Audit Committee

I. Membership

The Audit Committee of Applied Optoelectronics, Inc. (the “Corporation”) shall be comprised of at least three members of the Corporation’s Board of Directors (the “Board”). The members of the Audit Committee shall be appointed by the Board and shall collectively meet the applicable independence, financial literacy and other requirements of The NASDAQ Stock Market (“Nasdaq”) and applicable federal law. Members of the Audit Committee may be removed at any time, with or without cause, by the Board.

II. Quorum

A majority of the members of the Audit Committee shall constitute a quorum.

III. Frequency

The Audit Committee shall meet as required either on the dates of regular Board meetings or in special meetings as appropriate.

IV. Purpose

The purpose of the Audit Committee is to oversee the accounting and financial reporting processes of the Corporation and the audits of the Corporation’s financial statements.

V. Limitations

The Audit Committee shall not have authority to: (1) adopt, amend, or repeal the Corporation’s Bylaws; (2) fill vacancies on the Audit Committee or change its membership; (3) amend the Corporation’s Certificate of Incorporation; (4) act on matters assigned to other committees of the Board; or (5) take any action prohibited by the Corporation’s Certificate of Incorporation, Bylaws or applicable law.

VI. Minutes

Minutes will be kept of each meeting of the Audit Committee and will be provided to each member of the Board upon request. Unless otherwise restricted by the Corporation’s Certificate of Incorporation or Bylaws, any action that may be taken at any meeting of the Audit Committee may be taken without a meeting, if all members of the Audit Committee consent thereto in writing, and the writing is filed with the minutes of proceedings of such committee. Any action of the Audit Committee shall be subject to revision, modification, rescission, or alteration by the Board, provided that no rights of third parties shall be affected by any such revision, modification, rescission, or alteration.

VII. Powers, Responsibilities and Duties

To fulfill its responsibilities and duties, the Audit Committee shall:

  1. Be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation, and each such registered public accounting firm must report directly to the Audit Committee.  Periodically consider the rotation of the Corporation’s independent auditors.
  2. Resolve any disagreements between management and the Corporation’s independent auditors regarding financial reporting.
  3. Review the organization’s annual and quarterly financial statements and discuss the statements and reports with the Corporation’s management, including any significant adjustments, management judgements and estimates and new accounting policies, and review the organization’s quarterly earnings press releases.
  4. Pre-approve all auditing and permitted non-audit services to be performed by the Corporation’s auditors.
  5. Obtain, on an annual basis, a formal written statement from the independent auditor affirming their independence (as required by applicable standards of the Public Company Accounting Oversight Board or its successor) and delineating all relationships between the auditor and the Corporation that may reasonably be thought to bear on such independence. Discuss with the auditor any disclosed relationships or services that may impact the objectivity and independence of the auditor and take, or recommend that the Board take, appropriate action to oversee the independence of the independent auditor.
  6. Following completion of the annual audit, review separately with the independent auditor, the internal auditing department, if any, and management any significant difficulties encountered during the course of the audit.
  7. Review and consider the adequacy of the Corporation’s internal controls and the objectivity of the Corporation’s financial reporting.
  8. Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, as well as for the confidential, anonymous submission by the Corporation’s employees of concerns regarding questionable accounting or auditing matters.
  9. Retain independent counsel, experts and other advisors as the Audit Committee determines necessary to carry out its duties.
  10. Receive appropriate funds, as determined by the Audit Committee, from the Corporation for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation, (ii) compensation to any independent counsel, experts and other advisors employed by the Audit Committee, and (iii) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
  11. Review and approve all “related-party transactions” as such term is defined in Item 404 of Regulation S-K.
  12. Oversee compliance with the Corporation’s standards of business conduct and with the Foreign Corrupt Practices Act.
  13. Prepare the report of the Audit Committee required to be included in the Corporation’s annual proxy statement.
  14. Review and reassess the adequacy of this Charter at least annually and recommend any changes to the Board.
  15. Provide oversight and review of the Corporation’s asset management policies, including an annual review of the Corporation’s investment policies and performance for cash and short-term investments.
  16. Perform any other activities consistent with this Charter, the Corporation’s Bylaws, Nasdaq rules and governing law, as the Audit Committee or the Board deems necessary or appropriate, including, without limitation, the delegation of authority to one or more members of the Audit Committee of authority to carry out certain activities set forth hereunder.
Richard B. Black Min-Chu (Mike) Chen, Ph.D. Cynthia (Cindy) DeLaney
  • = Member
  • = Chair
  • = Financial Expert
  • = Independent Director