Company: AAOI
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001437749-25-033627
Chunk: 126

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 8
Chunk 126
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2030 Notes are subject to customary events of default. The 2030 Notes do not restrict the Company’s ability to incur debt or liens. No sinking fund is provided for the 2030 Notes. There are no guarantors of the 2030 Notes.
    
   Pursuant to the guidance in ASC 815-40, Contracts in Entity’s Own Equity, the Company evaluated whether the conversion feature of the note needed to be bifurcated from the host instrument as a freestanding financial instrument. Under ASC 815-40, to qualify for equity classification (or non-bifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s own stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the conversion option is indexed to its own stock and also met all the criteria for equity classification. Accordingly, the conversion option is not required to be bifurcated from the host instrument as a derivative.
    
   Pursuant to ASC 815-15, the Company further determined that the contingent redemption features in the 2030 Notes are not required to be bifurcated from the host contract and accounted for separately. Additionally, the Company then evaluated whether the conversion feature needed to be separately accounted for as an equity component under ASC 470-20, Debt with Conversion and Other Options, and determined that the additional premium was not substantial. Accordingly, that amount was recognized as a premium on the 2030 Notes.   

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   The following table sets forth interest expense information related to the 2026 Notes and 2030 Notes (in thousands):
   ​
   
       Three months ended September 30,    Nine months ended September 30,  
   2025    2024    2025    2024  
 Contractual interest expense  $364  $1,053  $1,157  $3,161 
 Amortization of debt issuance costs    220    363   650   1,072 
 Total interest cost  $584  $1,416  $1,807  $4,233 
 Effective interest rate   1.0%  5