Alliance Fiber Optic Products (AFOP) 10-Q 7 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Entity Registrant Name	ALLIANCE FIBER OPTIC PRODUCTS INC
Entity Central Index Key	1,122,342
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,015
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		17,915,615
Trading Symbol	AFOP

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 20,459	$ 22,723
Short-term investments	37,455	31,857
Accounts receivable, net	13,442	10,806
Inventories, net	10,643	9,305
Deferred tax asset	3,332	3,690
Prepaid expenses and other current assets	2,672	2,077
Total current assets	88,003	80,458
Long-term investments	10,727	10,635
Property and equipment, net	15,689	13,868
Other assets	262	212
Total assets	114,681	105,173
Current liabilities:
Accounts payable	12,401	9,236
Accrued expenses	8,316	8,699
Total current liabilities	20,717	17,935
Other long-term liabilities	1,000	978
Total liabilities	$ 21,717	$ 18,913
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, par value $0.001: 5,000,000 shares authorized: no shares issued or outstanding at June 30, 2015 and December 31, 2014.
Common stock, $0.001 par value: 100,000,000 shares authorized; 17,894,715 and 17,942,595 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively.	$ 18	$ 18
Additional paid-in-capital	109,045	111,622
Accumulated deficit	(18,219)	(26,817)
Accumulated other comprehensive income	2,120	1,437
Stockholders' equity	92,964	86,260
Total liabilities and stockholders' equity	$ 114,681	$ 105,173

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	17,894,715	17,942,595
Common stock, shares outstanding	17,894,715	17,942,595

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Condensed Consolidated Statements of Income and Comprehensive Income [Abstract]
Revenues	$ 25,045	$ 24,199	$ 46,708	$ 49,081
Cost of revenues	14,550	14,504	27,421	29,472
Gross profit	10,495	9,695	19,287	19,609
Operating expenses:
Research and development	1,169	1,067	2,312	2,175
Selling, marketing and administrative	2,567	2,061	4,798	4,397
Total operating expenses	3,736	3,128	7,110	6,572
Income from operations	6,759	6,567	12,177	13,037
Interest and other income, net	192	186	388	333
Income before income taxes	6,951	6,753	12,565	13,370
Provision for income taxes	(1,911)	(2,971)	(3,967)	(4,573)
Net income	5,040	3,782	8,598	8,797
Other comprehensive income:
Cumulative translation adjustments	260	351	696	(61)
Unrealized gain (loss) on investments	(9)	2	(13)	(4)
Comprehensive income	$ 5,291	$ 4,135	$ 9,281	$ 8,732
Net income per share:
Basic	$ 0.28	$ 0.20	$ 0.48	$ 0.48
Diluted	$ 0.27	$ 0.20	$ 0.47	$ 0.46
Shares used in computing net income per share:
Basic	17,822	18,533	17,847	18,478
Diluted	18,422	19,230	18,406	19,116

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net Income	$ 8,598	$ 8,797
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	$ 1,339	1,392
Loss on disposal of property and equipment		1
Stock-based compensation	$ 1,266	1,247
Provision for inventory reserves	382	191
Deferred tax assets	1,636	2,792
Changes in assets and liabilities:
Accounts receivable	(2,636)	(3,348)
Inventories	(1,720)	1,241
Prepaid expenses and other current assets	(595)	199
Other assets	(50)	18
Accounts payable	3,165	(271)
Accrued expenses	(383)	1,461
Other long-term liabilities	22	22
Net cash provided by operating activities	11,024	13,742
Cash flows from investing activities:
Purchase of short-term investments	(51,491)	(18,911)
Proceeds from sales and maturities of short-term investments	45,880	14,826
Purchase of long-term investments	(92)	(90)
Purchase of property and equipment	(2,992)	(2,678)
Net cash used in investing activities	(8,695)	(6,853)
Cash flows from financing activities:
Proceeds from issuance of stock under ESPP	343	340
Proceeds from the exercise of common stock options	187	248
Tax payments related to net share settlements of RSUs	(329)	$ (2,211)
Repurchase of common stock	(5,322)
Net cash used in financing activities	(5,121)	$ (1,623)
Effect of exchange rate changes on cash and cash equivalents	528	(65)
Net (decrease) increase in cash and cash equivalents	(2,264)	5,201
Cash and cash equivalents at beginning of period	22,723	18,603
Cash and cash equivalents at end of period	20,459	23,804
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$ 2,245	$ 735

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2015
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	1. Summary of Significant Accounting Policies The Company Alliance Fiber Optic Products, Inc. (the “Company”) was incorporated in California on December 12, 1995 and reincorporated in Delaware on October 19, 2000. The Company designs, manufactures and markets fiber optic components for communications equipment manufacturers. The Company's headquarters are located in Sunnyvale, California, and it has operations in Taiwan and China. Basis of Presentation The accompanying condensed consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of June 30, 2015 and for the three months and six months ended June 30, 2015 and 2014 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and include the accounts of Alliance Fiber Optic Products, Inc. and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. The unaudited condensed consolidated financial statements as of June 30, 2015, and for the three and six months ended June 30, 2015 and 2014, reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial information set forth herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for any subsequent interim period or for an entire year. There have been no significant changes in the Company's critical accounting policies during the six months ended June 30, 2015 as compared to those disclosed in the Company's Form 10-K for the fiscal year ended December 31, 2014. Revenue Recognition The Company recognizes revenue upon shipment of its products to customers, provided that it has received a purchase order, the price is fixed, collection of the resulting receivable is reasonably assured and transfer of title and risk of loss has occurred. Subsequent to the sale of products, the Company has no obligation to provide any modification or customization upgrades, enhancements or post contract customer support. Allowance for Doubtful Accounts and Returns Allowances are provided for estimated returns and potential uncollectable trade receivables. Provisions for return allowances are recorded at the time revenue is recognized based on historical returns, current economic trends and changes in customer demand. Such allowances are adjusted periodically to reflect actual and anticipated experience. The Company also identifies specific accounts considered to have a high risk of uncollectability and records an allowance for the full amount. Material differences may result in the amount and timing of revenue for any period than if management had made different judgments or utilized different estimates. Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist primarily of money market accounts, corporate bonds and certificates of deposit. Short-Term and Long-Term Investments The Company generally invests its excess cash in certificates of deposit and corporate bonds. Such investments are made in accordance with the Company's investment policy, which establishes guidelines relative to diversification and maturities designed to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. Concentrations of Risk Connectivity products contributed 79.1 68.7 20.9 31.3 Connectivity products contributed 79.4 73.8 20.6 26.2 In the three months ended June 30, 2015 and 2014, the Company's 10 largest customers comprised 78.4 77.8 37.1 2.7 34.7 15.6 In the six months ended June 30, 2015 and 2014 , the Company's 10 largest customers comprised 77.9 78.5 40.8 42.3 11.3

Recent Accounting Pronouncement

Recent Accounting Pronouncements	6 Months Ended
	Jun. 30, 2015
Recent Accounting Pronouncements [Abstract]
Recent Accounting Pronouncements	2. Recent Accounting Pronouncements In July 2015, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on simplifying the measurement of inventory which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the issuance of the standard, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). The accounting guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial position or results of operations. In January 2015, the FASB issued guidance which eliminates the concept of extraordinary items in an entity's income statement. The changes in ASU 2015-01 are effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements. In May 2014, the FASB issued a new financial accounting standard which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements.

Stockholders' Equity

Stockholders' Equity	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity [Abstract]
Stockholders' Equity	3. Stockholders' Equity Stock Repurchase Program. On November 30, 2011 and October 29, 2014, the Company announced programs to repurchase up to $ 6.0 15.0 313,477 740,190 1,082 eight

Stock-based Compensation

Stock-based Compensation	6 Months Ended
	Jun. 30, 2015
Stock-based Compensation [Abstract]
Stock-based Compensation	4. Stock-based Compensation The Accounting Standards Codification (“ASC”) 718 requires companies to record compensation expense for stock options measured at fair value, on the date of grant, using an option-pricing model. The fair value of stock options granted and stock purchased pursuant to the Employee Stock Purchase Plan (“ESPP”) was determined using the Black-Scholes Model. Pursuant to the Company's 2000 Stock Incentive Plan (the “2000 Plan”), participants may be granted restricted stock units (“RSUs”), representing an unfunded, unsecured right to receive shares of the Company's common stock on the date specified in the recipient's award. The RSUs granted under the plan generally vest over two 50 three 33.3 four 25 five 20 award. During the six months ended June 30, 2015, the Company issued 194,500 Options granted under the 2000 Plan generally vest over four ten The following information relates to stock option activity for the six months ended June 30, 2015: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Shares Price Life Value Outstanding at December 31, 2014 693,100 $ 9.08 Granted 22,000 16.60 Exercised (40,900 ) 4.55 Forfeited (2,000 ) 3.91 Outstanding at June 30, 2015 672,200 $ 9.62 8.03 $ 6,003,308 Vested and expected to vest at June 30, 2015 655,361 $ 9.60 8.02 $ 5,866,144 Exercisable at June 30, 2015 116,465 $ 4.93 5.68 $ 1,586,731 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of the second quarter of fiscal 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2015. This amount changes based on the fair market value of the Company's stock. The total intrinsic value of options exercised was $ 0.2 0.5 0.7 0.9 Cash received from option exercises during the six months ended June 30 was $ 0.2 During the three and six months ended June 30, 2015, 31,279 0.3 Options to purchase 12,000 22,000 7.9 four The following table summarizes employee stock-based compensation expense resulting from stock options, RSUs and the ESPP (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Included in cost of revenue $ 137 $ 115 $ 258 $ 292 Included in operating expenses: Research and development 58 64 104 147 Selling, marketing and administrative 575 351 904 808 Total 633 415 1,008 955 Total stock-based compensation expense $ 770 $ 530 $ 1,266 $ 1,247

Inventories, net

Inventories, net	6 Months Ended
	Jun. 30, 2015
Inventories, net [Abstract]
Inventories, net	5. Inventories, net (in thousands) June 30, December 31, 2015 2014 Inventories: Finished goods $ 2,870 $ 2,545 Work-in-process 3,970 2,970 Raw materials 3,803 3,790 $ 10,643 $ 9,305 The inventory balances shown above are presented net of an allowance for excess and obsolete inventories of $ 1.9 2.4

Net Income Per Share

Net Income Per Share	6 Months Ended
	Jun. 30, 2015
Net Income Per Share [Abstract]
Net Income Per Share	6. Net Income Per Share Basic net income per share is computed by dividing net income for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the combination of dilutive common share equivalents, comprised of shares issuable under the Company's stock-based compensation plans, and the weighted-average number of shares of common stock outstanding during the period. The following table sets forth the computation of basic and diluted net income per share for the periods indicated (in thousands, except per share data): Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Numerator: Net income $ 5,040 $ 3,782 $ 8,598 $ 8,797 Denominator: Shares used in computing net income per share: Basic 17,822 18,533 17,847 18,478 Diluted 18,422 19,230 18,406 19,116 Net income per share: Basic $ 0.28 $ 0.20 $ 0.48 $ 0.48 Diluted $ 0.27 $ 0.20 $ 0.47 $ 0.46

Comprehensive Income

Comprehensive Income	6 Months Ended
	Jun. 30, 2015
Comprehensive Income [Abstract]
Comprehensive Income	7. Comprehensive Income Comprehensive income is defined as the change in equity of a company during a period resulting from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. The difference between net income and comprehensive income for the Company is due to foreign exchange translations adjustments and unrealized gain/loss on available-for-sale securities.

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2015
Income Taxes [Abstract]
Income Taxes	8. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company is subject to income tax in the United States and in various foreign jurisdictions. The effective tax rate is also affected by the taxable earnings in foreign jurisdictions with various different statutory tax rates. The Company reviews its expected annual effective income tax rates and makes changes on a quarterly basis as necessary based on certain factors such as forecasted annual operating income and valuation of deferred tax assets. The Company's effective tax rate was 31.6 34.2 The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. The Company reduced its deferred tax assets by $ 0.3

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies [Abstract]
Commitments and Contingencies	9. Commitments and Contingencies Litigation: From time to time, the Company may be involved in litigation in the normal course of business. As of the date of these financial statements, the Company is not aware of any material legal proceedings pending or threatened against the Company. Indemnification and Product Warranty: The Company indemnifies certain customers, suppliers and subcontractors for attorney fees and damages and costs awarded against these parties in certain circumstances in which products are alleged to infringe third party intellectual property rights, including patents, trade secrets, trademarks or copyrights. In all cases, there are limits on and exceptions to the potential liability for indemnification relating to intellectual property infringement claims. The Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements. As of June 30, 2015, the Company has not paid any claim or been required to defend any action related to indemnification obligations, and accordingly, the Company has not accrued any amounts for such indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. The Company generally warrants products against defects in materials and workmanship and non-conformance to specifications for varying lengths of time. If there is a material increase in customer claims compared with historical experience, or if costs of servicing warranty claims are greater than expected, the Company may record a charge against cost of revenues. The Company accrued $ 0.09 0.08 Operating Leases: The Company leases office space under long-term operating leases expiring at various dates through 2019. The Company's aggregate future minimum facility lease payments are as follows (in thousands): Years ending December 31: 2015 (remaining six months of the year) $ 501 2016 735 2017 453 2018 447 2019 392 Total $ 2,528

Related Party Transactions

Related Party Transactions	6 Months Ended
	Jun. 30, 2015
Related Party Transactions [Abstract]
Related Party Transactions	10. Related Party Transactions As of June 30, 2015, and based on information filed with the Securities and Exchange Commission on January 4, 2002 for the year ended December 31, 2000, Foxconn Holding Limited (“Foxconn”) and Hon Hai Precision Industry Co. Ltd. (“Hon Hai”) held 17.9 Sales of products to Hon Hai were $ 0.003 1.2 0.003 0.6 Sales of products to Hon Hai were $ 0.01 0.9 0.01 0.5

Fair Value of Financial instrum

Fair Value of Financial instruments	6 Months Ended
	Jun. 30, 2015
Fair Value of Financial instruments [Abstract]
Fair Value of Financial instruments	11. Fair Value of Financial instruments U.S. GAAP defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact a purchase or sale and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability. The Company uses a fair value hierarchy established by U.S. GAAP that established a three-tiered fair value hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable to prioritize inputs used to measure fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement. Those tiers are defined as follows: Level 1 — inputs are quoted prices in active markets for identical assets or liabilities. Level 2 — inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly. Level 3 — inputs are unobservable and shall be used to the extent that observable inputs are not available in the overall fair value measurement. In accordance with the U.S. GAAP Codification Topic 820, the following table represents the fair value hierarchy for the Company's financial assets (investments) measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014: Fair Value Measurements at Reporting Date Using Quoted Prices Significant in Active Other Significant Balance at Markets for Observable Unobservable June 30, Identical Assets Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Cash equivalents: Money market mutual funds $ 4,046 $ 4,046 $ - $ - Marketable Securities: Time deposits 22,310 22,310 - - Corporate bonds 15,145 - 15,145 - Long-term investments: Time deposits 10,727 10,727 - - Total $ 52,228 $ 37,083 $ 15,145 $ - Fair Value Measurements at Reporting Date Using Quoted Prices Significant in Active Other Significant Balance at Markets for Observable Unobservable December 31, Identical Assets Inputs Inputs 2014 (Level 1) (Level 2) (Level 3) Cash equivalents: Money market mutual funds $ 4,070 $ 4,070 $ - $ - Marketable Securities: Time deposits 21,782 21,782 - - Corporate bonds 10,075 - 10,075 - Long-term investments: Time deposits 10,635 10,635 - - Total $ 46,562 $ 36,487 $ 10,075 $ - As of June 30, 2015 and December 31, 2014, the Company held investments in corporate bonds, certificates of deposit, and money market securities. The Company's cash and cash equivalents consist of investments with original maturities of 90 91 365

Geographic Segment Information

Geographic Segment Information	6 Months Ended
	Jun. 30, 2015
Geographic Segment Information [Abstract]
Geographic Segment Information	12. Geographic Segment Information The Company operates in a single industry segment. This industry segment is characterized by rapid technological change and significant competition. The following is a summary of the Company's revenues generated by geographic segments, revenues generated by product lines and identifiable assets located in these segments (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues North America $ 14,601 $ 12,728 $ 30,136 $ 28,609 Europe 6,773 6,878 9,633 12,157 Asia 3,671 4,593 6,939 8,315 $ 25,045 $ 24,199 $ 46,708 $ 49,081 Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues Connectivity Products $ 19,802 $ 16,619 $ 37,065 $ 36,200 Optical Passive Products 5,243 7,580 9,643 12,881 $ 25,045 $ 24,199 $ 46,708 $ 49,081 June 30, December 31, 2015 2014 Property and Equipment, net United States $ 210 $ 185 Taiwan 8,958 8,568 China 6,521 5,115 $ 15,689 $ 13,868

Summary of Significant Accoun18

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2015
Summary of Significant Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying condensed consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of June 30, 2015 and for the three months and six months ended June 30, 2015 and 2014 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and include the accounts of Alliance Fiber Optic Products, Inc. and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. The unaudited condensed consolidated financial statements as of June 30, 2015, and for the three and six months ended June 30, 2015 and 2014, reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial information set forth herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for any subsequent interim period or for an entire year. There have been no significant changes in the Company's critical accounting policies during the six months ended June 30, 2015 as compared to those disclosed in the Company's Form 10-K for the fiscal year ended December 31, 2014.
Revenue Recognition	Revenue Recognition The Company recognizes revenue upon shipment of its products to customers, provided that it has received a purchase order, the price is fixed, collection of the resulting receivable is reasonably assured and transfer of title and risk of loss has occurred. Subsequent to the sale of products, the Company has no obligation to provide any modification or customization upgrades, enhancements or post contract customer support.
Allowance for Doubtful Accounts and Returns	Allowance for Doubtful Accounts and Returns Allowances are provided for estimated returns and potential uncollectable trade receivables. Provisions for return allowances are recorded at the time revenue is recognized based on historical returns, current economic trends and changes in customer demand. Such allowances are adjusted periodically to reflect actual and anticipated experience. The Company also identifies specific accounts considered to have a high risk of uncollectability and records an allowance for the full amount. Material differences may result in the amount and timing of revenue for any period than if management had made different judgments or utilized different estimates.
Cash and Cash Equivalents	Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist primarily of money market accounts, corporate bonds and certificates of deposit.
Short-Term and Long-Term Investments	Short-Term and Long-Term Investments The Company generally invests its excess cash in certificates of deposit and corporate bonds. Such investments are made in accordance with the Company's investment policy, which establishes guidelines relative to diversification and maturities designed to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.
Concentrations of Risk	Concentrations of Risk Connectivity products contributed 79.1 68.7 20.9 31.3 Connectivity products contributed 79.4 73.8 20.6 26.2 In the three months ended June 30, 2015 and 2014, the Company's 10 largest customers comprised 78.4 77.8 37.1 2.7 34.7 15.6 In the six months ended June 30, 2015 and 2014 , the Company's 10 largest customers comprised 77.9 78.5 40.8 42.3 11.3

Stock-based Compensation (Table

Stock-based Compensation (Tables)	6 Months Ended
	Jun. 30, 2015
Stock-based Compensation [Abstract]
Schedule of Stock Options Activity	Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Shares Price Life Value Outstanding at December 31, 2014 693,100 $ 9.08 Granted 22,000 16.60 Exercised (40,900 ) 4.55 Forfeited (2,000 ) 3.91 Outstanding at June 30, 2015 672,200 $ 9.62 8.03 $ 6,003,308 Vested and expected to vest at June 30, 2015 655,361 $ 9.60 8.02 $ 5,866,144 Exercisable at June 30, 2015 116,465 $ 4.93 5.68 $ 1,586,731
Schedule of Employee Stock-Based Compensation Expense	Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Included in cost of revenue $ 137 $ 115 $ 258 $ 292 Included in operating expenses: Research and development 58 64 104 147 Selling, marketing and administrative 575 351 904 808 Total 633 415 1,008 955 Total stock-based compensation expense $ 770 $ 530 $ 1,266 $ 1,247

Inventories, net (Tables)

Inventories, net (Tables)	6 Months Ended
	Jun. 30, 2015
Inventories, net [Abstract]
Schedule of Inventories	June 30, December 31, 2015 2014 Inventories: Finished goods $ 2,870 $ 2,545 Work-in-process 3,970 2,970 Raw materials 3,803 3,790 $ 10,643 $ 9,305

Net Income Per Share (Tables)

Net Income Per Share (Tables)	6 Months Ended
	Jun. 30, 2015
Net Income Per Share [Abstract]
Schedule of Computation of Basic and Diluted Net Income Per Share	Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Numerator: Net income $ 5,040 $ 3,782 $ 8,598 $ 8,797 Denominator: Shares used in computing net income per share: Basic 17,822 18,533 17,847 18,478 Diluted 18,422 19,230 18,406 19,116 Net income per share: Basic $ 0.28 $ 0.20 $ 0.48 $ 0.48 Diluted $ 0.27 $ 0.20 $ 0.47 $ 0.46

Commitments and Contingencies (

Commitments and Contingencies (Tables)	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies [Abstract]
Schedule of Aggregate Future Minimum Facility Lease Payments	Years ending December 31: 2015 (remaining six months of the year) $ 501 2016 735 2017 453 2018 447 2019 392 Total $ 2,528

Fair Value of Financial instr23

Fair Value of Financial instruments (Tables)	6 Months Ended
	Jun. 30, 2015
Fair Value of Financial instruments [Abstract]
Schedule of Financial Assets at Fair Value	Fair Value Measurements at Reporting Date Using Quoted Prices Significant in Active Other Significant Balance at Markets for Observable Unobservable June 30, Identical Assets Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Cash equivalents: Money market mutual funds $ 4,046 $ 4,046 $ - $ - Marketable Securities: Time deposits 22,310 22,310 - - Corporate bonds 15,145 - 15,145 - Long-term investments: Time deposits 10,727 10,727 - - Total $ 52,228 $ 37,083 $ 15,145 $ - Fair Value Measurements at Reporting Date Using Quoted Prices Significant in Active Other Significant Balance at Markets for Observable Unobservable December 31, Identical Assets Inputs Inputs 2014 (Level 1) (Level 2) (Level 3) Cash equivalents: Money market mutual funds $ 4,070 $ 4,070 $ - $ - Marketable Securities: Time deposits 21,782 21,782 - - Corporate bonds 10,075 - 10,075 - Long-term investments: Time deposits 10,635 10,635 - - Total $ 46,562 $ 36,487 $ 10,075 $ -

Geographic Segment Information

Geographic Segment Information (Tables)	6 Months Ended
	Jun. 30, 2015
Geographic Segment Information [Abstract]
Schedule of Segment Reporting Information	Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues North America $ 14,601 $ 12,728 $ 30,136 $ 28,609 Europe 6,773 6,878 9,633 12,157 Asia 3,671 4,593 6,939 8,315 $ 25,045 $ 24,199 $ 46,708 $ 49,081 Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues Connectivity Products $ 19,802 $ 16,619 $ 37,065 $ 36,200 Optical Passive Products 5,243 7,580 9,643 12,881 $ 25,045 $ 24,199 $ 46,708 $ 49,081 June 30, December 31, 2015 2014 Property and Equipment, net United States $ 210 $ 185 Taiwan 8,958 8,568 China 6,521 5,115 $ 15,689 $ 13,868

Summary of Significant Accoun25

Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Concentration Risk [Line Items]
Accounts receivable, net	$ 13,442		$ 13,442		$ 10,806
Customer A [Member]
Concentration Risk [Line Items]
Accounts receivable, net	$ 2,700		$ 2,700
Sales [Member] | Product Concentration Risk [Member] | Connectivity Products [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	79.10%	68.70%	79.40%	73.80%
Sales [Member] | Product Concentration Risk [Member] | Optical Passive Products [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	20.90%	31.30%	20.60%	26.20%
Sales [Member] | Customer Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	78.40%	77.80%	77.90%	78.50%
Sales [Member] | Customer Concentration Risk [Member] | Customer A [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	37.10%	34.70%	40.80%	42.30%
Sales [Member] | Customer Concentration Risk [Member] | Customer B [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		15.60%		11.30%

Stockholders' Equity (Details)

Stockholders' Equity (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Amount remaining under programs	$ 8
November 2011 Program [Member]
Class of Stock [Line Items]
Stock Repurchase Program, Authorized Amount (in dollars)	$ 6,000,000
Shares repurchased during period	1,082
2014 October Program [Member]
Class of Stock [Line Items]
Stock Repurchase Program, Authorized Amount (in dollars)	$ 15,000,000
Shares repurchased during period	313,477	740,190

Stock-based Compensation (Sched

Stock-based Compensation (Schedule of Stock Option Activity) (Details) - Jun. 30, 2015 - Employee Stock Option [Member] - USD ($)	Total	Total
Shares
Outstanding, beginning balance		693,100
Granted	12,000	22,000
Exercised		(40,900)
Forfeited		(2,000)
Outstanding, ending balance	672,200	672,200
Vested and expected to vest, end of period	655,361	655,361
Exercisable, end of period	116,465	116,465
Weighted Average Exercise Price
Outstanding, beginning balance		$ 9.08
Granted		16.60
Exercised		4.55
Forfeited		3.91
Outstanding, ending balance	$ 9.62	9.62
Vested and expected to vest, end of period	9.60	9.60
Exercisable, end of period	$ 4.93	$ 4.93
Weighted Average Remaining Contractual Life
Outstanding, ending balance		8 years 11 days
Vested and expected to vest, end of period		8 years 7 days
Exercisable, end of period		5 years 8 months 5 days
Aggregate Intrinsic Value
Outstanding, ending balance	$ 6,003,308	$ 6,003,308
Vested and expected to vest, end of period	5,866,144	5,866,144
Exercisable, end of period	$ 1,586,731	$ 1,586,731

Stock-based Compensation (Narra

Stock-based Compensation (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from the exercise of common stock options			$ 187	$ 248
Proceeds from issuance of stock under ESPP			343	340
Compensation costs	$ 770	$ 530	1,266	1,247
Unrecognized compensation cost	7,900		$ 7,900
Unrecognized compensation cost, recognition period			4 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock issued subject to RSUs			194,500
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Vesting rate			50.00%
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Vesting rate			33.30%
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Vesting rate			25.00%
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Four [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			5 years
Vesting rate			20.00%
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Plan duration			10 years
Intrinsic value of options exercised	$ 200	$ 700	$ 500	$ 900
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares were issued under ESPP	31,279		31,279
Proceeds from issuance of stock under ESPP	$ 300		$ 300

Stock-based Compensation (Sch29

Stock-based Compensation (Schedule of Employee Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 770	$ 530	$ 1,266	$ 1,247
Cost of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	137	115	258	292
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	58	64	104	147
Sales, Marketing and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	575	351	904	808
Operating Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 633	$ 415	$ 1,008	$ 955

Inventories, net (Details)

Inventories, net (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Inventories, net [Abstract]
Finished goods	$ 2,870	$ 2,545
Work-in-process	3,970	2,970
Raw materials	3,803	3,790
Inventory, Net	10,643	9,305
Allowance for excess and obsolete inventories	$ 1,900	$ 2,400

Net Income Per Share (Details)

Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net income	$ 5,040	$ 3,782	$ 8,598	$ 8,797
Weighted average of common shares outstanding
Basic	17,822	18,533	17,847	18,478
Diluted	18,422	19,230	18,406	19,116
Net income per share:
Basic	$ 0.28	$ 0.20	$ 0.48	$ 0.48
Diluted	$ 0.27	$ 0.20	$ 0.47	$ 0.46

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Income Taxes [Abstract]
Effective tax rate	31.60%	34.20%
Net operating losses utilized against current taxable income	$ (0.3)

Commitments and Contingencies33

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Indemnification and Product Warranty:
Accrued warranty reserves	$ 90	$ 80
Operating Leases:
2015 (remaining six months of the year)	501
2,016	735
2,017	453
2,018	447
2,019	392
Total	$ 2,528

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Related Party Transaction [Line Items]
Ownership percentage	17.90%
Hon Hai Precision Industry Co. Ltd. [Member]
Related Party Transaction [Line Items]
Net sales to related party	$ 3	$ 10
Purchases of raw materials from related party	1,200	900
Amounts due from related party	3	10
Amounts due to related party	$ 600	$ 500

Fair Value of Financial instr35

Fair Value of Financial instruments (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 4,046	$ 4,070
Total	52,228	46,562
Short-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	22,310	21,782
Corporate Bond Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	15,145	10,075
Long-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	10,727	10,635
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	4,046	4,070
Total	37,083	36,487
Fair Value, Inputs, Level 1 [Member] | Short-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	$ 22,310	$ 21,782
Fair Value, Inputs, Level 1 [Member] | Corporate Bond Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments
Fair Value, Inputs, Level 1 [Member] | Long-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	$ 10,727	$ 10,635
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Total	$ 15,145	$ 10,075
Fair Value, Inputs, Level 2 [Member] | Short-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments
Fair Value, Inputs, Level 2 [Member] | Corporate Bond Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	$ 15,145	$ 10,075
Fair Value, Inputs, Level 2 [Member] | Long-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Total
Fair Value, Inputs, Level 3 [Member] | Short-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments
Fair Value, Inputs, Level 3 [Member] | Corporate Bond Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments
Fair Value, Inputs, Level 3 [Member] | Long-Term Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments

Geographic Segment Informatio36

Geographic Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Revenues
Revenues	$ 25,045	$ 24,199	$ 46,708	$ 49,081
Property and Equipment
Property and Equipment, net	15,689		15,689		$ 13,868
North America [Member]
Revenues
Revenues	14,601	12,728	30,136	28,609
Europe [Member]
Revenues
Revenues	6,773	6,878	9,633	12,157
Asia [Member]
Revenues
Revenues	3,671	4,593	6,939	8,315
United States [Member]
Property and Equipment
Property and Equipment, net	210		210		185
Taiwan [Member]
Property and Equipment
Property and Equipment, net	8,958		8,958		8,568
China [Member]
Property and Equipment
Property and Equipment, net	6,521		6,521		$ 5,115
Connectivity Products [Member]
Revenues
Revenues	19,802	16,619	37,065	36,200
Optical Passive Products [Member]
Revenues
Revenues	$ 5,243	$ 7,580	$ 9,643	$ 12,881