Company: AAOI
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001437749-25-033627
Chunk: 17

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 1
Chunk 17
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 entered into a lease to include the first floor which was previously excluded in the  September 1, 2025 lease. 
    
   On  September 19, 2025, the Company entered into a Lease Agreement with Coleman Logistics Assets LLC (“Coleman”), pursuant to which the Company will lease approximately 209,665 square feet of space located at 1111 Gillingham Lane, Sugar Land, Texas 77478. The leased premises will be used by the Company primarily for manufacturing and related operations. The lease has a term of 126 months, commencing on the earlier of (i) the date the Company commences manufacturing operations within the leased premises, (ii) the date on which the leasehold improvements are substantially completed, or (iii)  March 31, 2026, and expiring approximately 126 months thereafter, unless earlier terminated in accordance with the lease. Coleman has agreed to provide a construction allowance toward the cost of leasehold improvements in an amount equal to the lesser of (i) the actual aggregate cost of such improvements or (ii) $1,886,985. Base rent under the lease is abated for the first seven months of the term and thereafter increases on a scheduled basis through the end of the term, reflecting an average annual escalation of approximately 3.5%. Beginning in the eighth month of the term, base rent will be $7.44 per rentable square foot on an annual basis (approximately $129,992 per month), escalating periodically to $10.49 per rentable square foot on an annual basis (approximately $183,367 per month) during the final six months of the term.
    
   Although the lease agreement was executed prior to  September 30, 2025, the lease had not yet commenced as of that date, as Coleman is currently completing required improvements to the leased premises. The Company expects the lease to commence in the first quarter of 2026, at which time the Company will recognize a right-of-use (“ROU”) asset and a corresponding lease liability on its consolidated balance sheet. The total undiscounted lease payments over the initial lease term are approximately $21.9 million, which will be recognized upon lease commencement. No ROU asset or lease liability related to this agreement has been recorded as of  September 30, 2025.
    
   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 collateral