EX-99.1 9 aoslex991fy2025chongqingao.htm EX-99.1

Document

Exhibit 99.1

Chongqing Alpha and Omega Semiconductor Limited

Index to Financial Statements

			Pages
Report of Independent Auditor			F-2
Balance Sheets as of December 31, 2024 and 2023			F-4
Statements of Operations for the Years Ended December 31, 2024 and 2023			F-5
Statements of Equity for the Years Ended December 31, 2024 and 2023			F-6
Statements of Cash Flows for the Years Ended December 31, 2024 and 2023			F-7
Notes to Financial Statements			F-8

F-1

REPORT OF INDEPENDENT AUDITOR

The Board of Directors of Chongqing Alpha and Omega Semiconductor Limited

Opinion

We have audited the financial statements of Chongqing Alpha and Omega Semiconductor Limited ("the Company") which comprise the balance sheets as of December 31, 2024 and 2023, and the related statements of operations, equity and cash flows for the years ended December 31, 2024 and 2023, and the related notes to the financial statements (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023 in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

The financial statements of the Company have been prepared with the purpose of providing financial information to Alpha and Omega Semiconductor Limited ("AOS") to assist AOS in satisfying its reporting responsibilities under Regulation S-X, Rule 3-09.

Convenience Translation

Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 1(d) to the financial statements. Such United States dollar amounts are presented solely for the convenience of readers outside the People's Republic of China.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are issued.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

F-2

In performing an audit in accordance with GAAS, we:

•Exercise professional judgment and maintain professional skepticism throughout the audit.

•Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

•Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

•Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shanghai, the People's Republic of China

August 20, 2025

F-3

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

BALANCE SHEETS

(In thousands)

									December 31,
			Notes						2023									2024
									RMB									RMB						US$ (Note 1(d))
ASSETS
Current assets:
Cash and cash equivalents			3						168,471									199,491						27,332
Restricted cash, current									-									20,441						2,801
Accounts receivable, net of allowance for credit losses of RMB21 and RMB2, respectively									20,950									29,811						4,084
Amounts due from related parties, net of allowance for credit losses of RMB157 and RMB4,927, respectively			14						153,990									169,281						23,193
Inventories			4						295,779									303,782						41,621
Prepayments and other current assets			5						11,625									13,438						1,841
Total current assets									650,815									736,244						100,872
Property and equipment, net			6						2,023,919									1,997,829						273,720
Land use right, net									51,912									50,703						6,947
Intangible assets, net			7						281,107									221,648						30,368
Operating lease right-of-use assets, net			10						71,757									58,703						8,043
Restricted cash, non-current									14,000									-						-
Other long-term assets									22,699									5,491						752
Total non-current assets									2,465,394									2,334,374						319,830
TOTAL ASSETS									3,116,209									3,070,618						420,702
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable									107,976									138,215						18,936
Amounts due to related parties			14						65,612									48,024						6,580
Accrued and other liabilities			8						247,044									271,789						37,237
Short-term debts			9						183,798									54,920						7,525
Operating lease liabilities			10						8,288									7,618						1,044
Total current liabilities									612,718									520,566						71,322
Long-term debts			9						451,440									561,340						76,909
Operating lease liabilities - long-term			10						64,549									51,646						7,076
Total non-current liabilities									515,989									612,986						83,985
TOTAL LIABILITIES									1,128,707									1,133,552						155,307
Commitments and contingencies (Note 15)
Equity:
Paid-in capital			11						2,817,675									2,806,620						384,532
Additional paid-in capital			11						308,567									309,276						42,373
Accumulated deficit									(1,138,740)									(1,178,830)						(161,510)
TOTAL EQUITY									1,987,502									1,937,066						265,395
TOTAL LIABILITIES AND EQUITY									3,116,209									3,070,618						420,702

The accompanying notes are an integral part of the financial statements.

F-4

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

STATEMENTS OF OPERATIONS

(In thousands)

									For the years ended
			Note						2023						2024
									RMB						RMB						US$ (Note 1(d))
Revenue (include RMB708,070 and RMB718,959 from related parties for the years ended December 31, 2023 and 2024, respectively)									883,756						981,947						134,535
Cost of goods sold									912,451						938,964						128,646
Gross (loss) profit									(28,695)						42,983						5,889
Operating expenses:
Research and development									29,472						29,114						3,989
Selling, general and administrative									34,444						43,973						6,025
Other operating income, net									(13)						-						-
Total operating expenses									63,903						73,087						10,014
Operating loss						(92,598)									(30,104)						(4,125)
Interest expense, net						(25,143)									(16,382)						(2,244)
Other income, net									3,068						6,396						876
Net loss before income taxes						(114,673)									(40,090)						(5,493)
Income tax expense			13						-						-						-
Net loss						(114,673)									(40,090)						(5,493)

The accompanying notes are an integral part of the financial statements.

F-5

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

STATEMENTS OF EQUITY

(In thousands)

			Paid-in capital						Additional paid-in capital						Accumulated deficit						Total
			RMB						RMB						RMB						RMB
Balance at December 31, 2022			2,817,675						308,567						(1,024,067)						2,102,175
Net loss			-						-						(114,673)						(114,673)
Balance at December 31, 2023			2,817,675						308,567						(1,138,740)						1,987,502
Repurchase of restricted shares under Employee Stock Purchase Plan			(11,055)						709						-						(10,346)
Net loss			-						-						(40,090)						(40,090)
Balance at December 31, 2024			2,806,620						309,276						(1,178,830)						1,937,066

The accompanying notes are an integral part of the financial statements.

F-6

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

STATEMENTS OF CASH FLOWS

(In thousands)

						For the Years ended December 31
						2023						2024
						RMB						RMB						US$ (Note 1(d))
Cash flows from operating activities:
Net loss						(114,673)						(40,090)						(5,493)
Adjustments to reconcile net loss to net cash provided by operating activities:
Allowance for credit losses						(68)						4,751						651
Inventory write-down						5,434						5,466						749
Impairment of property and equipment						7,975						2,977						408
Noncash lease expenses						8,090						7,498						1,027
Depreciation and amortization						209,248						205,636						28,174
Loss on disposal of property and equipment						299						192						26
Foreign currency exchange loss						676						(6,987)						(957)
Changes in assets and liabilities:
Accounts receivable						(18,006)						(8,843)						(1,212)
Amounts due from related parties, net						88,050						(20,060)						(2,748)
Inventories						83,703						(13,469)						(1,845)
Prepayments and other current assets						6,167						(1,814)						(249)
Accounts payable						11,278						30,239						4,145
Amounts due to related parties						(30,927)						(17,942)						(2,458)
Accrued and other liabilities						(41,286)						13,620						1,866
Operating lease liabilities						(8,241)						(8,017)						(1,099)
Net cash provided by operating activities						207,719						153,157						20,985
Cash flows from investing activities:
Purchase of property and equipment						(318,048)						(132,977)						(18,219)
Disposal of property and equipment						119						210						29
Net cash used in investing activities						(317,929)						(132,767)						(18,190)
Cash flows from financing activities:
Proceeds from bank borrowings						450,000						170,000						23,291
Repayments of bank borrowings						(452,751)						(189,540)						(25,969)
Prepayment received from an investor						-						40,000						5,480
Principal payments on financing leases						(23,000)						-						-
Payment of share repurchase						-						(10,346)						(1,417)
Net cash (used in) provided by financing activities						(25,751)						10,114						1,385
Effect of exchange rate changes on cash, cash equivalents and restricted cash						2,215						6,957						953
Net (decrease) increase in cash, cash equivalents and restricted cash						(133,746)						37,461						5,133
Cash, cash equivalents and restricted cash at the beginning of the year						316,217						182,471						25,000
Cash, cash equivalents and restricted cash at end of the year						182,471						219,932						30,133
Supplemental disclosures of cash flow information:
Cash and cash equivalents						168,471						199,491						27,332
Restricted cash, current						-						20,441						2,801
Restricted cash, non-current						14,000						-						-
Total cash and cash equivalents and restricted cash						182,471						219,932						30,133
Cash paid for interest						26,366						18,509						2,536
Supplemental disclosures of non-cash investing information:
Property and equipment purchased during the current period but not yet paid						67,954						32,271						4,421

The accompanying notes are an integral part of the financial statements.

F-7

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

1. The Company and Significant Accounting Policies

(a) History and Principal Activities

Chongqing Alpha and Omega Semiconductor Limited ("CQAOS", "the Company") was incorporated in Chongqing, China on April 22, 2016. It was invested by Alpha and Omega Semiconductor Limited ("AOS") with two investment funds owned by the Municipality of Chongqing (the "Chongqing Funds") by entering into a joint venture contract, for the purpose of constructing and operating a power semiconductor assembling, testing and wafer fabrication facility in the Liangjiang New Area of Chongqing, the People's Republic of China.

(b) Basis of presentation

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

(c) Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. To the extent there are material differences between these estimates and actual results, the Company's financial statements will be affected. On an ongoing basis, the Company evaluates the estimates, judgments and assumptions including principal-versus-agent determination for revenue recognition, allowance for credit loss, inventory reserves, warranty accrual, income taxes, leases, impairment and useful lives for property and equipment and intangible assets.

(d) Foreign currency transaction and translation

Foreign currency transactions are translated into the functional currencies using the exchange rates prevailing at the beginning of the month. Foreign exchange gains and losses, resulting from the settlement of such transactions and from the re-measurement of monetary assets and liabilities denominated in foreign currencies using exchange rates at month end, are recognized in the statements of operations.

The Company's reporting currency and functional currency is Renminbi ("RMB"). Translations of balances in the balance sheets, statements of operations and statements of cash flows from RMB into U.S. Dollars ("US$") as of and for year ended December 31, 2024 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB7.2988 on December 31, 2024, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2024, or at any other rate.

(e) Cash, cash equivalents and restricted cash

Cash and cash equivalents primarily consist of cash on hand and short-term bank deposits with original maturities of three months or less. Cash equivalents are highly liquid investments with stated maturities of three months or less as of the dates of purchase. The carrying amounts reported for cash and cash equivalents are considered to approximate fair values based upon their short maturities.

As a condition of the loan arrangements, the Company is required to maintain a margin balance deposit at the issuing bank. The deposit has been excluded from the Company's cash and cash equivalents balance and are classified as restricted cash in the Company's balance sheets.

F-8

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

1. The Company and Significant Accounting Policies - continued

(f) Current expected credit loss

The Company adopted the CECL model since July 1, 2021 and the estimate of expected credit losses will be (1) recognized immediately upon either origination or acquisition and (2) adjusted in each subsequent reporting period. The allowance for credit loss is based on assessment of the collectability of accounts receivable from customers and amount due from related parties. The Company reviews the allowance by considering factors such as historical collection experience, credit quality, and current economic conditions that may affect a customer's ability to pay. The Company writes off a receivable and charges against its recorded allowance when it has exhausted its collection efforts without success.

(g) Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1 -     Quoted prices in active markets for identical assets or liabilities.

Level 2 -     Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 -     Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

(h) Fair Value of Financial Instruments and others

The fair value of cash equivalents is based on observable market prices and have been categorized in Level 1 in the fair value hierarchy. Cash equivalents consist primarily of short-term bank deposits. The carrying values of financial instruments such as cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to their short-term maturities. The carrying value of the Company's debt is considered a reasonable estimate of fair value which is estimated by considering the current rates available to the Company for debt of the same remaining maturities, structure and terms of the debts.

The Company measures certain long-lived assets at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets is below its recorded cost and impairment is required. Fair value of the property and equipment in impairment testing were determined by the Company based on either quoted market price, if available, or the income approach using the discounted cash flows associated with the underlying assets, which incorporated certain assumptions including projected revenue, growth rates and projected operating costs, expectation of management and projected trends of current operating results.

The Company recorded impairment charges of RMB7,975 and RMB2,977 (US$408) for certain property and equipment for the years ended December 31, 2023 and 2024 respectively. The fair value amounts for the impaired property and equipment were RMB0 as of December 31, 2023 and 2024.This fair value measurement of long-lived assets is categorized within Level 3 of the fair value hierarchy, as the measurement amount is based primarily on significant inputs that are not observable in the market. The impairment was recorded in cost of goods sold in its statements of operations.

F-9

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

1. The Company and Significant Accounting Policies - continued

(i) Inventories

The Company carries inventories at the lower of cost or net realizable value. Cost of inventory includes semiconductor wafer and raw materials, labour, depreciation expenses and other manufacturing expenses and overhead, and assembling and testing fees paid to third parties if subcontractors are used. Valuation of inventories are based on the Company's periodic review of inventory quantities on hand as compared with its sales forecasts, historical usage, aging of inventories, production yield levels and current selling prices. If actual market conditions are less favourable than those forecasted by management, additional future inventory write-downs may be required. Once established, adjustments to inventory are not reversed.

(j) Property and equipment, net

Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items and the costs incurred to make the assets ready for their intended use.

Depreciation is provided for on a straight-line basis over the estimated useful lives of the related assets as follows:

						Useful life
Building						20 ~ 30 years
Manufacturing machinery and equipment						10 ~ 15 years
Facility Machinery and Equipment						10 ~ 15 years
Software						3 ~ 10 years
Office furniture and equipment						3 ~ 5 years
Vehicle and other fix asset						4 years
Tooling and instrument						5 years

Construction in progress represent equipment received but the necessary installation has not been fully performed or building construction and leasehold improvements that have been started but not yet completed. Equipment and construction in progress are stated at cost and transferred to respective asset class when fully completed and ready for their intended use.

Software is externally purchased which is amortized over three to ten years on a straight-line basis. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized as selling, general and administrative expenses in the statements of operations. Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

(k) Land use right, net

The land use rights represent the operating lease prepayments for the rights to use the land in the PRC under Accounting Standards Codification Topic 842, Leases ("ASC 842"), which are amortized on a straight-line basis over the remaining term of the land use right. In March 2017, The Company acquired the land use right from the PRC government with a consideration of RMB60,178 (US$8,476). The land use right will expire on November 30, 2066. Amortization expense of land use rights for the years ended December 31, 2023 and 2024 amounted to RMB1,210 and RMB1,210 (US$166) respectively.

F-10

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

1. The Company and Significant Accounting Policies - continued

(l) Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. Long-lived assets with definite lives are not impaired unless undiscounted cash flow is less than the carrying value, at which time impairment is recorded for the difference between carrying value and fair value.

(m) Government Grants

The Company occasionally receives government grants that provide financial assistance for certain eligible expenditures in China. These grants include reimbursements on interest expense on bank borrowings, payroll related subsidy, as well as other business expansion credits. Grants received as incentives for conducting business in certain local districts with no performance obligation or other restriction as to the use are recognized when cash is received. Grants received with government specified performance obligations are recognized when all the obligations have been fulfilled and cash is received. If such obligations are not satisfied, the Company may be required to refund the subsidy. The Company records such grants either as a reduction of the interest expenses, related expense, or as other income depending upon the nature of the grant. For the year ended December 31, 2024, the Company reduced interest expense by RMB970 (US$133), reduced general and administrative expenses by RMB998 (US$137), reduced research and development expenses by RMB60 (US$8) and recorded other income of RMB821 (US$112) upon receipt of cash from government.

(n) Revenue Recognition

The Company's revenue is derived from the sales of silicon chips and wafer, providing assembly and testing ("A&T") service, and other revenue including sales of raw materials and scrapped materials.

The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied. The Company recognizes product revenue at a point in time when product is shipped to customer, and service revenue once rendered. The Company presents revenue net of sales taxes. The standard payment terms range from 30 to 90 days.

The Company's performance obligations relate to contracts with a duration of less than one year. The Company elected to apply the practical expedient provided in ASC 606, "Revenue from Contracts with Customers". Therefore, the Company is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The following is a summary of revenue by type:

			Years ended December 31
			2023						2024
			RMB						RMB						US$
Product			871,777						971,821						133,148
Others			11,979						10,126						1,387
Total			883,756						981,947						134,535

F-11

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

1. The Company and Significant Accounting Policies - continued

(o) Cost of goods sold

Cost of goods sold primarily consists of costs associated with semiconductor wafers, assembling and testing, shipping and handling, personnel, overhead attributable to manufacturing, impairment loss on manufacturing equipment, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories.

(p) Leases

The Company determines if an arrangement is a lease at inception. Right-of-use ("ROU") assets and lease liabilities are recognized for all leases based on the present value of the future minimum lease payments over the lease term at commencement date. The Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company classifies its leases into operating lease and finance lease. Operating leases are included in operating lease ROU assets and operating lease liabilities on the Company's balance sheets. Finance leases are included in property and equipment and finance lease liabilities on the balance sheets. Operating lease expense is recognized on a straight-line basis over the lease term, lease liability is amortized using the effective interest method over the lease period. The Company does not record leases on the balance sheet with a term of one year or less.

The Company leased certain idle manufacture equipment to related parties. The Company determines if an arrangement is a lease at inception. All leases are classified as operating leases and rents are recognized on a straight-line basis over the terms of the leases when collectability is probable, and the lessee has taken possession or controls the physical use of the leased equipment. The leased equipment is recognized in the statement of balance sheets as property and equipment, which lease income, net of depreciation expenses of the leased equipment, is recorded as other operating income, net in the statements of operations.

(q) Product Warranty

The Company provides a standard two-year warranty for the products from the date of purchase by the customers. The Company accrues for estimated warranty costs at the time revenue is recognized. The Company's warranty obligation is affected by product failure rates, labor and material costs for replacing defective products, related freight costs for failed parts and other quality assurance costs. The Company monitors its product returns for warranty claims and maintains warranty reserves based on historical experiences and anticipated warranty claims known at the time of estimation.

F-12

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

1. The Company and Significant Accounting Policies - continued

(r) Provision for Income Taxes

Income tax expense or benefit is based on income or loss before taxes. Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts.

Significant management judgment is required in determining whether deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or research and experimentation tax credit carry-forwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized. The Company considers all available positive and negative evidence when assessing whether it is more likely than not that deferred tax assets are recoverable. The Company considers evidence such as our past operating results, the existence of cumulative losses in recent years and our forecast of future taxable income.

The Financial Accounting Standards Board ("FASB") issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management.

(s) Share-based compensation

The Company grants restricted shares to the certain employees ("Share-based Awards"). The Company accounted for the Share-based Awards in accordance with ASC 718 Compensation—Stock Compensation. Vesting of Share-based Awards is subject to certain service and performance conditions. Employees are not entitled to transfer or redeem the share until twelve months after the Company completes initial public offering ("IPO condition"). Share-based Awards are measured at the grant date fair value using market approach and share-based compensation expenses are amortized on a straight-line basis over the service term but will not be recognized before the IPO condition is satisfied, at which time the cumulatively vested amount will be recognized.

2. Concentration of Credit Risk and Significant Customers

The Company manages its credit risk associated with exposure to customers on outstanding accounts receivable through the application of credit approvals, credit ratings and other monitoring procedures.

Credit sales, which are mainly on credit terms of 30 to 90 days, are only made to customers who meet the Company's credit standards, while sales to new customers or customers with low credit ratings are usually made on an advance payment basis. The Company considers its financial assets to be of good credit quality because its customers have long-standing business relationships with the Company and the Company has not experienced any significant bad debt write-offs of accounts receivable in the past. The Company closely monitors the aging of accounts receivable from customers, and regularly reviews their financial positions, where available.

The only customer whose revenue or accounts receivable balances were 10% or higher than the respective total amounts is the Company's related party, AOS Group. See note 14 for details of balance and transaction with AOS Group.

F-13

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

3. Cash and cash equivalents

			As of December 31,
			2023						2024
			RMB						RMB						US$
Cash at bank			168,471						199,491						27,332
Denominated in:
US$			99,151						131,249						17,982
RMB			69,320						68,242						9,350

Certain cash and bank balances denominated in US$ were deposited with banks in the PRC. The conversion of these US$ denominated balances into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

4. Inventories

			As of December 31,
			2023						2024
			RMB						RMB						US$
Raw materials			171,091						167,020						22,884
Work in progress			92,399						107,915						14,785
Finished goods			32,289						28,847						3,952
Inventories			295,779						303,782						41,621

The Company writes down inventory for any excess or obsolete inventories or when the Company believes that the net realizable value of inventories is less than the carrying value. For the years ended December 31, 2023 and 2024, the Company wrote down inventory of RMB5,434 and RMB5,466 (US$749), respectively.

5. Prepayments and other current assets

			As of December 31,
			2023						2024
			RMB						RMB						US$
Prepaid maintenance			414						686						94
Prepayment to supplier			1,744						2,037						279
VAT receivable			6,875						8,339						1,143
Others			2,592						2,376						325
Prepayments and other current assets			11,625						13,438						1,841

F-14

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

6. Property and equipment, net

Property and equipment, net consist of the following:

			As of December 31,
			2023						2024
			RMB						RMB									US$
Building			375,359						375,359									51,427
Manufacturing machinery and equipment			1,916,668						2,123,713									290,968
Equipment and tooling			265,001						268,241									36,751
Software			52,379						55,595									7,617
Office furniture and equipment			24,936						24,076									3,299
Vehicle and other fix asset			10,984						14,043									1,924
Long-term deferred expense			345						345									47
less: accumulated depreciation			(973,726)						(1,117,579)									(153,118)
Accumulated impairment loss			(17,721)						(20,698)									(2,836)
Equipment and construction in progress			369,694						274,734									37,641
Property and equipment, net			2,023,919						1,997,829									273,720

The depreciation for property and equipment for the years ended December 31, 2023 and 2024 were RMB148,580 and RMB144,968 (US$19,861) respectively. For the years ended December 31, 2023 and 2024, RMB7,975 and RMB2,977 (US$408) were recognized as impairment loss on manufacturing machinery and equipment, respectively.

7. Intangible assets, net

Intangible assets, net consist of the following:

			As of December 31,
			2023						2024
			RMB						RMB						US$
Patents and technology rights			571,243						571,243						78,265
Less: accumulated amortization			(290,136)						(349,595)						(47,897)
Intangible assets, net			281,107						221,648						30,368

The Company amortizes its intangible assets of patents and technology rights relating to power device semiconductors and wafer production over their estimated useful lives of 7 to 15 years. Amortization expenses for the years ended December 31, 2023 and 2024 were RMB59,458 and RMB59,458 (US$8,146), respectively.

Amortization expenses of the above intangible assets are expected to be approximately RMB59,458, RMB59,458, RMB59,458, and RMB43,274 for the years ending December 31, 2025, 2026, 2027, and 2028, respectively.

F-15

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

8. Accrued and other liabilities

			As of December 31,
			2023						2024
			RMB						RMB						US$
Accrued compensation and benefits			52,560						70,161						9,613
Accrued property and equipment			147,326						119,044						16,310
Warranty accruals			7,318						5,905						809
Accrued interest			1,703						472						65
Advance from customers			586						2,054						281
Advance payment from an investor									40,000						5,480
Others			37,551						34,153						4,679
Accrued and other liabilities			247,044						271,789						37,237

On December 30, 2024, the Company signed an investment agreement with an investor, pursuant to which the investor agreed to invest RMB500 million in the Company in three installments. The Company received the first installment of RMB40 million on December 31, 2024. The remaining installments were expected to be paid by July 31, 2025, but have not been received as of the issuance date of the audited financial statements. Taking into account that the Company completed the registration of the issuance of equity interest to the investor with the local government authority on January 15, 2025, the first instalment received was recorded as advance payment from an investor as of December 31, 2024.

9. Bank borrowings

Long-term debts

On March 12, 2019, the Company entered into a six-year credit facility agreement with Export-Import Bank of China in the aggregate principal amount of RMB200 million. The Company drew-down the whole facility in 2019. The interest was initially calculated based on the five-year Loan Prime Rate in China ("LPR") multiplied by 110%, subsequent to February 2, 2023, the interest is calculated based on the five-year Loan Prime Rate in China ("LPR") minus 10 basis points and shall be paid quarterly, and the interest rate is adjusted on February 3, May 3, August 3 and December 3 every year. This loan is secured by the buildings and certain equipment and land-use rights owned by the Company with a carrying value of RMB510 million as of December 31, 2024. As a condition of the loan arrangements, RMB14 million of cash is held as restricted cash by the Company as a deposit at the Company's bank until the principal is paid. As of December 31, 2024, the outstanding balance of the loan was RMB23 million.

On December 18, 2019, the Company entered into a five-year loan agreement with China Development Bank in the amount of US$24.0 million. The interest was initially calculated based on the London Inter-Bank Offered Rate ("LIBOR") of 6 months plus 2.8%, subsequent to June 30, 2023, the benchmark of interest rate was modified to Secured Overnight Financing Rate ("SOFR"), and the credit spread was increased to 3.23% and Interest rates are adjusted daily. This loan is secured by certain equipment and 100 patents owned by the Company with a carrying value of RMB1,052 million as of December 31, 2023. This loan shares collateral rights with the RMB250 million long-term loan signed on April 26, 2020. As of January 26, 2024, the principal and interest of the loan have been fully repaid, and then collateral has been released.

F-16

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

9. Bank borrowings - continued

Long-term debts - continued

On April 26, 2020, the Company entered into a five-year credit facility agreement with China Development Bank, Agricultural Bank of China, China Merchants Bank and Chongqing Rural Commercial Bank (collectively, "the Banks") in the aggregate principal amount of RMB250 million. The interest rate is calculated as the one-year LPR plus 1.3%, and interest rate is adjusted January 1 every year. This loan shares collateral rights with the US$24 million long-term loan signed on December 18, 2019. As of February 1, 2024, the principal and interest of the loan have been fully repaid, and then collateral has been released.

On July 17, 2023, the Company entered into a three-year loan agreement with China Merchants Bank to borrow a maximum of RMB200 million. There are certain financial covenants including quarterly sales and debt to assets ratio. The Company was fully in compliance with the covenants as of December 31, 2024 related to this facility. The maximum interest rate is calculated as the one-year LPR minus 65 basis points, and interest rate is adjusted July 19 every year. This loan is secured by certain equipment owned by the Company with a carrying value of RMB151 million as of December 31, 2024. As of December 31, 2024, the outstanding loan amount was RMB180 million.

On August 25, 2023, the Company entered into a three-year loan agreement with Bohai Bank to borrow a maximum of RMB100 million. The interest rate is fixed upon drawdown that calculated as the one-year LPR plus 40 basis points. On August 31, 2023, the Company drew down RMB20 million. As of December 31, 2024, the outstanding loan amount was RMB20 million.

On November 2, and December 25, 2023, the Company entered into three-year loan agreements with China Everbright Bank to borrow RMB50 million and RMB30 million. The interest rates are calculated respectively as five-year LPR minus 120 basis points and 160 basis points, and interest rate are respectively adjusted November 2 and December 25 every year. As of December 31, 2024, the outstanding loan amount was RMB80 million.

On December 5 and 20, 2023, the Company entered into three-year loan agreements with Export-Import Bank of China to borrow respectively RMB50 million and RMB100 million. The interest rate is fixed upon drawdown that calculated as the one-year LPR minus 75 basis points. As of December 31, 2024, the outstanding amount of the loans was RMB150 million.

On January 3, 2024, the Company entered into a three-year loan agreement with China Everbright Bank to borrow RMB20 million. The interest rate is calculated as the five-year LPR minus 160 basis points, and interest rate is adjusted January 3 every year. As of December 31, 2024, the outstanding loan amount was RMB20 million.

On January 29, 2024, the Company entered into a three-year loan agreement with China Citic Bank borrow a maximum of RMB60 million, then respectively drew down RMB30 million on January 29 and February 4, 2024. The interest rate is calculated as the one-year LPR minus 80 basis points, and interest rate are respectively adjusted January 29 and February 4 every year. As of December 31, 2024, the outstanding loan amount was RMB57 million.

On February 27, 2024, the Company entered into a three-year loan agreement with China Citic Bank borrow RMB40 million. The interest rate is calculated as the one-year LPR minus 80 basis points, and interest rate is adjusted February 27 every year. As of December 31, 2024, the outstanding loan amount was RMB38 million.

On April 1, 2024, the Company entered into a loan agreement with Export-Import Bank of China borrow RMB50 million for 36 months The interest rate is fixed upon drawdown that calculated as the one-year LPR minus 85 basis points. As of December 31, 2024, the outstanding loan amount was RMB50 million.

F-17

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

9. Bank borrowings - continued

Long-term debts - continued

December 31,						RMB						US$
2025						54,920						7,525
2026						417,240						57,166
2027						144,100						19,743
Total principal of debt						616,260						84,434
Less: debt issuance costs						-						-
Total principal of debt, less debt issuance costs						616,260						84,434

						Short-Term Debt									Long-Term Debt									Total
						RMB			US$						RMB			US$						RMB			US$
Principal amount						-			-						616,260			84,434						616,260			84,434
Add: mature in one year						54,920			7,525						(54,920)			(7,525)						-			-
Total						54,920			7,525						561,340			76,909						616,260			84,434

Financing lease

On May 9, 2018 (the "Effective Date"), the Company entered into a lease finance agreement and a security agreement (the "Agreements") with YinHai Leasing Company and China Import/Export Bank (the "Lenders"). Pursuant to the Agreements, the Lenders agree to provide an aggregate of RMB400 million of financing to the Company (the "Lease Financing"). In exchange for the Lease Financing, the Company agrees to transfer title of its assembly and testing equipment to the Lenders, and the Lenders lease such equipment to the Company under a five-year lease arrangement, pursuant to which the Company makes quarterly lease payments to the Lenders consisting of principal and interest based on a repayment schedule mutually agreed by the parties. The interest under the Lease Financing is accrued based on the five-year LPR multiplied by 1.15. Under the Agreements, at the end of the five-year lease term, the Lenders agree to sell such equipment back to the Company for a nominal amount RMB0.001. The Company's obligations under the Lease Financing are secured by the land and building

The lease financing shares the collateral rights both with the loan of RMB200 million signed on March 12, 2019 and the loan of RMB200 million signed on July 19, 2022 with The Export-Import Bank of China. The proceeds from the Lease Financing were used primarily for the acquisition and installation of the 12-inch fabrication equipment and other expenses of the Company relating to the completion of the fabrication facility located in Chongqing. The Agreements contain customary representation, warranties and covenants, including restrictions on the transfer of the Collateral. The Agreements also contain customary events of default, including but are not limited to, failure to make payments and breach of material terms under the Agreements. On June 28, 2020, the parties entered into a modification to this agreement as a result of a change in the bank reference rate, pursuant to which the interest rate was changed to be the five-year LPR plus 0.8125%. Other terms of this agreement remain the same. As of March 31, 2023, the financing leases has been fully repaid.

F-18

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

10. Lease

The Company evaluates contracts for lease accounting at contract inception and assesses lease classification at the lease commencement date. Operating leases are included in operating lease ROU assets, operating lease liabilities and operating lease liabilities - long-term on the Company's balance sheets. Finance leases are included in property and equipment, finance lease liabilities and finance lease liabilities-long-term on the balance sheets. The Company recognizes a ROU asset and corresponding lease obligation liability at the lease commencement date where the lease obligation liability is measured at the present value of the minimum lease payments. As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate at lease commencement. The Company uses an interest rate commensurate with the interest rate to borrow on a collateralized basis over a similar term with an amount equal to the lease payments. Operating leases are primarily related to offices facilities, employee apartments, and gas tank equipment. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. For operating leases, the amortization of the ROU asset and the accretion of its lease obligation liability result in a single straight-line expense recognized over the lease term. The finance lease is related to YinHai Leasing Company. The Company does not record leases on the balance sheet with a term of one year or less. Total lease expenses related to short-term leases were insignificant for the years ended December 31, 2023 and 2024.

The components of the Company's operating and finance lease expenses are as follows for the period presented:

			For the years ended
			2023						2024
			RMB						RMB						US$
Operating leases:
Fixed rent expense			12,075						10,530						1,443
Finance lease:
Amortization of equipment			4,539						-						-
Interest			358						-						-
Total lease expenses			16,972						10,530						1,443

Supplemental balance sheet information related to the Company's operating and finance lease is as follows (in thousands, except lease term and discount rate):

			As of December 31,
			2023						2024
			RMB						RMB						US$
Operating leases:
ROU assets associated with operating leases			71,757						58,703						8,043
Weighted average remaining lease term (in years)
Operating leases			9.00						8.00
Finance leases			-						-
Weighted average discount rate
Operating leases			5.35		%				5.32		%
Finance leases

F-19

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

10. Lease - continued

Supplemental cash flow information related to the Company's operating and finance lease is as follows:

			Years ended December 31,
			2023						2024
			RMB						RMB						US$
Cash paid from amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			12,226						11,049						1,514
Operating cash flows from finance lease			358						-						-
Financing cash flows from finance lease			23,000						-						-
Non-cash right-of-use assets obtained in acquisition for operating lease			2,853						1,922						263
Non-cash right-of-use assets decreased in rent adjustment or early termination for operating lease			-						(7,478)						(1,024)
Non-cash lease liabilities obtained in acquisition for operating lease			2,853						1,922						263
Non-cash lease liabilities decreased in rent adjustment or early termination for operating lease			-						(7,478)						(1,024)

Future minimum lease payments are as follows as of December 31, 2024:

						Operating Lease Payment						Operating Lease Payment
						RMB						US$
Years ending December 31,
2025						10,099						1,384
2026						9,389						1,286
2027						8,744						1,198
2028						8,551						1,172
2029						8,497						1,164
Thereafter						27,556						3,775
Total lease payments						72,836						9,979
Less: imputed interest						(13,572)						(1,859)
Total lease liabilities						59,264						8,120

11. Shareholders' Equity

In January 2022, certain third-party investors entered into investment agreements with the Company in total consideration of RMB509 million (US$80 million) to subscribe for the Company's equity interest ("2022 Financing"). As of December 31, 2022, the Company received all capital injection, of which RMB212,899 and RMB296,101 was recorded in paid-in capital and additional paid-in capital, respectively.

In January 2024, the Company repurchased certain restricted shares from terminated employees. The total consideration of RMB11,055(US$1,555) and RMB709(US$97) translation difference was recorded in paid-in capital and additional paid-in capital, respectively. (Note 12)

F-20

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

12. Share-based Compensation

On December 30, 2021, the Board of Directors approved a Share Incentive Plan ("Plan") to grant share-based compensation awards to attract, motivate, retain and reward its employees. Pursuant to the Plan, the Company reserved a total of 19,947,400 shares, of which 15,752,900 restricted shares as of December 31, 2023 were granted to certain employees through the employee stock holding platforms (the "Platform"), which are several limited partnerships. Under the Plan, employees are eligible to subscribe such restricted shares at one US$ dollar per each. Vesting is subject to certain service and performance conditions, which includes a condition where employees are not entitled to transfer or redeem the share until the Company's ordinary shares become listed securities over 12 months, which substantially creates a performance condition. The subscription consideration of RMB79,302(US$11,875) has been fully collected by the Company by the end of the year ended December 31, 2022.

The fair value of each restricted share granted was determined at RMB15.20 (US$2.38) using the market approach by reference to the fair value of the ordinary share indicating by the Company's most recent equity financing.

On January 19, 2024, the Company's shareholders approved to repurchase from the Platform 5,433,068 of issued restricted shares. This transaction included 1,555,232 shares with an original value of US$1 per share and the remaining 3,877,836 unpaid shares without any price. These shares were granted to the eligible employees who had left the Company by December 31, 2023 at a total consideration of RMB11,055(US$1,555). As a result, a total number of outstanding restricted shares under the Share Incentive Plan decreased to 10,319,832.

The following table discloses movements for the year ended December 31, 2024:

						Number of restricted shares
As of January 1, 2024						15,752,900
Repurchase						(5,433,068)
As of December 31, 2024						10,319,832
Number of restricted shares expected to vest						10,319,832

The Company did not recognize any share-based compensation expenses for restricted shares as the listing of the Company is assessed to be not probable as of December 31, 2024.

F-21

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

13. Income Tax Expense

Under PRC's Enterprise Income Tax Law ("EIT Law"), the statutory income tax rate is 25%, and the EIT rate will be reduced to 15% for the encouraged enterprises located in the western region which the Company met the requirement, according to the taxation No.23 in 2020 announced by China Development and Reform Commission of the Ministry of Finance and the State Administration, from January 1, 2021 to December 31, 2030. Additionally, as a recognized semiconductor integrated circuit production entity, the Company is entitled to a two-year exemption and three-year 50% reduction starting from the first profit making year after absorbing all prior years' tax losses. The Company has not entered into the first tax profitable year as of December 31, 2024. No provision for income taxes has been required to be accrued because the Company is in cumulative loss positions for the period presented. In 2023, the Company applied for Certified High and New Technology Enterprises ("HNTE"), thereby qualifying for an extended loss carryforward period of 10 years, increased from 5 years. To maintain its status as a HNTE, the Company must conduct an annual self-assessment to ensure it continues to meet the HNTE criteria; additionally, the Company must reapply for qualification every three years.

A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows:

						For the Years ended December 31,
						2023						2024
PRC Statutory income tax rate						25		%				25		%
Tax effect of non-deductible expenses in determining taxable profit						0		%				0		%
Research and development super deduction						4		%				8		%
Preferential tax rate						(10)		%				(10)		%
Changes in valuation allowance						(19)		%				(23)		%
Effective income tax rate						-						-

The principal components of the deferred tax assets are as follows:

						For the years ended December 31,
						2023						2024
						RMB						RMB						US$
Deferred tax assets:
Net loss carry-forward						153,610						125,942						17,255
Impairment provisions						3,205						4,331						593
Accrued warranty expenses						1,098						886						121
Accrued compensation						1,207						1,545						212
Deferred income of governmental subsidy						448						414						57
Accrued other expenses						2,174						(1,053)						(144)
Less: valuation allowance						(161,742)						(132,065)						(18,094)
Deferred tax assets, net						-						-						-

F-22

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

13. Income Tax Expense - continued

The Company considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will be more likely than not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of future profitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimates the Company is using to manage the underlying businesses. Valuation allowances are established for deferred tax assets based on a more likely than not threshold. The Company's ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. The Company has determined that for the deferred tax assets on temporary differences and net operating loss carry forwards, it is not able to conclude that the future realization of those net operating loss carry forwards and other deferred tax assets are more likely than not. As such, the Company has fully provided valuation allowance for the deferred tax assets as of December 31, 2023 and 2024. No unrecognized tax benefits and related interest and penalties were recorded in the period presented. Amounts of operating loss carry forwards were approximately RMB839 million (US$113 million) for the year ended December 31, 2024, which are expected to expire during the period from 2028 to 2034.

The following table presents the movement of the valuation allowance:

						For the year ended December 31, 2024
						RMB						US$
Balance as of December 31, 2023						161,742						22,160
Provided						10,014						1,372
Reversed						(39,691)						(5,438)
Balance as of December 31, 2024						132,065						18,094

14. Related party transactions

The table below sets forth the major related parties and the relationship with the Company as of December 31, 2023 and 2024:

Company Name						Relationship with the Company
Alpha and Omega Semiconductor Limited and its subsidiaries ("AOS Group")						Shareholder

(a)Amounts due from related parties

Account

Name of related parties

As of December 31,

2023

2024

RMB

RMB

US$

Amounts due from related parties, net

AOS Group

153,990

169,281

23,193

The balances of amounts due from related parties as of December 31, 2023 and 2024 are related to sale of finished goods to AOS Group.

(b)Amounts due to related parties

Account

Name of related parties

As of December 31,

2023

2024

RMB

RMB

US$

Amounts due to related parties

AOS Group

65,612

48,024

6,580

The balances of amounts due to related parties as of December 31, 2023 and 2024 are related to purchase of raw materials (RMB55,522 and RMB37,580 as of December 31, 2023 and 2024, respectively) and equipment (RMB10,090 and RMB10,444, as of December 31, 2023 and 2024, respectively) from AOS Group.

F-23

CHONGQING ALPHA AND OMEGA SEMICONDUCTOR LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2024

NOTES TO FINANCIAL STATEMENTS

(In Thousands of Renminbi, unless otherwise indicated)

14. Related party transactions - continued

(c)Sales and purchase with related parties

Accounts						Name of related parties						For the years ended December 31,
												2023						2024
												RMB						RMB						US$
Revenue from related parties						AOS Group						708,070						718,959						98,504
Other operating income, net from related parties						AOS Group						36						-						-
Purchase from related parties						AOS Group						64,252						80,074						10,971

For the years ended December 31, 2023 and 2024, all of the related parties balances and transactions are as above.

15. Commitments and Contingencies

As of December 31, 2024, the Company's commitments related to purchase of property and equipment contracted but not yet reflected in the financial statements were RMB65 million which are expected to be incurred for the year ending December 31, 2025.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. Legal costs incurred in connection with loss contingencies are expensed as incurred.

As of December 31, 2024, the Company doesn't have any contingency related to unsettled litigation.

16. Subsequent events

The subsequent events were evaluated through August 20, 2025, which is the issuance date of the audited financial statements.

On January 15, 2025, pursuant to a resolution adopted at the Board of Directors Meeting on December 24, 2024, the Company completed its business registration change, which resulted in the admission of a new investor as a new shareholder of the Company. Concurrently, the Company's registered capital was increased from USD 428,241 to USD 460,931.

In April 2025, certain assets of the Company amounting to RMB74,000 were seized by court order in connection with an arbitration initiated by a construction contractor over unpaid construction progress payments. The arbitration is in an early stage, and there are uncertainties with regard to the outcome of this arbitration as of the issuance date of the audited financial statements.

In July 2025, certain shareholders of the Company, including AOS, entered into a series of equity transfer agreements with a new investor. The investor plans to purchase 20.3% and 18.5% of the Company's shares from AOS and the other third-party shareholders, respectively. The purpose of these agreements is to make the investor the controlling shareholder of the Company. As of August 20, 2025, the transactions are not yet consummated.

F-24