Table of the year primarily due to annual price negotiations with customers that occur at the end of the prior year and lower capacity utilization during the annual new year holidays in China. This historical pattern typically adversely affects our revenues in the first quarter of each year and impacts the typical annual distribution of revenue from quarter to quarter through the year. That said, our first quarter revenue varies markedly year to year so should not be considered a reliable indicator of our future revenue or financial performance. In Q2 2020, this seasonality was higher due to the China central government extending the annual new year holidays in China in an effort to contain impact of the novel coronavirus.Contents

~~If our customers do not qualify our products for use, then our results of operations may suffer.~~

Prior to placing volume purchase orders with us, most of our customers require us to obtain their approval called qualification in our industry of our new and existing products, and our customers often audit our manufacturing facilities and perform other vendor evaluations during this process. The qualification process involves product sampling and reliability testing and collaboration with our product management and engineering teams in the design and manufacturing stages. If we are unable to qualify our products with customers, then our revenue would be lower than expected and we may not be able to recover the costs associated with the qualification process which would have an adverse effect on our results of operations.

In addition, due to evolving technological changes in our markets, a customer may cancel or modify a design project before we have qualified our product or begun volume manufacturing of a qualified product. It is unlikely that we would be able to recover the expenses for cancelled or unutilized custom design projects.

Covenants in our borrowing arrangements may limit our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic or industry conditions.

We have lending arrangements with several financial institutions, which generally require us to maintain certain financial covenants and limit our ability to take certain actions such as incurring some kinds of additional debt, paying dividends, or engaging in certain transactions like mergers and acquisitions, investments and asset sales without the lenders’ consent. These restrictions may limit our flexibility in responding to business opportunities, competitive developments and adverse economic or industry conditions. In addition, a breach of any of these covenants, or a failure to pay interest or indebtedness when due under any of our credit facilities, could result in a variety of adverse consequences, including the acceleration of our indebtedness.

We may be involved in intellectual property disputes, which could divert management’s attention, cause us to incur significant costs and prevent us from selling or using the challenged technology.

Participants in the markets in which we sell our products have experienced frequent litigation regarding patent and other intellectual property rights. Numerous patents in these industries are held by others, including our competitors. In addition,

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from time to time, we have been notified that we may be infringing certain patents or other intellectual property rights of ~~others.~~others (for example, see our discussion on the Finisar dispute). Regardless of their merit, responding to such claims can be time consuming, divert management’s attention and resources and may cause us to incur significant expenses. In addition, there can be no assurance that third parties will not assert infringement claims against us, whether or not such claims are valid. While we believe that our products do not infringe in any material respect upon intellectual property rights of other parties and/or meritorious defense would exist with respect to any assertions to the contrary, we cannot be certain that our products would not be found infringing the intellectual property rights of others.

In January 2010, Finisar Corporation, or Finisar (which was acquired by II-VI, Inc. in September 2019), filed a complaint in the U.S. District Court for the Northern District of California against us and three other co-defendants. In the complaint, Finisar alleged infringement of certain of its U.S. patents arising from the co-defendants’ respective manufacture, importation, use, sale of or offer to sell certain optical transceiver products in the U.S. In May 2012, we and Finisar agreed to toll our respective claims until the refiling of certain of the previously asserted claims from this dispute. As a result, Finisar/II-VI is permitted to bring a new lawsuit against us if it chooses to do so, and we may bring new claims against Finisar upon seven days written notice prior to filing such claims.

Although we believe that we would have meritorious defenses to ~~the~~ infringement allegations and intend to defend any new ~~similar~~ lawsuit vigorously, there can be no assurance that we will be successful in our defense. Even if we are successful, we may incur substantial legal fees and other costs in defending the lawsuit. Further, a new lawsuit, if brought by either party, would be likely to divert the efforts and attention of our management and technical personnel, which could harm our business.

If we fail to protect our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.

Our success depends to a significant degree on our ability to protect our intellectual property and other proprietary rights. We rely on a combination of patent, trademark, copyright, trade secret and unfair competition laws, as well as license agreements and other contractual provisions, to establish and protect our intellectual property and other proprietary rights. We have applied for patent registrations in the U.S. and in other foreign countries, some of which have been issued. We cannot guarantee that our pending applications will be approved by the applicable governmental authorities.

Similarly we must protect all company data as it pertains to customers, products and product designs, technology and technology related trade secrets, plus customer and supplier and personal data of suppliers, customers and personnel. We rely on a combination of these important data elements to establish and protect multiple aspects of our business, and loss of data, breaching of data or stealing of such data could hard ~~the company.~~our business.

Policing unauthorized use of our technology is difficult and we cannot be certain that the steps we have taken will prevent the misappropriation, unauthorized use or other infringement of our intellectual property rights. Further, we may not be able to effectively protect our intellectual property rights from misappropriation or other infringement in foreign countries where we have not applied for patent protections, and where effective patent, trademark, trade secret and other intellectual property laws may be unavailable, or may not protect our proprietary rights as fully as U.S. or Japan law. Particularly, our U.S. patents do not afford any intellectual property protection in China, Japan, Canada, Russia or other Asia locations.

In the future, we may need to take legal actions to prevent third parties from infringing upon or misappropriating our intellectual property or from otherwise gaining access to our technology. Protecting and enforcing our intellectual property rights and determining their validity and scope could result in significant litigation costs and require significant time and attention from our technical and management personnel. If we fail to protect our intellectual property and other proprietary rights, or if such intellectual property and proprietary rights are infringed or misappropriated, our business, results of operations or financial condition could be materially harmed.

~~We may be subject to disruptions or failures in information technology systems and network infrastructures that could have a material adverse effect on our business and financial condition.~~

We rely on the efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. A disruption, infiltration or failure of our information technology systems as a result of software or hardware malfunctions, system implementations or upgrades, computer viruses, cyber-attacks, third-party security breaches, employee error, theft or misuse, malfeasance, power disruptions, natural disasters or accidents could cause breaches of data security, loss of intellectual property and critical data and the release and misappropriation of sensitive competitive information and partner, customer and employee personal data. Any of these events could harm our competitive position, result in a loss of customer confidence, cause us to incur significant costs to remedy any damages and ultimately materially adversely affect our business and financial condition.

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It could be discovered that our products contain defects that may cause us to incur significant costs, divert our attention, result in a loss of customers and result in product liability claims.

Our products are complex and undergo quality testing as well as formal qualification, both by our customers and by us. For various reasons, such as the occurrence of performance problems that are unforeseeable in testing or that are detected only when products age or are operated under peak stress conditions, our products may fail to perform as expected long after customer acceptance. Failures could result from faulty components or design, problems in manufacturing or other unforeseen reasons. As a result, we could incur significant costs to repair or replace defective products under warranty, particularly when such failures occur in installed systems. Any significant product failure could result in lost future sales of the affected product and other products, as well as customer relations problems and litigation, which could harm our business.

Further, our products contain purchased components including electronic components. It is possible that such purchased items could contain quality defects, manufacturing defects, performance problems or even counterfeit substitutes. Any significant product failure that is the result of such defects could result in lost future sales as well as customer relations problems and litigation, which could harm our business.

The communications networks industry has long product development cycles requiring us to incur product development costs without assurances of an acceptable investment return.

Large volumes of communications equipment and support structures are installed with considerable expenditures of funds and other resources, and long investment return period expectations. At the component supplier level, these cycles create considerable, typically multi-year, gaps between the commencement of new product development and volume purchases. Due to changing industry and customer requirements, we are constantly developing new products, including seeking to further integrate functions on PICs and developing and using new technologies in our products. These development activities

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necessitate significant investment of capital. Our new products often require a long time to develop because of their complexity and rigorous testing and qualification requirements. Accordingly, we and our competitors often incur significant research and development and sales and marketing costs for products that, initially, will be purchased by our customers long after much of the cost is incurred and, in some cases, may never be purchased due to changes in industry or customer requirements in the interim.

Our revenues are typically subject to seasonality.

Our first quarter revenue is typically seasonally lower than the rest of the year primarily due to annual price negotiations with customers that occur at the end of the prior year and lower capacity utilization during the annual new year holidays in China. This historical pattern typically adversely affects our revenues in the first quarter of each year and impacts the typical annual distribution of revenue from quarter-to-quarter through the year. That said, our first quarter revenue varies markedly year- to-year so should not be considered a reliable indicator of our future revenue or financial performance.

If we fail to obtain the right to use the intellectual property rights of others which are necessary to operate our business, and to protect their intellectual property, our business and results of operations will be adversely affected.

From time to time we may choose to, or be required to, license technology or intellectual property from third parties in connection with the development of our products. Failure to obtain a necessary third-party license required for our product offerings or to develop new products and product enhancements could adversely affect our business.

Similarly, from time to time, others may endeavor to infringe on our intellectual property or encroach on our trademarks or other intellectual property. Our failure to identify, recognize and/or action to ~~product~~protect such intellectual property could adversely affect our business.

Participation in standards setting organizations may subject us to intellectual property licensing requirements or limitations that could adversely affect our business and prospects.

In the course of our participation in the development of emerging standards for some of our present and future products, we may agree to grant to all other participants a license to our patents that are essential to the practice of those standards on reasonable and non-discriminatory, or RAND, terms. If we fail to limit to whom we license our patents, or fail to limit the terms of any such licenses, we may be required to license our patents or other intellectual property to others in the future, which could limit the effectiveness of our patents against competitors.

Any potential dispute involving our products, services or technology could also include our customers using our products, which could trigger our indemnification obligations to them and result in substantial expenses to us.

In any potential dispute involving allegations that our products, services or technology infringe the intellectual property rights of third parties, our customers could also become the target of litigation. Because we often indemnify our customers for intellectual property claims made against them for products incorporating our technology, any claims against our customers could trigger indemnification obligations in some of our supply agreements, which could result in substantial expenses such as increased legal expenses, product recalls, damages for past infringement or royalties for future use.

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Rapidly changing standards and regulations could make our products obsolete, which would cause our revenue and results of operations to suffer.

We design our products to conform to regulations established by governments and to standards set by industry standards bodies worldwide, such as The American National Standards Institute, the European Telecommunications Standards Institute, the International Telecommunications Union and the Institute of Electrical and Electronics Engineers. Various industry organizations are currently considering whether and to what extent to create standards for elements used in 100Gbps and beyond systems. Because certain of our products are designed to conform to current specific industry standards, if competing or new standards emerge that are preferred by our customers, we would have to make significant expenditures to develop new products and our revenue and results of operations would suffer.

~~If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.~~

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Preparing our consolidated financial statements involves a number of complex manual and automated processes, which are dependent upon individual data input or review and require significant management judgment. One or more of these elements may result in errors that may not be detected and could result in a material misstatement of our consolidated financial statements. If we fail to maintain the adequacy of our internal controls over financial reporting, our business and operating results may be harmed and we may fail to meet our financial reporting obligations. If material weaknesses in our internal control are discovered or occur, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any failure of our internal controls could adversely affect the results of the periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock may decline.

We may be unable to utilize our net operating loss carryforwards to reduce our income taxes, which could adversely affect our future financial results.

As of December 31, ~~2019,~~2020, we had net operating loss ~~or NOL,~~("NOL"), carryforwards for U.S. federal and state tax purposes of ~~$290.4~~$289.4 million and ~~$52.1~~$52.0 million, respectively. ~~As these~~These net operating losses have not been utilized and may not be utilized prior to their expiration in the future. The utilization of the NOL and tax credit carryforwards are subject to a substantial limitation imposed by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions. We recorded deferred tax assets, net of valuation allowance, for the NOL carryforwards currently available after considering the existing Section 382 limitation. If we incur an additional limitation under Section 382, then the NOL carryforwards, as disclosed, could be reduced by the impact of any future limitation that would result in existing NOL carryforwards and tax credit carryforwards expiring unutilized and increases in future tax liabilities.

~~Natural disasters, terrorist attacks or other catastrophic events could harm our operations and our financial results.~~

Our worldwide operations could be subject to natural disasters and other business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses. For example, our corporate headquarters and wafer fabrication facility in Silicon Valley, California and our Tokyo, Japan facility are located near major earthquake fault lines, and our manufacturing facilities are located in Shenzhen and Dongguan, China, areas that are susceptible to typhoons. We are not insured against many natural disasters, including earthquakes.

Similarly, our worldwide operations could be subject to secondary effects of natural disasters, terrorist attacks or other catastrophic events. Even if our facilities are not directly affected, any of these types of events could substantially disrupt the business of our suppliers or customers, which could have a material adverse effect on us.

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We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs, or restrict our business or operations in the future.

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Our manufacturing operations and our products are subject to a variety of federal, state, local and international environmental, health and safety laws and regulations in each of the jurisdictions in which we operate or sell our products. Our failure to comply with present and future environmental, health or safety requirements, or the identification of contamination, could cause us to incur substantial costs, including cleanup costs, monetary fines, civil or criminal penalties, or curtailment of operations, which could have a material adverse effect on our business, financial condition and results of operations.

Additionally, increasing efforts to control emissions of greenhouse gases ~~or GHG,~~("GHG"), may also impact us. Additional climate change or GHG control requirements are under consideration at the federal level in the U.S. and in China. Additional restrictions, limits, taxes, or other controls on GHG emissions could increase our operating costs and, while it is not possible to

estimate the specific impact any final GHG regulations will have on our operations, there can be no assurance that these measures will not have significant additional impact on us.us.

Risks Related to Our Operations in China

Our business operations conducted in China are critical to our success. A significant portion of our revenue was recognized from customers for whom we shipped products to a location in China. Additionally, a substantial portion of our net property, plant and equipment, approximately ~~23%~~29% as of June 30, ~~2020,~~2021, was located in China. We expect to make further investments in China in the foreseeable future. Therefore, our business, financial condition, results of operations and prospects are to a significant degree subject to economic, political, legal, and social events and developments in China.

A considerable portion of our business outside of the Cloud and data center market segments involves selling high-speed optical components in China and any move to local Chinese vendors for these products might adversely affect our results.

In December 2017, the Chinese Government Ministry of Industry and Information Technology announced a five-year optical component technology roadmap with the aim to reduce China’s dependency on non-domestic companies for high-end optical chips and sub-components, including some products manufactured and sold by us. This announcement continues an ongoing trend in China to build domestic industry in this area. While we believe local Chinese component suppliers do not currently have the capability to supply the highest performance optical chips and sub-components, those companies may over time develop such capability and negatively impact our revenue and financial performance if we do not continue to innovate and maintain our lead in the highest speed and performance optical components.

Adverse changes in economic and political policies in China, or Chinese laws or regulations could have a material adverse effect on business conditions and the overall economic growth of China, which could adversely affect our business.

The Chinese government exercises significant control over China’s economy by way of the allocation of resources, control over foreign currency-denominated obligations and monetary policy and provision of preferential treatment to particular industries or companies. Moreover, the laws, regulations and legal requirements in China, including the laws that apply to foreign-invested enterprises are relatively new and are subject to frequent changes. The interpretation and enforcement of such laws is uncertain. Any adverse changes to these laws, regulations and legal requirements, including tax laws, or their interpretation or enforcement, or the creation of new laws or regulations relating to our business, could have a material adverse effect on our business.

Furthermore, any slowdown or economic downturn, whether actual or perceived, in China could have a material adverse effect on our business, financial condition and results of operation.

Changes in China’s international trade policies may adversely impact our business and operating results.

The China government ~~has recently made statements and taken certain actions that~~may change trade policies ~~including recently-imposed~~that impact our operations. Prior to early 2020, the China government imposed tariffs ~~affecting products manufactured in the U.S. Certain~~on certain of our products manufactured in our U.S. operations ~~have been included in the tariffs imposed on imports~~and imported into China from the United States. There has been exemption of these tariffs since then. We expect these tariffs, ~~as currently~~if applied without exemption, will increase our cost of goods ~~sold by approximately one percentage point.~~sold. It is unknown if exemption, or any additional such tariffs or retaliatory actions, will be imposed or what impact they would have on us or our industry and customers. As new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated between China and the U.S. or other affected countries, such changes could have a material adverse effect on our business, financial condition, results of operations or cash flows. Furthermore, in response to such trade tensions, the Chinese government and/or individual Chinese customers may take steps to reduce their supply chain dependence on products from U.S. suppliers through their own internal developments or the selection of non-U.S. suppliers, placing us at a commercial disadvantage and potentially affecting our business.

~~A considerable portion of our business involves selling high speed optical components in China and any move to local Chinese vendors for these products might adversely affect our results.~~

In December 2017, the Chinese Government Ministry of Industry and Information Technology has announced a five-year optical component technology roadmap with the aim to reduce China’s dependency on non-domestic companies for high-end optical chips and sub-components, including some products manufactured and sold by us. This announcement continues an

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ongoing trend in China to build domestic industry in this area. While we believe local Chinese component suppliers do not currently have the capability to supply the highest performance optical chips and sub-components, those companies may over time develop such capability and negatively impact our revenue and financial performance if we do not continue to innovate and maintain our lead in the highest speed and performance optical components.

Uncertainties with respect to China’s legal system could adversely affect the legal protection available to us.

Our operations in China are governed by Chinese laws and regulations. Our subsidiaries in China are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. China has not developed a fully-integrated legal system to fully address its transition to a more market-oriented economy, and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. Uncertainties in the Chinese legal system may impede our ability to enforce the contracts we have entered into with our distributors, business partners, customers and suppliers. In addition, protections of intellectual property rights and confidentiality in China may not be as effective as in the U.S. or other countries or regions with more developed legal systems. All of these uncertainties could limit the legal protections available to us and could materially and adversely affect our business and operations.

Our subsidiaries in China may be subject to restrictions on dividend payments, on making other payments to us or any other affiliated company, and on borrowing or allocating tax losses among our subsidiaries.

~~Current Chinese regulations permit our subsidiaries in China to pay dividends only out~~Table of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations, which are different than U.S. accounting standards and regulations. In addition, our subsidiaries in China are required to set aside at least 10% of their respectiveContents

accumulated profits each year, if any, to fund their statutory common reserves until such reserves have reached at least 50% of their respective registered capital. As of June 30, 2020 and December 31, 2019, our Chinese subsidiaries’ common reserves had not reached this threshold and, accordingly, these entities are required to continue funding such reserves with accumulated net profits. Accordingly, we may not be able to move our capital easily, which could harm our business.

Restrictions on currency exchange may limit our ability to use our cash effectively.

In China, the State Administration of Foreign Exchange ~~or SAFE,~~("SAFE") administers restrictions on currency exchange. These restrictions may limit our ability to use cash held in RMB to fund any business activities we may have outside China or to make dividend payments in U.S. dollars. SAFE or other Chinese regulatory authorities may impose more stringent restrictions on the convertibility of the RMB, especially with respect to foreign exchange transactions. If such restrictions are imposed, our ability to adjust our capital structure or engage in foreign exchange transactions may be limited.

If the Chinese government determines that we failed to obtain approvals of, or registrations with, the requisite Chinese regulatory authority with respect to our current and past import and export of technologies, or failed to obtain the necessary licenses to file patent applications outside China for inventions made in China, we could be subject to sanctions, which could adversely affect our business.

China imposes controls on technology import and export. The term “technology import and export” is broadly defined to include, without limitation, the transfer or license of patents, software and know-how, and the provision of services in relation to technology. Depending on the nature of the relevant technology, the import and export of technology to or from China requires either approval by or registration with, the relevant Chinese governmental authorities. Additionally, the Chinese government requires the patent application for any invention made at least in part in China to be filed first in China, then undergo a government secrecy review and obtain a license before such application is filed in other countries.

If the Chinese government determines that we failed to follow required procedures and obtain the appropriate license before filing a patent application outside China for an invention made at least in part in China, our China patents on such products may be invalidated, which could have a material and adverse effect on our business and operations.

China regulation of loans and direct investment by offshore holding companies to China entities may delay or prevent us from using our cash proceeds to make loans or additional capital contributions to our China subsidiaries.

From time to time, we may make loans or additional capital contributions to our China subsidiaries. We cannot assure that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to our future loans or capital contributions to our China subsidiaries. If we fail to receive such registrations or approvals, our ability to

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~~capitalize our China subsidiaries may be negatively affected, which could materially and adversely affect our liquidity and ability to fund and expand our business.~~

~~Dividends paid to us by our Chinese subsidiaries may be subject to Chinese withholding tax.~~

The Enterprise Income Tax Law and the implementation regulations provide that a 10% withholding tax may apply to dividends payable to investors that are “non-resident enterprises,” to the extent such dividends are derived from sources within China and in the absence of any tax treaty that may reduce such withholding tax rate.

Our contractual arrangements with our subsidiaries in China may be subject to audit or challenge by the Chinese tax authorities, and a finding that our subsidiaries in China owe additional taxes could substantially reduce our net income and the value of our stockholders’ investment.

Under the applicable laws and regulations in China, arrangements and transactions among related parties may be subject to audit or challenge by the Chinese tax authorities. We would be subject to adverse tax consequences if the Chinese tax authorities were to determine that the contracts with or between our subsidiaries were not executed on an arm’s length basis, and as a result the Chinese tax authorities could require that our Chinese subsidiaries adjust their taxable income upward for Chinese tax purposes. Such an adjustment could adversely affect us by increasing our tax expenses.

We may have difficulty maintaining adequate management, legal and financial controls in China, which we are required to do in order to comply with Section 404 of the Sarbanes-Oxley Act and securities laws, and which could cause a material adverse impact on our consolidated financial statements, the trading price of our common stock and our business.

Our subsidiaries in China are generally subject to our overall obligations to maintain strong corporate governance, internal controls and computer, financial and other control systems. We may have difficulty hiring and retaining employees in China with experience and expertise relating to accounting principles generally accepted in the U.S. and U.S. public-company reporting requirements. These issues could make it more difficult for us to establish and maintain adequate internal control over our financial reporting, which could then result in errors that could cause a material misstatement of our consolidated financial statements.

We may be exposed to liabilities under the FCPA and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practices Act of 1977 ~~or FCPA,~~("FCPA") and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations, agreements with third parties and we make significant sales in China. China also strictly prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by our employees, consultants, sales agents or distributors, even though they may not always be subject to our control. Although we have implemented policies and procedures to discourage these practices by our employees, our existing safeguards and any future improvements may prove to be less than effective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Violations of the FCPA or anti-corruption laws in other countries may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile due to fluctuation of our financial results from quarter-to-quarter and other factors.

Our quarterly revenue and results of operations have varied in the past and may continue to vary significantly from ~~quarter to quarter.~~quarter-to-quarter. This variability may lead to volatility in our stock price as research analysts and investors respond to these quarterly fluctuations. These fluctuations are due to numerous factors, including:

•~~fluctuations~~Fluctuations in demand for our products;

•~~the~~The timing, volume and product mix of sales of our products;

•~~changes~~Changes in our pricing and sales policies, particularly in the first quarter of the year, or changes in the pricing and sales policies of our competitors;

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•~~changes~~Changes in government export and import controls that restrict our sales to key customers;

•~~our~~Our ability to design, manufacture and deliver products to our customers in a timely and cost-effective manner and that meet customer requirements;

•~~quality~~Quality control, yield or other output-related problems in our manufacturing operations;

•~~our~~Our ability to timely obtain adequate quantities of the components used in our products;

•~~length~~Length and variability of the sales cycles of our products;

•~~unanticipated~~Unanticipated increases in costs or expenses; and

•~~fluctuations~~Fluctuations in foreign currency exchange rates.

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The foregoing factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly and annual results of operations in the future. In addition, a significant amount of our operating expenses is relatively fixed in nature due to our internal manufacturing, research and development, sales and general administrative efforts. Any failure to adjust spending quickly enough to compensate for a revenue shortfall could magnify the adverse impact of such revenue shortfall on our results of operations. Moreover, our results of operations may not meet our announced financial outlook or the expectations of research analysts or investors, in which case the price of our common stock could decrease significantly. There can be no assurance that we will be able to successfully address these risks.

The market price of our common stock could be subject to wide fluctuations in response to, among other things, the risk factors described in this section of this Quarterly Report on Form 10-Q, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us.

The stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions, such as recessions, sovereign debt or liquidity issues, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock.

In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may become the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

•~~providing~~Providing for a classified board of directors with staggered, three-year terms;

•~~not~~Not providing for cumulative voting in the election of directors;

•~~authorizing~~Authorizing our board of directors to issue, without stockholder approval, preferred stock rights senior to those of common stock;

•~~prohibiting~~Prohibiting stockholder action by written consent;

•~~limiting~~Limiting the persons who may call special meetings of stockholders; and

•~~requiring~~Requiring advance notification of stockholder nominations and proposals.

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In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding common stock, from engaging in certain business combinations without approval of substantially all of our stockholders for a certain period of time.

These and other provisions in our amended and restated certificate of incorporation, our amended and restated bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.

*Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings:

•~~any~~Any derivative action or proceeding brought on our behalf;

•~~any~~Any action asserting a breach of fiduciary duty;

•~~any~~Any action asserting a claim against us arising under the Delaware General Corporation Law; and

•~~any~~Any action asserting a claim against us that is governed by the internal-affairs doctrine.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act of 1933, as amended, creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.

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This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

General Risks

If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.

Natural disasters, terrorist attacks or other catastrophic events could harm our operations and our financial results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit
no. Exhibit Description Form SEC File No. Exhibit Filing Date Filed herewith
3.1
Amended and Restated Certificate of Incorporation of NeoPhotonics Corporation.
Form 8-K 001-35061 3.1 February 10, 2011
3.2
Amended and Restated Bylaws of NeoPhotonics Corporation.
Form S-1/A 333-166096 3.5 November 22, 2010
10.1
NeoPhotonics Corporation 2020 Equity Incentive Plan and forms of agreement thereunder
Form 8-K 001-35061 99.1 June 4, 2020
10.2
Amended Non-Employee Director Compensation Policy
X
31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a).
X
31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a)
X
32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS Inline XBRL Instance Document. X
101.SCH Inline XBRL Taxonomy Extension Schema Document. X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

Exhibit
no.

Exhibit Description

Form

SEC File No.

Exhibit

Filing Date

Filed herewith

3.1

Amended and Restated Certificate of Incorporation of NeoPhotonics Corporation.

Form 8-K

001-35061

3.1

February 10, 2011

3.2

Amended and Restated Bylaws of NeoPhotonics Corporation.

Form S-1/A

333-166096

3.5

November 22, 2010

10.1

Credit Line Agreement dated June 17, 2021, by and between NeoPhotonics (China) Co., Ltd. and Shanghai Pudong Development Bank Shenzhen Branch (Translation to English of Chinese original agreement)

Form 8-K

001-35061

10.1

June 22, 2021

10.2

Credit Line Agreement, dated June 17, 2021, by and between NeoPhotonics Dongguan Co., Ltd. and Shanghai Pudong Development Bank Shenzhen Branch (Translation to English of Chinese original agreement)

Form 8-K

001-35061

10.2

June 22, 2021

10.3

Amended and Restated Credit Agreement, dated as of June 29, 2021, among NeoPhotonics Corporation, the lenders that are parties thereto and Wells Fargo Bank, National Association, as administrative agent

Form 8-K

001-35061

10.1

July 2, 2021

10.4

Property Lease Contract dated July 27, 2021, by and between NeoPhotonics Dongguan Co., Ltd. and Dongguan Conrad Hi-Tech Park, Ltd.

31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a)

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

5846

Table of Contents

SIGNATURE

Pursuant to the requirements 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.

NeoPhotonics Corporation

Date:

August ~~5, 2020~~3, 2021

By:

/S/ ELIZABETH EBY

Elizabeth Eby

Senior Vice President, Finance and Chief Financial Officer

(Principal Financial and Accounting Officer)

5947



Delaware						94-3253730
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


		Page
	Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	43
	Condensed Consolidated Balance Sheets as of J ~~une~~ 3 0 ~~, 2020~~June 30, 2021 and December 31, ~~2019~~2020	43
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 3 0 ~~, 2020~~ 30, 2021 and ~~2019~~2020	54
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 3 0 ~~, 2020~~ 30, 2021 and ~~2019~~2020	65
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30,, 2021 and 2020 ~~and 2019~~	76
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended J ~~une~~ 3 0 ,June 30, 2021 and 2020 ~~and 2019~~	98
	Notes to Condensed Consolidated Financial Statements	109
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2824
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3932
Item 4.	Controls and Procedures	4032
	Part II. Other Information
Item 1.	Legal Proceedings	4133
Item 1A.	Risk Factors	4133
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5745
Item 3.	Defaults Upon Senior Securities	5745
Item 4.	Mine Safety Disclosures	5745
Item 5.	Other Information	5745
Item 6.	Exhibits	5846
	Signature	5947


	As of
(In thousands, except par value data)	June 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	66,836	$	95,117
Short-term investments	27,672		27,669
Restricted cash	495		489
Accounts receivable, net	47,763		45,232
Inventories	44,341		46,901
Prepaid expenses and other current assets	14,307		20,173
Total current assets	201,414		235,581
Property, plant and equipment, net	59,942		66,765
Operating lease right-of-use assets	14,452		13,823
Purchased intangible assets, net	1,139		1,468
Goodwill	1,115		1,115
Other long-term assets	5,193		4,912
Total assets	$	283,255	$	323,664
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	46,648	$	43,539
Current portion of long-term debt	3,033		3,232
Accrued and other current liabilities	25,461		42,053
Total current liabilities	75,142		88,824
Long-term debt, net of current portion	27,488		30,327
Operating lease liabilities, noncurrent	14,787		14,522
Other noncurrent liabilities	8,446		9,584
Total liabilities	125,863		143,257
Commitments and contingencies (Note 11)	0		0
Stockholders’ equity:
Preferred stock, $0.0025 par value, 10,000 shares authorized, 0 shares issued or outstanding	0		0
Common stock, $0.0025 par value, 100,000 shares authorized; at June 30, 2021, 52,080 shares issued and outstanding; at December 31, 2020, 50,457 shares issued and outstanding	130		126
Additional paid-in capital	602,877		597,460
Accumulated other comprehensive income	1,423		1,735
Accumulated deficit	(447,038)		(418,914)
Total stockholders’ equity	157,392		180,407
Total liabilities and stockholders’ equity	$	283,255	$	323,664


	As of
(In thousands, except par data)	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	94,536	$	70,467
Short-term investments	7,665		7,638
Restricted cash	11,055		10,972
Accounts receivable, net of allowance for doubtful accounts	61,223		68,890
Inventories	50,449		46,930

Prepaid expenses and other current assets	29,268		25,851
Total current assets	254,196		230,748
Property, plant and equipment, net	73,052		81,133
Operating lease right-of-use assets	14,662		15,603
Purchased intangible assets, net	1,771		2,151
Goodwill	1,115		1,115
Other long-term assets	3,838		3,929
Total assets	$	348,634	$	334,679
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	61,636	$	58,554

Current portion of long-term debt	3,083		3,044
Accrued and other current liabilities	45,354		47,481
Total current liabilities	110,073		109,079
Long-term debt, net of current portion	33,235		39,237
Operating lease liabilities, noncurrent	15,471		16,543
Other noncurrent liabilities	10,827		9,614
Total liabilities	169,606		174,473
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0025 par value, 10,000 shares authorized, 0 shares issued or outstanding	—		—
Common stock, $0.0025 par value, 100,000 shares authorized; at June 30, 2020, 49,547 shares issued and outstanding; at December 31, 2019, 48,526 shares issued and outstanding	124		121
Additional paid-in capital	590,800		582,504
Accumulated other comprehensive loss	(9,380)		(7,871)
Accumulated deficit	(402,516)		(414,548)
Total stockholders’ equity	179,028		160,206
Total liabilities and stockholders’ equity	$	348,634	$	334,679


	Three Months Ended June 30,				Six Months Ended June 30,

(In thousands, except per share data)	2021		2020		2021		2020
Revenue	$	65,010	$	103,171	$	125,935	$	200,572
Cost of goods sold	55,135		69,669		102,721		137,344
Gross profit	9,875		33,502		23,214		63,228
Operating expenses:
Research and development	15,410		13,689		28,508		25,573
Sales and marketing	3,362		4,279		7,227		7,938
General and administrative	7,398		8,803		14,692		15,592
Acquisition and asset sale related costs (recoveries)	(36)		120		127		132
Restructuring charges	22		0		22		0
Total operating expenses	26,156		26,891		50,576		49,235
Income (loss) from operations	(16,281)		6,611		(27,362)		13,993
Interest income	140		22		245		120
Interest expense	(220)		(301)		(447)		(679)
Other income (expense), net	(880)		(195)		263		1,003
Total interest and other income (expense), net	(960)		(474)		61		444
Income (loss) before income taxes	(17,241)		6,137		(27,301)		14,437
Income tax provision	(192)		(412)		(823)		(2,405)
Net income (loss)	$	(17,433)	$	5,725	$	(28,124)	$	12,032

Basic net income (loss) per share	$	(0.34)	$	0.12	$	(0.55)	$	0.25
Diluted net income (loss) per share	$	(0.34)	$	0.11	$	(0.55)	$	0.24
Weighted average shares used to compute basic net income (loss) per share	51,634		49,077		51,178		48,846
Weighted average shares used to compute diluted net income (loss) per share	51,634		51,661		51,178		51,124


	Three Months Ended June 30,				Six Months Ended June 30,

(in thousands)	2021		2020		2021		2020
Net income (loss)	$	(17,433)	$	5,725	$	(28,124)	$	12,032
Other comprehensive income (loss):
Foreign currency translation adjustments, net of 0 tax	2,031		461		(312)		(1,509)
Total other comprehensive income (loss)	2,031		461		(312)		(1,509)
Comprehensive income (loss)	$	(15,402)	$	6,186	$	(28,436)	$	10,523


Three Months Ended June 30, 2021	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
(In thousands)	Shares	Amount
Balances at March 31, 2021	51,009	$	128	$	599,744	$	(608)	$	(429,605)	$	169,659
Comprehensive income (loss)	—	—		—		2,031		(17,433)		(15,402)
Issuance of common stock upon exercise of stock options	199	—		1,045		—		—		1,045
Issuance of common stock under employee stock purchase plan	235	1		1,548		—		—		1,549
Issuance of common stock for vested restricted stock units	802	2		(2)		—		—		0
Tax withholding related to vesting of restricted stock units	(165)	(1)		(1,846)		—		—		(1,847)
Stock-based compensation costs	—	—		2,388		—		—		2,388
Balances at June 30, 2021	52,080	$	130	$	602,877	$	1,423	$	(447,038)	$	157,392


Three Months Ended June 30, 2020	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
(In thousands)	Shares	Amount
Balances at March 31, 2020	48,662	$	122	$	585,198	$	(9,841)	$	(408,241)	$	167,238
Comprehensive income	—	—		—		461		5,725		6,186
Issuance of common stock upon exercise of stock options	263	1		1,114		—		—		1,115
Issuance of common stock under employee stock purchase plan	204	—		1,331		—		—		1,331
Issuance of common stock for vested restricted stock units	483	1		(1)		—		—		0
Tax withholding related to vesting of restricted stock units	(65)	—		(567)		—		—		(567)
Stock-based compensation costs	—	—		3,725		—		—		3,725
Balances at June 30, 2020	49,547	$	124	$	590,800	$	(9,380)	$	(402,516)	$	179,028


Six Months Ended June 30, 2021	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
(In thousands)	Shares	Amount
Balances at December 31, 2020	50,457	$	126	$	597,460	$	1,735	$	(418,914)	$	180,407
Comprehensive loss	—	—		—		(312)		(28,124)		(28,436)
Issuance of common stock upon exercise of stock options	398	1		2,154		—		—		2,155
Issuance of common stock under employee stock purchase plan	235	1		1,548		—		—		1,549
Issuance of common stock for vested restricted stock units	1,305	3		(3)		—		—		0
Tax withholding related to vesting of restricted stock units	(315)	(1)		(3,682)		—		—		(3,683)
Stock-based compensation costs	—	—		5,400		—		—		5,400
Balances at June 30, 2021	52,080	$	130	$	602,877	$	1,423	$	(447,038)	$	157,392


Six Months Ended June 30, 2020	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
(In thousands)	Shares	Amount
Balances at December 31, 2019	48,526	$	121	$	582,504	$	(7,871)	$	(414,548)	$	160,206
Comprehensive income (loss)	—	—		—		(1,509)		12,032		10,523
Issuance of common stock upon exercise of stock options	316	1		1,346		—		—		1,347
Issuance of common stock under employee stock purchase plan	204	1		1,331		—		—		1,332
Issuance of common stock for vested restricted stock units	597	1		(1)		—		—		0
Tax withholding related to vesting of restricted stock units	(96)	—		(786)		—		—		(786)
Stock-based compensation costs	—	—		6,406		—		—		6,406
Balances at June 30, 2020	49,547	$	124	$	590,800	$	(9,380)	$	(402,516)	$	179,028


Three Months Ended June 30, 2019	Common stock					Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
(In thousands)	Shares	Amount
Balances at March 31, 2019	46,455	$	116	$	568,194	$	(4,189)	$	(411,563)	$	152,558
Comprehensive loss	—	—		—		(1,790)		(7,326)		(9,116)
Issuance of common stock upon exercise of stock options	118	—		406						406
Issuance of common stock under employee stock purchase plan	254	1		1,234		—		—		1,235
Issuance of common stock for vested restricted stock units	381	1		(1)		—		—		—
Tax withholding related to vesting of restricted stock units	(56)	—		(245)		—		—		(245)
Stock-based compensation costs	—	—		3,146		—		—		3,146
Balances at June 30, 2019	47,152	$	118	$	572,734	$	(5,979)	$	(418,889)	$	147,984


Six Months Ended June 30, 2019	Common stock					Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
(In thousands)	Shares	Amount
Balances at December 31, 2018	46,378	$	116	$	564,722	$	(7,126)	$	(397,472)	$	160,240
Comprehensive income (loss)	—	—		—		1,147		(21,417)		(20,270)
Issuance of common stock upon exercise of stock options	166	—		572		—		—		572
Issuance of common stock under employee stock purchase plan	254	1		1,234		—		—		1,235
Issuance of common stock for vested restricted stock units	423	1		(1)		—		—		—
Tax withholding related to vesting of restricted stock units	(69)	—		(327)		—		—		(327)
Stock-based compensation costs	—	—		6,534		—		—		6,534
Balances at June 30, 2019	47,152	$	118	$	572,734	$	(5,979)	$	(418,889)	$	147,984


		As of June 30, 2020														As of December 31, 2019															As of June 30, 2021				As of December 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Marketable securities:	Marketable securities:																	Marketable securities:
Money market funds	Money market funds	$	7,665	$	—	$	—	$	7,665	$	7,638	$	—	$	—	$	7,638	Money market funds	$	27,672	$	0	$	0	$	27,672	$	27,669	$	0	$	0	$	27,669
Reported as:	Reported as:																	Reported as:
Short-term investments	Short-term investments							$	7,665							$	7,638	Short-term investments							$	27,672							$	27,669


	As of June 30, 2021								As of December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Short-term investments:
Money market funds	$	27,672	$	0	$	0	$	27,672	$	27,669	$	0	$	0	$	27,669
Other long-term assets:
Mutual funds held in Rabbi Trust	$	834	$	0	$	0	$	834	$	810	$	0	$	0	$	810


	June 30, 2021		December 31, 2020
Accounts receivable	$	47,806	$	45,277
Allowance for doubtful accounts	(43)		(45)
	$	47,763	$	45,232


		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Raw materials	Raw materials	$	24,418	$	19,350	Raw materials	$	24,523	$	25,620
Work in process	Work in process	14,237		12,262		Work in process	11,695		9,196
Finished goods⁽¹⁾	Finished goods⁽¹⁾	11,794		15,318		Finished goods(1)	8,123		12,085
		$	50,449	$	46,930		$	44,341	$	46,901


	June 30, 2020		December 31, 2019
Transition services agreement receivable (refer to Note 6)	$	11,709	$	11,861
Prepaid taxes and taxes receivable	5,301		6,979
Receivables due from suppliers	8,935		4,147
Deposits and other prepaid expenses	2,791		2,512
Other receivable	532		352
	$	29,268	$	25,851


	June 30, 2020										December 31, 2019
	Gross Assets		Accumulated Amortization		Net Assets		Gross Assets		Accumulated Amortization		Net Assets
Technology and patents	$	36,716	$	(35,746)	$	970	$	36,880	$	(35,555)	$	1,325
Customer relationships	15,021		(15,021)		—		15,089		(15,089)		—
Leasehold interest	1,205		(404)		801		1,222		(396)		826
	$	52,942	$	(51,171)	$	1,771	$	53,191	$	(51,040)	$	2,151


2020 (remaining six months)	$	368
2021	644
2022	27
2023	27
2024	27
Thereafter	678
	$	1,771


2021 (remaining six months)	$	300
2022	10
2023	10
2024	10
2025	10
Thereafter	799
	$	1,139


	June 30, 2021		December 31, 2020
Pension and other employee-related	$	3,585	$	3,844
Asset retirement obligations	3,849		3,810
Transition services agreement payables (See Note 11)	0		823
Deferred income tax liabilities	507		501
Government grant	505		606
	$	8,446	$	9,584


	Employee Severance		Other		Total
Restructuring obligations December 31, 2020	$	97	$	42	$	139
Charges	136		0		136
Cash payments	(64)		(42)		(106)
Restructuring obligations June 30, 2021	$	169	$	0	$	169


	June 30, 2020						December 31, 2019
	Carrying Amount		Interest Rate		Carrying Amount		Interest Rate





Long-term debt, current and noncurrent:
Borrowing under Wells Fargo Credit Facility	$	22,780	2.37	%	$	27,329	3.72	%
Mitsubishi Bank loans	8,331		1.05% -1.45%		9,255		1.04%-1.44%
Mitsubishi Bank and Yamanashi Chuo Bank loan	5,351		1.07	%	5,868		1.07	%
Total long-term debt	36,462				42,452
Finance lease liability	233				275
Unaccreted discount and issuance costs	(377)				(446)
Total long-term debt, net of unaccreted discount and issuance costs	$	36,318			$	42,281
Reported as:
Current portion of long-term debt	$	3,083			$	3,044
Long-term debt, net of current portion	33,235				39,237
Total long-term debt, net of unaccreted discount and issuance costs	$	36,318			$	42,281


2020 (remaining six months)		$	1,561
2021		3,121
2021 (remaining six months)				2021 (remaining six months)	$	1,616
2022	2022	25,901		2022	3,080
2023	2023	3,121		2023	3,037
2024	2024	2,321		2024	2,260
2025				2025	427
Thereafter	Thereafter	437		Thereafter	20,341
		$	36,462		$	30,761


	Six Months Ended June 30,
	2020			2019
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,546		$	1,814
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—		$	136
Weighted average remaining lease term
Operating leases	7.0 years			7.7 years
Weighted average discount rate
Operating leases	6.5		%	6.4		%


	Operating Leases
2020 (remaining six months)	$	1,596
2021	3,095
2022	3,091
2023	3,041
2024	2,943
Thereafter	8,261
Total future minimum lease payments	22,027
Less imputed interest	(4,448)
Total	$	17,579


	Operating Leases
2021 (remaining six months)	$	1,713
2022	3,469
2023	3,448
2024	3,345
2025	3,422
Thereafter	5,407
Total future minimum lease payments	20,804
Less imputed interest	(3,588)
Total	$	17,216


Operating Leases:	June 30, 2020		December 31, 2019
Accrued and other current liabilities	$	2,108	$	2,086
Operating lease liabilities, noncurrent	15,471		16,543
Total	$	17,579	$	18,629


	Foreign Currency Translation Adjustments		Defined Benefit Pension Plan Adjustment		Total Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2020	$	1,951	$	(216)	$	1,735
Other comprehensive loss, net of taxes of 0	(312)		0		(312)
Balances at June 30, 2021	$	1,639	$	(216)	$	1,423


	Foreign Currency Translation Adjustments		Defined Benefit Pension Plan Adjustment		Total Accumulated Other Comprehensive Loss
Balance as of December 31, 2019	$	7,641	$	230	$	7,871
Other comprehensive loss, net of taxes of 0	1,509		—		1,509
Balances at June 30, 2020	$	9,150	$	230	$	9,380


	Stock Options				Restricted Stock Units
	Number of Shares	Weighted Average Exercise Price		Number of Units	Weighted Average Grant Date Fair Value
Balance as of December 31, 2019	2,598,745	$	5.93	3,170,981	$	5.80
Granted	53,760	8.56		1,778,251	7.63
Exercised/Converted	(315,611)	4.27		(597,324)	6.29
Cancelled/Forfeited	(47,516)	10.83		(73,278)	6.24
Balances at June 30, 2020	2,289,378	6.12		4,278,630	6.48


			Assumptions Used
Weighted-average volatility			66%
Risk-free interest rate			2.79%
Expected dividends			—%0%


	Three Months Ended June 30,							Six Months Ended June 30,
(in thousands, except percentages)	2021		2020		$ Change		% Change	2021		2020		$ Change		% Change
Total revenue	$	65,010	$	103,171	$	(38,161)	(37)%	$	125,935	$	200,572	$	(74,637)	(37)%