Joint Venture

On March 29, 2016, the Company entered into a joint venture contract (the “JV Agreement”) with two investment funds owned by the Municipality of Chongqing (the “Chongqing Funds”), pursuant to which the Company and the Chongqing Funds formed a joint venture, (the “JV Company”), for the purpose of constructing and operating a power semiconductor packaging, testing and 12-inch wafer fabrication facility in the Liangjiang New Area of Chongqing, China (the “JV Transaction”). The total initial capitalization of the JV Company is $330.0 million (the “Initial Capitalization”), which includes cash contribution from the Chongqing Funds and contributions of cash, equipment and intangible assets from the Company. The Initial Capitalization is expected to be completed in stages. As of March 31, 2018, the Chongqing Funds contributed approximately $162.0 million of initial capital in cash, including $42.0 million of contribution in March 2018. The Company owns 51%, and the Chongqing Funds own 49%, of the equity interest in the JV Company. If both parties agree that the termination of the JV Company is in the best interest of each party or the JV Company is bankrupt or insolvent where either party may terminate early, after paying the debts of the JV Company, the remaining assets of the JV Company shall be paid to the Chongqing Funds to cover the principal of its total paid-in contributions plus interest at 10% simple annual rate prior to distributing the balance of the JV Company's assets to the Company. The JV Company is in the pre-production phase and the Company expects the JV Company to complete its assembly and testing facilities in the quarter ending June 30, 2018 and fabrication facilities in December 2018.

There is no private land ownership in China. Individuals and companies are permitted to acquire land use rights for specific purpose. In September 2016, the JV Company paid approximately $8.7 million for land use rights to build the manufacturing facility. In March 2017, the JV Company received the necessary land use right certificate from the PRC government. The land use rights will expire on November 30, 2066.

As part of the JV Transaction, the JV Company entered into an Engineering, Procurement and Construction Contract (the “EPC Contract”) with The IT Electronics Eleventh Design & Research Institute Scientific and Technological Engineering Corporation Limited (the “Contractor”), effective as of January 10, 2017 (the "Effective Date"), pursuant which the Contractor was engaged to construct the manufacturing facility contemplated under the JV Agreement. Under the EPC Contract, the Contractor’s obligations include, but are not limited to: (i) the development of conceptual design, initial design, construction drawing design and optimization, and submission of such designs to the JV Company for examination and confirmation; and (ii) the construction of the assembly and wafer fabrication facilities and related procurement services, including the selection and engagement of subcontractors, in accordance with a construction schedule agreed upon by the parties. The total price payable under the EPC Contract is Chinese Renminbi (RMB) 540.0 million, or approximately $78.0 million based on the currency exchange rate between RMB and U.S. Dollars on the Effective Date, which consists of $2.8 million (RMB 19.5 million) of design fees (“Design Fees”) and $75.2 million (RMB 520.5 million) of construction and procurement fees (including compliance with safety and aesthetic requirements) (“Construction Fees”). The payment is subject to volatility as a result of exposure to fluctuations in RMB foreign exchange rates. The Design Fees and Construction Fees are paid by the JV Company pursuant to a payment schedule based on the progress of the construction and the achievements of specified milestones. As of March 31, 2018, the JV Company paid approximately $57.0 million (RMB 358.9 million), and expects to pay the remaining of $28.8 million (RMB 181.1 million) in calendar year 2018.

The changes in total stockholders' equity and noncontrolling interest were as follows (in thousands):



	Total AOS Stockholders' Equity			Noncontrolling Interest			Total Equity
Balance, June 30, 2017	$	270,770		$	27,779		$	298,549
Exercise of common stock options and release of RSUs	1,352			—			1,352
Reissuance of treasury stock upon exercise of common stock options and release of RSUs	(91		)	—			(91		)
Withholding tax on restricted stock units	(2,248		)	—			(2,248		)
Issuance of shares under ESPP	1,439			—			1,439
Repurchase of common shares under shares repurchase program	(12,016		)	—			(12,016		)
Stock-based compensation expense	8,477			—			8,477
Net income (loss)	13,242			(5,269		)	7,973
Deferred tax asset related to ASU 2016-16 adoption	(5,480		)	—			(5,480		)
Cumulative translation adjustment	4,848			4,398			9,246
Contributions from noncontrolling interest	—			128,994			128,994
Balance, March 31, 2018	$	280,293		$	155,902		$	436,195