Company: AAOI
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001437749-25-025450
Chunk: 13

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 1
Chunk 13
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 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):

       Three months ended June 30,    Six months ended June 30,  
 ​   2025    2024    2025    2024  
 Operating lease expense  $509  $290  $915  $586 
 Short Term lease expense   285   10   357   22 
 Total lease expense  $794  $300  $1,272  $608 

   Maturities of lease liabilities are as follows for the future one-year periods ending  June 30, 2025 (in thousands):
   ​
   
     Fiscal years:   Operating  
 2025 (remaining 6 months)