Company: AAOI
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001437749-25-025450
Chunk: 103

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 8
Chunk 103
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 a building on these parcels, totaling approximately 3,406 square meters, or approximately 36,662 square feet. The lease term is for fifteen years, commencing on  December 1, 2024, and ending on  November 30, 2039. A two-month renovation period from  October 1 to  November 30, 2024,  preceded the lease term, during which no rent was charged by San Ho Enterprise Co., Ltd. During the lease term, the monthly rent will increase by three percent (3%) every three years. 
    
   On  June 7, 2025, Prime World entered into a Land and Building Lease Agreement with San Ho Electric Machinery Industry Co., Ltd., under which Prime World will lease a parcel of land with a total area of approximately 10,040 square meters, or approximately 108,070 square feet, in Taoyuan City. The lease also includes a building on the parcel, totaling approximately 12,226 square meters, or approximately 131,600 square feet. The lease term is for fifteen years, commencing on  September 1, 2025, and ending on  August 31, 2040. A three-month renovation period from  June 1 to  August 31, 2025, will precede the lease term, during which no rent will be charged by San Ho Electric Machinery Industry Co., Ltd. During the lease term, the monthly rent will increase by three percent (3%) every three years.
    
   As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on the applicable lease terms and current economic environment, the Company applies a location approach for determining the incremental borrowing rate.
    
   Lease expense is included under general and administrative expenses and were $0.8 million and $0.3 million for the three months ended  June 30, 2025 and 2024, respectively. Lease expense is included under general and administrative expenses and were $1.3 million and $0.6 million for the six months ended  June 30, 2025 and 2024, respectively. The components of lease expense were as follows for the periods indicated (in thousands):