the price of gold increased significantly and certain of our supply chain partners assess surcharges to compensate for the rising commodity prices. We have been converting some of our products to use copper wires instead of gold wires. Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw materials, the quality of available raw materials deteriorates, or there are significant price changes for these raw materials. For periods in which the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers which would result in decreased margins for the products in which they are used and could have a material adverse effect on our net earnings. We also may need to record losses for adverse purchase commitments for these materials in periods of declining prices. We do not enter into formal hedging arrangements to mitigate against commodity risk. We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk, such as gold, would decrease or increase our current year's net earnings by $0.6 million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals at fixed prices. 61 Item 8. Financial Statements and Supplementary Data See Part IV, Item 15 “Exhibits and Financial Statement Schedules” for our consolidated financial statements and the notes and schedules thereto filed as part of this annual report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024, the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation as of the end of the period covered in this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024. Management’s Annual Report on Internal Control over Financial Reporting Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), as amended from time to time. Based on the assessment, our management concluded that the Company's internal control over financial reporting was effective as of June 30, 2024. The effectiveness of the Company’s internal control over financial reporting as of June 30, 2024 has been audited by Baker Tilly US, LLP, an independent registered public accounting firm, as stated in their report, included on page 67. Remediation of Previously Disclosed Material Weakness As previously disclosed in Item 9A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (the “prior year Form 10-K”), and in subsequent quarterly reports, we did not (i) design and maintain effective information technology general controls in the areas of user access, and segregation of duties for one of the information technology systems that supports the Company’s financial reporting over inventory (work in process and finished goods) in costing; and (ii) identify and test controls to ensure the reliability of the costing of inventory (work in process and finished goods). We executed the following remediation measures, including testing and evaluation of the newly designed and enhanced controls: • Designed and implemented controls to further improve information technology general controls in the areas of user access and segregation of duties (work in process and finished goods); and 62 • Designed and implemented controls over inventory costing (work in process and finished goods) Based upon the above, we have determined that these control activities are appropriately designed and implemented, and operating effectively for a sufficient period of time to conclude that the previously identified material weakness has been remediated as of June 30, 2024. Changes in Internal Control Over Financial Reporting As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated our internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter covered by this Form 10-K that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. Except for the remediation efforts implemented in connection with the material weakness discussed above, there were no changes during the quarter ended June 30, 2024. Inherent Limitations on the Effectiveness of Controls While our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance that their respective objectives will be met, we do not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors and all fraud. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. 63 Item 9B. Other Information Trading Plans or Rule 10b5-1 Trading Plans The table below summarizes the material terms of trading arrangements adopted by any of our executive officers or directors during the June 2024 quarter. All of the trading arrangements listed below are intended to satisfy the affirmative defense of Rule 10b5-1(c). Name Title Date of Adoption End Date Aggregate number of shares common shares to be sold pursuant to 10b5-1 trading agreements Wenjun Li Chief Operating Officer June 12, 2024 November 29, 2024 11,529 This plan will expire on the earlier of the end date and the completion of all transactions under the trading arrangement. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not Applicable. 1 1 64 PART III Certain information required by Part III is omitted from this Annual Report on Form 10-K because we intend to file our definitive proxy statement for our next annual general meeting of shareholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “2024 Proxy Statement”), no later than 120 days after the end of fiscal year 2024, and certain information to be included in the 2024 Proxy Statement is incorporated herein by reference. Item 10. Directors, Executive Officers and Corporate Governance The information required by this item concerning our directors, executive officers, Section 16 compliance and corporate governance matters is contained in part under the caption “Business - Executive Officers” in Part I of this report, and the remainder is incorporated by reference to the information set forth in the sections titled “Election of Directors” and “Delinquent Section 16(a) Reports” in the 2024 Proxy Statement. Item 11. Executive Compensation The information required by this item regarding executive compensation is incorporated by reference from the information set forth under the captions “Compensation of Non-Employee Directors” and “Executive Compensation,” in the 2024 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference to the information set forth in the section titled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2024 Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item regarding related party transactions and director independence is incorporated by reference from the information set forth under the captions “Board of Directors and Committees of the Board” and “Related Party Transactions” in the 2024 Proxy Statement. Item 14. Principal Accountant Fees and Services The information required by this item regarding principal accountant fees and services is incorporated by reference from the information set forth under the caption “Principal Accounting Fees and Services” in the 2024 Proxy Statement. 65 PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this annual report: (1) Consolidated Financial Statements. The index to the consolidated financial statements is below. Item Page Report of Independent Registered Public Accounting Firm (Baker Tilly US, LLP - PCAOB Firm ID No.23) 67 Report of Independent Registered Public Accounting Firm (BDO USA, LLP - PCAOB Firm ID No. 243) 70 Consolidated Balance Sheets 71 Consolidated Statements of Operations 72 Consolidated Statements of Comprehensive Income (Loss) 73 Consolidated Statements of Equity 74 Consolidated Statements of Cash Flows 75 Notes to the Consolidated Financial Statements 77 (2) Financial Statement Schedules. Schedule II - Valuation and Qualifying accounts 110 (b) Exhibits The exhibits listed on the accompanying Index to Exhibits in Item 15(b) below are filed as part of, or hereby incorporated by reference into, this Annual Report on Form 10-K. 66 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Alpha and Omega Semiconductor Limited: Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Alpha and Omega Semiconductor Limited (the "Company") as of June 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the two years in the period ended June 30, 2024, and the related notes and schedule (collectively referred to as the "consolidated financial statements"). We also have audited the Company’s internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting included in Item 9A of this Annual Report on Form 10-K. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 67 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Excess and Obsolete Inventory Reserve As described in Note 1 of the consolidated financial statements, the Company assesses the valuation of its inventory on a periodic basis and provides an allowance based on several factors including inventory quantities on hand as compared with its sales forecasts, historical usage, aging of inventories, production yield levels and current product selling prices. We identified the provision for excess and obsolete inventory as a critical audit matter because the determination of excess and obsolete inventory reserves is judgmental and considers several factors that are affected by market and economic conditions, such as company forecasts, dynamic pricing environments, and industry supply and demand. How the critical audit matter was addressed in the audit Our audit procedures related to management’s estimates used in the valuation of inventory included the following, among others: • We evaluated and tested the design and operating effectiveness of the Company's internal controls over the valuation of inventory, including the calculation of lower of cost or net realizable value reserves, and the determination of demand forecasts and related application against on hand inventory. • We reviewed the reasonableness of the Company’s methodology for estimating the valuation of inventories by evaluating factors including excess units on hand based on ending inventory quantities compared to forecasted shipment quantities. • We tested the significant assumptions, including product demand forecasts, and the completeness and accuracy of the underlying data used in management's inventory valuation assessment. • We evaluated management’s ability to accurately estimate forecasted demand by comparing estimates made in prior periods to the historical actual results for those same periods. Revenue recognition – Variable consideration of the allowance for price adjustments As described in Notes 1 and 6 of the consolidated financial statements, the Company provides special pricing to certain distributors, primarily based on volume, to encourage resale of the Company's products. The Company estimates the variable consideration of the allowance for price adjustments at the time revenue is recognized. The Company records a reduction of revenue and a corresponding allowance for price adjustments against accounts receivable on the consolidated balance sheets. Estimating the allowance for price adjustments requires management to make certain assumptions including distributor inventory levels, forecasted distributor selling prices, distributor margins and future demand for products . These assumptions could be affected by current and future economic and market conditions. We identified the variable consideration of the allowance for price adjustments as a critical audit matter because auditing management’s estimate of the allowance for price adjustments was complex, due to the significant assumptions used in estimating the variable consideration. How the critical audit matter was addressed in the audit Our audit procedures related to management’s estimate of the variable consideration of the allowance for price adjustments included the following, among others: • We evaluated and tested the design and operating effectiveness of the Company's internal controls for estimating the variable consideration of the allowance for price adjustments, including testing controls over management’s review of the allowance calculation and the underlying assumptions used to develop the estimate. • We confirmed the quantity of select distributor inventories. • We tested revenues and allowance for price adjustments and agreed to supporting documents. 68 • We evaluated the reasonableness of management’s significant assumptions by comparing them to the forecasted distributor selling prices, as well as historical results of the company, including testing the completeness and accuracy of the underlying data. /s/ Baker Tilly US, LLP We have served as the Company's auditor since 2022. San Jose, California August 23, 2024 69 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Alpha & Omega Semiconductor Limited Sunnyvale, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of operations, and comprehensive income (loss), stockholders’ equity, and cash flows of Alpha and Omega Semiconductor Limited (the “Company”) for the year ended June 30, 2022, and the related notes and schedule (collectively referred to as the “Consolidated Financial Statements”). In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s Consolidated Financial Statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the Consolidated Financial Statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the Consolidated Financial Statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated Financial Statements. We believe that our audit provides a reasonable basis for our opinion. /s/ BDO USA, LLP We have served as the Company's auditor from 2018 to 2022. San Jose, California September 19, 2022 70 ALPHA AND OMEGA SEMICONDUCTOR LIMITED CONSOLIDATED BALANCE SHEETS (in thousands, except par value per share) June 30, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 175,127 $ 195,188 Restricted cash 413 415 Accounts receivable, net 12,546 22,420 Inventories 195,750 183,247 Other current assets 14,165 22,666 Total current assets 398,001 423,936 Property, plant and equipment, net 336,619 357,831 Operating lease right-of-use assets, net 25,050 24,349 Intangible assets, net 3,516 6,765 Equity method investment 356,039 366,617 Deferred income tax assets 549 536 Other long-term assets 25,239 19,703 Total assets $ 1,145,013 $ 1,199,737 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 45,084 $ 50,775 Accrued liabilities 72,371 79,533 Payable related to equity investee, net 13,682 11,950 Income taxes payable 2,798 5,546 Short-term debt 11,635 11,434 Deferred revenue 2,591 8,073 Finance lease liabilities 935 867 Operating lease liabilities 5,137 4,383 Total current liabilities 154,233 172,561 Long-term debt 26,724 38,360 Income taxes payable - long-term 3,591 2,817 Deferred income tax liabilities 26,416 27,283 Finance lease liabilities - long-term 2,282 3,216 Operating lease liabilities - long-term 20,499 20,544 Other long-term liabilities 19,661 51,037 Total liabilities 253,406 315,818 Commitments and contingencies (Note 15) Equity: Preferred shares, par value $0.002 per share: Authorized: 10,000 shares; issued and outstanding: none at June 30, 2024 and 2023 — — Common shares, par value $0.002 per share: Authorized: 100,000 shares; issued and outstanding: 36,107 shares and 28,969 shares, respectively at June 30, 2024 and 34,811 shares and 27,654 shares, respectively at June 30, 2023 72 70 Treasury shares at cost; 7,138 shares at June 30, 2024 and 7,157 shares at June 30, 2023 (79,213) (79,365) Additional paid-in capital 353,109 329,034 Accumulated other comprehensive loss (13,419) (8,111) Retained earnings 631,058 642,291 Total Alpha and Omega Semiconductor Limited shareholders’ equity 891,607 883,919 Total liabilities and equity $ 1,145,013 $ 1,199,737 The accompanying notes are an integral part of these consolidated financial statements. 71 ALPHA AND OMEGA SEMICONDUCTOR LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended June 30, 2024 2023 2022 Revenue $ 657,274 $ 691,321 $ 777,552 Cost of goods sold 485,356 491,785 508,996 Gross profit 171,918 199,536 268,556 Operating expenses: Research and development 89,940 88,146 71,259 Selling, general and administrative 85,734 88,861 95,259 Total operating expenses 175,674 177,007 166,518 Operating income (loss) (3,756) 22,529 102,038 Other income (loss), net (73) (1,730) 999 Interest income (expense), net 1,186 (1,087) (3,920) Gain on deconsolidation of the JV Company — — 399,093 Loss on changes of equity interest in the JV Company, net — — (3,140) Net income (loss) before income taxes (2,643) 19,712 495,070 Income tax expense 3,649 5,937 39,258 Net income (loss) before loss from equity method investment (6,292) 13,775 455,812 Equity method investment loss from equity investee (4,789) (1,411) (2,629) Net income (loss) (11,081) 12,364 453,183 Net income attributable to noncontrolling interest — — 20 Net income (loss) attributable to Alpha and Omega Semiconductor Limited $ (11,081) $ 12,364 $ 453,163 Net income (loss) per common share attributable to Alpha and Omega Semiconductor Limited Basic $ (0.39) $ 0.45 $ 16.93 Diluted $ (0.39) $ 0.42 $ 16.07 Weighted average number of common share attributable to Alpha and Omega Semiconductor Limited used to compute net income (loss) per share: Basic 28,236 27,552 26,764 Diluted 28,236 29,528 28,203 The accompanying notes are an integral part of these consolidated financial statements. 72 ALPHA AND OMEGA SEMICONDUCTOR LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year ended June 30, 2024 2023 2022 Net income (loss) including noncontrolling interest $ (11,081) $ 12,364 $ 453,183 Other comprehensive income (loss), net of tax Foreign currency translation adjustment (5,308) (9,191) 1,307 Cumulative translation adjustment removal due to deconsolidation of the JV Company — — (3,642) Comprehensive income (loss) (16,389) 3,173 450,848 Less: Noncontrolling interest — — (1,080) Comprehensive income (loss) attributable to Alpha and Omega Semiconductor Limited $ (16,389) $ 3,173 $ 451,928 The accompanying notes are an integral part of these consolidated financial statements. 73 ALPHA AND OMEGA SEMICONDUCTOR LIMITED CONSOLIDATED STATEMENTS OF EQUITY (in thousands) Preferred Shares Common Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (loss) Retained Earnings Total AOS Shareholders' Equity Noncontrolling Interest Total Equity Shares Amount Shares Amount Shares Amount Balance, June 30, 2021 — — 32,975 $ 66 (6,625) $ (66,064) $ 259,993 $ 2,315 $ 176,895 $ 373,205 $ 143,120 $ 516,325 Exercise of common stock options and release of RSUs — — 652 1 — — 897 — — 898 — 898 Reissuance of treasury stock upon exercise of common stock options and release of RSUs — — — — 8 64 — — (64) — — — Withholding tax on restricted stock units — — (183) — — — (8,641) — — (8,641) — (8,641) Issuance of shares under Employee Stock Purchase Plan — — 544 1 — — 5,244 — — 5,245 — 5,245 Share-based compensation expense — — — — — — 31,058 — — 31,058 — 31,058 Restricted stock units settlement in connection with service — — — — — — 400 — — 400 — 400 Net income including noncontrolling interest through December 1, 2021 — — — — — — — — 453,163 453,163 20 453,183 Foreign currency translation adjustment — — — — — — — 558 — 558 749 1,307 Deconsolidation of noncontrolling interest — — — — — — — (1,793) — (1,793) (143,889) (145,682) Balance, June 30, 2022 — — 33,988 68 (6,617) (66,000) 288,951 1,080 629,994 854,093 — 854,093 Exercise of common stock options and release of RSUs — — 715 1 — — 550 — — 551 — 551 Reissuance of treasury stock upon exercise of common stock options and release of RSUs — — — — 8 67 — — (67) — — — Withholding tax on restricted stock units — — (242) — — — (6,381) — — (6,381) — (6,381) Issuance of shares under Employee Stock Purchase Plan — — 350 1 — — 8,426 — — 8,427 — 8,427 Repurchase of common shares under share repurchase program — — (548) (13,432) — — — (13,432) — (13,432) Share-based compensation expense — — — — — — 37,488 — — 37,488 — 37,488 Net income — — — — — — — — 12,364 12,364 — 12,364 Foreign currency translation adjustment — — — — — — — (9,191) — (9,191) — (9,191) Balance, June 30, 2023 — — 34,811 70 (7,157) (79,365) 329,034 (8,111) 642,291 883,919 — 883,919 Exercise of common stock options and release of RSUs — — 1,210 2 — — 2,311 — — 2,313 — 2,313 Reissuance of treasury stock upon exercise of common stock options and release of RSUs — — — — 19 152 — — (152) — — — Withholding tax on restricted stock units — — (320) — — — (7,678) — — (7,678) — (7,678) Issuance of shares under Employee Stock Purchase Plan — — 406 — — — 7,801 — — 7,801 — 7,801 Share-based compensation expense — — — — — — 21,641 — — 21,641 — 21,641 Net loss — — — — — — — — (11,081) (11,081) — (11,081) Foreign currency translation adjustment — — — — — — — (5,308) — (5,308) — (5,308) Balance, June 30, 2024 — $ — 36,107 $ 72 (7,138) $ (79,213) $ 353,109 $ (13,419) $ 631,058 $ 891,607 $ — $ 891,607 The accompanying notes are an integral part of these consolidated financial statements. 74 ALPHA AND OMEGA SEMICONDUCTOR LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended June 30, 2024 2023 2022 Cash flows from operating activities Net income (loss) including noncontrolling interest $ (11,081) $ 12,364 $ 453,183 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on deconsolidation of the JV Company — — (399,093) Loss on changes of equity interest in the JV Company, net — — 3,140 Deferred income tax on deconsolidation and changes of equity interest in the JV Company — — 29,973 Depreciation and amortization 53,757 43,207 42,851 Equity method investment loss from equity investee 4,789 1,411 2,629 Share-based compensation expense 21,641 37,488 31,324 Deferred income taxes, net (880) (1,418) 1,592 Loss on disposal of property and equipment 78 182 18 Changes in assets and liabilities: Accounts receivable 9,873 43,262 (30,085) Inventories (12,503) (25,207) (57,416) Other current and long-term assets 1,927 (18,695) (9,408) Payable related to equity investee, net 1,731 (17,038) 48,192 Accounts payable (2,406) (19,568) 23,755 Income taxes payable (1,974) 1,957 (1,687) Income taxes payable on deconsolidation and changes of equity interest in the JV Company — — 3,490 Increase (decrease) in deferred revenue (5,482) 8,073 — Accrued and other liabilities (33,760) (45,545) 76,407 Net cash provided by operating activities 25,710 20,473 218,865 Cash flows from investing activities Proceeds from sale of equity interest in the JV Company — — 26,347 Deconsolidation of cash and cash equivalents of the JV Company — — (20,734) Purchases of property and equipment (37,088) (110,428) (138,014) Proceeds from sale of property and equipment 383 167 135 Government grants related to equipment 961 631 1,444 Net cash used in investing activities (35,744) (109,630) (130,822) Cash flows from financing activities Withholding tax on restricted stock units (7,678) (6,381) (8,641) Proceeds from exercise of stock options and ESPP 10,114 8,978 6,143 Payments for repurchase of common shares — (13,432) — Proceeds from borrowings — 8,632 64,276 Repayments of borrowings (11,472) (26,598) (35,748) Principal payments on finance leases (867) (810) (4,176) Net cash provided by (used in) financing activities (9,903) (29,611) 21,854 Effect of exchange rate changes on cash, cash equivalents and restricted cash (126) (280) (59) Net increase (decrease) in cash, cash equivalents and restricted cash (20,063) (119,048) 109,838 Cash, cash equivalents and restricted cash at beginning of year 195,603 314,651 204,813 Cash, cash equivalents and restricted cash at end of year $ 175,540 $ 195,603 $ 314,651 75 ALPHA AND OMEGA SEMICONDUCTOR LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended June 30, 2024 2023 2022 Supplemental disclosures of cash flow information: Cash paid for interest $ 2,564 $ 3,711 $ 3,404 Cash paid for income taxes $ 5,758 $ 1,537 $ 5,768 Supplemental disclosures of non-cash investing and financing information: Property and equipment purchased but not yet paid $ 7,381 $ 12,715 $ 62,165 Reissuance of treasury stock $ 152 $ 67 $ 64 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 175,127 $ 195,188 $ 314,352 Restricted cash 413 415 299 Total cash, cash equivalents, and restricted cash $ 175,540 $ 195,603 $ 314,651 The accompanying notes are an integral part of these consolidated financial statements. 76 ALPHA AND OMEGA SEMICONDUCTOR LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and a subsidiary in which it had a controlling interest until December 1, 2021. As of December 2, 2021, the Company ceased having control over this subsidiary. Therefore, the Company deconsolidated this subsidiary as of that date. Subsequently, the Company has accounted for it using the equity method of accounting. All intercompany account balances and transactions have been eliminated. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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”). As of December 1, 2021, the Company owned 50.9%, and the Chongqing Funds owned 49.1%, of the equity interest in the JV Company. The Joint Venture was accounted under the provisions of the consolidation guidance since the Company had controlling financial interest until December 1, 2021. As of December 2, 2021, the Company ceased having control over the JV Company. Therefore, the Company deconsolidated the JV Company as of that date. Subsequently, the Company has accounted for its investment in the JV Company using the equity method of accounting. As of June 30, 2023, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2%. Such reduction reflects (i) the sale by the Company of approximately 2.1% of the outstanding JV equity interest which resulted in the deconsolidation of the JV Company, (ii) additional sale by the Company of approximately 1.1% of outstanding JV equity interest in December 2021, (iii) the adoption of an employee equity incentive plan and the issuance of additional equity interest equivalent to 3.99% of the JV Company to investors in exchange for cash in December 2021, and (iv) issuance of additional equity interest of JV to investors in January 2022. In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased the Company’s percentage of equity ownership in the JV Company by 0.54%. As of June 30, 2024, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.8%. Risks and Uncertainties The Company is subject to certain risks and uncertainties. The Company believes changes in any of the following areas could have a material adverse effect on the Company's future financial position or results of operations or cash flows: the macroeconomic condition and cyclical nature of the semiconductor industry; the timing and success of new product development, including market receptiveness, operation of in-house manufacturing facilities, litigation or claims against the Company based on intellectual property, patent, product regulatory or other factors, competition from other products, general economic conditions, the inability to attract and retain qualified employees, lack of control of the JV Company and ultimately to sustain profitable operations, risks associated with doing business in China, and ability to diversify products and develop digital business; the general state of the U.S., China and world economies; the loss of any of its larger customers; restrictions on the Company’s ability to sell to foreign customers due to trade laws, regulations and requirements; disruptions of the supply chain of components needed for our products; inability to obtain additional financing; inability to meet certain debt covenants; fundamental changes in the technology underlying the Company’s products; successful and timely completion of product design efforts; and new product design introductions by competitors. Additional risks and uncertainties that the Company is unaware of, or that the Company currently believes are not material, may also become important factors that adversely affect its business. 77 The Company's revenue is limited by its ability to utilize wafer production and packaging and testing capacity from its in-house facilities and obtain adequate wafer supplies from third-party foundries. Currently the Company's main third-party foundry is Shanghai Hua Hong Grace Electronic Company Limited, or HHGrace, located in Shanghai, China. HHGrace has been manufacturing wafers for the Company since 2002. HHGrace manufactured approximately 3.8%, 9.6% and 10.3% of the wafers used in the Company's products for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. Although the Company believes that its volume of production allows the Company to secure favorable pricing and priority in allocation of capacity in its third-party foundries, if the foundries' capacities are constrained due to market demands, HHGrace, together with other foundries from which the Company purchases wafers, may not be willing or able to satisfy all of the Company's manufacturing requirements on a timely basis and/or at favorable prices. In addition, manufacturing facilities' capacity affects the Company's gross margin because the Company has certain fixed costs associated with its Oregon Fab as well as in-house packaging and testing facilities. If the Company fails to utilize its manufacturing facilities' capacity at a desirable level, its financial condition and results of operations will be adversely affected. Use of Estimates The preparation of the 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 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. Foreign Currency Transactions and Translation Most of the Company's principal subsidiaries use U.S. dollars as their functional currency because their transactions are primarily conducted and settled in U.S. dollars. All of their revenues and a significant portion of their operating expenses are denominated in U.S. dollars. The functional currencies for the Company's in-house packaging and testing facilities in China are U.S. dollars, and a majority of their capital expenditures are denominated in U.S. dollars. Foreign currency transactions are translated into the functional currencies using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses, resulting from the settlement of such transactions and from the re-measurement of monetary assets and liabilities denominated in foreign currencies using exchange rates at balance sheet date and non-monetary assets and liabilities using historical exchange rates, are recognized in the consolidated statements of operations. For the Company's subsidiaries which use the local currency as their functional currency, their results and financial position are translated into U.S. dollars using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses items. The resulting translation differences are presented as a separate component of accumulated other comprehensive income (loss) in the consolidated statements of equity. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents primarily consist of cash on hand and short-term bank deposits with original maturities of three months or less. Cash equivalents are highly liquid investments with stated maturities of three months or less as of the dates of purchase. The carrying amounts reported for cash and cash equivalents are considered to approximate fair values based upon their short maturities. Cash and cash equivalents are maintained with reputable major financial institutions. If, due to current economic conditions or other factors, one or more of the financial institutions with which the Company maintains deposits fails, the Company's cash and cash equivalents may be at risk. Deposits with these banks may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk. The Company maintains restricted cash in connection with cash balances temporarily restricted for regular business operations. These balances have been excluded from the Company’s cash and cash equivalents balance and are classified as restricted cash in the Company’s consolidated balance sheets. As of June 30, 2024 and 2023, the amount of restricted cash was $0.4 million and $0.4 million, respectively. Accounts Receivable, net The allowance for expected credit loss is based on assessment of the expected collectability of accounts receivable from customers. The Company reviews the allowance by considering factors such as historical collection experience, credit quality, age of the accounts receivable balances and current economic conditions that may affect a customer's ability to pay. The 78 Company writes off a receivable and charges against its recorded allowance when it has exhausted its collection efforts without success. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Fair Value of Financial Instruments The fair value of cash equivalents is based on observable market prices and 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. Inventories The Company carries inventories at the lower of cost (determined on a first-in, first-out basis) or net realizable value. Cost includes semiconductor wafer and raw materials, labor, depreciation expenses and other manufacturing expenses and overhead, and packaging and testing fees paid to third parties if subcontractors are used. Valuation of inventories are based on the Company's periodic review of inventory quantities on hand as compared with its sales forecasts, historical usage, aging of inventories, production yield levels and current product selling prices. If actual market conditions are less favorable than those forecasted by management, additional future inventory write-downs may be required that could adversely affect the Company's operating results. Adjustments to inventory once established are not reversed until the related inventory has been sold or scrapped. If actual market conditions are more favorable than expected and the products that have previously been written down are sold, our gross margin would be favorably impacted. Property, Plant and Equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items and the costs incurred to make the assets ready for their intended use. Depreciation is provided for on a straight-line basis over the estimated useful lives of the related assets as follows: Building and building improvements 20 years Manufacturing machinery and equipment 7 to 10 years Equipment and tooling 3 to 5 years Computer hardware and software 3 to 5 years Office furniture and equipment 3 to 5 years Leasehold improvements 2 to 15 years Vehicle 5 years 79 Equipment and construction in progress represent equipment received but the necessary installation has not been fully performed or building construction and leasehold improvements have been started but not yet completed. Equipment and construction in progress are stated at cost and transferred to the respective asset class when fully completed and ready for their intended use. Internal-use software development costs are capitalized to the extent that the costs are directly associated with the development of identifiable and unique software products controlled by the Company that will probably generate economic benefits beyond one year. Costs incurred during the application development stage are required to be capitalized. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Costs include employee costs incurred and fees paid to outside consultants for the software development and implementation. Internally developed software is amortized over its estimated useful life of three to five years starting from the date when it is ready for its intended use. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized as selling, general and administrative expenses in the consolidated statements of operations. Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. 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 fiscal year ended June 30, 2024, the Company reduced property, plant and equipment by $1.0 million. During the fiscal year ended June 30, 2023, the Company reduced property, plant and equipment by $0.6 million and operating expenses by $0.1 million. During the fiscal year ended June 30, 2022, the Company reduced interest expense by $0.9 million, property, plant and equipment by $1.4 million, and operating expenses by $0.2 million. Long-lived Assets The Company reviews all long-lived assets whenever events or changes in circumstance indicate that these assets may not be recoverable. When evaluating long-lived assets, if the Company concludes that the estimated undiscounted cash flows attributable to the assets are less than their carrying value, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their respective fair values, which could adversely affect its results of operations. There was no impairment of long-lived assets for fiscal years 2024, 2023 and 2022. 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 product revenue at a point in time when product is shipped to the customer, as determined by the agreed upon shipping terms, net of estimated stock rotation returns and price adjustments that it expects to provide to certain distributors. The Company presents revenue net of sales taxes and any similar assessments. Our standard payment terms range from 30 to 60 days. The Company sells its products primarily to distributors, who in turn sell the products globally to various end customers. The Company allows stock rotation returns from certain distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by distributors during a specified period. The Company records an allowance for stock rotation returns based on historical returns, current expectations, and individual distributor agreements. The Company also provides special pricing to certain distributors, primarily based on volume, to encourage resale of the Company's products. Allowance for price adjustments is recorded against accounts receivable and the provision for stock rotation rights is included in accrued liabilities on the consolidated balance sheets. The Company's performance obligations relate to contracts with a duration of less than one year. The Company elected to apply the practical expedient provided in ASC 606, “Revenue from Contracts with Customers”. Therefore, the Company is not 80 required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company recognizes the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer. Applying the practical expedient, the Company recognizes commissions as expense when incurred, as the amortization period of the commission asset the Company would have otherwise recognized is less than one year. Packaging and testing services revenue is recognized at a point in time upon shipment of serviced products to the customer. License and Development Services Revenue Recognition In February 2023, the Company entered into a license agreement with a customer to license the Company’s proprietary SiC technology and to provide 24- months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee of $18.0 million, $6.8 million and $9.0 million paid to the Company in March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones. The license and development fee is determined to be one performance obligation and is recognized over the 24 months when the Company performs the engineering and development services. The Company uses the input method to measure progression, representing a faithful depiction of the transfer of services. During the fiscal years ended June 30, 2024 and 2023, the Company recorded $21.2 million and $9.9 million of license and development revenue, respectively. The amount of contract liability is recorded as deferred revenue on the consolidated balance sheets. In addition, the Company also entered an accompanying supply agreement to provide limited wafer supply to the customer. 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 consolidated balance sheets. Finance leases are included in property, plant and equipment, finance lease liabilities and long-term finance leases liabilities on the 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 determines 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 consolidated balance sheet with a term of one year or less. The Company elected to combine its lease and non-lease components as a single lease component for all asset classes. Product Warranty The Company provides a standard one-year warranty for products from the date of purchase by the end customers. The Company accrues for estimated warranty costs at the time revenue is recognized. The Company's warranty obligation is determined by product failure rates, labor and material costs for replacing defective parts, related freight costs for failed parts and other quality assurance costs. The Company monitors its product returns for warranty claims and maintains warranty reserves based on historical experiences and anticipated warranty claims known at the time of estimation. Shipping and Handling Costs Shipping and handling costs are included in cost of goods sold. Research and Development Research and development costs are expensed as incurred. 81 Provision for Income Taxes Income tax expense or benefit is based on income or loss before taxes. Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. The Company is subject to income taxes in a number of jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company establishes accruals for certain tax contingencies based on estimates of whether additional taxes may be due. While the final tax outcome of these matters may differ from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Significant management judgment is also required in determining whether deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or research and experimentation tax credit carryforwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized. The Company considers all available positive and negative evidence on a jurisdiction-by-jurisdiction basis when assessing whether it is more likely than not that deferred tax assets are recoverable. The Company considers evidence such as our past operating results, the existence of cumulative losses in recent years and our forecast of future taxable income. The Company has concluded that it should report a full valuation allowance on its state research and development (R&D) tax credit carryforwards as the Company annually generates more state R&D tax credits than it could use based on its forecasts. The Financial Accounting Standards Board (FASB), issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management. If the ultimate resolution of tax uncertainties is different from what is currently estimated, a material impact on income tax expense could result. The Company's provision for income taxes is subject to volatility and could be adversely impacted by changes in earnings or tax laws and regulations in various jurisdictions. The Company is subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of changes to reserves, as well as the related net interest and penalties. 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. The Black-Scholes option valuation model requires the input of subjective assumptions, including the expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time of grant. Changes in estimated forfeitures are recognized in the period of change and impact the amount of stock compensation expenses to be recognized in future periods, which could be material if actual results differ significantly from estimates. 82 The Employee Share Purchase Plan (the “ESPP”) is accounted for at fair value on the date of grant using the Black-Scholes option valuation model. Advertising Advertising expenditures are expensed as incurred. Advertising expense was $0.6 million, $0.5 million and $0.2 million in the fiscal years ended June 30, 2024, 2023, and 2022, respectively. 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. Recent Accounting Pronouncements Recently Adopted Accounting Standards None Recently Issued Accounting Standards not yet adopted In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures”, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. This guidance is effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of the ASU on its income tax disclosures within the consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures”, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the ASU on its disclosures within the consolidated financial statements. 2. Equity Method Investment in Equity Investee On December 1, 2021 (the “Effective Date”), Alpha & Omega Semiconductor (Shanghai) Ltd. (“AOS SH”) and Agape Package Manufacturing (Shanghai) Limited (“APM SH”), each a wholly-owned subsidiary of the Company, entered into a share transfer agreement (“STA”) with a third-party investor to sell a portion of the Company's equity interest in the JV Company which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing, China (the “Transaction”). The Transaction closed on December 2, 2021 (the “Closing Date”), which reduced the Company’s equity interest in the JV Company from 50.9% to 48.8%. Also, the Company’s right to designate directors on the board of the JV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction. As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company and has determined that the JV Company was deconsolidated from the Company’s consolidated financial statements effective as of the Closing Date. In connection with the deconsolidation and in accordance with ASC 810, the Company recorded a gain on deconsolidation of $399.1 million during the fiscal year ended June 30, 2022 in the condensed consolidated statements of operations. The gain on deconsolidation of the JV Company was calculated as follows: 83 (in thousands) Cash received for sales of shares in the JV Company $ 16,924 Fair value of retained equity method investment 393,124 Carrying amount of non-controlling interest 143,889 Cumulative translation adjustment removal 1,793 Carrying amount of net assets of the JV Company at December 1, 2021 (156,637) Gain on deconsolidation of the JV Company $ 399,093 On December 24, 2021, the Company entered into a share transfer agreement with another third-party investor, pursuant to which the Company sold to this investor 1.1% of outstanding equity interest held by the Company in the JV Company. In addition, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company in exchange to cash. As a result of these two transactions, the Company owned 45.8% of the equity interest in the JV Company as of December 31, 2021. On January 26, 2022, the JV Company completed a financing transaction pursuant to a corporate investment agreement (the “Investment Agreement”) between the JV Company and certain third-party investors (the “New Investors”). Under the Investment Agreement, the New Investors purchased newly issued equity interest of the JV Company, representing approximately 7.82% of post-transaction outstanding equity interests of the JV Company, for a total purchase price of RMB 509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”). Following the closing of the Investment and as of June 30, 2022, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2%. The net loss associated with these sales of JV Company equity interest held by the Company was recorded in the fiscal year ended June 30, 2022 as follows: (in thousands) Gain on 1.1% equity interest sold $ 475 Loss on diluted equity interest from issuance of shares under the employee equity incentive plan (8,116) Gain on 7.82% equity interest sold 4,501 Loss on changes on equity interest of the JV Company, net $ (3,140) In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased the Company’s percentage of equity ownership in the JV Company by 0.54%. As of June 30, 2024, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.8%. The Company accounts for its investment in the JV Company as an equity method investment and reports its equity in earnings or loss of the JV Company on a three-month lag due to an inability to timely obtain financial information of the JV Company. During the fiscal years ended June 30, 2024, 2023 and 2022, the Company recorded $4.8 million, $1.4 million and $2.6 million of its equity in loss of the JV Company, respectively, using lag reporting. Summarized Financial Information The following table presents summarized financial information for the JV Company (in thousands): 84 As of March 31, 2024 As of March 31, 2023 As of March 31, 2022 Current assets $ 86,280 $ 122,324 $ 198,323 Non-current assets $ 338,450 $ 333,165 $ 364,777 Current liabilities $ 70,776 $ 122,340 $ 251,988 Non-current liabilities $ 81,899 $ 36,525 $ 76,207 For the period April 1, 2023 to March 31, 2024 For the period April 1, 2022 to March 31, 2023 For the period December 2, 2021 to March 31, 2022 Revenue $ 128,951 $ 178,974 $ 68,972 Gross loss (income) $ (1,844) $ (4,502) $ 870 Operating expenses $ 9,174 $ 5,939 $ 2,280 Net loss $ 9,477 $ 4,906 $ 6,197 3. Related Party Transactions As of June 30, 2024, the Company owned 42.8% equity interest in the JV Company, which, by definition, is a related party to the Company. The JV Company supplies 12-inch wafers and provides assembly and testing services to AOS. AOS previously sold 8-inch wafers to the JV Company for further assembly and testing services until January 1, 2023, when it changed to consign the 8-inch wafers to the JV Company. Due to the right of offset of receivables and payables with the JV Company, as of June 30, 2024 and 2023, AOS recorded the net amount of $13.7 million and $12.0 million, respectively, as a payable related to equity investee, net, on the Consolidated Balance Sheet. Since the December 2, 2021 deconsolidation of the JV Company and through the fiscal year ended June 30, 2022, the Company purchased finished goods and services of $117.6 million from the JV Company and AOS provided the JV Company with $36.4 million of 8- inch wafers. The purchases by AOS for the fiscal year ended June 30, 2023 were $127.8 million and the sales by AOS for the fiscal year ended June 30, 2023 were $35.6 million. The purchases by AOS for the fiscal year ended June 30, 2024 were $96.6 million and the sales by AOS for the fiscal year ended June 30, 2024 were $9.8 million. 85 4. Net Income (Loss) Per Common Share Attributable to Alpha and Omega Semiconductor Limited Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares outstanding, plus potential shares of common stock during the period. Potential shares of common stock include dilutive shares attributable to the assumed exercise of share options, ESPP shares and vesting of RSUs using the treasury stock method and contingent issuances of common shares related to convertible preferred shares, if dilutive. Under the treasury stock method, potential common shares outstanding are not included in the computation of diluted net income (loss) per share if their effect is anti-dilutive. The following table presents the calculation of basic and diluted net income (loss) per share attributable to common shareholders: Year Ended June 30, 2024 2023 2022 (in thousands, except per share data) Numerator: Net income (loss) attributable to Alpha and Omega Semiconductor Limited $ (11,081) $ 12,364 $ 453,163 Denominator: Basic: Weighted average number of common shares used to compute basic net income (loss) per share 28,236 27,552 26,764 Diluted: Weighted average number of common shares used to compute basic net income (loss) per share 28,236 27,552 26,764 Effect of potentially dilutive securities: Stock options, RSUs and ESPP shares — 1,976 1,439 Weighted average number of common shares used to compute diluted net income (loss) per share 28,236 29,528 28,203 Net income (loss) per share attributable to Alpha and Omega Semiconductor Limited: Basic $ (0.39) $ 0.45 $ 16.93 Diluted $ (0.39) $ 0.42 $ 16.07 The following potential dilutive securities were excluded from the computation of diluted net income (loss) per share as their effect would have been anti- dilutive: Year Ended June 30, 2024 2023 2022 (in thousands) Employee stock options and RSUs 2,822 310 277 ESPP 1,019 309 21 Total potential dilutive securities 3,841 619 298 86 5. 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 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 standards, 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. Summarized below are individual customers whose revenue or accounts receivable balances were 10% or higher than the respective total consolidated amounts: Year Ended June 30, Percentage of revenue 2024 2023 2022 Customer A 25.0 % 21.6 % 24.6 % Customer B 46.0 % 35.6 % 39.7 % Customer D * 14.0 % * June 30, Percentage of accounts receivable 2024 2023 Customer A * 15.3 % Customer B * 17.6 % Customer C 33.4 % 13.3 % Customer D 33.4 % 30.9 % * Less than 10% 87 6. Balance Sheet Components Accounts receivable, net June 30, 2024 2023 (in thousands) Accounts receivable $ 54,265 $ 62,426 Less: Allowance for price adjustments (41,689) (39,976) Less: Allowance for doubtful accounts (30) (30) Accounts receivable, net $ 12,546 $ 22,420 Inventories June 30, 2024 2023 (in thousands) Raw materials $ 78,064 $ 86,620 Work in-process 87,898 69,426 Finished goods 29,788 27,201 $ 195,750 $ 183,247 Other current assets June 30, 2024 2023 (in thousands) VAT receivable $ 304 $ 275 Other prepaid expenses 1,822 3,863 Prepaid insurance 4,623 4,162 Prepaid maintenance 2,195 1,697 Prepayments to supplier 1,301 10,689 Prepaid income tax 819 707 Interest receivable 383 135 Other receivables 2,718 1,138 $ 14,165 $ 22,666 88 Property, plant and equipment, net June 30, 2024 2023 (in thousands) Land $ 4,877 $ 4,877 Building and building improvements 71,266 26,478 Manufacturing machinery and equipment 423,960 398,757 Equipment and tooling 36,203 32,737 Computer equipment and software 53,081 49,890 Office furniture and equipment 3,193 3,087 Leasehold improvements 41,671 38,787 634,251 554,613 Less: accumulated depreciation (320,751) (272,503) 313,500 282,110 Equipment and construction in progress 23,119 75,721 Property, plant and equipment, net $ 336,619 $ 357,831 Total depreciation expense was $50.5 million, $40.4 million and $39.9 million for fiscal years 2024, 2023 and 2022, respectively. The Company capitalized $0.6 million, $0.5 million and $0.3 million of software development costs during the fiscal years 2024, 2023 and 2022, respectively. Amortization of capitalized software development costs was $0.6 million in fiscal year 2024, $0.4 million in fiscal year 2023 and $0.4 million in fiscal year 2022. Unamortized capitalized software development costs in each of the periods presented at June 30, 2024 and 2023 were $1.0 million and $0.9 million, respectively. Other long-term assets June 30, 2024 2023 (in thousands) Prepayments for property and equipment $ 620 $ 1,717 Investment in privately held companies 100 100 Customs deposit 652 931 Deposit with supplier 22,117 12,290 Other long-term deposits 37 37 Office leases deposits 1,418 1,274 Other 295 3,354 $ 25,239 $ 19,703 89 Intangible assets, net June 30, 2024 2023 (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 (16,208) (12,959) 3,247 6,496 Goodwill 269 269 Intangible assets, net $ 3,516 $ 6,765 The Company is amortizing intangible assets of patents and technology rights related to a license agreement with STMicroelectronics International N.V. Amortization expense for intangible assets was $3.2 million, $3.3 million and $3.4 million for the years ended June 30, 2024, 2023 and 2022, respectively. The estimated useful lives for patents and technology rights and trade name were five years and ten years, respectively. Customer relationships are fully amortized. Estimated future minimum amortization expense of intangible assets is as follows (in thousands): Year ending June 30, 2025 $ 3,247 90 Accrued liabilities June 30, 2024 2023 (in thousands) Accrued compensation and benefits $ 14,945 $ 15,627 Warranty accrual 2,407 1,674 Stock rotation accrual 4,660 5,588 Accrued professional fees 3,198 2,458 Accrued inventory 728 1,597 Accrued facilities related expenses 2,137 2,327 Accrued property, plant and equipment 6,986 6,402 Other accrued expenses 3,822 4,401 Customer deposits 32,182 38,082 ESPP payable 1,306 1,377 $ 72,371 $ 79,533 Short-term customer deposits are payments received from customers for securing future product shipments. As of June 30, 2024, $9.0 million were from Customer A, $8.9 million were from Customer B, and $14.3 million were from other customers. As of June 30, 2023, $13.5 million were from Customer A, $9.2 million were from Customer B, and $15.4 million were from other customers. The activity in the warranty accrual, included in accrued liabilities is as follows: Year Ended June 30, 2024 2023 2022 (in thousands) Beginning balance $ 1,674 $ 2,650 $ 2,795 Addition 1,186 3,666 1,127 Utilization (453) (4,642) (1,272) Ending balance $ 2,407 $ 1,674 $ 2,650 The activity in the stock rotation accrual, included in accrued liabilities is as follows: Year Ended June 30, 2024 2023 2022 (in thousands) Beginning balance $ 5,588 $ 4,798 $ 3,917 Addition 11,044 13,950 5,817 Utilization (11,972) (13,160) (4,936) Ending balance $ 4,660 $ 5,588 $ 4,798 91 Other long-term liabilities June 30, 2024 2023 (in thousands) Customer deposits $ 19,661 $ 46,393 Computer software liabilities — 4,644 Other long-term liabilities $ 19,661 $ 51,037 Customer deposits are payments received from customers for securing future product shipments. As of June 30, 2024, $12.0 million were from Customer A, $2.0 million were from Customer B, and $5.7 million were from other customers. As of June 30, 2023, $21.0 million were from Customer A, $11.7 million were from Customer B and $13.7 million were from other customers. 7. Bank Borrowing Short-term bank borrowing In March 2024, Bank of Communications Limited in China provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 140 million or $19.3 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024 with a maturity date of March 15, 2025. As of June 30, 2024, there was no outstanding balance for this loan. In December 2023, Industrial and Commercial Bank of China provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility was to provide working capital borrowings. The Company could borrow up to approximately RMB 72.0 million, or $9.9 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024, with a maturity date of December 31, 2024. As of June 30, 2024, there was no outstanding balance for this loan. In September 2023, China Construction Bank provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 50 million or $6.9 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024 with a maturity date of September 8, 2025. As of June 30, 2024, there was no outstanding balance for this loan. 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 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. The Borrower was in compliance with these covenants as of June 30, 2024. As of June 30, 2024, there was no outstanding balance for this factoring agreement. Debt financing 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 has a 5 years term, after which 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, until the final installation and acceptance of the equipment. 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 92 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 which had a carrying amount of $13.6 million as of June 30, 2024. As of June 30, 2024, the outstanding balance of this debt financing was $9.2 million. Long-term bank borrowings 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 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 adjusted LIBOR 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, 2024, Jireh was in compliance with these covenants and the outstanding balance of this loan was $29.2 million. At June 30, 2024, maturities of short-term debt and long-term debt were as follows (in thousands): Year ending June 30, 2025 $ 11,664 2026 11,871 2027 14,344 2028 536 Total principal of debt 38,415 Less: debt issuance costs (56) Total principal of debt, less debt issuance costs $ 38,359 Short-term Debt Long-term Debt Total Principal amount $ 11,664 $ 26,751 $ 38,415 Less: debt issuance costs (29) (27) (56) Total debt, less debt issuance costs $ 11,635 $ 26,724 $ 38,359 93 8. 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 consolidated balance sheets. Finance leases are included in property, plant and equipment, finance lease liabilities and finance lease liabilities-long-term on the 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 $5.1 million of a machinery lease financing with a vendor. In September 2022, the lease was amended to make a monthly payment of principal and interest as a fixed amount effective in October 2022. Other terms remain the same. The amendment was accounted for as a debt modification and no gain or loss was recognized. The Company does not record leases on the consolidated balance sheet with a term of one year or less. The components of the Company’s operating and finance lease expenses are as follows for the years presented (in thousands): Year Ended June 30, 2024 Year Ended June 30, 2023 Operating leases: Fixed rent expense $ 6,268 $ 5,779 Variable rent expense 1,095 1,014 Finance lease: Amortization of equipment 513 522 Interest 277 306 Short-term leases: Short-term lease expenses 161 400 Total lease expenses $ 8,314 $ 8,021 94 Supplemental balance sheet information related to the Company’s operating and finance leases is as follows (in thousands, except lease term and discount rate): June 30, 2024 June 30, 2023 Operating Leases: ROU assets associated with operating leases $ 25,050 $ 24,349 Finance Lease: Property, plant and equipment, gross $ 5,133 $ 5,133 Accumulated depreciation (1,171) (657) Property, plant and equipment, net $ 3,962 $ 4,476 Weighted average remaining lease term (in years) Operating leases 5.54 6.57 Finance lease 3.25 4.25 Weighted average discount rate Operating leases 4.91 % 4.67 % Finance lease 7.51 % 7.51 % Supplemental cash flow information related to the Company’s operating and finance leases is as follows (in thousands): Year Ended June 30, 2024 Year Ended June 30, 2023 Cash paid from amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6,330 $ 5,945 Operating cash flows from finance lease $ 277 $ 306 Financing cash flows from finance lease $ 867 $ 810 Non-cash investing and financing information: Operating lease right-of-use assets obtained in exchange for lease obligations $ 5,884 $ 5,579 Future minimum lease payments are as follows as of June 30, 2024 (in thousands): Operating Leases Finance Leases 2025 $ 6,291 $ 1,144 2026 5,455 1,144 2027 4,546 1,145 2028 4,071 191 2029 3,937 — Thereafter 5,136 — Total minimum lease payments 29,436 3,624 Less amount representing interest (3,800) (407) Total lease liabilities $ 25,636 $ 3,217 95 9. Shareholders' Equity Common Shares The Company's Bye-laws, as amended, authorized the Company to issue 100,000,000 common shares with par value of $0.002. Each common share is entitled to one vote. The holders of common shares are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors. No dividends had been declared as of June 30, 2024. 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 stock-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. As of June 30, 2023, there were no availability under this repurchase program, which was terminated. During fiscal year 2023, the Company repurchased an aggregate of 548,132 shares, from the open market for a total cost of approximately $13.4 million, excluding fees and related expenses, at an average price of $24.51 per share. During fiscal year 2024 and 2022, the Company did not repurchase any shares pursuant to the repurchase program. As of June 30, 2024, the Company had repurchased an aggregate of 7,332,780 shares for a total cost of $81.1 million, at an average price of $11.01 per share, excluding fees and related expenses, since inception of the program. No repurchased shares have been retired. Of the 7,332,780 repurchased shares, 194,716 shares with a weighted average repurchase price of $9.77 per share, were reissued at an average price of $4.29 per share for option exercises and vested restricted stock units (“RSU”). 96 10. Share-based Compensation 2018 Omnibus Incentive Plan The 2009 Share Option/Share Issuance Plan (the “2009 Plan”) was approved in September 2009 at the annual general meeting of shareholders in connection with the Company's IPO. At the annual general meeting of shareholders in November 2018, the 2009 Plan was approved to be terminated and the 2018 Omnibus Incentive Plan (the “2018 Plan”) was effective. No further awards will be made under the 2009 Plan. The 2018 Plan authorized the board of directors to grant incentive share options, non-statutory share options and restricted shares to employees, directors, non-employee directors and consultants of the Company and its subsidiaries for up to 2,065,000 common shares. The 2018 Plan does not include an evergreen authorization Therefore, the Company is not permitted to increase the number of shares reserved in the share pool without obtaining further shareholder approval. Outstanding shares under the 2018 Plan and awards granted under the 2009 Plan that expire, are forfeited or cancelled or terminate prior to the issuance of the shares subject to those awards or are settled in cash will be available for subsequent issuance under the 2018 Plan. At the annual general meeting of shareholders in November 2021, 2022 and 2023, the 2018 Plan was approved to increase by 1,000,000, 740,000 and 427,000 shares, respectively, to a total of 4,232,000 shares. As of June 30, 2024, 919,093 shares were available for grant under the 2018 Plan. Beginning with the 2014 Annual Shareholders Meeting, on the date of each annual shareholders meeting, each individual who commences service as a non- employee Board member by reason of his or her election to the Board at such annual meeting and each individual who is to continue to serve as a non-employee Board member, whether or not that individual is standing for re-election to the Board at that particular annual meeting, will automatically be granted an award in the form of restricted share units covering that number of common shares determined by dividing one hundred sixty thousand dollars ($160,000) by the average fair market value per share for the ninety (90)-day period preceding the grant date, up to a maximum of 10,000 shares. Under the 2018 Plan, incentive share options and RSU are to be granted at a price that is not less than 100% and nonstatutory share options are to be granted at not less than 85% of the fair value of the common shares, at the date of grant for employees and consultants. Options and RSUs generally vest over a four-year to five-year period, and are exercisable for a maximum period of ten years after the date of grant. The fair value of RSU, including time-based restricted stock units and performance-based restricted stock units is based on the market price of the Company's common shares on the date of grant. Time-based Restricted Stock Units (“TRSU”) The following table summarizes the Company's TRSU activities: Number of Time-based Restricted Stock Units Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (Years) Aggregate Intrinsic Value Nonvested at June 30, 2021 1,053,524 $ 21.60 1.73 $ 32,016,594 Granted 597,381 $ 45.83 Vested (410,670) $ 20.54 Forfeited (70,626) $ 26.79 Nonvested at June 30, 2022 1,169,609 $ 34.03 1.73 $ 38,994,764 Granted 714,080 $ 27.70 Vested (451,549) $ 28.84 Forfeited (47,075) $ 33.40 Nonvested at June 30, 2023 1,385,065 $ 32.48 1.73 $ 45,430,132 Granted 679,993 $ 23.12 Vested (521,109) $ 30.00 Forfeited (74,814) $ 30.34 Nonvested at June 30, 2024 1,469,135 $ 29.13 1.66 $ 54,901,575 97 Performance-based Restricted Stock Units (“PRSU”) In March each year since fiscal year 2017, the Company granted PRSU to certain personnel. The number of shares to be ultimately earned under the PRSU is determined based on the level of attainment of predetermined financial goals. The PRSU vests in four equal annual installments from the first anniversary date after the grant date if certain predetermined financial goals were met. The Company recorded $2.8 million, $5.2 million and $4.6 million of expenses for these PRSUs during the years ended June 30, 2024, 2023 and 2022, respectively. The following table summarizes the Company’s PRSU activities: Number of Performance- based Restricted Stock Units Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (Years) Aggregate Intrinsic Value Nonvested at June 30, 2021 353,824 $ 22.69 1.74 $ 10,752,711 Granted 194,000 $ 48.65 Vested (151,199) $ 19.44 Forfeited (7,250) $ 40.33 Nonvested at June 30, 2022 389,375 $ 36.56 1.85 $ 12,981,763 Granted 264,214 $ 25.70 Vested (116,132) $ 30.54 Forfeited (10,743) $ 48.65 Nonvested at June 30, 2023 526,714 $ 32.19 1.78 $ 17,276,219 Granted 209,250 $ 21.55 Vested (123,632) $ 30.50 Forfeited (268,207) $ 26.59 Nonvested at June 30, 2024 344,125 $ 30.69 1.73 $ 12,859,951 Market-based Restricted Stock Units (“MSUs”) In December 2021, the Company granted 1.0 million market-based restricted stock units to certain non-officer personnel. The number of shares to be earned at the end of the performance period was determined based on the Company’s achievement of specified stock prices and revenue thresholds during the performance period from January 1, 2022 to December 31, 2024 as well as the recipients remaining in continuous service with the Company through such period. The MSU vests in four equal annual installments after the end of performance period. The Company estimated the grant date fair values of its MSUs using a Monte-Carlo simulation model. In September 2023, the Company determined it was no longer probable that it would achieve the minimum revenue threshold specified in the awards. Therefore, the Company reversed all of the previously recognized expenses of $6.4 million for these MSUs. In addition, on September 19, 2023, the Compensation Committee of the Board approved a modification of the terms of MSUs to extend the performance period through December 31, 2025, changed the commencement date for the four-year time-based service period to January 1, 2026, and reduced the achievement of specified stock prices and revenue thresholds. The fair value of these MSUs was revalued to reflect the change using a Monte-Carlo simulation model with the following assumptions: risk- free interest rate of 4.94%, expected term of 2.28 years, expected volatility of 61.38% and dividend yield of 0%. In June 2024, the Company determined it was no longer probable that the revenue thresholds for the modified MSU would be achieved. Therefore, the Company reversed $2.4 million in the June 2024 quarter that was recorded during the fiscal year 2024 related to the modification on September 19, 2023. The Company recorded approximately $(6.4) million, $1.9 million and $4.5 million of expenses for these MSUs during the fiscal years ended June 30, 2024, 2023 and 2022, respectively. During the quarter ended September 30, 2018, the Company granted 1.3 million MSUs to certain personnel. The number of shares to be earned at the end of the 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 performance period. On August 31, 2020, the Compensation Committee of the Board approved a modification of the terms of MSU to (i) extend the performance period through December 31, 2022 and (ii) change the commencement date for the four-year time-based service period to January 1, 2023. The modified MSUs were valued 98 immediately before and after the modification, using Monte-Carlo simulation pricing model. The Monte-Carlo simulation pricing model applied the following assumptions for pre-modification conditions: risk-free interest rate of 0.13%, expected term of 1.3 years, expected volatility of 66.7% and dividend yield of 0%; and for post-modification conditions: risk-free interest rate of 0.14%, expected term of 2.3 years, expected volatility of 59.1% and dividend yield of 0%. 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 Company recorded approximately $1.0 million, $3.9 million and $1.6 million of expense for these MSUs during the years ended June 30, 2024, 2023 and 2022, respectively. The following table summarizes the Company’s MSUs activities: Number of Market-based Restricted Stock Units Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (Years) Aggregate Intrinsic Value Nonvested at June 30, 2021 1,240,000 $ 5.17 3.84 $ 37,683,600 Granted 1,022,000 $ 48.44 Forfeited (56,000) $ 9.81 Nonvested at June 30, 2022 2,206,000 $ 25.10 3.83 $ 73,548,040 Vested (90,000) $ 5.17 Forfeited (8,000) $ 48.44 Nonvested at June 30, 2023 2,108,000 $ 25.86 2.96 $ 69,142,400 Vested (275,000) $ 5.17 Forfeited (106,000) $ 42.32 Nonvested at June 30, 2024 1,727,000 $ 28.15 2.83 $ 64,537,990 Stock Option The following table summarizes the Company's stock option activities: Weighted Weighted Average Average Remaining Number of Exercise Price Contractual Aggregate Shares Per Share Term (in years) Intrinsic Value Outstanding at June 30, 2021 487,875 $ 7.99 2.32 Exercised (98,000) $ 9.15 $ 3,936,675 Outstanding at June 30, 2022 389,875 $ 7.70 1.53 Exercised (65,500) $ 8.42 $ 1,442,646 Canceled or forfeited (5,000) $ 9.19 Outstanding at June 30, 2023 319,375 $ 7.53 0.72 $ 8,071,631 Exercised (309,375) $ 7.48 $ 5,588,750 Outstanding at June 30, 2024 10,000 $ 9.07 0.13 $ 283,000 Options vested and expected to vest 10,000 $ 9.07 0.13 $ 283,000 Exercisable at June 30, 2024 10,000 $ 9.07 0.13 $ 283,000 The aggregate intrinsic value for options outstanding at June 30, 2024 in the table above is based on the Company’s common stock closing price on June 30, 2024. The 2018 Employee Share Purchase Plan At the annual general meeting of shareholders in November 2018, the 2018 Employee Share Purchase Plan (“Purchase Plan” or “ESPP”) Plan was approved, under which 1,430,000 common shares are available for issuance. The Purchase Plan does not include an evergreen authorization, therefore the Company is not permitted to increase the number of shares reserved 99 in the share pool without obtaining further shareholder approval. At the general meeting of shareholders in November 2021, and 2023, the ESPP Plan was approved to increase by 1,070,000 and 1,200,000 shares, respectively to a total of 3,700,000 shares. The Purchase Plan provided for a series of overlapping offering periods with a duration of 24 months, generally beginning on May 15 and November 15 of each year. The Purchase Plan allows employees to purchase common shares through payroll deductions of up to 15% of their eligible compensation. Such deductions will accumulate over a six-month accumulation period without interest. After such accumulation period, common shares will be purchased at a price equal to 85% of the fair market value per share on either the first day of the offering period or the last date of the accumulation period, whichever is less. The maximum number of shares that may be purchased by a participant on any purchase date may not exceed 875 shares for a total of 3,500 shares per a 24-month offering period. In addition, no participant may purchase more than $25,000 worth of common stock in any one calendar year period. No more than 300,000 common shares may be purchased by all participants on any purchase date. The ESPP is compensatory and results in compensation expense. The fair values of common shares to be issued under the ESPP were determined using the Black-Scholes option pricing model with the following assumptions: Year Ended June 30, 2024 2023 2022 Volatility rate 53.0% - 64.3% 64.0% - 70.5% 66.4% - 69.9% Risk-free interest rate 5.0% - 5.2% 4.5% - 4.6% 0.3% - 2.1% Expected term 1.3 years 1.3 years 1.3 years Dividend yield —% —% —% The weighted-average estimated fair value of employee stock purchase rights granted pursuant to the ESPP during the years ended June 30, 2024, 2023 and 2022 was $10.16, $11.46 and $16.48 per share, respectively. Share-based Compensation Expenses The total share-based compensation expense related to TRSU, PRSUs, MSUs, stock options and ESPP described above, recognized in the consolidated statements of operations for the years presented was as follows: Year Ended June 30, 2024 2023 2022 (in thousands) Cost of goods sold $ 3,434 $ 5,851 $ 5,125 Research and development 5,210 9,437 7,049 Selling, general and administrative 12,997 22,200 19,150 $ 21,641 $ 37,488 $ 31,324 Total unrecognized share-based compensation expense as of June 30, 2024 was $30.7 million including estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.6 years. 11. Employee Benefit Plans The Company maintains a 401(k) retirement plan for the benefit of qualified employees in the U.S. Employees who participate may elect to make salary deferral contributions to the plan up to 100% of the employees' eligible salary subject to annual Internal Revenue Code maximum limitations. The employer's contribution is discretionary. Effective from April 1, 2022, the Company began to match 50% of employee contribution up to 4% of eligible compensation for a 2% maximum match. During the fiscal years ended June 30, 2024, 2023 and 2022, the Company made employer match contributions of $1.8 million, $1.9 million and $0.3 million, respectively. The Company makes mandatory contributions for its employees to the respective local governments in terms of retirement, medical insurance and unemployment insurance, where applicable, according to labor and social security laws and regulations of the countries and areas in which the Company operates. The retirement contribution rate is 7.7% in the U.S., 100 Table of Contents 16.0% in China, 6.0% in Taiwan, and 12.0% in India. The Company has no obligations for the payment of such social benefits beyond the required contributions as set out above. 101 12. Income Taxes The domestic and foreign components of income before taxes are: Year Ended June 30, 2024 2023 2022 (in thousands) U.S. operations $ 9,079 $ 19,001 $ 16,684 Non-U.S. operations (11,722) 711 478,386 Net income (loss) before income taxes $ (2,643) $ 19,712 $ 495,070 The provision for income taxes is comprised of: Year Ended June 30, 2024 2023 2022 (in thousands) U.S. federal taxes: Current $ 485 $ 1,093 $ 645 Deferred 1,652 549 2,260 Non-U.S. taxes: Current 3,187 4,620 7,749 Deferred (1,669) (404) 28,599 State taxes, net of federal benefit: Current (6) 79 5 Total provision for income taxes $ 3,649 $ 5,937 $ 39,258 The reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows (in percentage): Year Ended June 30, 2024 2023 2022 United States statutory rate 21.0 % 21.0 % 21.0 % Stock-based compensation (3.7) 0.2 0.0 Foreign taxes, net (186.9) 13.5 (14.3) Outside basis difference on equity method investment 27.4 (1.0) 1.2 Tax credits 86.2 (13.3) (0.3) Non-deductible expenses (6.9) 1.5 — Tax exempt income 2.8 (1.5) — Withholding taxes — 9.0 — Non-deductible executive compensation (78.6) 7.3 0.5 Foreign derived intangible income deduction 0.0 (7.2) (0.3) Other 0.6 0.6 0.1 (138.1)% 30.1 % 7.9 % 102 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows: June 30, 2024 2023 (in thousands) Deferred tax assets: Accrued compensation $ 2,188 $ 2,218 Net operating loss carryforwards — 18 Depreciation 6,286 5,360 Tax credits 16,161 15,180 Operating lease liabilities 4,574 4,567 Capitalized R&D costs 1,398 1,116 Accruals and reserves 445 558 Total deferred tax assets 31,052 29,017 Valuation allowance (7,266) (6,686) Total deferred tax assets, net of valuation allowance 23,786 22,331 Deferred tax liabilities: Depreciation and amortization (19,062) (16,899) Right of use assets (4,328) (4,315) Investments (26,263) (27,864) Total deferred tax liabilities (49,653) (49,078) Net deferred tax liabilities $ (25,867) $ (26,747) The breakdown between deferred tax assets and liabilities is as follows: June 30, 2024 2023 (in thousands) Deferred tax assets $ 549 $ 536 Deferred tax liabilities (26,416) (27,283) Net deferred tax liabilities $ (25,867) $ (26,747) The Company’s valuation allowance related to deferred income taxes as reflected in the consolidated balance sheets was $7.3 million and $6.7 million as of June 30, 2024 and 2023, respectively. The change in valuation allowance for June 30, 2024 and 2023 was an increase of $0.6 million and an increase of $0.9 million, respectively. At June 30, 2024 and 2023, the Company provided a valuation allowance for its state research and development credit carryforward deferred tax assets of $7.3 million and $6.7 million, respectively, as it generated more state tax credits each year than it can utilize. The Company intends to maintain a valuation allowance equal to the state research and development credit carryforwards in excess of the state net deferred tax liabilities on all other state book/tax differences and net operating loss carryforward. At June 30, 2024, the Company had federal research and development tax credit carryforwards of approximately $8.2 million. The federal tax credits begin to expire in 2040, if not utilized. At June 30, 2024, the Company had state tax credit carryforwards of approximately $9.9 million, of which $9.0 million carryforward indefinitely, $0.6 million have a 10 to 15 year life (beginning to expire in 2033) and $0.3 million with a 20 year life, (beginning to expire in 2038). The Company intends to reinvest the undistributed earnings of its foreign subsidiaries indefinitely, except for Alpha and Omega Semiconductor (Cayman) Ltd. and AOS International LP. As of June 30, 2024, the cumulative earnings of Alpha and Omega Semiconductor (Cayman) and AOS International LP totaled $46.2 million, and there was no deferred tax liability 103 recorded as there is no income nor withholding tax amongst the applicable jurisdictions. As of June 30, 2024, the cumulative amount of undistributed earnings of its foreign entities considered permanently reinvested is $414.6 million. Should the Company decide to remit this income to its Bermuda parent company in a future period, its provision for income taxes may increase materially in that period. The determination of the unrecognized deferred tax liability on these earnings is not practicable due to the complexity and variety of assumptions necessary to estimate the tax. As of June 30, 2024, the Company has recorded a deferred tax liability of $26.3 million for the basis difference related to our investment in the JV Company. A reconciliation of the beginning and ending amount of unrecognized tax benefits from July 1, 2021 to June 30, 2024 is as follows: Year Ended June 30, 2024 2023 2022 (in thousands) Balance at beginning of year $ 9,335 $ 8,609 $ 7,645 Additions based on tax positions related to the current year 764 804 1,121 Reductions based on tax positions related to prior years (11) (68) (40) Reductions due to lapse of applicable statute of limitations — (10) (117) Balance at end of year $ 10,088 $ 9,335 $ 8,609 At June 30, 2024, the total unrecognized tax benefits of $10.1 million included $7.1 million of unrecognized tax benefits that have been netted against the related deferred tax assets. The remaining $3.0 million of unrecognized tax benefits was recorded within long-term income tax payable on the Company's consolidated balance sheet as of June 30, 2024. The Company cannot reasonably estimate the timing and amount of potential cash settlements on the unrecognized tax benefits. The total unrecognized tax benefits of $10.1 million at June 30, 2024 included $6.9 million that, if recognized, would reduce the effective income tax rate in future periods. It is reasonably possible that the Company will recognize approximately $0.2 million reduction to its uncertain tax positions during the next twelve months due to a lapse in the applicable statute of limitations.. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The amount of interest and penalties accrued at June 30, 2024 was $0.5 million, of which $0.2 million was recognized in the year ended June 30, 2024. The amount of interest and penalties accrued at June 30, 2023 was $0.3 million, of which $0.1 million was recognized in the year ended June 30, 2023. The Company files its income tax returns in the United States and in various foreign jurisdictions. The tax years 2004 to 2024 remain open to examination by U.S. federal and state tax authorities due to tax attribute carryovers. The tax years 2018 to 2024 remain open to examination by foreign tax authorities. The Company's 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. If the 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 the Company determines the liabilities are no longer necessary. "U.S. Tax Cuts and Jobs Act", Enacted December 22, 2017 On December 22, 2017, the United States enacted tax legislation commonly known as the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changed the existing U.S. tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a move from a worldwide tax system toward a territorial system through a “participation exemption” deduction for certain foreign-source dividends, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that allows for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. 104 The Company is not currently subject to the Base Erosion and Anti-Abuse (BEAT) tax, which is a tax imposed on certain entities who make payments to their non U.S. affiliates, where such payments reduce the U.S. tax base. The BEAT tax is imposed at a rate of 10% on Adjusted Taxable Income, excluding certain payments to foreign related entities. It is an incremental tax over and above the corporate income tax and is recorded as a period cost. It is possible that this tax could be applicable in future periods, which would cause an increase to the effective tax rate and cash taxes. The Company is subject to U.S. research expense capitalization under IRC Section 174 and is eligible for the foreign derived intangible income (FDII) deductions under the 2017 U.S. Tax Cuts and Jobs Act. The IRC Section 174 research expense capitalization results in a timing difference which is amortizable over five years for domestic R&D expenditures and 15 years for foreign R&D expenditures. The FDII deduction results in a favorable permanent book-tax difference which is based on multiple factors including the amount of foreign sourced taxable income of U.S. corporations. “The Chip and Science Act of 2022”, Enacted August 2, 2022 In August 2022 the U.S. enacted the Chip and Science Act of 2022 (the Chips Act). The Chips Act provides incentives to semiconductor chip manufacturers in the United States, including providing a 25% manufacturing investment credits for investments in semiconductor manufacturing property placed in service after December 31, 2022, for which construction begins before January 1, 2027. Property investments qualify for the 25% credit if, among other requirements, the property is integral to the operation of an advanced manufacturing facility, defined as having a primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment. Currently, we are evaluating the impact of the Chips Act to us. “The Inflation Reduction Act”, Enacted August 16, 2022 In August 2022 the United States enacted tax legislation through the Inflation Reduction Act (IRA). The IRA introduces a 15% corporate alternative minimum tax (CAMT) for corporations whose average annual adjusted financial statement income (AFSI) for any consecutive three-tax-year period preceding the applicable tax year exceeds $1 billion. The CAMT is effective for tax years beginning after 31 December 2022. The CAMT is currently not applicable to the Company. Bermuda Corporate Income Tax for Tax Years Beginning in 2025 The Company is subject to income tax expense or benefit based upon pre-tax income or loss reported in the consolidated statements of income (loss) and the provisions of currently enacted tax laws. The parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, the Company is not subject to any income or capital gains taxes in Bermuda. As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after January 1, 2025. In particular, the CIT applies to multinational companies with annual revenue of 750 million euros or more in the consolidated financial statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply. The Company is not in a position to determine whether the annual revenues may meet and/or cross the 750 million Euro threshold for at least two of the four fiscal years immediately preceding the fiscal year when CIT may apply. The Company continues to monitor and assess if and when it may be within the scope of the CIT. If we become subject to the Bermuda CIT, we may be subject to additional income taxes, which may adversely affect our financial position, results of operations and our overall business. Altera Litigation On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In the July 2015 ruling, the Tax Court concluded that the sharing of the cost of employee stock compensation in a company’s cost-sharing arrangement was invalid under the U.S. Administrative Procedures Act. In June 2019, a panel of the Ninth Circuit of the U.S. Court of Appeals reversed this decision. In July 2019, Altera petitioned U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing of the case. The petition was subsequently denied by the Ninth Circuit. Altera appealed the case to the U.S. Supreme Court in February 2020, but the U.S. Supreme Court declined to hear the case in June 2020, leaving intact the U.S. Court of Appeals for the Ninth Circuit’s decision. AOS has not recorded any benefit related to the Altera Corporation Tax Court decision in any 105 period through June 30, 2024. The Company will continue to monitor ongoing developments and potential impact to its financial statements. 106 Table of Contents 13. Segment and Geographic Information The Company is organized as, and operates in, one operating segment: the design, development and supply of power semiconductor products for computing, consumer electronics, communication and industrial applications. The chief operating decision-makers are the Executive Chairman and the Chief Executive Officer. The financial information presented to the Company’s Executive Chairman and Chief Executive Officer is on a consolidated basis, accompanied by information about revenue by customer and geographic region, for purposes of evaluating financial performance and allocating resources. The Company has one business segment, and there are no segment managers who are held accountable for operations, operating results and plans for products or components below the consolidated unit level. Accordingly, the Company reports as a single operating segment. The Company sells its products primarily to distributors in the Asia Pacific region, who in turn sell these products to end customers. Because the Company’s distributors sell their products to end customers which may have a global presence, revenue by geographical location is not necessarily representative of the geographical distribution of sales to end user markets. In February 2023, the Company entered into a license agreement with a customer to license the Company’s proprietary SiC technology and to provide 24- months of engineering and development services for a total fee of $45.0 million. The revenue by geographical location in the following tables is based on the country or region in which the products were shipped to: Year Ended June 30, 2024 2023 2022 (in thousands) Hong Kong $ 524,788 $ 561,855 $ 630,238 China 95,417 84,546 120,978 South Korea 9,956 9,168 11,802 United States 4,938 19,744 12,470 Other countries 22,175 16,008 2,064 $ 657,274 $ 691,321 $ 777,552 Year Ended June 30, 2024 2023 2022 (in thousands) Power discrete $ 426,146 $ 458,795 $ 545,135 Power IC 205,778 218,620 220,882 Packaging and testing services and other 4,119 3,979 11,535 License and development services 21,231 9,927 — $ 657,274 $ 691,321 $ 777,552 Long-lived assets, net consisting of property, plant and equipment and land use rights, net, as well as operating lease right-of-use assets, net by geographical area are as follows: June 30, 2024 2023 (in thousands) China $ 106,666 $ 114,822 United States 249,791 263,083 Other countries 5,212 4,275 $ 361,669 $ 382,180 107 Table of Contents 14. Restricted Net Assets Laws and regulations in China permit payments of dividends by the Company's subsidiaries in China only out of their retained earnings, if any, as determined in accordance with China accounting standards and regulations. Each China subsidiary is also required to set aside at least 10% of its after-tax profit, if any, based on China accounting standards each year to its statutory reserves until the cumulative amount of such reserves reaches 50% of its registered capital. As a result of these China laws and regulations, the Company's subsidiaries in China are restricted in their abilities to transfer a portion of their net assets to the Company. As of June 30, 2024 and 2023, such restricted portion amounted to approximately $93.5 million and $93.2 million, or 10.5% and 10.5%, of our total consolidated net assets attributable to the Company, respectively. As the Company's subsidiaries in China are not revenue generating operating units, the Company does not expect to repatriate funds in the form of dividends, loans or advances from its subsidiaries in China for working capital and other funding purposes. 15. Commitments and Contingencies Purchase commitments As of June 30, 2024 and 2023, the Company had approximately $100.8 million and $127.5 million, respectively, of outstanding purchase commitments primarily for purchases of semiconductor raw materials, wafers, spare parts, packaging and testing services and others. As of June 30, 2024 and 2023, the Company had approximately $6.9 million, and $9.7 million, respectively, of commitments for the purchase of property and equipment. Other commitments See Notes 1, 7 and 8 to the Consolidated Financial Statements contained in this annual Report on Form 10-K for descriptions of commitments including Joint Venture, bank borrowings and leases. Contingencies and indemnities The Company has in the past, and may from time to time in the future, become involved in legal proceedings arising from the normal course of business activities. The semiconductor industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. Irrespective of the validity of such claims, the Company could incur significant costs in the defense of such claims and suffer adverse effects on its operations. As previously disclosed, the Company is currently cooperating with Department of Commerce (“DOC”) in connection with its investigation of the Company’s export control practices. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review. Given the case is in still ongoing and DOC have not provided the Company with any clear indication of the timing and schedule for the investigation, the Company cannot estimate the reasonably possible loss or range of loss that may occur. Also, the Company is unable to predict the duration, scope, result or related costs of the investigation, although the Company expects to incur additional professional fees as a result of this matter. In addition, the Company is unable to predict what, if any, further action that may be taken by the government in connection with the investigation, or what, if any, penalties, sanctions or remedial actions may be sought. The Company is a party to a variety of agreements that it has contracted with various third parties. Pursuant to these agreements, the Company may be obligated to indemnify another party to such an agreement with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by the Company, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations and covenants related to such matters as title to assets sold, certain intellectual property rights, specified environmental matters and certain income taxes. In these circumstances, payment by the Company is customarily conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party's claim. Further, the Company's obligations under these agreements may be limited in time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by it under these agreements. The Company has not historically paid or recorded any material indemnifications, and no accrual was made at June 30, 2024 and 2023. The Company has agreed to indemnify its directors and certain employees as permitted by law and pursuant to its Bye-laws, and has entered into indemnification agreements with its directors and executive officers. The Company has not recorded a liability associated with these indemnification arrangements, as it historically has not incurred any material costs associated with such indemnification obligations. Costs associated with such indemnification obligations may be mitigated by insurance 108 coverage that the Company maintains. However, such insurance may not cover any, or may cover only a portion of, the amounts the Company may be required to pay. In addition, the Company may not be able to maintain such insurance coverage at reasonable cost, if at all, in the future. Environmental matters The Company is subject to various federal, state, local, and foreign laws and regulations governing environmental matters, including the use, handling, discharge, and disposal of hazardous materials. The Company believes that it has been in material compliance with applicable environmental regulations and standards. Complying with current laws and regulations has not had a material adverse effect on the Company’s financial condition and results of operations. However, it is possible that additional environmental issues may arise in the future, which the Company cannot currently predict. 109 SCHEDULE II ALPHA AND OMEGA SEMICONDUCTOR LIMITED VALUATION AND QUALIFYING ACCOUNTS (in thousands) Allowance Allowance Valuation Allowance for Doubtful for Price for Deferred Accounts Adjustments Tax Assets June 30, 2021 $ 30 $ 12,415 $ 41,474 Additions — 170,651 — Reductions — (164,335) (35,719) June 30, 2022 $ 30 $ 18,731 $ 5,755 Additions — 165,543 931 Reductions — (144,298) — June 30, 2023 $ 30 $ 39,976 $ 6,686 Additions — 204,153 580 Reductions — (202,440) — June 30, 2024 $ 30 $ 41,689 $ 7,266 110 (b) Index to Exhibits: Number Description 3.1 Memorandum of Association of Registrant (incorporated by reference to Exhibit 3.1 from Registration Statement on Form F-1 (File No. 333-165823) filed with the Commission on March 31, 2010) 3.2 Amended and Restated Bye-laws of Registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission on November 12, 2015) 3.3 Amendment No. 1 to Amended and Restated Bye-Laws of Registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission on November 14, 2017) 4.1 Form of Common Share Certificate (incorporated by reference to Exhibit 4.2 from Registration Statement on Form F-1 (File No. 333-165823) filed with the Commission on March 31, 2010) 4.2 Description of Securities of the Registrant (incorporated by reference to Exhibit 4.2 on to the Annual Report on Form 10-K (File No. 001-34717) filed with the Commission on August 29, 2023) 10.1†† Foundry Agreement dated as of January 10, 2002 between the Registrant and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.16 from Registration Statement on Form F-1 (File No. 333-165823) filed with the Commission on March 31, 2010) 10.2†† First Addendum to Foundry Agreement dated as of July 28, 2005 between the Registrant and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.17 from Registration Statement on Form F-1 (File No. 333-165823) initially filed with the Commission on March 31, 2010) 10.3†† Second Addendum to Foundry Agreement dated as of April 11, 2007 between the Registrant and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.18 from Registration Statement on Form F-1 (File No. 333-165823) filed with the Commission on March 31, 2010) 10.4†† Foundry Service Agreement dated as of November 2, 2009 between Alpha & Omega Semiconductor (Macau), Ltd. and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.6 from Registration Statement on Form F-1 (File No. 333-165823) filed with the Commission on March 31, 2010) 10.5 Non-Exclusive Distributor Agreement dated as of July 27, 2010 between Alpha & Omega Semiconductor (Hong Kong) Limited and Frontek Technology Corporation (incorporated by reference to Exhibit 4.17 from Annual Report on Form 20-F (File No. 001-34717) filed with the Commission on September 2, 2010) 10.6†† Supplement to Non-Exclusive Distributor Agreement dated as of July 27, 2010 between Alpha & Omega Semiconductor (Hong Kong) Limited and Frontek Technology Corporation (incorporated by reference to Exhibit 4.18 from Annual Report on Form 20-F (File No. 001-34717) filed with the Commission on September 2, 2010) 10.7†† First Amendment of Supplement to Distribution Agreement dated as of April 21, 2011 between Alpha & Omega Semiconductor (Hong Kong) Limited and Frontek Technology Corporation(incorporated by reference to Exhibit 10.15 from Annual Report Form 10-K (File No. 001-34717) filed with the Commission on September 9, 2011) 10.8 Supplement to Distribution Agreement dated as of July 27, 2010 between the Registrant and Frontek Technology Corporation (incorporated by reference to Exhibit 10.1 from Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on February 6, 2015) 10.9 Non-Exclusive Distributor Agreement dated as of July 27, 2010 between Alpha & Omega Semiconductor (Hong Kong) Limited and Promate Electronic Co., Ltd. (incorporated by reference to Exhibit 4.19 from Annual Report on Form 20-F (File No. 001-34717) filed with the Commission on September 2, 2010) 10.10†† Supplement to Non-Exclusive Distributor Agreement dated as of July 27, 2010 between Alpha & Omega Semiconductor (Hong Kong) Limited and Promate Electronic Co., Ltd. (incorporated by reference to Exhibit 4.20 from Annual Report on Form 20-F (File No. 001-34717) filed with the Commission on September 2, 2010) 10.11†† First Amendment of Supplement to Distribution Agreement dated as of April 21, 2011 between Alpha & Omega Semiconductor (Hong Kong) Limited and Promate Electronic Co., Ltd. (incorporated by reference to Exhibit 10.18 from Annual Report Form 10-K (File No. 001-34717) filed with the Commission on September 9, 2011) 111 10.12 Supplement to Distribution Agreement dated as of July 27, 2010 between the Registrant and Promate Electronic Co., Ltd (incorporated by reference to Exhibit 10.2 from Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on February 6, 2015) 10.13 Lease dated as of December 23, 2009 between Alpha and Omega Semiconductor Incorporated and OA Oakmead II, LLC (incorporated by reference to Exhibit 10.19 from Registration Statement on Form F-1 (File No. 333- 165823) filed with the Commission on March 31, 2010) 10.14 Guarantee dated as of January 5, 2010 between the Registrant and OA Oakmead II, LLC (incorporated by reference to Exhibit 10.20 from Registration Statement on Form F-1 (File No. 333-165823) filed with the Commission on March 31, 2010) 10.15 Third Addendum to Foundry Agreement dated as of March 6, 2012 by and among the Registrant and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.34 from Annual Report on Form 10-K (File No.: 001-34717) filed with the Commission on August 31, 2012) 10.16 (+) Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on February 9, 2017) 10.17 Third Supplemental Agreement to the Joint Venture Contract on Incorporation of Chongqing Alpha and Omega Semiconductor Limited (English Translation) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on May 11, 2020) 10.18 First Amendment to Lease dated as of December 23, 2009 between Alpha and Omega Semiconductor Incorporated and ECI Five Oakmead, LLC (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on May 11, 2020) 10.19 Alpha & Omega Semiconductor Limited 2018 Omnibus Incentive Plan (as amended and restated effective as of November 9, 2023) (incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule 14A filed with the Commission on September 25, 2023) 10.20 Amendment to Market Performance Restricted Share Unit Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on November 6, 2020) 10.21* Alpha & Omega Semiconductor Limited 2018 Employee Purchase Plan (as amended and restated effective as of November 9, 2023) 10.22(+) 2021 Officer Form Retention Agreement for Executive Officers of Alpha and Omega Semiconductor Limited (incorporated by reference to Exhibit 10.45 from Annual Report on Form 10-K (File No. 001-34717) filed with the Commission on August 30, 2021) 10.23(+) Second Amendment To Lease US Sunnyvale Office (incorporated by reference to Exhibit 10.47 from Annual Report on Form 10-K (File No. 001-34717) filed with the Commission on August 30, 2021) 10.24(+) Third Amendment To Lease US Sunnyvale Office (incorporated by reference to Exhibit 10.48 from Annual Report on Form 10-K (File No. 001-34717) filed with the Commission on August 30, 2021) 10.25 Amended and Restated Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on November 5, 2021) 10.26 Equity Transfer Agreement of Chongqing Alpha and Omega Semiconductor Limited dated as of December 1, 2021 (English Translation) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on February 9, 2022) 10.27 Fourth Addendum to Foundry Agreement dated as of July 28, 2005 between the Registrant and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on May 10, 2022) 10.28 Fifth Addendum to Foundry Agreement dated as of July 28, 2005 between the Registrant and Shanghai Hua Hong NEC Electronics Company, Limited (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on May 10, 2022) 10.29† Shareholders Contract of Chongqing Alpha and Omega Semiconductor Limited dated as of July 12, 2022 (incorporated by reference to Exhibit 10.54 from Annual Report on Form 10-K (File No. 001-34717) filed with the Commission on September 20, 2022) 112 10.30 Executive Chairman Employment Agreement (Mike Chang) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on May 8, 2023) 10.31 Chief Executive Officer Employment Agreement (Stephen Chang) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-34717) filed with the Commission on May 8, 2023) 10.32* Market Performance Restricted Share Unit Agreement 19.1* Statement of Company Policy Regarding Insider Trading amended and restated on May 11, 2023 21.1* List of Subsidiaries of the Registrant 23.1* Consent of Baker Tilly US, LLP, independent registered public accounting firm 23.2* Consent of BDO USA, P.C., independent registered public accounting firm 31.1* Certification of Chief Executive Officer required by Rule 13(a)-14(a) under the Exchange Act 31.2* Certification of Chief Financial Officer required by Rule 13(a)-14(a) under the Exchange Act 32.1* Certification of Chief Executive Officer required by Rule 13a-14(b) under the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code 32.2* Certification of Chief Financial Officer required by Rule 13a-14(b) under the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code 97* Compensation of Recoupment Policy dated October 2, 2023 99.1* Chongqing Alpha and Omega Semiconductor Limited Report of Independent Auditor 101.INS XBRL Instance 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation 101.DEF XBRL Taxonomy Extension Definition 101.LAB XBRL Taxonomy Extension Labels 101.PRE XBRL Taxonomy Extension Presentation * Filed with this Annual Report on Form 10-K. † Certain provisions in this exhibit have been omitted as confidential information. †† Confidential treatment has been granted for certain information contained in this document pursuant to an order of the Securities and Exchange Commission. Such information has been omitted and filed separately with the Securities and Exchange Commission. (+) Indicates management contract or compensatory plan or arrangement. 113 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. August 23, 2024 ALPHA AND OMEGA SEMICONDUCTOR LIMITED By: /s/ STEPHEN C. CHANG Stephen C. Chang Chief Executive Officer (Principal Executive Officer) 114 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen C. Chang and Yifan Liang, and each or any one of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ STEPHEN C. CHANG Chief Executive Officer and Director August 23, 2024 Stephen C. Chang (Principal Executive Officer) /s/ MIKE F. CHANG Executive Chairman and Chairman of the Board August 23, 2024 Mike F. Chang, Ph.D. (Principal Executive Officer) /s/ YIFAN LIANG Chief Financial Officer and Corporate Secretary August 23, 2024 Yifan Liang (Principal Financial Officer and Principal Accounting Officer) /s/ LUCAS S. CHANG Director August 23, 2024 Lucas S. Chang /s/ CLAUDIA CHEN Director August 23, 2024 Claudia Chen /s/ SO-YEON JEONG Director August 23, 2024 So-Yeon Jeong /s/ HANQING (HELEN) LI Director August 23, 2024 Hanqing (Helen) Li /s/ KING OWYANG Director August 23, 2024 King Owyang /s/ MICHAEL L. PFEIFFER Director August 23, 2024 Michael L. Pfeiffer /s/ MICHAEL J. SALAMEH Director August 23, 2024 Michael J. Salameh 115 Exhibit 10.21 ALPHA AND OMEGA SEMICONDUCTOR LIMITED 2018 EMPLOYEE SHARE PURCHASE PLAN (As amended and restated effective November 9, 2023) I. PURPOSE OF THE PLAN This 2018 Employee Share Purchase Plan is intended to promote the interests of Alpha and Omega Semiconductor Limited, a company incorporated and existing under the laws of the Islands of Bermuda, by providing eligible employees with the opportunity to acquire a proprietary interest in the Company. The Company intends that the Plan qualify as an “employee stock purchase plan” under Code Section 423 for one or more specified offerings made under the Plan. The Company may, however, establish one or more offerings under the Plan that are not designed to comply with the requirements of Code Section 423 but are intended to comply with the tax, securities and other compliance requirements of, and obtain tax and other objectives in, the foreign jurisdictions in which those offerings are conducted in order to allow participants in such offerings to purchase shares in a manner similar to the Plan. Such offerings shall be separate from any offering designed to comply with the Code Section 423 requirements but may be conducted concurrently with any such offering. The Plan shall serve as the successor to the Company’s Employee Share Purchase Plan (the “Predecessor Plan), and no additional offerings will commence under the Predecessor Plan on or after the Effective Date. All outstanding offerings under the Predecessor Plan, however, shall continue in effect in accordance with their terms, consistent with the Predecessor Plan. Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix. II. ADMINISTRATION OF THE PLAN The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of Code Section 423 or other applicable law. Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan. III. SHARES SUBJECT TO PLAN A. The shares purchasable under the Plan shall be authorized but unissued or reacquired Common Shares, including Common Shares purchased on the open market. Subject to Section III.B, the number of Common Shares reserved for issuance over the term of the Plan shall not exceed Three Million Seven Hundred Thousand (3,700,000) shares. B. Should any change be made to the Common Shares by reason of any share split, share dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction, extraordinary distribution (whether in cash, securities or other property) or other change affecting the outstanding Common Shares as a class without the Company’s receipt of consideration, or should the value of the outstanding Common Shares be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, then equitable adjustments shall be made to (i) the maximum number and class of securities issuable under the Plan, (ii) the maximum number and class of securities purchasable per Participant on any one Purchase Date, (iii) the maximum number and class of securities purchasable in total by all Participants on any one Purchase Date and (iv) the number and class of securities and the price per share in effect under each outstanding purchase right. The adjustments shall be made in such manner as the Plan Administrator deems appropriate in order to prevent the dilution or enlargement of benefits thereunder. IV. OFFERING PERIODS A. The Plan shall be implemented in one or more offerings. Offerings may be consecutive or overlapping. Each offering shall be in such form and shall contain such terms and conditions as the Plan Administrator shall deem appropriate. The terms and conditions of each offering may vary, and two or more offerings may run concurrently under the Plan, each with its own terms and conditions. In addition, special offerings may be established with respect to entities that are acquired by the Company (or any subsidiary of the Company) or under such other circumstances as the Plan Administrator deems appropriate. In no event, however, shall the terms and conditions of any offering contravene the express limitations and restrictions of the Plan, and to the extent required by Code Section 423, the Participants in each separate offering shall have equal rights and privileges under that offering in accordance with the requirements of Code Section 423(b)(5). B. Common Shares shall be offered for purchase under each offering through a series of overlapping offering periods until such time as (i) the maximum number of Common Shares available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated. C. Each offering period shall be of such duration (not to exceed twenty-seven (27) months) as determined by the Plan Administrator prior to the commencement date of such offering period. Until such time as otherwise determined by the Plan Administrator, offering periods will commence on May 15 and November 15 (or if such dates are not Trading Days, then the first Trading day immediately following such dates) and will be of a duration of approximately twenty-four (24) months. D. Each offering period shall consist of one or more successive Purchase Intervals as determined by the Plan Administrator prior to the commencement of such offering period. Until such time as otherwise determined by the Plan Administrator, Purchase Intervals will commence on May 15 and November 15 each year (or if such dates are not Trading Days, then the first Trading Day immediately following such dates) and end on November 14 and May 14, respectively (or if such dates are not Trading Days, then the immediately preceding Trading Day). E. Should the Fair Market Value per Common Share on any Purchase Date within a particular offering period be less than the Fair Market Value per Common Share on the start date of that offering period, then the individuals participating in such offering period shall, immediately after the purchase of Common Shares on their behalf on such Purchase Date, be transferred from that offering period and automatically enrolled in the next offering period commencing on the next business day following such Purchase Date, provided and only if the Fair Market Value per Common Share on the start date of that new offering period is lower than the Fair Market Value per Common Share on the start date of the offering period in which they were currently enrolled. F. The terms and conditions of each offering period may vary, and two or more offerings periods may run concurrently under the Plan, each with its own terms and conditions. In addition, special offering periods may be established with respect to entities that are acquired by the Company (or any subsidiary of the Company) or under such other circumstances as the Plan Administrator deems appropriate. In no event, however, shall the terms and conditions of any offering period contravene the express limitations and restrictions of the Plan, and to the extent required by Code Section 423, the Participants in each separate offering shall have equal rights and privileges under that offering in accordance with the requirements of Code Section 423(b)(5). V. ELIGIBILITY A. Purchase rights may be granted under the Plan only to Employees of the Company or an Affiliate. Unless otherwise determined by the Plan Administrator for an offering, each individual who is an Eligible Employee on the start date of any offering period under the Plan may enter that offering period on such start date. However, no Eligible Employee may participate in more than one offering period at any one time. B. The date an individual enters an offering period shall be designated his or her Entry Date for purposes of that offering period. C. Except as otherwise provided in Section IV.E above, an Eligible Employee must, in order to participate in the Plan for a particular offering period, complete and timely submit the enrollment forms prescribed by the Plan Administrator (which may include accessing the website designated by the Company and electronically completing and submitting the enrollment forms) and file such forms with the Plan Administrator (or its designate) on or before his or her scheduled Entry Date. However, unless sooner enrolled in the Plan in accordance with the foregoing, any Participant enrolled in any offering period outstanding under the Predecessor Plan on the Effective Date shall automatically, following the completion of that offering period, be enrolled upon the same terms and conditions in effect for that offering period, including the authorized rate of payroll deduction, on the start date of the first offering period under the Plan thereafter that incorporates those same terms and conditions. VI. PAYROLL DEDUCTIONS A. The payroll deduction authorized by the Participant for purposes of acquiring Common Shares during an offering period may be any multiple of one percent (1%) of the Cash Earnings or Base Salary (as determined by the Plan Administrator prior to the start of the offering period) paid to the Participant during each Purchase Interval within that offering period, up to a maximum of fifteen percent (15%). The deduction rate so authorized shall continue in effect throughout the offering period, except to the extent such rate is changed in accordance with the following guidelines: (i) The Participant may, at any time during the offering period, reduce his or her rate of payroll deduction to become effective as soon as possible after filing the appropriate form with the Plan Administrator. Unless otherwise determined by the Plan Administrator for an offering, the Participant may not, however, effect more than one (1) such reduction per Purchase Interval. (ii) The Participant may, prior to the commencement of any new Purchase Interval within the offering period or prior to the start date of any new offering period, increase the rate of his or her payroll deduction by filing the appropriate form with the Plan Administrator. The new rate (which may not exceed the maximum payroll deduction percentage in effect for that offering period) shall become effective on the start date of the first Purchase Interval or first offering period (if earlier) following the filing of such form. (iii) The Participant may at any time reduce his or her rate of payroll deduction to 0%. Such reduction shall become effective as soon as administratively practicable following the filing of the appropriate form with the Plan Administrator. The Participant’s existing payroll deductions for the Purchase Interval in which such reduction occurs shall be applied to the purchase of Common Shares on the next scheduled Purchase Date. B. Payroll deductions shall begin on the first pay day administratively feasible following the Participant’s Entry Date and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that offering period. The amounts so collected shall be credited to the Participant’s book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account unless otherwise required by applicable law. The amounts collected from the Participant shall not be required to be held in any segregated account or trust fund and may be commingled with the general assets of the Company and used for general corporate purposes unless otherwise required by applicable law. C. Payroll deductions (together with any permitted contributions) shall automatically cease upon the termination of the Participant’s purchase right in accordance with the provisions of the Plan. D. The Plan Administrator may permit Employees in one or more offerings to contribute to the Plan by means other than payroll deductions. E. The Participant’s acquisition of Common Shares under the Plan on any Purchase Date shall neither limit nor require the Participant’s acquisition of Common Shares on any subsequent Purchase Date, whether within the same or a different offering period. VII. PURCHASE RIGHTS A. Grant of Purchase Rights. A Participant shall be granted a separate purchase right for each offering period in which he or she is enrolled. The purchase right shall be granted on the Participant’s Entry Date and shall provide the Participant with the right to purchase Common Shares, in a series of one or more successive installments during that offering period, upon the terms set forth below. Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, shares possessing five percent (5%) or more of the total combined voting power or value of all classes of shares of the Company or any Affiliate. B. Exercise of the Purchase Right. Each purchase right shall be automatically exercised on each successive Purchase Date within the offering period, and Common Shares shall accordingly be purchased on behalf of each Participant on each such Purchase Date. The purchase shall be effected by applying the Participant’s payroll deductions (or, to the extent applicable, his or her lump sum contribution) for the Purchase Interval ending on such Purchase Date to the purchase of whole Common Shares at the purchase price in effect for the Participant for that Purchase Date. C. Purchase Price. The purchase price per share at which Common Shares will be purchased on the Participant’s behalf on each Purchase Date within the particular offering period in which he or she is enrolled shall be determined by the Plan Administrator and shall not be less than eighty-five percent (85%) of the lower of (i) the Fair Market Value per Common Share on the Participant’s Entry Date or (ii) the Fair Market Value per Common Share on that Purchase Date. Unless such time as otherwise determined by the Plan Administrator the purchase price per share on any Purchase Date shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per Common Share on the Participant’s Entry Date or (ii) the Fair Market Value per Common Share on that Purchase Date. D. Number of Purchasable Shares. The number of Common Shares purchasable by a Participant on each Purchase Date during the particular offering period in which he or she is enrolled shall be the number of whole shares obtained by dividing the amount collected from the Participant through payroll deductions during the Purchase Interval ending with that Purchase Date (or, to the extent applicable, his or her lump sum contributions) by the purchase price in effect for the Participant for that Purchase Date. However, the maximum number of Common Shares purchasable per Participant on any one Purchase Date within such offering period shall not exceed 875 shares and the maximum number of Common Shares purchasable in total by all Participants on any one Purchase Date within such offering period shall not exceed 300,000 shares, with each such limitation subject to periodic adjustments in the event of certain changes in the Company’s capitalization. The Plan Administrator shall have the discretionary authority, exercisable prior to the start of any offering period under the Plan, to increase or decrease the limitations to be in effect for the number of shares purchasable per Participant and in total by all Participants on each Purchase Date within that offering period. E. Excess Payroll Deductions. Any payroll deductions (or contributions) not applied to the purchase of Common Shares on any Purchase Date because they are not sufficient to purchase a whole Common Share or by reason of the limitation on the maximum number of shares purchasable per Participant or in total by all Participants on the Purchase Date shall be promptly refunded. F. Suspension of Payroll Deductions. In the event that a Participant is, by reason of the accrual limitations in Article VIII, precluded from purchasing additional Common Shares on one or more Purchase Dates during the offering period in which he or she is enrolled, then no further payroll deductions (or contributions) shall be collected from such Participant with respect to those Purchase Dates. The suspension of such deductions (or contributions) shall not terminate the Participant’s purchase right for the offering period in which he or she is enrolled, and payroll deductions (or, to the extent applicable, contributions) shall automatically resume on behalf of such Participant once he or she is again able to purchase shares during that offering period in compliance with the accrual limitations of Article VIII. G. Withdrawal from Offering Period. The following provisions shall govern the Participant’s withdrawal from an offering period: (i) A Participant may withdraw from the offering period in which he or she is enrolled at any time prior to the next scheduled Purchase Date by filing the appropriate form with the Plan Administrator (or its designate), and no further payroll deductions (or contributions) shall be collected from the Participant with respect to that offering period. Any payroll deductions (or contributions) collected during the Purchase Interval in which such withdrawal occurs shall, at the Participant’s election, be immediately refunded or held for the purchase of shares on the next Purchase Date. If no such election is made at the time of such withdrawal, then the payroll deductions (or contributions) collected from the Participant during the Purchase Interval in which such withdrawal occurs shall be refunded as soon as possible. (ii) The Participant’s withdrawal from a particular offering period shall be irrevocable, and the Participant may not subsequently rejoin that offering period at a later date. In order to resume participation in any subsequent offering period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into that offering period. H. Termination of Purchase Right. The following provisions shall govern the termination of outstanding purchase rights: (i) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participant’s payroll deductions (or, to the extent applicable, his or her lump sum contributions) for the Purchase Interval in which the purchase right so terminates shall be immediately refunded. (ii) However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the right, exercisable up until the last business day of the Purchase Interval in which such leave commences, to (a) withdraw all the payroll deductions (or contributions) collected to date on his or her behalf for that Purchase Interval or (b) have such funds held for the purchase of shares on his or her behalf on the next scheduled Purchase Date. Unless otherwise determined by the Plan Administrator for one or more offerings, in no event, however, shall any further payroll deductions be collected on the Participant’s behalf during such leave. Upon the Participant’s return to active service (x) within three (3) months following the commencement of such leave or (y) prior to the expiration of any longer period for which such Participant has a right to reemployment with the Company (or an Affiliate) provided by statute or contract, his or her payroll deductions under the Plan shall automatically resume (and the Participant may resume contributions to the extent permitted) at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. Unless otherwise determined by the Plan Administrator for one or more offerings, an individual who returns to active employment following a leave of absence that exceeds in duration the applicable (x) or (y) time period will be treated as a new Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into the offering period. I. Change in Control. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Change in Control, by applying the payroll deductions of each Participant (or, to the extent applicable, his or her lump sum contributions) for the Purchase Interval in which such Change in Control occurs to the purchase of whole Common Shares at the purchase price per share in effect for that Purchase Interval. However, any applicable limitation on the number of Common Shares purchasable per Participant shall continue to apply to any such purchase, but not the limitation applicable to the maximum number of Common Shares purchasable in total by all Participants on any one Purchase Date. The Company shall use its best efforts to provide at least ten (10) days’ prior written notice of the occurrence of any Change in Control, and the Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Change in Control. J. Proration of Purchase Rights. Should the total number of Common Shares to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the payroll deductions of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Shares pro-rated to such individual, shall be refunded. K. ESPP Brokerage Account. The Plan Administrator shall have the discretionary authority to require that the shares purchased on behalf of each Participant be deposited directly into a brokerage account which the Company shall establish for the Participant at a Company-designated brokerage firm. The account will be known as the ESPP Brokerage Account, and any shares deposited in the Participant’s ESPP Broker Account must remain in that account until the earliest to occur of (i) the date those shares are to be sold or transferred by gift, (ii) the date on which the requisite holding period necessary to avoid a disqualifying disposition of those shares under the federal tax laws has been satisfied, or (iii) the date of the Participant’s death. L. Assignability. The purchase right shall be exercisable only by the Participant and shall not be assignable or transferable by the Participant. M. Shareholder Rights. A Participant shall have no shareholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participant’s behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares. N. Withholding Taxes. The Company’s obligation to deliver shares upon exercise of a purchase right under the Plan shall be subject to the satisfaction of all income, employment and payroll taxes, social insurance, social security, national insurance and other contributions, payment on account obligations or other payments required to be collected, withheld or accounted for in connection with the purchase right. The Company or appropriate Affiliate may, but shall not be obligated to, withhold from any compensation or other accounts payable to the Participant the amount necessary to satisfy such obligations. VIII. ACCRUAL LIMITATIONS A. No Participant shall be entitled to accrue rights to acquire Common Shares pursuant to any purchase right outstanding under this Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Shares accrued under any other purchase right granted under this Plan and (ii) similar rights accrued under other employee share purchase plans (within the meaning of Code Section 423) of the Company or any Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000.00) worth of shares of the Company or any Affiliate (determined on the basis of the Fair Market Value per share on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding. B. For purposes of applying such accrual limitations to the purchase rights granted under the Plan, the following provisions shall be in effect: (i) The right to acquire Common Shares under each outstanding purchase right shall accrue in a series of installments on each successive Purchase Date during the offering period in which such right remains outstanding. (ii) No right to acquire Common Shares under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Shares under one or more other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000.00) worth of Common Shares (determined on the basis of the Fair Market Value per share on the date or dates of grant) for each calendar year such rights were at any time outstanding. C. If by reason of such accrual limitations, any purchase right of a Participant does not accrue for a particular Purchase Interval, then the payroll deductions (or contributions) that the Participant made during that Purchase Interval with respect to such purchase right shall be promptly refunded. D. In the event there is any conflict between the provisions of this Article and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article shall be controlling. IX. EFFECTIVE DATE AND TERM OF THE PLAN A. The Plan was adopted by the Board on October 3, 2018 and became effective on the Effective Date. The Plan was amended in 2021 to increase the share reserve by 1,070,000 shares and the Company’s shareholders approved the amendment at the 2021 Annual Shareholders Meeting. The Plan was further amended by the Board on or about September 20, 2023, subject to shareholder approval at the 2023 Annual Shareholders Meeting, to increase the share reserve by 1,200,000 shares. B. Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) November 14, 2028, (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan or (iii) the date on which all purchase rights are exercised in connection with a Change in Control. No further purchase rights shall be granted or exercised, and no further payroll deductions (or contributions) shall be collected, under the Plan following such termination. X. AMENDMENT OF THE PLAN A. The Board may alter, amend, suspend or terminate the Plan at any time to become effective immediately following the close of any Purchase Interval. B. In no event may the Board effect any of the following amendments or revisions to the Plan without the approval of the Company’s shareholders: (i) increase the number of Common Shares issuable under the Plan, except for permissible adjustments in the event of certain changes in the Company’s capitalization or (ii) modify the class of corporations that may be designated for participation in the Plan. XI. GENERAL PROVISIONS A. All costs and expenses incurred in the administration of the Plan shall be paid by the Company; however, each Participant shall bear all costs and expenses incurred by such individual in the sale or other disposition of any shares purchased under the Plan. B. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Company or any Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such person’s employment at any time for any reason, with or without cause. C. The provisions of the Plan shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. APPENDIX The following definitions shall be in effect under the Plan: A. Affiliate shall mean any parent or subsidiary corporation of the Company (as determined in accordance with Code Section 424), whether now existing or subsequently established. B. Base Salary shall mean the regular base salary paid to a Participant by one or more Participating Companies during such individual’s period of participation in one or more offering periods under the Plan. Base Salary shall be calculated before deduction of (i) any income or employment tax withholdings or (ii) any contributions made by the Participant to any Code Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit program now or hereafter established by the Company or any Affiliate. However, Base Salary shall not include (i) any overtime payments, bonuses, commissions, profit-sharing distributions or other incentive-type payments received during the Participant’s period of participation or (ii) any contributions made by the Company or any Affiliate on the Participant’s behalf to any employee benefit or welfare plan now or hereafter established (other than Code Section 401(k) or Code Section 125 contributions deducted from his or her Base Salary). C. Board shall mean the Company’s Board of Directors. D. Cash Earnings shall mean (i) the regular base salary paid to a Participant by one or more Participating Companies during such individual’s period of participation in one or more offering periods under the Plan and (ii) any overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments received during such period. Cash Earnings shall be calculated before deduction of (A) any income or employment tax withholdings or (B) any contributions made by Participant to any Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit program now or hereafter established by the Company or any Corporate Affiliate. Cash Earnings shall not include any contributions made on the Participant’s behalf by the Company or any Corporate Affiliate to any employee benefit or welfare plan now or hereafter established (other than Code Section 401(k) or Code Section 125 contributions deducted from such Cash Earnings). The Plan Administrator may make modifications to the definition of Cash Earnings for one or more offerings as deemed appropriate. E. Change in Control shall mean a change in ownership or control of the Company effected through any of the following transactions: (i) a merger, consolidation or other reorganization approved by the Company’s shareholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor company are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction, (ii) a sale, transfer or other disposition of all or substantially all of the Company’s assets in liquidation or dissolution of the Company, (iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders, or (iv) a change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members ceases to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period (“Incumbent Directors”) or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Incumbent Directors who were still in office at the time the Board approved such election or nomination; provided that any individual who becomes a Board member subsequent to the beginning of such period and whose election or nomination was approved by two- thirds of the Board members then comprising the Incumbent Directors will be considered an Incumbent Director. F. Code shall mean the Internal Revenue Code of 1986, as amended. G. Common Share shall mean the Company’s common share. H. Company shall mean Alpha and Omega Semiconductor Limited, a company incorporated and existing under the laws of the Islands of Bermuda, and any corporate successor to all or substantially all of the assets or voting shares of Alpha and Omega Semiconductor Limited that shall by appropriate action adopt the Plan. I. Effective Date shall mean the date upon which the Plan is approved by the shareholders. J. Eligible Employee shall mean any Employee who is employed by a Participating Company on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings considered wages under Code Section 3401(a); provided, however, that the Plan Administrator may, prior to the start of an offering period, waive one or both of the twenty (20) hours and five (5) month service requirements. K. Employee shall mean an individual who is in the employ of the Company (or any Affiliate), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. L. Entry Date shall mean the date an Eligible Employee first commences participating in the offering period in effect under the Plan. The earliest Entry Date under the Plan shall be the Effective Time. M. Fair Market Value per Common Share on any relevant date shall be the closing selling price per Common Share at the close of regular hours trading (i.e., before after-hours trading begins) on date on question on the Stock Exchange serving as the primary market for the Common Share, as such price is reported by the National Association of Securities Dealers (if primarily traded on the Nasdaq Global Select Market) or as officially quoted in the composite tape of transactions on any other Stock Exchange on which the Common Share is then primarily traded. If there is no closing selling price for the Common Share on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. N. 1933 Act shall mean the Securities Act of 1933, as amended. O. Participant shall mean any Eligible Employee of a Participating Company who is actively participating in the Plan. P. Participating Company shall mean the Company and such Affiliate or Affiliates as may be authorized from time to time by the Board to extend the benefits of the Plan to their Eligible Employees. Q. Plan shall mean the Company’s 2018 Employee Share Purchase Plan, as set forth in this document. R. Plan Administrator shall mean the committee of two (2) or more Board members appointed by the Board to administer the Plan. S. Purchase Date shall mean the last business day of each Purchase Interval. T. Purchase Interval shall mean each purchase interval within a particular offering period (as determined by the Plan Administrator) at the end of which there shall be purchased Common Shares on behalf of each Participant. U. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock Exchange. V. Trading Day shall mean the day on which the primary Stock Exchange on which the Common Shares are traded is open for trading. Exhibit 10.32 ALPHA AND OMEGA SEMICONDUCTOR LIMITED MARKET PERFORMANCE RESTRICTED SHARE UNIT AGREEMENT RECITALS A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees and consultants and other independent advisors who provide services to the Company (or any Parent or Subsidiary). B. Participant is to render valuable services to the Company (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of Common Shares to Participant under the Plan. C. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix A. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Performance Restricted Share Units. The Company hereby awards to Participant, as of the Award Date, a market performance restricted share units award (the “Award”) under the Plan entitling Participant to receive a number of Common Shares based on the extent, if any, to which the applicable performance and service vesting criteria are satisfied. The initial number of Common Shares that shall be used to determine Participant’s rights pursuant to this Award is set forth in the Award Summary below (the “Target Performance Shares”). The number of Target Performance Shares shall be used solely to calculate the maximum number of Common Shares that may be issued to Participant under this Agreement. The applicable performance criteria and service vesting schedule for the Award, the dates on which the vested shares shall become issuable to Participant and the remaining terms and conditions governing the Award shall be as set forth in this Agreement. AWARD SUMMARY Participant: Award Date: July , 2018_ Designated Number of Target Performance Shares: <# of Target Shares Awarded> Common Shares 2. Vesting Requirements. The Award shall initially be unvested and shall vest only in accordance with the vesting provisions of this Paragraph 2 or the special vesting acceleration provisions of Paragraph 5. The number of Common Shares in which Participant may vest under the Award shall be determined pursuant to a two-step process as follows: (a) Determination of Number of Shares Based on Performance Requirement: First, there shall be calculated the maximum number of Common Shares in which Participant can vest under the Award (the “Performance-Qualified Shares”) based upon the level of attainment of the performance criteria specified in Schedule I of this Agreement (the “Performance Goals”) for the performance period commencing on January 1, 2019 and ending on December 31, 2021 (the “Performance Period”) in accordance with the methodology set forth in Schedule I (including any adjustment for individual performance pursuant to Paragraph 6 of Schedule I). The determination of the number of Performance-Qualified Shares shall be made following the end of the Performance Period as set forth in Schedule I. In no event may the number of actual Performance-Qualified Shares exceed one hundred percent (100%) of the Target Performance Shares. (b) Service Vesting: The Performance-Qualified Shares (as determined pursuant to Paragraph 2(a)) shall be subject to service-based vesting in four (4) successive annual installments upon Participant’s completion of each year of Service over the four (4)–year period measured from January 1, 2022. Should Participant cease Service prior to vesting in one or more Performance- Qualified Shares, the unvested portion of the Award shall be immediately canceled and Participant shall thereupon cease to have any right or entitlement to receive any Common Shares under the cancelled Award. 3. Limited Transferability. Prior to actual receipt of the Common Shares which vest hereunder, Participant may not transfer any interest in the Award or the underlying Common Shares. Any Common Shares which vest hereunder but which otherwise remain unissued at the time of Participant’s death may be transferred pursuant to the provisions of Participant’s will or the laws of inheritance. 4. Shareholder Rights and Dividend Equivalents. The holder of this Award shall not have any shareholder rights, including voting or dividend rights, with respect to the Common Shares subject to the Award until Participant becomes the record holder of those Common Shares upon their actual issuance following the Company’s collection of the applicable Withholding Taxes. 5. Change in Control. (a) In the event a Change in Control occurs prior to completion of the Performance Period and Participant remains in Service through the effective date of that Change in Control, then this Award shall be converted into a right to receive that portion of the Performance-Qualified Shares, if any, determined pursuant to the formula specified in Paragraph 7 of Schedule I, subject to the provisions of Paragraphs 5(c) and 5(d) below. (b) If the Change in Control occurs on or after completion of the Performance Period but prior to completion of the Service vesting requirements and Participant A-2 remains in continued Service through the effective date of that Change in Control, this Award shall entitle Participant to receive the number of unvested Performance-Qualified Shares determined in accordance with Paragraph 2(a) above based on the level of attainment of the Performance Goals, subject to the provisions of Paragraphs 5(c) and 5(d) below. (c) This Award, to the extent outstanding at the time of a Change in Control may be assumed by the successor entity or otherwise continued in full force and effect. In the event of such assumption or continuation of the Award, Participant shall continue to vest in the Performance-Qualified Shares subject to the Award in accordance with the service vesting requirements of Paragraph 2(b). (d) In the event the Award is assumed or otherwise continued in effect, the number of Performance-Qualified Shares subject to the Award shall be adjusted immediately after the consummation of the Change in Control so as to apply to the number and class of securities into which the Performance-Qualified Shares subject to the Award immediately prior to the Change in Control would have been converted in consummation of that Change in Control had those Common Shares actually been issued and outstanding at that time. To the extent the actual holders of the outstanding Common Shares receive cash consideration for their Common Shares in consummation of the Change in Control, the successor corporation (or parent entity) may, in connection with the assumption or continuation of the Award at that time, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per Common Share in the Change in Control transaction. (e) Upon Participant’s cessation of Service due to an Involuntary Termination occurring within eighteen (18) months after a Change in Control in which this Award is assumed or continued in effect, Participant shall immediately vest in the number of Performance-Qualified Shares (or other securities into which such Common Shares are converted in connection with the assumption of this Award) subject to the Award, and that number of Common Shares (or other securities) shall be issued to Participant on the date of Participant’s cessation of Service or soon as practicable thereafter but in no event more than fifteen (15) business days after such cessation. (f) If this Award at the time of the Change in Control is not assumed or otherwise continued in effect in accordance with Paragraph 5(c), then Participant shall immediately prior to the closing of the Change in Control vest in the unvested Performance- Qualified Shares subject to the Award. The Common Shares subject to such vested Award shall be converted into the right to receive for each such Share the same consideration per Common Share payable to the other stockholders of the Company in consummation of that Change in Control, and such consideration shall be distributed to Participant within three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Company’s collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 7. (g) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. A-3 6. Adjustment in Shares. In the event of any of the following transactions affecting the outstanding Common Shares as a class without the Company’s receipt of consideration: any share split, share dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Shares as a class without the Company’s receipt of consideration, or in the event of a substantial reduction to the value of the outstanding Common Shares as a result of a spin-off transaction or extraordinary distribution, then equitable and proportional adjustments shall be made by the Plan Administrator to the Target Performance Shares, the Performance-Qualified Shares and the total number and/or class of securities issuable pursuant to this Award in order to reflect such change. 7. Issuance of Shares. (a) Each Common Share in which Participant vests in accordance with the terms of this Agreement shall be issued, subject to the Company’s collection of all applicable Withholding Taxes, on the vesting date for such Common Share or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such vesting date occurs or (if later) the fifteenth day of the third calendar month following such vesting date (the “Issuance Date”). The Common Shares which vest pursuant to Paragraph 5 of this Agreement shall be issued in accordance with the provisions of such Paragraph. On each applicable issuance date for the Common Shares which vest in accordance with the provisions of this Agreement, the Company shall issue to or on behalf of Participant a certificate (which may be in electronic form) for the vested Common Shares to be issued on such date, subject to the Company’s collection of the applicable Withholding Taxes. (b) The Company shall collect the applicable Withholding Taxes through an automatic share withholding procedure pursuant to which the Company will withhold, on the applicable Issuance Date for the Common Shares that vest under the Award, a portion of those vested Common Shares with a Fair Market Value (measured as of the Issuance Date) equal to the amount of such Withholding Taxes (the “Share Withholding Method”); provided, however, that the amount of any Common Shares so withheld shall not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to supplemental taxable income. (c) Notwithstanding the foregoing provisions of this Paragraph 7, the employee portion of the federal, state and local employment taxes required to be withheld by the Company in connection with the vesting of the Common Shares (the “Employment Taxes”) shall in all events be collected from Participant no later than the last business day of the calendar year in which the Common Shares vest hereunder. Accordingly, to the extent the applicable issuance date for one or more vested Common Shares is to occur in a year subsequent to the calendar year in which those Common Shares vest, Participant shall, on or before the last business day of the calendar year in which the Common Shares vest, deliver to the Company a check payable to its order in the dollar amount equal to the Employment Taxes required to be withheld with respect to those Common Shares. The provisions of this Paragraph 7(d) shall be applicable only to the extent necessary to comply with the applicable tax withholding requirements of Code Section A-4 3121(v). (d) Except as otherwise provided in Paragraph 5 or Paragraph 7(b), the settlement of the Award shall be made solely in Common Shares. No fractional share shall be issued pursuant to this Award, and any fractional share resulting from any calculation made in accordance with the terms of this Agreement shall be rounded down to the next whole Common Share. 8. Clawback. This Award and any Common Shares issued thereunder shall be subject to recoupment and/or forfeiture under the Company’s Executive Compensation Clawback Policy. 9. Compliance with Laws and Regulations. The issuance of Common Shares pursuant to the Award shall be subject to compliance by the Company and Participant with all applicable requirements of law relating thereto and with all applicable regulations of the Stock Exchange on which the Common Share is listed for trading at the time of such issuance. 10. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices, and directed to the attention of Stock Plan Administrator. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the most current address then on record with the Company or shall be delivered electronically to Participant through the Company’s electronic mail system. All notices shall be deemed effective upon personal delivery, upon sending of an email or upon deposit in the mail, postage prepaid and properly addressed to the party to be notified. 11. Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Participants, and Participant’s assigns, the legal representatives, heirs and legatees of Participant’s estate. 12. Construction. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award. 13. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. 14. Employment at Will. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant’s Service at any time for any reason, with or without cause. A-5 15. Code Section 409A. It is the intention of the parties that the provisions of this Agreement comply with the requirements of the short-term deferral exception of Section 409A of the Code and Treasury Regulations Section 1.409A-1(b)(4). Accordingly, to the extent there is any ambiguity as to whether one or more provisions of this Agreement would otherwise contravene the requirements or limitations of Code Section 409A applicable to such short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Code Section 409A and the Treasury Regulations thereunder that apply to such exception. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above. ALPHA AND OMEGA SEMICONDUCTOR LIMITED By: Title: PARTICIPANT Name: Signature: A-6 APPENDIX A DEFINITIONS The following definitions shall be in effect under the Agreement: A. Agreement shall mean this Restricted Share Unit Issuance Agreement. B. Award shall mean the award of restricted share units made to Participant pursuant to the terms of this Agreement. C. Award Date shall mean the date the restricted share units are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Company’s Board of Directors. E. Change in Control shall mean a change in ownership or control of the Company effected through any of the following transactions: (i) a merger, consolidation or other reorganization approved by the Company’s shareholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction, or (ii) a shareholder-approved sale, transfer or other disposition of all or substantially all of the Company’s assets in liquidation or dissolution of the Company, or (iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders. F. Code shall mean the Internal Revenue Code of 1986, as amended. G. Common Share shall mean the Company’s common shares. H. Company shall mean Alpha and Omega Semiconductor Limited, a company incorporated and existing under the laws of the Islands of Bermuda, and any successor corporation to all or substantially all of the assets or voting stock of Alpha and Omega Semiconductor Limited which shall by appropriate action assume this option A-1 I. Employee shall mean an individual who is in the employ of the Company (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. J. Fair Market Value per Common Share on any relevant date shall be the closing price per Common Share on the date in question, as such price is reported by the Financial Industry Regulatory Authority (if traded at the time on the Nasdaq Global or Global Select Market) or as officially quoted in the composite tape of transactions on any other Stock Exchange on which the Common Share is then traded. If there is no closing selling price for the Common Share on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. K. Involuntary Termination shall mean Participant’s involuntary dismissal or discharge by the Company for reasons other than Misconduct. L. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by Participant, any unauthorized use or disclosure by Participant of confidential information or trade secrets of the Company (or any Parent or Subsidiary), or any other intentional misconduct by Participant adversely affecting the business or affairs of the Company (or any Parent or Subsidiary) in a material manner. M. 1934 Act shall mean the Securities Exchange Act of 1934, as amended from time to time. N. Participant shall mean the person to whom the Award is made pursuant to the Agreement. O. Parent shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, provided each corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. P. Plan shall mean the Company’s 2009 Share Option/Share Issuance Plan, as amended and restated from time to time. Q. Plan Administrator shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan. R. Service shall mean Participant’s performance of services for the Company (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor. For purposes of this Agreement, Participant shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) Participant no longer performs services in any of the foregoing capacities for the Company (or any Parent or Subsidiary) or (ii) the entity for which Participant performs such services ceases to remain a Parent or Subsidiary of the Company, even though Participant A-2 may subsequently continue to perform services for that entity. Except to the extent otherwise required by law or expressly authorized by the Plan Administrator or by the Company’s written policy on leaves of absence in effect at the time of such leave, no Service credit shall be given for vesting purposes for any period Participant is on a leave of absence. S. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock Exchange. T. Subsidiary shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. U. Withholding Taxes shall mean (i) the employee portion of the federal, state and local employment taxes required to be withheld by the Company in connection with the vesting of the Common Shares under the Award and (ii) the federal, state and local income taxes required to be withheld by the Company in connection with the issuance of the Common Shares which vest under the Award. SCHEDULE I A-3 PERFORMANCE PERIOD, PERFORMANCE GOALS, DETERMINATION OF PERFORMANCE- QUALIFIED SHARES 1. Performance Period: January 1, 2019 to December 31, 2021 2. Performance Goals: For the Award to obtain Performance-Qualified Shares, the following two Performance Goals must be achieved: (1) Company Stock Price, as set forth in Paragraph 4 below, must equal or exceed $26.25 during the Performance Period; and (2) Revenue for calendar year 2021 must equal or exceed $550 million (the “Threshold Revenue”). If the Threshold Revenue is not attained, none of the Award will vest (regardless of the level of Company Stock Price attained). 3. Performance-Qualified Shares: The number of Performance-Qualified Shares (if any) will be calculated in accordance with the following formula (subject to adjustment for individual performance pursuant to Paragraph 6 below): Performance-Qualified Shares = Target Performance Shares x Stock Price Hurdle Percentage x Revenue Multiplier 4. Stock Price Hurdle Percentage: The Stock Price Hurdle Percentage will be determined as follows based on the level of Company Stock Price attained during the Performance Period: Company Stock Price $ Stock Price Hurdle Percentage % ≥26.25 25 ≥30.00 50 ≥37.50 75 ≥45.00 100 • “Company Stock Price” means the average closing price of a Common Share as reported on the Stock Exchange (on which the Common Share is then traded) for any period of twenty (20) consecutive trading days at any time during the Performance Period. • The Company Stock Price targets in the preceding table in this Paragraph 4 shall be adjusted as appropriate to reflect any adjustment event specified under Paragraph 6 of the Agreement. The Plan Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, will make the determination of any such adjustments required in connection with any such event. • The Stock Price Hurdle Percentage will be determined based on the highest Company Stock Price attained during the Performance Period. A-4 • Stock Price Hurdle Percentage will be determined at the meeting of the Compensation Committee of the Board held in the first quarter of 2022. 5. Revenue Multiplier: The Revenue Multiplier will be determined as follows based on the level of Revenue for calendar year 2021: Revenue for Calendar Year 2021 Company Revenue Multiplier Less than Threshold Revenue 0.0 Threshold Revenue 0.5 Target Revenue 1.0 • “Revenue” means the Company’s revenue on a consolidated basis for calendar year 2021 as derived from its publicly reported financial statement for calendar year 2021, as adjusted, at the discretion of the Plan Administrator, to exclude any revenue derived from any acquisition or restructuring that occurred during the Performance Period. • Threshold Revenue means $550 million • Target Revenue means $600 million • Company Revenue Multiplier will be determined by the Plan Administrator following review and approval of the Company’s audited financial statements for the fiscal year ending June 30, 2022. • If the Company Revenue attained is between Threshold Revenue and Target Revenue, then the Company Revenue Multiplier will be determined based on straight-line interpolation between the corresponding Company Revenue Multiplier in the table above. 6. Individual Performance: The number of Performance-Qualified Shares may be adjusted down by the Plan Administrator based on its review and assessment of Participant’s individual performance during the Performance Period. 7. Change in Control: If a Change in Control occurs during the Performance Period, then the number of Performance-Qualified Shares will be determined as of the date such Change in Control is consummated in accordance with the following rules (without regard to adjustment for individual performance): a. If the Change in Control occurs on or prior to March 31, 2021, then: (i) The number of Performance-Qualified Shares will be determined solely on the basis of the Company Stock Price Hurdle Percentage (without regard to Revenue). A-5 (ii) In determining the Company Stock Price Hurdle Percentage under Paragraph 4 of this Schedule I, the Company Stock Price will mean the higher of (i) the Company Stock Price as defined in Paragraph 4 of this Schedule I and attained prior to the Change in Control or (ii) the Per Share Deal Price. “Per Share Deal Price” means the value of the total amount of consideration paid for a Common Share in connection with the Change in Control. The value of the consideration paid for a Common Share, including the value of any non-cash consideration will be determined in good faith by the Plan Administrator. (iii) The Target Performance Shares will then be multiplied by the Company Stock Price Hurdle Percentage as so determined and the Award with the resulting number of Performance-Qualified Shares shall be treated in accordance with Paragraph 5 of the Agreement. b. If the Change in Control occurs after March 31, 2021, then: (i) The number of Performance-Qualified Shares will be determined in accordance with the formula set forth in Paragraph 3 of this Schedule I. (ii) In determining the Company Stock Price Percentage under Paragraph 4 of this Schedule I, the Company Stock Price will mean the higher of (i) the Company Stock Price as defined in Paragraph 4 of this Schedule I and attained prior to the Change in Control or (ii) the Per Share Deal Price. (iii) Revenue for calendar year 2021 will be measured on a cumulative basis from January 1, 2021 through the last day of the fiscal quarter ending immediately prior to or concurrent with the consummation of the Change in Control (such Revenue, the “Adjusted Revenue”) and the Revenue Multiplier will be determined based on the following table instead of the table set forth in Paragraph 5 of this Schedule I: Adjusted Revenue $ Million Company Revenue Multiplier Less than Adjusted Threshold Revenue 0.0 Adjusted Threshold Revenue 0.5 Adjusted Target Revenue 1.0 (iv) The Target Performance Shares will then be multiplied by the Company Stock Price Percentage and Revenue Multiplier as so determined and the Award with the resulting number of Performance-Qualified Shares shall be treated in accordance with Paragraph 5 of the Agreement. • If the Adjusted Revenue is less than the Threshold Adjusted Revenue, then the Award will be forfeited regardless of the level of Company Stock Price. A-6 • Adjusted Threshold Revenue and Adjusted Target Revenue depend on the number of full fiscal quarters completed prior to or concurrently with the Change in Control as follows: Number of Full Fiscal Quarters Completed Adjusted Threshold Revenue $ Million Adjusted Target Revenue $ Million 1 125.00 136.36 2 260.00 283.64 3 400.00 436.36 4 550.00 600.00 A-7 Exhibit 19.1 STATEMENT OF COMPANY POLICY REGARDING INSIDER TRADING Amended and Restated on May 11, 2023 This policy applies to all officers, directors and employees of Alpha and Omega Semiconductor Limited and its subsidiaries (collectively, the “Company”) and supersedes all prior insider trading policies of the Company. I. THE NEED FOR A POLICY STATEMENT Under the federal securities laws, it is illegal to trade in transactions in the Company’s securities (collectively referred to in this Policy as “Company Securities”) while in the possession of material nonpublic information about the Company. It is also illegal to disclose or give material nonpublic information to others who may trade on the basis of that information or to advise others how to trade while in possession of material nonpublic information. Any person who possesses material nonpublic information about the Company is deemed to be an “insider.” The category of insiders is NOT limited to officers and directors of the Company. Insider trading violations are pursued vigorously by the Securities and Exchange Commission (the “SEC”) and the U.S. Department of Justice, and such violations are punished severely. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other controlling persons if they fail to take reasonable steps to prevent insider trading by company personnel. Both the SEC and The NASDAQ Stock Market are very effective at detecting and pursuing insider trading cases. The SEC has successfully prosecuted cases against employees trading through foreign accounts, trading by family members and friends, and trading involving only a small number of shares. The Company has adopted this Statement of Company Policy Regarding Insider Trading (the “Policy”) both to satisfy the Company’s obligation to prevent insider trading and to help Company personnel avoid the severe consequences associated with violations of the insider trading laws. The Policy is also intended to prevent even the appearance of improper conduct on the part of anyone employed by or associated with the Company (not just the officers or directors of the Company). For clarity, this Policy also applies to family members, other members of a person’s household and entities controlled by a person covered by this Policy, as described below. The Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who have access to material nonpublic information. Each individual is responsible for making sure that he, she or they complies with this Policy, and that any family member, household member or entity whose transactions are subject to this Policy, as discussed below, also comply with this Policy. II. THE PENALTIES The consequences of an insider trading violation can be extremely serious and severe: Traders and Tippers. Company personnel (or their tippees) who trade on inside information (or tip inside information to others) are subject to the following penalties, among other things: • A civil penalty of up to three times the profit gained or loss avoided; • A criminal fine of up to $5,000,000 (no matter how small the profit from the trade); and • A jail term of up to twenty years. A person who tips information to a person who then trades is subject to the same penalties as the tippee, even if the person did not trade and did not profit from the tippee’s trading. Control Persons. The Company and its supervisory personnel, if they fail to take appropriate steps to prevent illegal insider trading, can be subject to the following penalties: • A civil penalty of up to $1,000,000 or, if greater, three times the profit gained or loss avoided as a result of the employee’s violation; and • A criminal penalty of up to $25,000,000. Company-Imposed Sanctions. Compliance with the Policy is a condition of continued employment or service with the Company of each employee, officer and director. An employee’s failure to comply with the Company’s insider trading policy will subject the employee to Company- imposed sanctions, which may include dismissal for cause, whether or not the employee’s failure to comply results in a violation of law. The Company reserves the right to determine, in its own discretion and on the basis of the information available to it, whether this Policy has been violated. The Company may also determine that specific conduct violates this Policy whether or not the conduct also violates the law. It is not necessary for the Company to wait for the filing or conclusion of a civil or criminal action against the alleged violator before taking disciplinary action. Needless to say, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career. III. ADMINISTRATION OF THE POLICY The Company’s Chief Financial Officer, shall be responsible for administration of this Policy. In event of his absence, another employee designated by the Chief Financial Officer shall serve as the point of contact for purposes of this Policy. IV. STATEMENT OF POLICY This Policy applies to transactions in Company Securities, including the Company’s common stock, options to purchase common stock, or any other type of securities that the Company may issue, including (but not limited to) preferred stock, convertible debentures and warrants, as well as derivative securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to the Company’s Securities. Transactions subject to this Policy include purchases, sales and bona fide gifts of Company Securities. It is the policy of the Company that no director, officer or other employee of the Company (or any other person designated by this Policy or by the Chief Financial Officer as subject to this Policy) who is aware of material nonpublic information relating to the Company may, directly, or indirectly through family members or other persons or entities: 1. Engage in transactions in Company Securities, including, but not limited to buying and selling Company Securities, except as otherwise specified in this Policy, including under the headings “Transactions Under Company Plans” and “Rule 10b5-1 Plans;” 2. Recommend that others engage in transactions in any Company Securities; 3. Disclose material nonpublic information to persons within the Company whose jobs do not require them to have that information, or outside of the Company to other persons, including, but not limited to, family, friends, business associates, investors and expert consulting firms, unless any such disclosure is made in accordance with the Company’s policies regarding the protection or authorized external disclosure of information regarding the Company; or 4. Assist anyone engaged in the above activities. In addition, it is the policy of the Company that no director, officer or other employee of the Company (or any other person designated as subject to this Policy) who, in the course of working for the Company, learns of material nonpublic information about a company (1) with which the Company does business, such as the Company’s distributors, vendors, customers and suppliers, or (2) that is involved in a potential transaction or business relationship with Company, may engage in transactions in that company’s securities until the information becomes public or is no longer material. No Exception for Emergencies. There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are not excepted from the Policy. If the employee, officer or director has material nonpublic information, the prohibition still applies. The securities laws do not recognize such mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for adhering to high standards of conduct. Disclosure of Information to Others. The Company may be required under federal securities laws to avoid the selective disclosure of material nonpublic information. The Company has established procedures for releasing material information in a manner that is designed to achieve broad public dissemination of the information immediately upon its release. You may not disclose such information to anyone outside the Company, including family members and friends, other than in accordance with those procedures. You may not pass on to others any inside information about the Company or recommend the purchase or sale of Company Securities while in the possession of material nonpublic information (even if that information itself is not disclosed). Internet Disclosures. Due to the risk of inadvertent disclosure of material non-public information, you may not disclose or discuss any nonpublic information of the Company in any Internet chat room, message board or other Internet site (whether or not such site is specifically related to the Company). In addition, the Company strongly discourages you from participating in such forums in any capacity when the subject matter relates to the Company or to competitors of the Company or entities with which the Company has a significant business relationship. Material Information. Material information is any information that a reasonable investor would consider important in making a decision to buy, hold or sell securities. Any information that could be expected to affect the Company’s stock price, whether it is positive or negative, should be considered material. Some examples of information that ordinarily would be regarded as material are set forth below, but this list is not exhaustive – other information may be deemed material based upon the circumstances: • Financial information, including, but not limited to, revenue results, operating income or loss, or net income or loss; • Changes to previously announced earnings guidance, or the decision to suspend earnings guidance; • News about a significant contract or cancellation of an existing significant contract; • News about significant new products or services; • The gain or loss of a significant supplier, distributor or customer; • News about a potential design win for the Company’s product; • Development of new and significant technologies; • A Company restructuring; • A pending or proposed merger, acquisition, joint venture or tender offer; • A pending or proposed acquisition or disposition of a significant asset(s) or facility; • The implementation, change in or results of a Company stock buy-back; • A public or private offering of additional securities, borrowings, credit facilities or other financing transactions; • A change in the Board of Directors, senior management or any other major personnel changes; • Major marketing changes; • Significant legal exposure due to actual, pending or threatened litigation; • A significant cybersecurity incident, such as a data breach, or any other significant disruption in the Company’s information technology infrastructure; or • Significant related party transactions; • The imposition of an event-specific restriction on trading in Company Securities or the securities of another company or the extension or termination of such restriction; or • Impending bankruptcy or the existence of financial or liquidity problems. Twenty-Twenty Hindsight. Anyone scrutinizing your transactions will be doing so after the fact, with the benefit of 20/20 hindsight. As a practical matter, before engaging in any transaction, you should carefully consider how enforcement authorities and others might view the transaction in hindsight. When Information is “Public.” Information that has not been disclosed to the public is generally considered to be nonpublic information. If you are aware of material nonpublic information, you may not trade until the information has been disclosed broadly to the marketplace (such as by press release or an SEC filing) and the investing public has had time to absorb the information fully. Information generally would be considered widely disseminated if it has been disclosed through the newswire services, a broadcast on widely-available radio or television programs, publication in a widely-available newspaper, magazine or news website, or public disclosure documents filed with the SEC that are available on the SEC’s website. By contrast, information would likely not be considered widely disseminated if it is available only to the Company’s employees, or if it is only available to a select group of analysts, brokers and institutional investors. To avoid the appearance of impropriety, as a general rule, information should not be considered fully absorbed by the marketplace until after the second business day after the information is released. If, for example, the Company were to make an announcement on a Monday, you should not trade in Company Securities until Thursday. If an announcement was made on a Friday, Wednesday generally would be the first eligible trading day after the announcement. Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to the release of specific material nonpublic information. Transactions by Family Members and Others. This Policy applies to your family members who reside with you (including a spouse, a child, a child away at college, stepchildren, grandchildren, parents, stepparents, grandparents, siblings and in-laws), anyone else who lives in your household, and any family members who do not live in your household but whose transactions in Company Securities are directed by you or are subject to your influence or control, such as parents or children who consult with you before they trade in Company Securities (collectively referred to as “Family Members”). You are responsible for the transactions of these other persons and therefore should make them aware of the need to confer with you before they trade in Company Securities, and you should treat all such transactions for the purposes of this Policy and applicable securities laws as if the transactions were for your own account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by or related to you or your Family Members. Gifts and Donations. Bona fide gifts are not transactions subject to this Policy, unless the person making the gift has reason to believe that the recipient intends to sell the Company Securities while the officer, employee or director is aware of material nonpublic information, or the person making the gift is subject to the trading restrictions specified below under the heading “Additional Procedures” and the sales by the recipient of the Company Securities occur during a blackout period. Whether a gift is truly bonafide will depend on the circumstances surrounding each gift. The more unrelated the donee is to the donor, the more likely the gift would be considered “bonafide.” For example, gifts to charities, churches and service organizations would clearly not be a trading transaction. On the other hand, gifts to dependent children followed by a sale of the “gift” securities in close proximity to the time of the gift may imply some economic benefit to the donor and, therefore, make the gift non bonafide. In addition, please note that a gift transaction by executive officers and directors is required to be reported on a Form 4 within two (2) business days of such transaction, therefore it is important that executive officers and directors inform the Company immediately of any pending gift transactions. Transactions Under Company Plans. This Policy does not apply in the case of the following transactions, except as specifically noted: a. Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s plans, or to the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to satisfy tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option. b. Restricted Stock Awards. This Policy does not apply to the vesting of restricted stock, or the exercise of a tax withholding right pursuant to which you elect to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted stock. The Policy does apply, however, to any market sale of restricted stock. c. Employee Stock Purchase Plan. This Policy does not apply to purchases of Company Securities in the employee stock purchase plan resulting from your periodic contribution of money to the plan pursuant to the election you made at the time of your enrollment in the plan. This Policy also does not apply to purchases of Company Securities resulting from lump sum contributions to the plan, provided that you elected to participate by lump sum payment at the beginning of the applicable enrollment period. This Policy does apply, however, to your election to participate in the plan for any enrollment period, and to your sales of Company Securities purchased pursuant to the plan. d. Employee Stock Purchase Plan. This Policy does not apply to purchases of Company Securities in the employee stock purchase plan resulting from your periodic contribution of money to the plan pursuant to the election you made at the time, Additional Prohibited Transactions. The Company considers it improper and inappropriate for any director, officer or employee of the Company to engage in short-term or speculative transactions in Company Securities. It therefore is the Company’s policy that directors, officers and employees may NOT engage in any of the following transactions: e. Short Sales. Short sales of Company Securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in the Company or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance. For these reasons, short sales of Company Securities are prohibited by this Policy. In addition, the Company may be subject to Section 16(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which prohibits officers and directors from engaging in short sales. f. Publicly-Traded Options. A transaction in options is, in effect, a bet on the short-term movement of the Company’s stock, and therefore creates the appearance that the director, officer or employee is trading based on inside information. Transactions in options also may focus the director’s, officer’s or employee’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in puts, calls or other derivative securities involving the Company, on an exchange or in any other organized market, are prohibited by the Policy. (Option positions arising from certain types of hedging transactions are governed by the section below captioned “Hedging Transactions”). g. Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company Securities, directors, officers and employees are prohibited from holding Company Securities in a margin account or pledging Company Securities as collateral for a loan, unless prior written approval has been obtained pursuant to the Pre-Clearance Procedure set forth in the Addendum to this Policy. An exception to this prohibition is available where a person wishes to pledge Company Securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. h. Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow a director, officer or employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the director, officer or employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as the Company’s other shareholders. Therefore, the Company discourages you from engaging in such transactions. Any person wishing to enter into such an arrangement must first pre-clear the proposed transaction with the Company’s Chief Financial Officer or Chief Executive Officer. Any request for pre-clearance of a hedging or similar arrangement must be submitted to the Company’s Chief Financial Officer or Chief Executive Officer for approval at least one week prior to the proposed execution of documents evidencing the proposed transaction and must set forth a justification for the proposed transaction. Post-Termination Transactions. The Policy continues to apply to your transactions in Company Securities even after you have terminated service as an employee, officer or director of the Company. If you are in possession of material nonpublic information when your service terminates, you may not trade in Company Securities until that information has become public or is no longer material. Event Specific Black-Outs; Cancellation of Existing Orders. The Company may, on occasion, engage in a major transaction or experience a significant event which would constitute material nonpublic information. The Company reserves the right to enforce a trading window, and, in its sole discretion, may prohibit you from trading in Company stock during such transaction or event. As such, the Company may require you to cancel existing orders (including good until cancelled orders) and also may instruct your broker to cancel any such orders. Do not assume that the Company will notify you when it believes you are in possession of inside information. The law states that you may not trade while in the possession of inside information. Ultimately, however, the responsibility for adhering to this Policy and avoiding unlawful transactions rests with the individual employee, officer or director. Contract Personnel (Non-Employees). The Company sometimes utilizes the services of contract personnel who are not employees of the Company. As such, non-employee personnel may have access to material nonpublic information about the Company. All such contract personnel must comply with the Policy to the same extent as employees are required to comply with such policy. The Company will take appropriate action against any such personnel and the organizations for which they are employed if there is a failure to comply with the policies of the Company. Rule 10b5-1 Plans. Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain conditions specified in the Rule (a “Rule 10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1, transactions in Company Securities may occur without regard to certain insider trading restrictions. In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not aware of material nonpublic information. Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party. All persons entering into a Rule 10b5-1 plan must act in good faith with respect to that plan. A Rule 10b5-1 Plan must be approved by the Chief Financial Officer and meet the requirements of Rule 10b5-1 and these guidelines. Any Rule 10b5-1 Plan must be submitted for approval prior to the entry into the Rule 10b5-1 Plan. No further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan will be required. The following additional guidelines apply to all Rule 10b5-1 Plans: • For executive officers and directors, no transaction may take place under a Rule 10b5-1 Plan until the later of (a) 90 days after adoption or modification (as specified in Rule 10b5-1) of the Rule 10b5-1 Plan or (b) two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the fiscal quarter (the Company’s fourth fiscal quarter in the case of a Form 10-K) in which the Rule 10b5-1 Plan was adopted or modified (as specified in Rule 10b5-1). In any event, the cooling- off period is subject to a maximum of 120 days after adoption of the plan. • For persons other than executive officers and directors, no transaction may take place under a Rule 10b5-1 Plan until 30 days following the adoption or modification (as specified in Rule 10b5-1) of a Rule 10b5-1 Plan. • Subject to certain limited exceptions specified in Rule 10b5-1, you may not enter into more than one Rule 10b5-1 Plan at the same time; • Subject to certain limited exceptions specified in Rule 10b5-1, you are limited to only one Rule 10b5-1 designed to effect an open market purchase or sale of the total amount of securities subject to the Rule 10b-1 Plan as a single transaction in any 12-month period; • You must act in good faith with respect to a Rule 10b5-1 Plan. A Rule 10b5-1 Plan cannot be entered into as part of a plan or scheme to evade the prohibition of Rule 10b5. Therefore, although modifications to an existing Rule 10b5-1 Plan are not prohibited, a Rule 10b5-1 Plan should be adopted with the intention that it will not be amended or terminated prior to its expiration. • Executive officers and directors must include a representation to the Company at the time of adoption or modification of a Rule 10b5-1 Plan that (i) the person is not aware of material nonpublic information about the Company or Company Securities and (ii) the person is adopting the plan in good faith and not as part of plan or scheme to evade the prohibitions of Rule 10b-5. You should note that the termination of a Trading Plan can result in the loss of an affirmative defense for past or future transactions under a Trading Plan. You should consult with your own legal counsel before deciding to terminate a Trading Plan. If an individual terminates a Trading Plan after the first option exercise or stock sale, then the individual must cancel all outstanding Trading Plans and agree not to enter into another Trading Plan until a waiting period has expired, and the length of such waiting period will depend on the nature of the termination and you should consult with the Chief Financial Officer regarding such waiting period. Amendments to plans call into question as to whether the Trading Plan was initially executed in good faith and increase the risk of a loss of affirmative defense afforded under Rule 10b5-1. Accordingly, any amendment of Trading Plan will not be permitted unless it has been pre-cleared by the Chief Financial Officer. Furthermore, please note that an amendment of a Trading Plan may require the reinstatement of a new cooling-off period as required under SEC rules. Under certain circumstances, a Trading Plan must be terminated. This includes circumstances such as the announcement of a merger or the occurrence of an event that would cause the transaction either to violate the law or to have an adverse effect on the Company. The Chief Financial Officer of the Company is authorized to notify the broker in such circumstances, thereby insulating the Insider in the event of termination. The Company and the Company’s executive officers and directors must make certain disclosures in SEC filings concerning Rule 10b5-1 Plans. Executive officers and directors of the Company must undertake to provide any information requested by the Company regarding Rule 10b5- 1 Plans for the purpose of providing the required disclosures or any other disclosures that the Company deems to be appropriate under the circumstances. Each director, executive officer and other Section 16 insider understands that the approval or adoption of a pre-planned selling program in no way reduces or eliminates such person’s obligations under Section 16 of the Exchange Act, including such person’s disclosure and short-swing trading liabilities thereunder. If any questions arise, such person should consult with their own counsel in implementing a Rule 10b5-1 Plan. Company Assistance. Any person who has a question about this Policy or its application to any proposed transaction may obtain additional guidance from the Chief Financial Officer, Chief Executive Officer, or the Company’s legal counsel. In addition, if you have any doubt as to whether you are in possession of material nonpublic information or whether a trade may otherwise violate this Policy, you should contact the foregoing person(s) before trading any securities of the Company. Other Procedures. The Company may change these procedures or adopt such other procedures in the future as the Company considers appropriate or advisable in order to carry out the purposes of this Policy or to comply with the federal securities laws. Wherever this Policy refers to, or calls for action by or involving the Company’s Chief Financial Officer, such reference shall include such other person as the Chief Financial Officer may designate from time to time, if the Chief Financial Officer is unavailable or otherwise unable to act for any reason. No Third Party Rights. This Policy is not intended to create any rights in third parties with respect to any violation of its terms and is also not intended to create any legal liability for the Company or any employee, officer or director beyond those for which they are already responsible under applicable securities laws. Certifications. All employees, officers and directors must certify their understanding of, and intent to comply with, this Policy. A copy of the certification that all employees (other than executive officers) must sign is attached to this Policy. Please return an executed copy of the attached certification immediately. Directors, executive officers and certain key employees are also subject to additional restrictions on their transactions in Company Securities, which are described in a separate Addendum to this Policy. Directors, executive officers and such key employees subject to the Addendum should sign the certification attached to that Addendum instead of the one attached hereto. CERTIFICATION I hereby certify that: 1. I have read and understand the Statement of Company Policy Regarding Insider Trading dated May 11, 2023 (the “Policy”). I understand that the Chief Financial Officer and the legal counsel of Alpha and Omega Semiconductor Limited (the “Company”), are available to answer any questions I have regarding the Policy. 2. I agree that I will comply with the Policy for as long as I am subject to the Policy. 3. I agree that the Company may at any time and in its sole discretion issue a prohibition on trading in Company Securities and that the Company shall have full power and authority to cancel any outstanding orders, including “good until cancelled” orders, that I may place, but that I have the sole responsibility for compliance with the Policy. I further agree and represent that I will not trade in Company Securities while I am in possession of material nonpublic information regarding the Company or any of its subsidiaries. 4. This certification constitutes consent for the Company to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with this Policy. Signature: Print Name: Date: ADDENDUM TO STATEMENT OF COMPANY POLICY REGARDING INSIDER TRADING Amended and Restated on May 11, 2023 This Addendum applies to all directors, executive officers and certain key employees of Alpha and Omega Semiconductor Limited and its subsidiaries (collectively, the “Company”) In addition to adopting the Statement of Company Policy Regarding Insider Trading (the “Policy”), the Company has adopted procedures governing transactions in Company Securities by directors, executive officers and key employees. These procedures also apply to other employees who regularly become aware of earnings information or other material nonpublic information about the Company. This Addendum supplements the Policy and describes these procedures. I. PRE-CLEARANCE PROCEDURES To help prevent inadvertent violations of the federal securities laws and to avoid even the appearance of trading on inside information, directors, executive officers and key employees of the Company and any other persons designated by the Company’s Chief Financial Officer or Chief Executive Officer as being subject to the Company’s pre-clearance procedures, together with their family members, may not engage in any transaction involving Company Securities (including a stock plan transaction such as an option exercise, gift, loan or pledge or hedge, contribution to a trust, or any other transfer) without first obtaining pre-clearance of the transaction from the Chief Financial Officer or Chief Executive Officer. A request for pre-clearance should be submitted to the Chief Financial Officer or Chief Executive Officer at least five business days in advance of the proposed transaction, unless earlier notice is otherwise required by the Policy (e.g., one week for hedging transactions). The Chief Financial Officer or Chief Executive Officer is under no obligation to approve a trade submitted for pre-clearance, and may in their sole discretion, determine not to permit the trade. If a person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company Securities, and should not inform any other person of the restriction. Transactions not effected within the time limit would be subject to pre-clearance again. When a request for pre-clearance is made, the requestor should carefully consider whether he or she may be aware of any material nonpublic information about the Company, and should describe fully those circumstances to the Chief Financial Officer or Chief Executive Officer. In the event the requester is a director or an executive officer, the requestor should also indicate whether he or she has effected any non-exempt “opposite-way” transactions within the past six months, and should be prepared to report the proposed transaction on an appropriate Form 4 or Form 5. The requestor should also be prepared to comply with SEC Rule 144 and file a Form 144, if necessary, at the time of any sale. The person must also notify the Chief Financial Officer or Chief Executive Officer within two business days following completion of the transaction. II. BROKER INTERFACE PROCEDURES In the event the Company becomes subject to Section 16 of the Exchange Act, the accelerated reporting obligations for Section 16 reports require tight interface with brokers handling transactions for our executives and directors. We require that you provide a copy of this Addendum to your broker and such broker must agree that he or she: (a) Will not enter any orders for you (except for orders under pre-approved Rule 10b5-1 plans) without first: (1) verifying with the Company that your transaction was pre-cleared; and (2) complying with the brokerage firm’s compliance procedures (e.g., Rule 144). (b) Report any transactions immediately to the Chief Financial Officer or the Company’s legal counsel via: (1) telephone; and (2) in writing via e-mail describing the details of every transaction involving Company Securities, including gifts, transfers, pledges, and all 10b5-1 transactions. III. BLACKOUT PERIODS (a) Quarterly Blackout Periods. The Company’s announcement of its quarterly financial results almost always has the potential to have a material effect on the market for Company Securities. Therefore, to avoid even the appearance of trading while in possession of material nonpublic information, persons who are or may be expected to be aware of the Company’s quarterly financial results generally will not be pre-cleared to trade in Company Securities during the period beginning two weeks prior to the end of each fiscal quarter and ending after the second full business day following the earlier of the Company’s (i) issuance of its quarterly earnings release, or (ii) if applicable, filing of its periodic report for the corresponding quarter (or year in the case of a Form 20-F or Form 10-K, as applicable). Persons subject to these quarterly blackout periods include all directors, executive officers, key employees, all employees in the accounting or finance department who have access to the Company’s financial information, and all other persons who are informed by the Chief Financial Officer or Chief Executive Officer that they are subject to the quarterly blackout periods. The Company may on occasion issue interim earnings guidance or other potentially material information by means of a press release, a Form 6-K, a Form 8-K filed with the SEC or by other means designed to achieve widespread dissemination of the information. You should anticipate that trades are unlikely to be pre-cleared while the Company is in the process of assembling the information to be released and until the information has been released and fully absorbed by the market. (b) Event-Specific Blackout Periods. From time to time, an event may occur that is material to the Company and is known by only a few directors or employees. So long as the event remains material and nonpublic, directors, executive officers, key employees, and such other persons as are designated by the Chief Financial Officer or Chief Executive Officer may not trade in Company Securities. In addition, the Company’s financial results may be sufficiently material in a particular fiscal quarter that, in the judgment of the Chief Financial Officer or Chief Executive Officer, designated persons should refrain from engaging in transactions in Company Securities even sooner than the quarterly blackout period described in the previous section. The existence of an event-specific blackout will not be announced, other than to those who are aware of the event giving rise to the blackout. If, however, a person whose trades are subject to pre- clearance requests permission to trade in Company Securities during an event-specific blackout, the Chief Financial Officer or Chief Executive Officer will inform the requester of the existence of a blackout period, without disclosing the reason for the blackout. Any person made aware of the existence of an event-specific blackout should not disclose the existence of the blackout to any other person. The failure of the Chief Financial Officer or Chief Executive Officer to designate a person as being subject to an event-specific blackout will not relieve that person of the obligation not to trade while aware of material nonpublic information. (c) Exceptions. The quarterly trading restrictions and event-specific trading restrictions do not apply to those transactions to which this Policy does not apply, as described in the Policy under the heading “Transactions Under Company Plans.” Furthermore, the following exceptions apply: Rule 10b5-1 Plans Exception. The requirement for pre-clearance, the quarterly trading restrictions and event-specific trading restrictions do not apply to transactions conducted pursuant to approved Rule 10b5-1 plans, described under the heading “Rule 10b5-1 Plans” in the Policy. Hardship Exception. A person who is subject to a quarterly earnings blackout period and who has an unexpected and urgent need to sell Company’s securities in order to generate cash may, in appropriate and very limited and rare circumstances, be permitted to sell such securities even during the blackout period. A hardship exception may be granted only by the Audit Committee of the Board of Directors of the Company, at its sole discretion, and such exception must be requested at least five business days in advance of the proposed trade. A hardship exception may be granted only if the Audit Committee concludes that the Company’s earnings information for the applicable quarter does not constitute material nonpublic information or if the Company does not have sufficient insight as to the Company’s earnings information as of that time. It is highly unlikely that a hardship exception will be granted. IV. POST-TERMINATION TRANSACTIONS If you are aware of material nonpublic information when you terminate service as a director, officer or employee of the Company, you may not trade in Company Securities until that information has become public or is no longer material. In all other respects, the procedures set forth in this Addendum will cease to apply to your transactions in Company Securities upon the expiration of any “blackout period” that is applicable to your transactions at the time of your termination of service. V. GENERAL a. Company Assistance. Any person who has a question about the Policy or this Addendum or their application to any proposed transaction may obtain additional guidance from the Chief Financial Officer or the Company’s legal counsel. In addition, if you have any doubt as to whether you are in possession of material nonpublic information or whether a trade may otherwise violate the Policy or this Addendum, you should contact the Company’s Chief Financial Officer or legal counsel before trading any securities of the Company. Ultimately, however, the responsibility for adhering to the Policy and this Addendum and avoiding unlawful transactions rests with the individual director, officer and employee. b. Other Procedures. The Company may change these procedures or adopt such other procedures in the future as the Company considers appropriate in order to carry out the purposes of the Policy and this Addendum or to comply with the federal securities laws. Wherever this Policy refers to, or calls for action by or involving the Company’s Chief Financial Officer, such reference shall include such other person as the Chief Financial Officer may designate from time to time, if the Chief Financial Officer is unavailable or otherwise unable to act for any reason. c. No Third Party Rights. Neither the Policy nor this Addendum is intended to create any rights in third parties with respect to any violation of its terms and neither is intended to create any legal liability for the Company or any employee, officer or director beyond those for which they are already responsible under applicable securities laws. d. Certifications. All directors, officers and employees subject to the procedures set forth in this Addendum must certify their understanding of, and intent to comply with, the Policy and this Addendum. Please return an executed copy of the attached certification immediately. CERTIFICATION (For Executive Officers, Directors and Certain Key Employees) I hereby certify that: 1. I have read and understand the Statement of Company Policy Regarding Insider Trading (the “Insider Trading Policy”) dated May 11, 2023 of Alpha and Omega Semiconductor Limited (the “Company”) and the Addendum to such policy dated May 11, 2023 (collectively, the “Insider Trading Policy”). I understand that the Chief Financial Officer and the legal counsel of the Company are available to answer any questions I have regarding the Insider Trading Policy. 2. I agree that I will comply with the Insider Trading Policy for as long as I am subject to such policy. 3. I understand that all of my trades must be preapproved by the Company’s Chief Financial Officer, Chief Executive Officer, or such other person as the Company may designate from time to time. 4. I agree that the Company may at any time and in its sole discretion issue a prohibition on trading in Company Securities, and that the Company shall have full power and authority to cancel any outstanding orders, including good until cancelled orders, that I may place, but I understand that I have the sole responsibility for compliance with the Insider Trading Policy. I further agree and represent that I will not trade in Company Securities while I am in possession of material nonpublic information regarding the Company or any of its subsidiaries. 5. This certification constitutes consent for the Company to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with the Insider Trading Policy. Signature: Print Name: Date: Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANT Subsidiary Name Incorporated Location Percentage Owned Alpha and Omega Semiconductor Incorporated California, United States 100% owned by AOS Alpha and Omega Semiconductor (Cayman) Ltd. Cayman 100% owned by AOS Alpha and Omega Semiconductor (Shanghai) Co., Ltd. China 100% owned by AOS Alpha & Omega Semiconductor (Shenzhen) Limited China 100% owned by AOS Alpha & Omega Semiconductor (Hong Kong) Limited Hong Kong 100% owned by AOS Alpha & Omega Semiconductor (Macau), Ltd. Macau 100% owned by AOS Alpha & Omega Semiconductor (Taiwan) Limited Taiwan 100% owned by AOS Alpha & Omega Semiconductor (Germany) GmbH Germany 100% owned by AOS Agape Package Manufacturing Ltd. Cayman 100% owned by AOS Agape Limited Hong Kong 100% owned by AOS Jireh Semiconductor Incorporated Oregon, United States 100% owned by AOS Chongqing Alpha and Omega Semiconductor Limited Chongqing, China 42.8% owned by AOS Alpha and Omega Semiconductor International LP Canada 100% owned by AOS Alpha and Omega Semiconductor (Delaware) LLC Delaware, United States 100% owned by AOS Alpha and Omega Electronic Technology (Shanghai) Co., Ltd. China 100% owned by AOS Alpha and Omega Semiconductor (India) Limited India 100% owned by AOS Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-279211, 333-269638, 333-261036, 333-228297, 333-207987, 333-190935, 333-186480, 333-180126, 333-172173, and 333-166403) of Alpha and Omega Semiconductor Limited of our report dated August 23, 2024, relating to the consolidated financial statements, the financial statement schedule, and the effectiveness of internal control over financial reporting of Alpha and Omega Semiconductor Limited, appearing in this Annual Report on Form 10-K of Alpha and Omega Semiconductor Limited for the year ended June 30, 2024. /s/ BAKER TILLY US, LLP San Jose, California August 23, 2024 Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Alpha and Omega Semiconductor Limited Sunnyvale, California We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-279211, 333-269638, 333-261036, 333-228297, 333- 207987, 333-190935, 333-186480, 333-180126, 333-172173, and 333-166403) of Alpha and Omega Semiconductor Limited (the Company) of our report dated September 19, 2022, relating to the consolidated financial statements and schedule, which appears in this Form 10-K. /s/ BDO USA, P.C. San Jose, California August 23, 2024 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Stephen C. Chang, certify that: 1. I have reviewed this report on Form 10-K of Alpha and Omega Semiconductor Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 23, 2024 /s/ Stephen C. Chang Stephen C. Chang Chief Executive Officer Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Yifan Liang, certify that: 1. I have reviewed this report on Form 10-K of Alpha and Omega Semiconductor Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 23, 2024 /s/ YIFAN LIANG Yifan Liang Chief Financial Officer and Corporate Secretary Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Stephen C. Chang, the chief executive officer of Alpha and Omega Semiconductor Limited (the “Company”), certify for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, a. the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2024 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and b. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 23, 2024 /s/ Stephen C. Chang Stephen C. Chang Chief Executive Officer Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Yifan Liang, the chief financial officer of Alpha and Omega Semiconductor Limited (the “Company”), certify for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, a. the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2024 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and b. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 23, 2024 /s/ YIFAN LIANG Yifan Liang Chief Financial Officer and Corporate Secretary Exhibit 97 ALPHA AND OMEGA SEMICONDUCTOR LIMITED COMPENSATION RECOUPMENT POLICY I. Purpose. The Board of Directors (“Board”) of Alpha and Omega Semiconductor Limited (the “Company”) has adopted this Compensation Recoupment Policy (this “Policy”) in order to implement a mandatory clawback policy in the event of a Restatement in compliance with Section 10D of the Securities Exchange Act of 1934. Any capitalized terms used, but not defined, in this Policy have the meanings set forth in Section VIII. II. Administration. This Policy shall be administered by the Compensation Committee (the “Committee”), which shall make all determinations with respect to this Policy in its sole discretion; provided that this Policy shall be interpreted in a manner consistent with the requirements of the Applicable Rules. Notwithstanding the foregoing, subject to the Applicable Rules, the Board may assume any or all powers and authority of the Committee with respect to this Policy, in which case references to the Committee shall be deemed to include the Board, as applicable. III. Recovery on a Restatement. In the event that the Company is required to prepare a Restatement, the Company shall reasonably promptly recover from each Executive Officer the amount of any erroneously awarded Incentive-Based Compensation that is received by such Executive Officer during the Recovery Period. The amount of erroneously received Incentive-Based Compensation will be the excess of the Incentive- Based Compensation received by the Executive Officer (whether in cash or shares) based on the erroneous data in the original financial statements over the Incentive-Based Compensation (whether in cash or in shares) that would have been received by the Executive Officer had such Incentive-Based Compensation been based on the restated results, without respect to any tax liabilities incurred or paid by the Executive Officer. For purposes of this Policy, Incentive-Based Compensation will be deemed received in the Company’s fiscal period during which the Financial Reporting Measure applicable to the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period. Recovery of any erroneously awarded compensation under this Policy is not dependent on fraud or misconduct by the Executive Officer in connection with a Restatement. Without limiting the foregoing, for Incentive-Based Compensation based on the Company’s stock price or total shareholder return, where the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in the Restatement, (i) the amount of erroneously awarded compensation shall be based on the Company’s reasonable estimate of the effect of the Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was received and (ii) the Company shall maintain documentation of the determination of that reasonable estimate and provide such estimate to the Regulators as required by the Applicable Rules. In addition to the foregoing, in the event that an Executive Officer fails to repay or reimburse erroneously awarded compensation that is subject to recovery, the Committee may require the Executive Officer to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering erroneously awarded compensation under this Policy from the Executive Officer. IV. Covered Persons and Incentive-Based Compensation. This Policy covers all persons who are Executive Officers at any time during the Recovery Period for which Incentive-Based Compensation is received. Incentive-Based Compensation shall not be recovered under this Policy to the extent received by any person before the date the person served as an Executive Officer. Subsequent changes in an Executive Officer’s employment status, including retirement or termination of employment, do not affect the Company’s right to recover Incentive-Based Compensation pursuant to this Policy. This Policy shall apply to Incentive-Based Compensation that is received by any Executive Officer on or after the Effective Date, including, for the avoidance of doubt, Incentive-Based Compensation that may have been approved, awarded, or granted to an Executive Officer on or before the Effective Date if such Incentive-Based Compensation is received after the Effective Date. V. Exceptions to Policy. No recovery of Incentive-Based Compensation shall be required if any of the following conditions are met and the Committee determines that, on such basis, recovery would be impracticable: (a) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered; provided that prior to making a determination that it would be impracticable to recover any Incentive-Based Compensation based on the expense of enforcement, the Company shall (i) have made a reasonable attempt to recover the Incentive-Based Compensation, (ii) have documented such reasonable attempts to recover, and (iii) provide the documentation to the Regulators as required by the Applicable Rules; (b) recovery would violate home country law where that law was adopted prior to November 28, 2022; or (c) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and U.S. Treasury regulations promulgated thereunder. VI. Methods of Recovery. In the event of a Clawback Event, subject to applicable law, the Committee may take any such actions as it deems necessary or appropriate, including, without limitation: (a) the reduction or cancellation of any Incentive-Based Compensation in the form of vested or unvested equity or equity-based awards that have not been distributed or otherwise settled prior to the date of determination; (b) the recovery of any Incentive-Based Compensation that was previously paid to the Executive Officer; (c) the recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any Incentive-Based Compensation in the form of equity or equity-based awards; (d) the offset, withholding, or elimination of any amount that could be paid or awarded to the Executive Officer after the date of determination; (e) the recoupment of any amount in respect of Incentive-Based Compensation contributed to a plan that takes into account Incentive- Based Compensation (excluding certain tax-qualified plans, but including long-term disability, life insurance, supplemental executive retirement plans and deferred compensation plans, in each case to the extent permitted by applicable law, including Section 409A of the Code) and any earnings accrued to date on any such amount; and (f) any other remedial and recovery action permitted by law, as determined by the Committee. In addition, the Committee may authorize legal action for breach of fiduciary duty or other violation of law and take such other actions to enforce the Executive Officer’s obligations to the Company as the Committee deems appropriate. VII. Miscellaneous. (a) Effective Date. This Policy shall be effective as of October 2, 2023 (“Effective Date”). (b) Public Disclosure. The Company shall make all required disclosures and filings with the Regulators with respect to this Policy in accordance with the requirements of the Applicable Rules, and any other requirements applicable to the Company, including any disclosures required in connection with SEC filings. (c) No Indemnification. The Company shall not indemnify any current or former Executive Officer against the loss of erroneously awarded compensation and shall not pay or reimburse any Executive Officer for premiums incurred or paid for any insurance policy to fund such Executive Officer’s potential recovery obligations. (d) No Substitution of Rights; Non-Exhaustive Rights. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to (i) any equity or equity-based incentive compensation agreement or plan or any successor plan thereto, or any other incentive plan of the Company or any of its subsidiaries or affiliates or (ii) the terms of any similar policy or provision in any employment agreement, compensation agreement or arrangement, or similar agreement and any other legal remedies available to the Company. In addition to recovery of compensation as provided for in this Policy, the Company may take any and all other actions as it deems necessary, appropriate and in the Company’s best interest in connection with a Clawback Event, including termination of an Executive Officer’s employment and initiating legal action against an Executive Officer, and nothing in this Policy limits the Company’s rights to take any such or other appropriate actions. (e) Governing Law. This Policy and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Applicable Rules, shall be governed by and construed in accordance with the laws of the State of California without regard to choice of law principles. If any provision of this Policy shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Policy, but this Policy shall be construed and enforced as if the illegal or invalid provision had never been included in this Policy. (f) Amendment; Termination; Sunset. The Board may amend this Policy at any time for any reason, subject to any limitations under the Applicable Rules. Unless otherwise required by applicable law, this Policy shall no longer be effective from and after the date that the Company no longer has a class of securities publicly listed on a U.S. national securities exchange or is otherwise not subject to the Applicable Rules. VIII. Defined Terms. (a) “Applicable Rules” means Section 10D of the Exchange Act and Rule 10D-1 promulgated thereunder, Listing Rule 5608 of the Listing Rules of Nasdaq, and any other national stock exchange rules that the Company is or may become subject to. (b) “Clawback Event” means a required recoupment of Incentive-Based Compensation in the event of a Restatement under the Applicable Rules. (c) “Exchange Act” means the Securities Exchange Act of 1934, as amended. (d) “Executive Officer” means each individual who is currently or was previously designated as an “officer” of the Company as defined in Rule 16a-1(f) under the Exchange Act, including, at a minimum, the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice president of the Company in charge of a principal business unit, division or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar significant policy-making functions for the Company or any subsidiaries. (e) “Financial Reporting Measures” means (i) measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures, (ii) the Company’s stock price, and (iii) total shareholder return in respect of the Company. A “Financial Reporting Measure” need not be presented within the financial statements or included in a filing with the SEC. (f) “Incentive-Based Compensation” means any compensation that is granted, earned, or vested, based wholly or in part upon the attainment of a Financial Reporting Measure. Incentive-Based Compensation does not include, among other forms of compensation, equity awards that vest exclusively upon completion of a specified employment period, without any performance condition, and bonus awards that are discretionary or based on subjective goals or goals unrelated to Financial Reporting Measures. (g) “Nasdaq” means the Nasdaq Stock Market. (h) “Recovery Period” means the three completed fiscal years immediately preceding the date on which the Company is required to prepare a Restatement, which date is the earlier of (i) the date the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement or (ii) a date that a court, regulator, or other legally authorized body directs the Company to prepare a Restatement. (i) “Regulators” means, as applicable, the SEC and Nasdaq. (j) “Restatement” means an accounting restatement of the Company’s financial statements due to a material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements (i) that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. (k) “SEC” means the U.S. Securities and Exchange Commission. Exhibit 99.1 Chongqing Alpha and Omega Semiconductor Limited Index to Financial Statements Pages Report of Independent Auditor F-2 Balance Sheets as of December 31, 2023 and 2022 F-4 Statements of Operations for the Years ended December 31, 2023 and 2022 F-5 Statements of Equity for the Years ended December 31, 2023 and 2022 F-6 Statements of Cash Flows for the years ended December 31, 2023 and 2022 F-7 Notes to Financial Statements F-8 F - 1 REPORT OF INDEPENDENT AUDITOR The Board of Directors of Chongqing Alpha and Omega Semiconductor Limited Opinion We have audited the financial statements of Chongqing Alpha and Omega Semiconductor Limited ("the Company") which comprise the balance sheets as of December 31, 2023 and 2022, and the related statements of operations, equity and cash flows for the years ended December 31, 2023 and 2022, and the related notes to the financial statements (collectively referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022 in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The financial statements of the Company have been prepared with the purpose of providing financial information to Alpha and Omega Semiconductor Limited ("AOS") to assist AOS in satisfying its reporting responsibilities under Regulation S-X, Rule 3-09. Convenience Translation Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 1(d) to the financial statements. Such United States dollar amounts are presented solely for the convenience of readers outside the People's Republic of China. Responsibilities of management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are issued. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. F - 2 In performing an audit in accordance with GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. /s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP Shanghai, the People's Republic of China August 20, 2024 F - 3 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED BALANCE SHEETS (In thousands) December 31, 2022 2023 Notes RMB RMB US$ (Note 1(d)) ASSETS Current assets: Cash and cash equivalents 3 302,217 168,471 23,729 Accounts receivable, net 2,962 20,950 2,951 Amounts due from related parties, net 14 241,954 153,990 21,689 Inventories 4 384,916 295,779 41,660 Prepayments and other current assets 5 22,792 11,625 1,637 Total current assets 954,841 650,815 91,666 Property and equipment, net 6 1,753,230 2,023,919 285,063 Land use right, net 53,122 51,912 7,312 Intangible assets, net 7 340,565 281,107 39,593 Operating lease right-of-use assets, net 10 76,993 71,757 10,107 Restricted cash - long-term 14,000 14,000 1,972 Other long-term assets 64,359 22,699 3,197 Total non-current assets 2,302,269 2,465,394 347,244 TOTAL ASSETS 3,257,110 3,116,209 438,910 LIABILITIES AND EQUITY Current liabilities: Accounts payable 96,698 107,976 15,208 Amounts due to related parties 14 96,376 65,612 9,242 Accrued liabilities 8 219,678 247,044 34,796 Short-term debts 9 451,335 183,798 25,887 Finance lease liabilities 28,000 - - Operating lease liabilities 10 11,625 8,288 1,167 Total current liabilities 903,712 612,718 86,300 Long-term debts 9 184,623 451,440 63,584 Operating lease liabilities - long-term 10 66,600 64,549 9,092 Total non-current liabilities 251,223 515,989 72,676 TOTAL LIABILITIES 1,154,935 1,128,707 158,976 Commitments and contingencies (Note 15) Equity: Paid-in capital 11 2,817,675 2,817,675 396,861 Additional paid-in capital 11 308,567 308,567 43,461 Accumulated deficit (1,024,067) (1,138,740) (160,388) TOTAL EQUITY 2,102,175 1,987,502 279,934 TOTAL LIABILITIES AND EQUITY 3,257,110 3,116,209 438,910 The accompanying notes are an integral part of the financial statements. F - 4 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED STATEMENTS OF OPERATIONS (In thousands) For the years ended Notes 2022 2023 RMB RMB US$ (Note 1(d)) Revenue (include RMB1,239,221 and RMB708,070 from related parties for the years ended December 31, 2022 and 2023, respectively) 1,364,784 883,756 124,474 Cost of goods sold 1,311,570 912,451 128,516 Gross profit (loss) 53,214 (28,695) (4,042) Operating expenses: Research and development 22,710 29,472 4,151 Selling, general and administrative 34,524 34,444 4,851 Other operating income, net (20,555) (13) (2) Total operating expenses 36,679 63,903 9,000 Operating income (loss) 16,535 (92,598) (13,042) Interest expense, net (32,659) (25,143) (3,541) Other income, net 14,779 3,068 432 Net loss before income taxes (1,345) (114,673) (16,151) Income tax expense 13 - - - Net loss (1,345) (114,673) (16,151) The accompanying notes are an integral part of the financial statements. F - 5 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED STATEMENTS OF EQUITY (In thousands) Paid-in capital Additional paid-in capital Accumulated deficit Total RMB RMB RMB RMB Balance at December 31, 2021 2,525,474 12,466 (1,022,722) 1,515,218 Issuance of ordinary shares to new investors 212,899 296,101 - 509,000 Issuance of restricted shares to employees 79,302 - - 79,302 Net loss - - (1,345) (1,345) Balance at December 31, 2022 2,817,675 308,567 (1,024,067) 2,102,175 Net loss - - (114,673) (114,673) Balance at December 31, 2023 2,817,675 308,567 (1,138,740) 1,987,502 The accompanying notes are an integral part of the financial statements. F - 6 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED STATEMENTS OF CASH FLOWS (In thousands) For the Years ended December 31 2022 2023 RMB RMB US$ (Note 1(d)) Cash flows from operating activities Net loss (1,345) (114,673) (16,151) Adjustments to reconcile net loss to net cash provided by operating activities: Allowance for credit losses 245 (68) (10) Inventory write-down 62 5,434 765 Impairment of property and equipment 4,933 7,975 1,123 Noncash lease expenses 8,615 8,090 1,139 Depreciation and amortization 213,416 209,248 29,472 Loss on disposal of property and equipment 64 299 42 Foreign currency exchange loss 3,280 676 95 Changes in assets and liabilities: Accounts receivable (2,004) (18,006) (2,536) Amounts due from related parties, net 54,390 88,050 12,402 Inventories (58,183) 83,703 11,789 Prepayments and other current assets 12,152 6,167 869 Accounts payable (95,080) 11,278 1,588 Amounts due to related parties (303,120) (30,927) (4,356) Accrued liabilities 32,552 (41,286) (5,813) Operating lease liabilities (7,000) (8,241) (1,161) Net cash (used in) provided by operating activities (137,023) 207,719 29,257 Cash flows from investing activities: Purchase of property and equipment (205,119) (318,048) (44,796) Disposal of property and equipment 126 119 17 Net cash used in investing activities (204,993) (317,929) (44,779) Cash flows from financing activities: Proceeds from bank borrowings 400,000 450,000 63,380 Repayments of bank borrowings (399,213) (452,751) (63,769) Principal payments on financing leases (108,000) (23,000) (3,239) Proceeds from issuance of restricted shares to employees 79,302 - - Proceeds from issuance of ordinary shares to new investors 509,000 - - Net cash (used in) provided by financing activities 481,089 (25,751) (3,628) Effect of exchange rate changes on cash, cash equivalents and restricted cash 30,888 2,215 313 Net increase in cash, cash equivalents and restricted cash 169,961 (133,746) (18,837) Cash, cash equivalents and restricted cash at the beginning of the year 146,256 316,217 44,538 Cash, cash equivalents and restricted cash at end of the year 316,217 182,471 25,701 Supplemental disclosures of cash flow information: Cash and cash equivalents 302,217 168,471 23,729 Restricted cash, non-current 14,000 14,000 1,972 Total cash and cash equivalents and restricted cash 316,217 182,471 25,701 Cash paid for interest 33,365 26,366 3,657 Supplemental disclosures of non-cash investing information: Property and equipment purchased during the current period but not yet paid 64,803 67,954 9,571 The accompanying notes are an integral part of the financial statements. F - 7 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 1. The Company and Significant Accounting Policies (a) History and Principal Activities Chongqing Alpha and Omega Semiconductor Limited ("CQAOS", "the Company") was incorporated in Chongqing, China on April 22, 2016. It was invested by Alpha and Omega Semiconductor Limited ("AOS") with two investment funds owned by the Municipality of Chongqing (the "Chongqing Funds") by entering into a joint venture contract, for the purpose of constructing and operating a power semiconductor assembling, testing and wafer fabrication facility in the Liangjiang New Area of Chongqing, the People of Republic China. (b) Basis of presentation The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). (c) Use of Estimates The preparation of the 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 financial statements will be affected. On an ongoing basis, the Company evaluates the estimates, judgments and assumptions including principal-versus-agent determination for revenue recognition, allowance for credit loss, inventory reserves, warranty accrual, income taxes, leases, impairment and useful lives for property and equipment and intangible assets. (d) Foreign currency transaction and translation Foreign currency transactions are translated into the functional currencies using the exchange rates prevailing at the beginning of the month. Foreign exchange gains and losses, resulting from the settlement of such transactions and from the re-measurement of monetary assets and liabilities denominated in foreign currencies using exchange rates at month end, are recognized in the statements of operations. The Company's reporting currency and functional currency is Renminbi ("RMB"). Translations of balances in the balance sheets, statements of operations and statements of cash flows from RMB into U.S. Dollars ("US$") as of and for year ended December 31, 2023 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB7.0999 on December 29, 2023, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 29, 2023, or at any other rate. (e) Cash, cash equivalents and restricted cash Cash and cash equivalents primarily consist of cash on hand and short-term bank deposits with original maturities of three months or less. Cash equivalents are highly liquid investments with stated maturities of three months or less as of the dates of purchase. The carrying amounts reported for cash and cash equivalents are considered to approximate fair values based upon their short maturities. As a condition of the loan arrangements, the Company is required to keep a compensating balance at the issuing bank. The balance has been excluded from the Company's cash and cash equivalents balance and are classified as restricted cash in the Company's balance sheets. F-8 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 1. The Company and Significant Accounting Policies - continued (f) Current expected credit loss The Company adopted the CECL model since July 1, 2021 and the estimate of expected credit losses will be (1) recognized immediately upon either origination or acquisition and (2) adjusted in each subsequent reporting period. The allowance for credit loss is based on assessment of the collectability of accounts receivable from customers and amount due from related parties. The Company reviews the allowance by considering factors such as historical collection experience, credit quality, and current economic conditions that may affect a customer's ability to pay. The Company writes off a receivable and charges against its recorded allowance when it has exhausted its collection efforts without success. (g) Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. (h) Fair Value of Financial Instruments and others The fair value of cash equivalents is based on observable market prices and 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. The Company measures certain long-lived assets at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets is below its recorded cost and impairment is required. Fair value of the property and equipment in impairment testing were determined by the Company based on either quoted market price, if available, or the income approach using the discounted cash flows associated with the underlying assets, which incorporated certain assumptions including projected revenue, growth rates and projected operating costs, expectation of management and projected trends of current operating results. The Company recorded impairment charges of RMB4,933 and RMB7,975 (US$1,123) for certain property and equipment for the years ended December 31, 2022 and 2023 respectively. The impairment was recorded in cost of goods sold in its statements of operations. F-9 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 1. The Company and Significant Accounting Policies - continued (i) Inventories The Company carries inventories at the lower of cost or net realizable value. Cost of inventory includes semiconductor wafer and raw materials, labour, depreciation expenses and other manufacturing expenses and overhead, and assembling and testing fees paid to third parties if subcontractors are used. Valuation of inventories are based on the Company's periodic review of inventory quantities on hand as compared with its sales forecasts, historical usage, aging of inventories, production yield levels and current selling prices. If actual market conditions are less favourable than those forecasted by management, additional future inventory write-downs may be required. Once established, adjustments to inventory are not reversed. (j) Property and equipment, net Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items and the costs incurred to make the assets ready for their intended use. Depreciation is provided for on a straight-line basis over the estimated useful lives of the related assets as follows: Useful life Building 20 ~ 30 years Manufacturing machinery and equipment 10 ~ 15 years Facility Machinery and Equipment 10 ~ 15 years Software 3 ~ 10 years Office furniture and equipment 3 ~ 5 years Vehicle and other fix asset 4 years Tooling and instrument 5 years Construction in progress represent equipment received but the necessary installation has not been fully performed or building construction and leasehold improvements that have been started but not yet completed. Equipment and construction in progress are stated at cost and transferred to respective asset class when fully completed and ready for their intended use. Software is externally purchased which is amortized over three to ten years on a straight-line basis. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized as selling, general and administrative expenses in the statements of operations. Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. (k) Land use right, net The land use rights represent the operating lease prepayments for the rights to use the land in the PRC under Accounting Standards Codification Topic 842, Leases (“ASC 842”), which are amortized on a straight-line basis over the remaining term of the land use right. In March 2017, The Company acquired the land use right from the PRC government with a consideration of RMB60,178 (US$8,476). The land use right will expire on November 30, 2066. Amortization expense of land use rights for the years ended December 31, 2022 and 2023 amounted to RMB1,210 and RMB1,210 (US$170) respectively. F-10 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 1. The Company and Significant Accounting Policies - continued (l) Impairment of Long-lived Assets Long-lived assets are reviewed for impairment in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. Long-lived assets with definite lives are not impaired unless undiscounted cash flow is less than the carrying value, at which time impairment is recorded for the difference between carrying value and fair value. (m) 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 related subsidy, as well as other business expansion credits. Grants received as incentives for conducting business in certain local districts with no performance obligation or other restriction as to the use are recognized when cash is received. Grants received with government specified performance obligations are recognized when all the obligations have been fulfilled and cash is received. If such obligations are not satisfied, the Company may be required to refund the subsidy. The Company records such grants either as a reduction of the interest expenses, related expense, or as other income depending upon the nature of the grant. For the year ended December 31, 2023, the Company reduced interest expense by RMB232 (US$33), reduced general and administrative expenses by RMB1,345 (US$189), reduced research and development expenses by RMB100 (US$14) and recorded other income of RMB175 (US$25) upon receipt of cash from government. (n) Revenue Recognition The Company's revenue is derived from the sales of silicon chips and wafer, providing assembly and testing ("A&T") service, and other revenue including sales of raw materials and scrapped materials. The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied. The Company recognizes product revenue at a point in time when product is shipped to customer, and service revenue once rendered. The Company presents revenue net of sales taxes. The standard payment terms range from 30 to 90 days. The Company's performance obligations relate to contracts with a duration of less than one year. The Company elected to apply the practical expedient provided in ASC 606, "Revenue from Contracts with Customers". Therefore, the Company is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The following is a summary of revenue by type: Years ended December 31 2022 2023 RMB RMB US$ Product 1,334,522 871,777 122,788 Service 11,499 - - Others 18,763 11,979 1,686 Total 1,364,784 883,756 124,474 F-11 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 1. The Company and Significant Accounting Policies - continued (o) Cost of goods sold Cost of goods sold primarily consists of costs associated with semiconductor wafers, assembling and testing, shipping and handling, personnel, overhead attributable to manufacturing, impairment loss on manufacturing equipment, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories. (p) Leases The Company determines if an arrangement is a lease at inception. Right-of-use ("ROU") assets and lease liabilities are recognized for all leases 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. 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. The Company classifies its leases into operating lease and finance lease. Operating leases are included in operating lease ROU assets and operating lease liabilities on the Company's balance sheets. Finance leases are included in property and equipment and finance lease liabilities on the balance sheets. Operating lease expense is recognized on a straight-line basis over the lease term, lease liability is amortized using the effective interest method over the lease period. The Company does not record leases on the balance sheet with a term of one year or less. The Company leased certain idle manufacture equipment to related parties. The Company determines if an arrangement is a lease at inception. All leases are classified as operating leases and rents are recognized on a straight-line basis over the terms of the leases when collectability is probable, and the lessee has taken possession or controls the physical use of the leased equipment. The leased equipment is recognized in the statement of balance sheets as property and equipment, which lease income, net of depreciation expenses of the leased equipment, is recorded as other operating income, net in the statements of operations. (q) Product Warranty The Company provides a standard two-year warranty for the products from the date of purchase by the customers. The Company accrues for estimated warranty costs at the time revenue is recognized. The Company's warranty obligation is affected by product failure rates, labor and material costs for replacing defective products, related freight costs for failed parts and other quality assurance costs. The Company monitors its product returns for warranty claims and maintains warranty reserves based on historical experiences and anticipated warranty claims known at the time of estimation. F-12 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 1. The Company and Significant Accounting Policies - continued (r) Provision for Income Taxes Income tax expense or benefit is based on income or loss before taxes. Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. Significant management judgment is required in determining whether deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or research and experimentation tax credit carry-forwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized. The Company considers all available positive and negative evidence when assessing whether it is more likely than not that deferred tax assets are recoverable. The Company considers evidence such as our past operating results, the existence of cumulative losses in recent years and our forecast of future taxable income. The Financial Accounting Standards Board (“FASB”) issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management. (s) Share-based compensation The Company grants restricted shares to the certain employees ("Share-based Awards"). The Company accounted for the Share-based Awards in accordance with ASC 718 Compensation—Stock Compensation. Vesting of Share-based Awards is subject to certain service and performance conditions. Employees are not entitled to transfer or redeem the share until twelve months after the Company completes initial public offering (“IPO condition”). Share-based Awards are measured at the grant date fair value using market approach and share-based compensation expenses are amortized on a straight-line basis over the service term but will not be recognized before the IPO condition is satisfied, at which time the cumulatively vested amount will be recognized. 2. Concentration of Credit Risk and Significant Customers The Company manages its credit risk associated with exposure to customers on outstanding accounts receivable through the application of credit approvals, credit ratings and other monitoring procedures. Credit sales, which are mainly on credit terms of 30 to 90 days, are only made to customers who meet the Company's credit standards, while sales to new customers or customers with low credit ratings are usually made on an advance payment basis. The Company considers its financial assets to be of good credit quality because its 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 customers, and regularly reviews their financial positions, where available. The only customer whose revenue or accounts receivable balances were 10% or higher than the respective total amounts is the Company's related party, AOS Group. See note 14 for details of balance and transaction with AOS Group. F-13 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 3. Cash and cash equivalents As of December 31, 2022 2023 RMB RMB US$ Cash at bank 302,217 168,471 23,729 Denominated in: US$ 101,561 99,151 13,965 RMB 200,656 69,320 9,764 Certain cash and bank balances denominated in US$ were deposited with banks in the PRC. The conversion of these US$ denominated balances into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. 4. Inventories As of December 31, 2022 2023 RMB RMB US$ Raw materials 222,962 171,091 24,098 Work in progress 116,948 92,399 13,015 Finished goods 45,006 32,289 4,547 Inventories 384,916 295,779 41,660 The Company writes down inventory for any excess or obsolete inventories or when the Company believes that the net realizable value of inventories is less than the carrying value. For the years ended December 31, 2022 and 2023, the Company wrote down inventory of RMB62 and RMB5,434 (US$765), respectively. 5. Prepayments and other current assets As of December 31, 2022 2023 RMB RMB US$ Prepaid maintenance 2,508 414 58 Prepayment to supplier 4,629 1,744 246 VAT receivable 7,859 6,875 968 Others 7,796 2,592 365 Prepayments and other current assets 22,792 11,625 1,637 F-14 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 6. Property and equipment, net Property and equipment, net consist of the following: As of December 31, 2022 2023 RMB RMB US$ Building 372,042 375,359 52,868 Manufacturing machinery and equipment 1,759,122 1,916,668 269,957 Equipment and tooling 256,972 265,001 37,325 Software 45,561 52,379 7,377 Office furniture and equipment 25,628 24,936 3,512 Vehicle and other fix asset 8,209 10,984 1,547 Long-term deferred expense 294 345 49 less: accumulated depreciation (847,777) (973,726) (137,146) Accumulated impairment loss (9,746) (17,721) (2,496) Equipment and construction in progress 142,925 369,694 52,070 Property and equipment, net 1,753,230 2,023,919 285,063 The depreciation for property and equipment for the years ended December 31, 2022 and 2023 were RMB153,958 and RMB148,580 (US$20,927) respectively. For the years ended December 31, 2022 and 2023, RMB4,814 and RMB7,975 (US$1,123) were recognized as impairment loss on manufacturing equipment, respectively. 7. Intangible assets, net Intangible assets, net consist of the following: As of December 31, 2022 2023 RMB RMB US$ Patents and technology rights 571,243 571,243 80,458 Less: accumulated amortization (230,678) (290,136) (40,865) Intangible assets, net 340,565 281,107 39,593 The Company amortizes its intangible assets of patents and technology rights relating to power device semiconductors and wafer production over their estimated useful lives of 7 to 15 years. Amortization expenses for the years ended December 31, 2022 and 2023 were RMB59,458 and RMB 59,458 (US$8,374), respectively. Amortization expenses of the above intangible assets are expected to be approximately RMB59,458, RMB59,458, RMB59,458, RMB59,458 and RMB43,275 for the years ending December 31, 2024, 2025, 2026, 2027, and 2028, respectively. F-15 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 8. Accrued Liabilities As of December 31, 2022 2023 RMB RMB US$ Accrued compensation and benefits 66,867 52,560 7,403 Accrued property and equipment 79,535 147,326 20,750 Warranty accruals 13,806 7,318 1,031 Accrued interest 2,334 1,703 240 Advance from customers 13,846 586 83 Others 43,290 37,551 5,289 Accrued Liabilities 219,678 247,044 34,796 9. Bank borrowings Short-term debts On December 27, 2022, the Company entered into a one-year credit facility agreement with China Citic Bank to borrow a maximum of RMB100 million at a floating interest rate based on one-year Loan Prime Rate in China ("LPR") minus 17 basis points. The Company drew down RMB100 million at interest rate of 3.48% per annum. As of December 31, 2023, the principal and interest of the loan have been fully repaid. On April 14, 2021, the Company entered into a credit facility with China Everbright Bank in China to borrow a maximum of RMB100 million. The borrowing can be in either RMB or US$ and be repaid in the same currency. The loan consists of RMB50 million for working capital borrowings in RMB and RMB50 million for trade financing in US$. The loan is collateralized by eligible accounts receivable of RMB50 million. In 2021, the Company drew down RMB50 million and US$7.6 million, at respective interest rate of 5.1% and 2.7% per annum. As of December 31, 2022, the principal and interest of the loan have been fully repaid. On July 19, 2022, The Company entered into a credit facility agreement with The Export-Import Bank of China to borrow a maximum of RMB 200 million. This loan is secured by the buildings and certain equipment owned by the Company with a carrying value of RMB566 million as of December 31, 2022. This loan shares collateral rights under YinHai financing lease signed on May 9, 2018 and the RMB 200 million long-term loan signed on March 12, 2019 with The Export- Import Bank of China. On July 22, 2022, the Company drew-down RMB200 million for one year at an interest rate of 3.1% per annum. As of December 31, 2023, the principal and interest of the loan have been fully repaid. Long-term debts On December 18, 2019, the Company entered into a loan agreement with China Development Bank in the amount of US$24.0 million. The loan agreement is secured by certain assets of the Company with a net carrying value of RMB1,052 million as of December 31, 2023. Beginning December 18, 2020, The Company will make consecutive semi-annual payments of principal until December 8, 2024. The interest was initially calculated based on the London Inter-Bank Offered Rate (“LIBOR”) of 6 months plus 2.8%, subsequent to June 30, 2023, the benchmark of interest rate was modified to Secured Overnight Financing Rate (“SOFR”), and the credit spread was increased to 3.23%. The interest is required to be paid on March 21 and September 21 each year. As of December 31, 2023, the outstanding balance of the loan was US$5.2 million (RMB37 million) at interest rate of 8.56% per annum. The loan will be due within one year. On April 26, 2020, the Company entered into a credit facility 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 RMB250 million. This loan shares collateral rights with the US$24.0 million long-term loan signed on December 18, 2019 with China Development Bank. Beginning December 18, 2020, the Company is required to make consecutive semi-annual payments of principal until F-16 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) December 8, 2024. Interest payment is due on March 20, June 20, September 20 and December 20 of each year based on one-year LPR plus 1.3%. The Company drew-down RMB250 million in May 2020 at interest rate of 5.15% per annum. As of December 31, 2023, the outstanding balance of the principal was RMB80 million at an interest rate of 4.95% per annum. The loan will be due within one year. On March 12, 2019, the Company entered into a credit facility agreement with Export-Import Bank of China in the aggregate principal amount of RMB200 million. The loan will mature on February 20, 2025. The Company drew-down the whole facility in 2019. The interest is calculated based on the five- year LPR multiplied by 110%, and shall be paid quarterly. 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 and land-use rights owned by the Company with a carrying value of RMB563 million as of December 31, 2023. This loan shares collateral rights under YinHai financing lease signed on May 9, 2018 and the RMB200 million short-term loan signed on July 19, 2022 with The Export-Import Bank of China. As a condition of the loan arrangements, RMB14 million of cash is held as restricted cash by the Company as a compensating balance at the Company's bank until the principal is paid. As of December 31, 2023, the outstanding balance of the loan was RMB69 million at interest rate of 4.10% per annum, among which RMB46 million will be due within one year. 9. Bank borrowings - continued Long-term debts - continued On July 17, 2023, the Company entered into a three-year loan agreement with China Merchants Bank to borrow a maximum of RMB200 million for three years. The maximum interest rate is calculated as the one-year LPR minus 65 basis points. The loan requires quarterly interest payments. On July 19, 2023, the Company drew down RMB200 million at interest rate of 2.9% per annum. There are some financial covenants including revenue and asset-liability ratio related to this facility. The Company was fully in compliance with the covenants as of December 31, 2023. As of December 31, 2023, the outstanding loan amount was RMB200 million. On August 25, 2023, the Company entered into a three-year loan agreement with Bohai Bank to borrow a maximum of RMB100 million for three years. The interest rate is calculated as the one-year LPR plus 40 basis points. The loan requires quarterly interest payments. On August 31, 2023, the Company drew down RMB20 million at interest rate of 3.85% per annum. As of December 31, 2023, the outstanding loan amount was RMB20 million. On November 2, and December 25, 2023, the Company entered into three-year loan agreements with China Everbright Bank to borrow RMB30 million and RMB50 million at respective interest rate of 2.6% and 3.0% per annum. The interest rates were calculated respectively as five-year LPR minus 160 basis points and 120 basis points. As of December 31, 2023, the outstanding loan amount was RMB80 million. On December 5 and 20, 2023, the Company entered into three-year loan agreements with Export-Import Bank of China to borrow respectively RMB50 million and RMB100 million, both at fixed interest rate of 2.70% per annum. The loans share collateral rights with the RMB200 million long-term loan signed on March 19, 2019 with the same bank. As of December 31, 2023, the outstanding amount of the loans was RMB150 million. As of December 31, 2023, maturities of short-term debts and long-term debts are as follows: December 31, RMB US$ 2024 184,390 25,971 2025 44,560 6,276 2026 406,880 57,307 Total principal of debt 635,830 89,554 Less: debt issuance costs (592) (83) Total principal of debt, less debt issuance costs 635,238 89,471 F-17 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) Short-Term Debt Long-Term Debt Total RMB US$ RMB US$ RMB US$ Principal amount - - 635,830 89,554 635,830 89,554 Less: debt issuance costs - - (592) (83) (592) (83) Add: mature in one year 183,798 25,887 (183,798) (25,887) - - Total 183,798 25,887 451,440 63,584 635,238 89,471 Financing lease On May 9, 2018 (the "Effective Date"), the 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 agree to provide an aggregate of RMB400 million of financing to the Company (the "Lease Financing"). In exchange for the Lease Financing, the Company agrees to transfer title of its assembly and testing equipment to the Lenders, and the Lenders lease such equipment to the Company under a five-year lease arrangement, pursuant to which the 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 five-year LPR multiplied by 1.15. Under the Agreements, at the end of the five-year lease term, the Lenders agree to sell such equipment back to the Company for a nominal amount RMB0.001. The Company's obligations under the Lease Financing are secured by the land and building owned by the Company (the "Collateral"). F-18 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 9. Bank borrowings - continued Financing lease – continued The lease financing shares the collateral rights both with the loan of RMB 200 million signed on March 12, 2019 and the loan of RMB 200 million signed on July 19, 2022 with The Export-Import Bank of China. 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 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 are not limited to, failure to make payments and breach of material terms under the Agreements. On June 28, 2020, the parties entered into a modification to this agreement as a result of a change in the bank reference rate, pursuant to which the interest rate was changed to be the five-year LPR plus 0.8125%. Other terms of this agreement remain the same. As of December 31, 2023, the financing leases has been fully repaid. 10. Lease 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 ROU assets, operating lease liabilities and operating lease liabilities - long-term on the Company's balance sheets. Finance leases are included in property and equipment, finance lease liabilities and finance lease liabilities-long-term on the 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 facilities, employee apartments, and gas tank equipment. 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 YinHai Leasing Company. The Company does not record leases on the balance sheet with a term of one year or less. Total lease expenses related to short-term leases were insignificant for the years ended December 31, 2022 and 2023. The components of the Company's operating and finance lease expenses are as follows for the period presented: For the years ended 2022 2023 RMB RMB US$ Operating leases: Fixed rent expense 11,582 12,075 1,700 Finance lease: Amortization of equipment 36,092 4,539 639 Interest 5,030 358 50 Total lease expenses 52,704 16,972 2,389 F-19 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 10. Lease - continued Supplemental balance sheet information related to the Company's operating and finance leases (Note) is as follows (in thousands, except lease term and discount rate): As of December 31, 2022 2023 RMB RMB US$ Operating leases: ROU assets associated with operating leases 76,993 71,757 10,107 Weighted average remaining lease term (in years) Operating leases 9.80 9.00 Finance leases 0.25 Weighted average discount rate Operating leases 5.34% 5.35% Finance leases 5.43% Note: All collateralized assets related to finance leases were de-mortgaged as of December 31, 2023. The carrying amounts for the related assets as of December 31, 2022 and 2023 were respectively 142,817 and 124,572. Supplemental cash flow information related to the Company's operating and finance lease is as follows: Years ended December 31, 2022 2023 RMB RMB US$ Cash paid from amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 11,176 12,226 1,722 Operating cash flows from finance lease 5,184 358 50 Financing cash flows from finance lease 108,000 23,000 3,239 Non-cash right-of-use assets obtained in acquisition for operating lease 10,194 2,853 402 Non-cash lease liabilities obtained in acquisition for operating lease 10,194 2,853 402 Future minimum lease payments are as follows as of December 31, 2023: F-20 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) Operating Lease Payment Operating Lease Payment Finance Lease Payment Finance Lease Payment Total Lease Payment Total Lease Payment Years ending December 31, RMB US$ RMB US$ RMB US$ 2024 10,860 1,530 - - 10,860 1,530 2025 10,362 1,459 - - 10,362 1,459 2026 9,953 1,402 - - 9,953 1,402 2027 9,683 1,364 - - 9,683 1,364 2028 9,489 1,336 - - 9,489 1,336 Thereafter 40,328 5,678 - - 40,328 5,678 Total lease payments 90,675 12,769 - - 90,675 12,769 Less: imputed interest (17,838) (2,510) - - (17,838) (2,510) Total lease liabilities 72,837 10,259 - - 72,837 10,259 11. Shareholders' Equity In January 2022, certain third-party investors entered into investment agreements with the Company in total consideration of RMB509 million (US$80 million) to subscribe for the Company's equity interest ("2022 Financing"). As of December 31, 2022, the Company received all capital injection, of which RMB212,899 and RMB296,101 was recorded in paid-in capital and additional paid-in capital, respectively. 12. Share-based Compensation On December 30, 2021, the Board of Directors approved a Share Incentive Plan ("Plan") to grant share-based compensation awards to attract, motivate, retain and reward its employees. Pursuant to the Plan, the Company reserved a total of 19,947,400 shares, of which15,752,900 restricted shares as of December 31, 2023 were granted to certain employees through the employee stock holding platforms (the "Platform"), which are several limited partnerships. Under the Plan, employees are eligible to subscribe such restricted shares at one US$ dollar per each. Vesting is subject to certain service and performance conditions, which includes a condition where employees are not entitled to transfer or redeem the share until the Company's ordinary shares become listed securities over 12 months, which substantially creates a performance condition. The subscription consideration of RMB79,302(US$11,875) has been fully collected by the Company by the end of the year ended December 31, 2022. The fair value of each restricted share granted was determined at RMB15.20 (US$2.38) using the market approach by reference to the fair value of the ordinary share indicating by the Company’s most recent equity financing. The following table discloses movements for the year ended December 31, 2023: Number of restricted shares As of January 1, 2023 15,752,900 Granted - As of December 31, 2023 15,752,900 Number of restricted shares expected to vest 10,319,832 The Company did not recognize any share-based compensation expenses for restricted shares as the listing of the Company is assessed to be not probable as of December 31, 2023. F-21 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 13. Income Tax Expense Under PRC's Enterprise Income Tax Law ("EIT Law"), the statutory income tax rate is 25%, and the EIT rate will be reduced to 15% for the encouraged enterprises located in the western region which the company met the requirement, according to the taxation No.23 in 2020 announced by China Development and Reform Commission of the Ministry of Finance and the State Administration, from January 1, 2021 to December 31, 2030. Additionally, as a recognized semiconductor integrated circuit production entity, the Company is entitled to a two-year exemption and three-year 50% reduction starting from the first profit making year after absorbing all prior years' tax losses. The Company has not entered into the first tax profitable year as of December 31, 2023. No provision for income taxes has been required to be accrued because the Company is in cumulative loss positions for the period presented. In 2023, the Company applied for Certified High and New Technology Enterprises (“HNTE”), thereby qualifying for an extended loss carryforward period of 10 years, increased from 5 years. To maintain its status as a HNTE, the Company must conduct an annual self-assessment to ensure it continues to meet the HNTE criteria; additionally, the Company must reapply for qualification every three years. F-22 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 13. Income Tax Expense – continued A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows: For the Years ended December 31, 2022 2023 PRC Statutory income tax rate 25% 25% Tax effect of non-deductible expenses in determining taxable profit (10%) 0% Research and development super deduction 251% 4% Preferential tax rate (10)% (10)% Changes in valuation allowance (256)% (19)% Effective income tax rate - - The principal components of the deferred tax assets are as follows: For the years ended December 31, 2022 2023 RMB RMB US$ Deferred tax assets: Net loss carry-forward 136,691 153,610 21,636 Impairment provisions 2,260 3,205 451 Accrued warranty expenses 2,071 1,098 155 Accrued compensation 1,384 1,207 170 Deferred income of governmental subsidy 482 448 63 Accrued other expenses 3,498 2,174 306 Less: valuation allowance (146,386) (161,742) (22,781) Deferred tax assets, net - - - The Company considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will be more likely than not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of future profitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimates the Company is using to manage the underlying businesses. Valuation allowances are established for deferred tax assets based on a more likely than not threshold. The Company's ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. The Company has determined that for the deferred tax assets on temporary differences and net operating loss carry forwards, it is not able to conclude that the future realization of those net operating loss carry forwards and other deferred tax assets are more likely than not. As such, the Company has fully provided valuation allowance for the deferred tax assets as of December 31, 2022 and 2023. No unrecognized tax benefits and related interest and penalties were recorded in the period presented. Amounts of operating loss carry forwards were approximately RMB1,004 million (US$141 million) for the year ended December 31, 2023, which are expected to expire through 2028. The following table presents the movement of the valuation allowance: For the year ended December 31, 2023 RMB US$ Balance as of December 31, 2022 146,386 20,618 Provided 18,091 2,548 Reversed (2,508) (353) Written off - - Balance as of December 31, 2023 161,969 22,813 F-23 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) 4. Related party transactions The table below sets forth the major related parties and the relationship with the Company as of December 31, 2022 and 2023: Company Name Relationship with the Company Alpha and Omega Semiconductor Limited and its subsidiaries ("AOS Group") Shareholder (a) Amounts due from related parties Account Name of related parties As of December 31, 2022 2023 RMB RMB US$ Amounts due from related parties, net AOS Group 241,954 153,990 21,689 The balances of amounts due from related parties as of December 31, 2022 and 2023 are related to sale of finished goods to AOS Group. (b) Amounts due to related parties Account Name of related parties As of December 31, 2022 2023 RMB RMB US$ Amounts due to related parties AOS Group 96,376 65,612 9,242 The balances of amounts due to related parties as of December 31, 2022 and 2023 are related to purchase of raw materials (RMB86,449 and RMB55,522 as of December 31, 2022 and 2023, respectively) and equipment (RMB9,927 and RMB10,090, as of December 31, 2022 and 2023, respectively) from AOS Group. (c) Sales and purchase with related parties Accounts Name of related parties For the years ended December 31, 2022 2023 RMB RMB US$ Revenue from related parties AOS Group 1,239,221 708,070 99,730 Other operating income, net from related parties AOS Group 20,555 36 5 Purchase from related parties AOS Group 430,585 64,252 9,050 For the years ended December 31, 2022 and 2023, all of the related parties balances and transactions are as above. 15. Commitments and Contingencies As of December 31, 2023, the Company's commitments related to purchase of property and equipment contracted but not yet reflected in the financial statements were RMB102,125 which are expected to be incurred for the year ending December 31, 2024. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible F-24 CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2023 NOTES TO FINANCIAL STATEMENTS (In Thousands of Renminbi, unless otherwise indicated) loss if determinable and material, is disclosed. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of December 31, 2023, the Company doesn't have any contingency related to unsettled litigation. 16. Subsequent events The subsequent events were evaluated through August 20, 2024, which is the issuance date of the audited financial statements. On January 19, 2024, the Company's shareholders approved to cancel and repurchase from the Platform 1,555,232 of issued restricted shares, which were granted to the eligible employees who had left the Company by December 31, 2023 at a total consideration of US$1,555. The Company cancelled additional 3,877,836 reserved restricted shares from the platform. As a result, a total number of outstanding restricted shares under the Share Incentive Plan decreased to 10,319,832. On January 19, 2024, the Company's shareholder meeting resolved to approve the undertaking of RMB500 million equity financing proposed by certain potential investor(s), the valuation shall be subjected to further approval from the Company's board of director and shareholder meeting. The Company repaid on February 1, 2024 certain long-term borrowings from China Development Bank totalling RMB117 million, and the collateralized assets with a net carrying value of RMB1,052 million was subsequently de-mortgaged. F-25

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