10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from        to        

Commission File Number: 001-35061

NeoPhotonics Corporation

(Exact name of registrant as specified in its charter)

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

2911 Zanker Road

San Jose, California 95134

(Address of principal executive offices, zip code)

(408) 232-9200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨	(do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨     No   x

As of June 16, 2014, there were 31,780,761 shares of the registrant’s Common Stock outstanding.

NEOPHOTONICS CORPORATION

For the Quarter Ended March 31, 2014

Table of Contents

		Page
	Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2014 and 2013	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
	Part II. Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
	Signatures	29

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NEOPHOTONICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of
(In thousands, except per share data)	March 31, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	53,056		$	57,101
Short-term investments		8,285			17,916
Restricted cash		2,953			2,138
Accounts receivable, net of allowance for doubtful accounts		70,647			64,533
Inventories		67,949			64,908
Prepaid expenses and other current assets		12,503			9,977
Total current assets		215,393			216,573
Property, plant and equipment, net		66,115			68,851
Other intangible assets, net		13,972			15,005
Other long-term assets		1,820			1,798
Total assets	$	297,300		$	302,227
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	56,845		$	48,569
Notes payable		11,210			9,738
Current portion of long-term debt		10,395			10,325
Accrued and other current liabilities		26,246			23,643
Total current liabilities		104,696			92,275
Long-term debt, net of current portion		19,145			24,150
Deferred income tax liabilities		1,205			1,004
Other noncurrent liabilities		7,444			7,987
Total liabilities		132,490			125,416
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0025 par value
At March 31, 2014 and December 31, 2013: 10,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.0025 par value
At March 31, 2014: 100,000 shares authorized, 31,664 shares issued and outstanding;
At December 31, 2013: 100,000 shares authorized, 31,572 shares issued and outstanding		80			79
Additional paid-in capital		449,531			447,467
Accumulated other comprehensive income		10,209			11,687
Accumulated deficit		(295,010	)		(282,422	)
Total stockholders’ equity		164,810			176,811
Total liabilities and stockholders’ equity	$	297,300		$	302,227

See accompanying Notes to Condensed Consolidated Financial Statements.

3

NEOPHOTONICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months EndedMarch  31,
(In thousands, except per share data)	2014			2013
Revenue	$	68,168		$	56,063
Cost of goods sold		54,368			44,306
Gross profit		13,800			11,757
Operating expenses:
Research and development		12,056			9,707
Sales and marketing		3,411			3,586
General and administrative		8,987			5,059
Acquisition-related transaction costs		—			4,510
Amortization of purchased intangible assets		379			321
Restructuring charges		—			325
Total operating expenses		24,833			23,508
Loss from operations		(11,033	)		(11,751	)
Interest income		65			131
Interest expense		(251	)		(163	)
Other expense, net		(607	)		(274	)
Total interest and other expense, net		(793	)		(306	)
Loss before income taxes		(11,826	)		(12,057	)
Income tax expense		(762	)		(183	)
Net loss	$	(12,588	)	$	(12,240	)
Basic and diluted net loss per share	$	(0.40	)	$	(0.40	)
Weighted average shares used to compute basic and diluted net loss per share		31,610			30,574

See accompanying Notes to Condensed Consolidated Financial Statements.

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NEOPHOTONICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended March 31,
(In thousands)	2014			2013
Net loss	$	(12,588	)	$	(12,240	)
Foreign currency translation adjustments, net of tax of zero		(1,599	)		172
Defined benefit pension plans adjustment, net of tax of $73		118			-
Unrealized gain (loss) on investments, net of tax of zero		3			(19	)
Comprehensive loss	$	(14,066	)	$	(12,087	)

See accompanying Notes to Condensed Consolidated Financial Statements.

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NEOPHOTONICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
(In thousands)	2014			2013
Cash flows from operating activities
Net loss	$	(12,588	)	$	(12,240	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		5,528			4,152
Stock-based compensation expense		1,901			1,202
Deferred taxes		76			—
Investment-related amortization and accrued interest		56			315
Loss on disposal of property and equipment		15			111
Adjustment to fair value of penalty payment derivative		186			—
Allowance for doubtful accounts		(84	)		22
Write-down of inventories		567			30
Other, net		(333	)		34
Change in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(6,643	)		7,155
Inventories		(4,413	)		(4,682	)
Prepaid expenses and other assets		(2,512	)		(1,292	)
Accounts payable		9,168			2,126
Accrued and other liabilities		1,719			4,228
Net cash provided by (used in) operating activities		(7,357	)		1,161
Cash flows from investing activities
Purchase of property, plant and equipment		(2,070	)		(5,134	)
Purchase of marketable securities		(5,072	)		(29,030	)
Proceeds from sale of marketable securities		9,644			23,747
Proceeds from maturity of securities		5,007			20,900
Decrease (increase) in restricted cash		(879	)		524
Acquisition, net of notes payable		—			(14,087	)
Net cash provided by (used in) investing activities		6,630			(3,080	)
Cash flows from financing activities
Proceeds from exercise of stock options		303			151
Tax withholding on restricted stock units		(80	)		(72	)
Proceeds from bank loans		—			26,443
Repayment of bank loans		(5,157	)		(8,610	)
Proceeds from issuance of notes payable		6,178			4,881
Repayment of notes payable		(4,448	)		(6,482	)
Net cash provided by (used in) financing activities		(3,204	)		16,311
Effect of exchange rates on cash and cash equivalents		(114	)		72
Net increase (decrease) in cash and cash equivalents		(4,045	)		14,464
Cash and cash equivalents at the beginning of the period		57,101			36,940
Cash and cash equivalents at the end of the period	$	53,056		$	51,404
Supplemental disclosure of noncash investing and financing activities:
Issuance of notes to the seller of acquired business	$	—		$	11,130

See accompanying Notes to Condensed Consolidated Financial Statements.

6

NeoPhotonics Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Basis of presentation and significant accounting policies

Basis of Presentation and Consolidation

The condensed consolidated financial statements of NeoPhotonics Corporation (“NeoPhotonics” or the “Company”) as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013, have been prepared in accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, the Company has omitted certain information and notes normally provided in the Company’s annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the interim periods. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”). These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results expected for the entire fiscal year. All significant intercompany accounts and transactions have been eliminated.

Certain Significant Risks and Uncertainties

The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors.  For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the general state of the U.S. and world economies, the highly cyclical nature of the industries the Company serves; the loss of any of a small number of its larger customers; ability to obtain additional financing; inability to meet certain debt covenants; failure to successfully integrate completed acquisitions; fundamental changes in the technology underlying the Company’s products; the hiring, training and retention of key employees; successful and timely completion of product design efforts; and new product design introductions by competitors.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Significant estimates made by management include: the useful lives of property, plant and equipment and intangible assets as well as future cash flows to be generated by those assets; fair values of identifiable assets acquired and liabilities assumed in business combinations; allowances for doubtful accounts; valuation allowances for deferred tax assets; write off of excess and obsolete inventories and the valuations, warranty reserves and recognition of stock-based compensation, among others. Actual results could differ from these estimates.

Summary of Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies for the three months ended March 31, 2014, as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended December 31, 2013.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment.  The Company is in the process of evaluating the impact of adoption on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08") which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued

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operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In July 2013, the FASB issued amendments to the FASB Accounting Standard Codification on Income Taxes, to improve the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This guidance is expected to reduce diversity in practice and is expected to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exists. This guidance is effective for reporting periods beginning after December 15, 2013. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

Note 2. Net loss per share

The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):

	Three months endedMarch 31,
	2014			2013
Numerator:
Net loss	$	(12,588	)	$	(12,240	)
Denominator:
Weighted average shares used to compute basic and diluted net loss per share		31,610			30,574
Basic and diluted net loss per share	$	(0.40	)	$	(0.40	)

The Company has excluded the impact of outstanding employee stock options, restricted stock units, common stock warrants and shares expected to be issued under its employee stock purchase plan from the computation of diluted net loss per share attributable to NeoPhotonics Corporation common stockholders, as their effect would have been antidilutive.  The shares potentially issuable for each of these outstanding awards at March 31, 2014 and 2013 were as follows (in thousands):

	March 31,
	2014		2013
Employee stock options		3,952		2,759
Restricted stock units		1,134		849
Employee stock purchase plan		469		484
Common stock warrants		4		4
		5,559		4,096

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Note 3. Cash equivalents and investments

The following table summarizes the Company’s unrealized gains and losses related to the cash equivalents and investments in marketable securities designated as available-for-sale (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and cash equivalents
Money market funds	$	16	$	—	$	—	$	16	$	11	$	—	$	—		$	11
Time deposits		—		—		—		—		6,540		—		—			6,540
Short-term investments
Money market funds		—		—		—		—		4,577		—		—			4,577
Corporate bonds		4,571		—		—		4,571		6,708		3		(5	)		6,706
Foreign bonds and notes		2,008		6		—		2,014		4,827		5		—			4,832
Variable rate demand notes		1,700		—		—		1,700		1,801		—		—			1,801
Total short-term investments		8,279		6		—		8,285		17,913		8		(5	)		17,916
Total investments	$	8,295	$	6	$	—	$	8,301	$	24,464	$	8	$	(5	)	$	24,467

As of March 31, 2014 and December 31, 2013, maturities of marketable securities were as follows (in thousands):

	March 31, 2014		December 31, 2013
Less than 1 year	$	4,587	$	20,658
Due in 1 to 2 years		2,014		2,008
Due in 2 to 5 years		—		—
Due after 5 years		1,700		1,801
Total	$	8,301	$	24,467

The Company may sell its investments in the future to fund future operating needs. As a result, the Company recorded all its marketable securities in short-term investment as of March 31, 2014 and December 31, 2013, regardless of the contractual maturity date of the securities.

Realized gains and losses on the sale of marketable securities during the three months ended March 31, 2014 and 2013 were immaterial. The Company did not recognize any impairment losses on its marketable securities during the three months ended March 31, 2014 or 2013. As of March 31, 2014, the Company did not have any investments in marketable securities that were in an unrealized loss position for a period in excess of 12 months.

Note 4. Fair value disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the Company's assets that are measured at fair value on a recurring basis (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash, cash equivalents and short-term investments
Money market funds	$	16	$	—	$	—	$	16	$	4,588	$	—	$	—	$	4,588
Time deposits		—		—		—		—		—		6,540		—		6,540
Corporate bonds		—		4,571		—		4,571		—		6,706		—		6,706
U.S. federal agencies		—		—		—		—		—		—		—		—
Foreign bonds and notes		—		2,014		—		2,014		—		4,832		—		4,832
Variable rate demand notes		—		1,700		—		1,700		—		1,801		—		1,801
	$	16	$	8,285	$	—	$	8,301	$	4,588	$	19,879	$	—	$	24,467
Mutual funds held in Rabbi Trust	$	484	$	—	$	—	$	484	$	442	$	—	$	—	$	442

The Company offers a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of its highly compensated employees.  The NQDC Plan provides participants the opportunity to defer payment of certain compensation as defined in the NQDC

9

Plan.  A Rabbi Trust has been established to fund the NQDC Plan obligation, which was fully funded at March 31, 2014. The assets held by the Rabbi Trust are substantially in the form of exchange traded mutual funds and are included in the Company’s other long-term assets on its condensed consolidated balance sheets at March 31, 2014 and December 31, 2013.

The following table presents the Company's liabilities that are measured at fair value on a recurring basis (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent consideration (Note 10)	$	—	$	—	$	1,985	$	1,985	$	—	$	—	$	1,985	$	1,985
Penalty payment derivative (Note 10)	$	—	$	—	$	425	$	425	$	—	$	—	$	239	$	239

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

There were no assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2014 or December 31, 2013.

Assets and Liabilities Not Measured at Fair Value

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term nature and liquidity of these financial instruments.

The fair values of the Company’s long-term debt have been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of liabilities with a similar maturity and discounting the cash flows at that rate which it considers to be a level 2 fair value measurement. The fair values do not necessarily give an indication of the amount that the Company would currently have to pay to extinguish any of this debt.

The fair value of the Company’s variable rate bank borrowings and acquisition-related debt was not materially different than its carrying value at March 31, 2014 and December 31, 2013 as the interest rates approximated rates currently available to the Company.  

Note 5. Business combination

On March 29, 2013 (the “closing date”) the Company acquired certain assets and assumed certain liabilities related to the semiconductor Optical Components Business Unit (the “OCU”) of LAPIS Semiconductor Co., Ltd., a wholly owned subsidiary of Rohm Co., Ltd (“LAPIS”) of Japan with the intention of operating the OCU as an ongoing business. The business is now known as NeoPhotonics Semiconductor.

Total consideration for NeoPhotonics Semiconductor was $24.3 million, including cash of $14.1 million paid upon closing and notes payable of $11.1 million (see Note 8), partially offset by a net receivable from Lapis of $1.0 million that was received subsequent to March 31, 2013. The cash paid includes $2.0 million that was withheld and placed into escrow to cover certain indemnity obligations.

In connection with the acquisition, the Company incurred approximately $4.5 million in acquisition-related transaction costs during the three months ended March 31, 2013 related to investment banking, legal, accounting and other professional services and transfer taxes related to real property acquired. The acquisition costs were expensed as incurred and were included in operating expenses in the Company’s condensed consolidated statement of operations.

NeoPhotonics Semiconductor’s results of operations between the closing date of March 29, 2013 and the Company’s quarter end date of March 31, 2013 were immaterial.

10

The Company accounted for its acquisition of the NeoPhotonics Semiconductor assets and assumed liabilities as a business combination. NeoPhotonics Semiconductor’s tangible and identifiable intangible assets acquired and liabilities assumed were recorded based upon their estimated fair values as of the closing date of the acquisition. The estimated fair values of the identifiable assets acquired and liabilities assumed approximated the purchase price; therefore, no goodwill was recorded. The following table summarizes the acquisition accounting and the tangible and intangible assets acquired as of the date of acquisition and subsequent adjustments (in thousands):

Total purchase consideration:
Cash paid	$	14,087
Net receivable from LAPIS		(959	)
Notes payable		11,130
	$	24,258
Liabilities assumed:
Pension and retirement obligations	$	6,471
Other compensation-related liabilities		1,083
Other current liabilities		1,265
	$	8,819
Fair value of assets acquired:
Inventory	$	13,309
Other current assets		35
Land, property, plant and equipment		14,433
Intangible assets acquired:
Developed technology		2,120
Customer relationships		3,180
	$	33,077

The following unaudited supplemental pro forma information presents the combined results of operations of NeoPhotonics Corporation and NeoPhotonics Semiconductor for the three months ended March 31, 2013 as though the companies had been combined as of the beginning of the period presented. The pro forma financial information includes elimination of $4.5 million of transaction costs and $1.9 million of revenue and $1.8 million of costs related to sales from NeoPhotonics Semiconductor to the Company.

The unaudited pro forma results do not assume any operating efficiencies as a result of the consolidation of operations (in thousands, except per share data):

	Three Months Ended March 31, 2013
Revenue	$	68,754
Net loss	$	(5,277	)
Basic and diluted net loss per share	$	(0.17	)

Note 6. Balance sheet components

Accounts receivable, net

Accounts receivable, net consists of the following (in thousands):

	March 31, 2014			December 31, 2013
Accounts receivable	$	64,586		$	57,010
Trade notes receivable		6,480			8,054
Allowance for doubtful accounts		(419	)		(531	)
	$	70,647		$	64,533

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Inventories

Inventories consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Raw materials	$	27,876	$	26,379
Work in process		22,844		14,341
Finished goods (1)		17,229		24,188
	$	67,949	$	64,908

⁽¹⁾Finished goods inventory at customer vendor managed inventory locations was $4.9 million and $5.4 million as of March 31, 2014 and December 31, 2013, respectively.

Purchased intangible assets

Purchased intangible assets consist of the following (in thousands):

	March 31, 2014							December 31, 2013
	Gross Assets		Accumulated Amortization			Net Assets		Gross Assets		Accumulated Amortization			Net Assets
Technology and patents	$	34,250	$	(26,337	)	$	7,913	$	34,524	$	(25,931	)	$	8,593
Customer relationships		14,920		(9,967	)		4,953		15,004		(9,732	)		5,272
Leasehold interest		1,373		(267	)		1,106		1,406		(266	)		1,140
Noncompete agreements		950		(950	)		—		950		(950	)		—
	$	51,493	$	(37,521	)	$	13,972	$	51,884	$	(36,879	)	$	15,005

Amortization expense relating to technology and patents and the leasehold interest intangible assets is included within cost of goods sold, and customer relationships within operating expenses. The following table presents details of the amortization expense of the Company’s purchased intangible assets as reported in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of goods sold	$	714	$	428
Operating expenses		379		321
Total	$	1,093	$	749

The estimated future amortization expense of purchased intangible assets as of March 31, 2014, is as follows (in thousands):

2014 (remaining 9 months)	$	3,275
2015		4,426
2016		3,682
2017		807
2018		591
Thereafter		1,191
	$	13,972

Accrued and other current liabilities

Accrued and other current liabilities consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Employee-related accrued expenses	$	14,449	$	12,297
Other accrued expenses		11,372		11,346
Penalty payment derivative		425		—
	$	26,246	$	23,643

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Warranty Accrual

The table below summarizes the movement in the warranty accrual, which is included in accrued and other current liabilities (in thousands):

	Three Months Ended March 31,
	2014			2013
Beginning balance	$	1,737		$	1,072
Warranty accruals		289			26
Settlements and adjustments		(357	)		86
Ending balance	$	1,669		$	1,184

Other noncurrent liabilities

Other noncurrent liabilities consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Pension and other employee-related	$	6,098	$	6,206
Penalty payment derivative		—		239
Other		1,346		1,542
	$	7,444	$	7,987

Note 7. Restructuring

The following table summarizes activity associated with restructuring obligations during the three months ended March 31, 2014 (in thousands):

	Facilities			Contract Termination			Total
Restructuring obligations, December 31, 2013	$	211		$	66		$	277
Restructuring costs incurred		—			—			—
Cash payments		(27	)		(66	)		(93	)
Non-cash settlements and other		—			—			—
Restructuring obligations, March 31, 2014	$	184		$	—		$	184

Note 8. Debt

The table below summarizes the carrying amount and weighted average interest rate of the Company’s notes payable and long-term debt (in thousands, except percentages):

	March 31, 2014						December 31, 2013
	Carrying Amount			Weighted Average Interest Rate			Carrying Amount		Weighted Average Interest Rate
Notes payable	$	11,210				$	9,738		—
Long-term debt:
Acquisition-related	$	6,790		1.50	%	$	9,975		1.50	%
Bank borrowings		22,750		3.15	%		24,500		2.92	%
		29,540					34,475
Less: current portion of long-term debt		(10,395	)				(10,325	)
Total long-term debt, net of current portion	$	19,145				$	24,150

Notes payable

The Company regularly issues notes payable to its suppliers in China in exchange for accounts payable. These notes are supported by noninterest bearing bank acceptance drafts and are due three to six months after issuance. As a condition of the notes payable arrangements, the Company is required to keep a compensating balance at the issuing banks that is a percentage of the total

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notes payable balance until the amounts are settled. These balances are classified as restricted cash on the Company’s consolidated balance sheets. As of March 31, 2014 and December 31, 2013, restricted cash totaled $3.0 million and $2.1 million, respectively. In May 2014, one of the Company’s subsidiaries in China issued a 90-day bank acceptance draft of $8.0 million to another of the Company’s subsidiaries that required a compensating balance of $2.4 million.  This bank acceptance draft can be sold for cash at a discount prior to its expiration.

At March 31, 2014, the Company’s subsidiaries in China had two short-term line of credit facilities with banking institutions, both of which subsequently expired. In June 2014, one of the credit facilities was renewed.  Under the renewed agreement, which expires in June 2015, the Company’s subsidiaries in China have a short-term line of credit of RMB 160.0 million ($25.7 million) of which the full amount can be used for bank acceptance drafts (with a 25% compensating balance requirement) and up to RMB 120.0 million ($19.3 million) can be used for short-term loans, which will bear interest at varying rates depending upon the term.  The second credit facility is in the process of being renewed.

Acquisition-related

In connection with the acquisition of NeoPhotonics Semiconductor on March 29, 2013, the Company was obligated to pay 1,050 million Japanese Yen in three equal installments on the first, second and third anniversaries of the closing date for the purchase of the real estate used by NeoPhotonics Semiconductor, of which 700 million Japanese Yen ($6.8 million) was outstanding at March 31, 2014. The obligation bears interest at 1.5% per year, payable annually, and is secured by the acquired real estate property.

Bank borrowings

The Company has a credit agreement with Comerica Bank as lead bank in the U.S., which has been amended several times. The components of the available credit facilities are as follows:

— A revolving credit facility under which there was nothing outstanding at March 31, 2014 or December 31, 2013 and $20.0 million was available for borrowing at March 31, 2014, subject to covenant requirements. Amounts borrowed are due on or before March 2016 and borrowings bear interest at an interest rate option of a base rate as defined in the agreement plus 1.75% or LIBOR plus 2.75%. As of March 31, 2014 the rate on the LIBOR option was 2.90%.

— A term loan facility of $28.0 million, under which $22.8 million and $24.5 million was outstanding at March 31, 2014 and December 31, 2013, respectively. Interest is payable quarterly in arrears and the principal is paid in equal quarterly installments over the term of the loan ending in June 2017. Borrowings under the term loan bear interest at an interest rate option of a base rate as defined in the agreement plus 2.0% or LIBOR plus 3.0%. As of March 31, 2014 the rate on the LIBOR option was 3.15%.

The Company’s credit agreement requires the maintenance of specified financial covenants, including a debt to EBITDA ratio and liquidity ratios.  The agreement also restricts the Company’s ability to incur certain additional debt or to engage in specified transactions, restricts the payment of dividends and is secured by substantially all of its U.S. assets, other than intellectual property assets. The Company was not in compliance with the debt to EBITDA covenant at March 31, 2014, which noncompliance was effectively waived in the amendment described below.  

On May 19, 2014, the Company executed an amendment to the credit agreement that waived the testing of certain covenants for compliance, including the March 31, 2014 debt to EBITDA covenant, provided that the Company maintain compensating balances equal to outstanding amounts under the credit agreement in accounts for which the bank will have sole access.  The Company intends to work with the bank in the coming months to restructure the credit agreement, including the covenant requirements.  In the absence of a restructured agreement, the Company believes it will need to continue to maintain the compensating balances at least through the end of 2014. As of May 19, 2014, the amount of the Company’s cash and short-term investments in these compensating balance accounts was $21.1 million, which will be classified as restricted cash on the Company’s June 30, 2014 condensed consolidated balance sheet.    

At March 31, 2014, maturities of long-term debt were as follows (in thousands):

2014 (remaining nine months)	$	5,250
2015		10,395
2016		10,395
2017		3,500
	$	29,540

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On May 23, 2014, one of the Company’s subsidiaries in China borrowed CNY 50 million ($8.0 million) under a working capital loan agreement with a bank.  The loan bears interest at 7% per annum.  Interest is payable monthly and the principal is due on November 23, 2014.

Note 9. Japan pension plans

In connection with its acquisition of NeoPhotonics Semiconductor on March 29, 2013, the Company assumed responsibility for two defined benefit plans that provide retirement benefits to its NeoPhotonics Semiconductor employees in Japan: the Retirement Allowance Plan (“RAP”) and the Defined Benefit Corporate Pension Plan (“DBCPP”). The RAP is an unfunded plan administered by the Company.  Effective February 28, 2014, the DBCPP was converted to a defined contribution plan (“DCP”). In May 2014, LAPIS transferred approximately $2.0 million into the newly formed DCP which is the allowable amount that can be transferred according to the Japanese regulations.   LAPIS also will pay the Company approximately $0.3 million in connection with the conversion of the plan, which the Company has included in prepaid expenses and other current assets at March 31, 2014. Additionally, the Company transferred the net unfunded projected benefit obligation amount from the DBCPP to the RAP and froze the RAP benefit at the February 28, 2014 amount.

As a result of these changes to the DBCPP and the RAP, the Company recorded a curtailment gain of $0.1 million in the quarter ended March 31, 2014. The pension liability at March 31, 2014 was $5.7 million.

The Company contributed $15,000 to the DBCPP from January 1, 2014 to February 28, 2014.  Because the DBCPP transitioned to the DCP on that date, no further contributions to the DBCPP are required.

Net periodic pension cost associated with these plans for the period from December 31, 2013 to February 28, 2014 included the following components (in thousands):

Service cost	$	53
Interest cost		13
Amortization		1
Net periodic pension costs	$	67

Note 10. Commitments and contingencies

Litigation

From time to time, the Company is subject to various claims and legal proceedings, either asserted or unasserted, that arise in the ordinary course of business. The Company accrues for legal contingencies if the Company can estimate the potential liability and if the Company believes it is more likely than not that the case will be ruled against it. If a legal claim for which the Company did not accrue is resolved against it, the Company would record the expense in the period in which the ruling was made. The Company does not believe that the ultimate amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect the Company’s financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, and unfavorable outcomes could have a material negative impact on the Company’s financial condition and operating results. Regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, negative publicity, diversion of management resources and other factors.

On January 5, 2010, Finisar Corporation, or Finisar, filed a complaint in the U.S. District Court for the Northern District of California against Source Photonics, Inc., MRV Communications, Inc., Oplink Communications, Inc. and the Company, or collectively, the co-defendants. In the complaint, Finisar alleged infringement of certain of its U.S. patents arising from the codefendants’ respective manufacture, importation, use, sale of or offer to sell certain optical transceiver products. On March 23, 2010, the Company filed an answer to the complaint and counterclaims, asserting two claims of patent infringement and additional claims asserting that Finisar has violated state and federal competition laws and violated its obligations to license on reasonable and non-discriminatory terms. On May 5, 2010, the court dismissed without prejudice all co-defendants (including the Company) except Source Photonics, Inc., on grounds that such claims should have been asserted in four separate lawsuits, one against each defendant. This dismissal without prejudice does not prevent Finisar from bringing a new similar lawsuit against the Company. On January 18, 2011, the Company and Finisar agreed to suspend their respective claims and not to refile the originally asserted claims against each other until at least 90 days after one or more specified events occur resulting in the partial or complete resolution of litigation involving the same Finisar patents between Oplink Communications, Inc. and Finisar. This tolling period expired on April 30, 2012. On May 3, 2012 the Company and Finisar agreed to further toll their respective claims until the refiling of certain of the previously asserted claims from this dispute. As a result, Finisar is permitted to bring a new lawsuit against the Company if it chooses to do so, and the Company may bring new claims against Finisar upon seven days written notice prior to filing such claims. The Company is

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currently unable to predict the outcome of this dispute and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. As of March 31, 2014, the Company does not have any material indemnification claims that were probable or reasonably possible.

Leases

The Company leases various facilities under non-cancelable operating leases expiring through 2023.  Future minimum payments under these operating leases totaled $6.3 million as of March 31, 2014. Rent expense was $0.5 million and $0.6 million for the three months ended March 31, 2014 and 2013, respectively.

Settlement with Santur

In May 2014, the Company entered into a settlement agreement covering the outstanding claims in connection with its 2011 acquisition of Santur Corporation (“Santur”). Under the terms of the settlement agreement, a net amount of $1.9 million was paid to the Company from the escrow account that was set up under the original merger agreement. This amount comprises $3.9 million related to certain indemnification claims by the Company (“Indemnification Amount”) which were partially offset by $2.0 million related to additional consideration for the business acquisition that was contingent upon Santur’s gross profit performance during 2012 (“Contingent Consideration Amount”).   The Company had recorded the entire $2.0 million as its estimated fair value of the Contingent Consideration Amount as of December 31, 2013. Because it is considered to be a contingent gain, the $3.9 million Indemnification Amount will not be recognized until the quarter ended June 30, 2014 (the quarter in which it was received).

Penalty Payment Derivative

In connection with a private placement transaction in 2012, the Company agreed to certain performance obligations including establishing a wholly-owned subsidiary in the Russian Federation and making a $30.0 million investment commitment (the ‘Investment Obligation’) towards the Company’s Russian operations. The Investment Obligation can be partially satisfied by investment outside of the Russian Federation and/or by way of non-cash asset transfers, including but not limited to capital equipment, small tools, intellectual property, and other intangibles.  A minimum of $15.0 million of the Investment Obligation is required to be satisfied by making capital expenditures and the remaining $15.0 million can be satisfied through general working capital and research and development expenditures.  All of the amount for general working capital can be spent either inside or outside of Russia.  However, at least 80% of the amount expended for research and development expenditure must be spent inside Russia.  General working capital can include acquisition of other businesses or portions thereof to be owned by the Russian subsidiary.

The purchaser of the common stock has non-transferable veto rights over the Company’s Russian subsidiary’s annual budget during the investment period and must approve non-cash asset transfers to be made in satisfaction of the Investment Obligation.  Spending and/or commitments to spend for general working capital and research and development do not require approval by the purchaser. There are no legal restrictions on the specific usage of the $39.8 million received in the private placement transaction or on withdrawal from the Company’s bank accounts for use in general corporate purposes.

The Company is required to satisfy the Investment Obligation by July 31, 2014 or, in the event the Company has not recorded aggregate revenue from sales of its products in the Russian Federation of at least $26.8 million during the period beginning July 1, 2012 and ending June 30, 2014, then will be automatically extended from July 31, 2014 to March 31, 2015. The Company expects the date for achievement of the Investment Obligation will be extended to March 31, 2015. Therefore, the Company intends to meet its Investment Obligation by March 31, 2015.  If the Company fails to meet the Investment Obligation by the deadline, including failure to meet the Investment Obligation because the purchaser of the common stock does not approve the transfer of non-cash assets, the Company will be required to pay a $5.0 million penalty (the ‘Penalty Payment’) as the sole and exclusive remedy for damages and monetary relief available to the purchaser for failure to meet the Investment Obligation.  

The Company has accounted for the $5.0 million Penalty Payment as an embedded derivative instrument, with the underlying being the performance or nonperformance of meeting the Investment Obligation by the extended deadline of March 31, 2015. The fair value of the Penalty Payment derivative has been estimated at the date of the original common stock sale (April 27, 2012) and at each

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subsequent balance sheet date using a probability-weighted discounted future cash flow approach using unobservable inputs, which are classified as Level 3 within the fair value hierarchy. The primary inputs for this approach include the probability of achieving the Investment Obligation and a discount rate that approximates the Company’s incremental borrowing rate. After the initial measurement, changes in the fair value of this derivative were recorded in other income (expense). The estimated fair value of this derivative was $0.4 million and $0.2 million at March 31, 2014 and December 31, 2013, respectively.

Note 11. Stockholders’ equity

Common Stock

As of March 31, 2014, the Company had reserved 7,076,987common stock shares for issuance under its stock option plans, 969,878 common stock shares for issuance under its stock purchase plan and 4,482common stock shares to be issued upon exercise of the outstanding warrants.

Accumulated Deficit

Approximately $6.5 million of the Company’s accumulated deficit at December 31, 2013 was subject to restriction due to the fact that the Company’s subsidiaries in China are required to set aside at least 10% of their respective accumulated profits each year to fund statutory common reserves as well as allocate a discretional portion of their after-tax profits to their staff welfare and bonus fund.

Note 12. Stock-based compensation

The following table summarizes the stock-based compensation expense recognized for the three months ended March 31, 2014 and 2013 (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of goods sold	$	330	$	243
Research and development		707		418
Sales and marketing		373		238
General and administrative		491		303
	$	1,901	$	1,202

Determining Fair Value

The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:

	Three Months Ended March 31,
Stock options	2014	2013
Weighted-average expected term (years)	5.12	6.55
Weighted-average volatility	72%	76%
Risk-free interest rate	1.75%	1.08%
Expected dividends	—  %	—  %
Stock appreciation units
Weighted-average expected term (years)	2.15	2.61
Weighted-average volatility	59%	63%
Risk-free interest rate	0.13% – 0.78%	0.20% – 0.46%
Expected dividends	—  %	—  %
ESPP
Weighted-average expected term (years)	0.76	0.74
Weighted-average volatility	54%	48%
Risk-free interest rate	0.10 – 0.13%	0.13 – 0.16%
Expected dividends	—  %	—  %

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Stock Options

The Company granted 20,600 and 17,800 stock options during the three months ended March 31, 2014 and 2013, with weighted-average grant-date fair values per share of $4.68 and $3.80, respectively. Options for 113,184 and 14,472 shares were forfeited during the three months ended March 31, 2014 and 2013, respectively.  As of March 31, 2014, there were 3,952,356 unexercised stock options outstanding.

Restricted Stock Units (“RSUs”)

The Company granted 22,500 and 12,200 RSUs during the three months ended March 31, 2014 and 2013, with weighted-average grant-date fair values per share of $7.98 and $5.74, respectively. As of March 31, 2014, there were 1,134,317 RSUs outstanding.

Stock appreciation units (“SAUs”)

The Company did not grant any SAUs during the three months ended March 31, 2014 or 2013. As of March 31, 2014, there were 414,655 SAUs outstanding. SAUs are liability classified share-based awards which are re-measured each reporting period at fair value.

Employee Stock Purchase Plan (“ESPP”)

At March 31, 2014 there was $0.4 millionof unrecognized stock-based compensation expense for stock purchase rights that will be recognized over the remaining offering period, through November 2014. Due to the delay in filing its Annual Report on Form 10-K, in May 2014 the Compensation Committee of the Company’s Board of Directors (the Committee) rescheduled the May 15 purchase date under the current offering period to the date that is three business days after the later of (i) the filing of its Annual Report on Form 10-K and (ii) the Company’s general public release of its revenues for the first quarter of 2014, which occurred on June 17, 2014. Additionally, the Committee waived the existing purchase limits for the upcoming purchase date only, creating a modification of the purchase price formula for the current offering period.

Note 13. Income taxes

The Company’s income tax expense for the three months ended March 31, 2014 and 2013 was primarily related to income taxes of the Company’s non-U.S. operations.

The Company conducts its business globally and its operating income is subject to varying rates of tax in the United States, China and Japan. Consequently, the Company’s effective tax rate is dependent upon the geographic distribution of its earnings or losses and the tax laws and regulations in each geographical region. Historically, the Company has experienced net losses in the United States and in the short term, expects this trend to continue. One of the Company’s subsidiaries in China has historically qualified for a preferential 15% tax rate available for high technology enterprises as opposed to the statutory 25% tax rate. The Company intends to reapply for the preferential rate for 2014 to 2016.

Due to historic losses in the US, the Company has a full valuation allowance on its US federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

As of March 31, 2014, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2013.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended March 31, 2014 and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2013 included in our Annual Report on Form 10-K. References to “NeoPhotonics” “we,” “our” and “us” are to NeoPhotonics Corporation unless otherwise specified or the context otherwise requires.

This Quarterly Report on Form 10-Q for the period ended March 31, 2014 contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q for the period ended March 31, 2014 that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Terminology such as “believe,” “may,” “might,” “objective,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions is intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and industry and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified in “Part II —Item 1A. Risk Factors” below, and those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on June 4, 2014.  Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Business overview

We are a leading designer and manufacturer of photonic integrated circuit, or PIC-based optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks.

Our products are designed to enable high-speed transmission rates and efficient allocation of bandwidth over optical networks with high quality and low costs. Our PIC technology utilizes proprietary design elements that provide optical functionality on a silicon or indium phosphide or hybrid chip. PIC devices can integrate many more functional elements than discretely packaged components, enabling increased functionality in a small form factor while reducing packaging and interconnection costs. In addition, the cost advantages of PIC-based components are similar to the economics of semiconductor wafer mass manufacturing, where the marginal cost of producing an incremental chip is much less than that of a discrete component.

We have research and development and wafer fabrication facilities in San Jose and Fremont, California and in Tokyo, Japan which coordinate with our research and development and manufacturing facilities in Shenzhen and Wuhan, China and Ottawa, Canada. We utilize proprietary design tools and design-for-manufacturing techniques to align our design process with our precision nanoscale, vertically integrated manufacturing and testing capabilities. We sell our products to the leading network equipment vendors globally, including ADVA AG Optical Networking Ltd., Alcatel-Lucent SA, Ciena Corporation, Cisco Systems, Inc., Coriant Gmbh & Co. KG (formerly Nokia Siemens Networks B.V.), ECI Telecom, Ltd., FiberHome Technologies Group, Fujitsu Limited, Huawei Technologies Co., Ltd, Juniper Networks, Inc., Mitsubishi Electric Corporation, NEC Corporation, Telefonaktiebolaget LM Ericsson and ZTE Corporation. We refer to these companies as our Tier 1 customers.

On March 29, 2013, we acquired the optical semiconductor business unit of LAPIS Semiconductor Co., Ltd., now known as NeoPhotonics Semiconductor Godo Keisha (“NeoPhotonics Semiconductor”). NeoPhotonics Semiconductor is a leading provider of lasers, drivers, and detectors for high speed 100Gbps applications and is located in Japan. We believe the acquisition of NeoPhotonics Semiconductor enhances our competitive position in 100Gbps products.

In the three months ended March 31, 2014, our revenue growth of 22% over the three months ended March 31, 2013 was driven primarily by demand for our 100Gbps speed products, as carriers continued to accelerate deployment of high capacity optical transport networks and by our acquisition of NeoPhotonics Semiconductor, many of whose products are 100Gbps.

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We expect continued volume growth for our 100Gbps products, although quarter-to-quarter results may show considerable variability as is usual in a rapid initial ramp-up for a new technology.  Similar to revenue, our gross margins can fluctuate materially depending on a variety of factors including average selling price changes, product mix, volume, manufacturing utilization and ongoing manufacturing process improvements.

Critical accounting policies and estimates

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2014 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2013 Form 10-K.

Results of operations

Revenue

We sell substantially all of our products to original equipment manufacturers, or OEMs. Revenue is recognized when title of our products passes to the OEM. We price our products based on market and competitive conditions and may periodically reduce the price of our products as market and competitive conditions change and as manufacturing costs are reduced. Our sales transactions to customers are denominated primarily in Chinese Renminbi (“RMB”), Japanese Yen (“JPY”) or U.S. dollars. We have generated most of our revenue from a limited number of customers. Our top ten customers represented 88% and 91% of our revenue in the three months ended March 31, 2014 and 2013, respectively.

For the three months ended March 31, 2014, Huawei Technologies Co., Ltd. (35%), Ciena Corporation (14%) and Alcatel-Lucent SA (13%) each accounted for 10% or more of our total revenue. For the three months ended March 31, 2013, Huawei Technologies Co., Ltd. (27%), Ciena Corporation (22%), Alcatel-Lucent SA (13%) and Cisco Systems, Inc. (11%) each accounted for 10% or more of our total revenue. No other customers accounted for 10% or more of total revenue. We expect that a significant portion of our revenue will continue to be derived from a limited number of customers. As a result, the loss of, or a significant reduction in, orders from any of our other key customers would materially affect our revenue and results of operations.

	Three Months Ended March 31,
(in thousands)	2014		2013		$ Change		% Change
Total revenue	$	68,168	$	56,063	$	12,105		22	%

Our first quarter revenue is typically seasonally the lowest revenue quarter of the year. The revenue increase in the three months ended March 31, 2014 compared to the same period in 2013 was primarily due to $13.7 million in higher revenue from our Speed and Agility products, including strong growth in 40Gps/100Gps products.  The increase in revenue from our Speed and Agility products includes $11.2 million from Neophotonics Semiconductor, which was acquired on March 29, 2013.   The increase from Speed and Agility product revenue was partially offset by a $1.4 million decrease in revenue from our Access products.

Cost of goods sold and gross margin

Our cost of goods sold consists primarily of the cost to produce wafers and to manufacture and test our products. Additionally, our cost of goods sold includes stock-based compensation, write-downs of excess and obsolete inventory, royalty payments, amortization of certain purchased intangible assets, depreciation, acquisition-related fair value adjustments, restructuring cost, warranty, shipping and allocated facilities and IT costs.

	Three Months Ended March 31,
	2014					2013
(in thousands, except percentages)	Amount		% of Revenue			Amount		% of Revenue			$ Change		% Change
Cost of goods sold	$	54,368		80	%	$	44,306		79	%	$	10,062		23	%

	Three Months Ended March 31,
	2014			2013
Gross margin		20	%		21	%

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Gross profit as a percentage of total revenue, or gross margin, has been and is expected to continue to be affected by a variety of factors including the introduction of new products, production volume, production volume compared to sales over time, the mix of products sold, inventory changes, changes in the average selling prices of our products, changes in the cost and volumes of materials purchased from our suppliers, changes in labor costs, changes in overhead costs or requirements, revaluation of stock appreciation unit awards that are impacted by our stock price, write-downs of excess and obsolete inventories and warranty costs. In addition, we periodically negotiate pricing with certain customers which can cause our gross margins to fluctuate, particularly in the quarters in which the negotiations occurred. Our first quarter gross margins are typically seasonally lower than the rest of the year due to lower capacity utilization and the impact on average selling prices from annual price negotiations.

Operating expenses

Personnel costs are the most significant component of operating expenses and consist of costs such as salaries, benefits, bonuses, stock-based compensation and, with regard to sales and marketing expense, sales commissions. Our operating expenses are denominated primarily in RMB, JPY and U.S. dollars.

	Three Months Ended March 31,
	2014					2013
(in thousands, except percentages)	Amount		% of Revenue			Amount		% of Revenue			$ Change			% Change
Research and development	$	12,056		18	%	$	9,707		17	%	$	2,349			24		%
Sales and marketing		3,411		5	%		3,586		6	%		(175	)		(5	)	%
General and administrative		8,987		13	%		5,059		9	%		3,928			78		%
Amortization of purchased intangible assets		379		—	%		321		1	%		58			18		%
Restructuring charges		—		—	%		325		1	%		(325	)		(100	)	%
Acquisition-related transaction costs		—		—	%		4,510		8	%		(4,510	)		(100	)	%
Total operating expenses	$	24,833		36	%	$	23,508		42	%	$	1,325			6		%

Research and development

Research and development expense consists of personnel costs, including stock-based compensation, for our research and development personnel, and product development costs, including engineering services, development software and hardware tools, depreciation of equipment and facility costs. We record all research and development expense as incurred.

Research and development expense increased by $2.3 million in the three months ended March 31, 2014 compared to the same period in 2013, representing a 24% increase.  The acquisition of NeoPhotonics Semiconductor increased our research and development expense by $1.3 million. Other increases in 2014 included $0.9 million for new and ongoing research and development projects and $0.4 million in higher stock-based compensation, travel expense and supplies purchases, partially offset by $0.3 million in lower personnel-related costs in China.

We intend to continue to invest in research and development and expect this expense to increase as we grow our business over time. As a percentage of total revenue, our research and development expense may vary with changes in our revenue.

Sales and marketing

Sales and marketing expense consists primarily of personnel costs, including stock-based compensation and sales commissions, costs related to sales and marketing programs and services and facility costs.

Sales and marketing expense decreased by $0.2 million in the three months ended March 31, 2014 compared to the same period in 2013 primarily due to lower commission expense in the 2014 period.

We expect our sales and marketing expense to increase as we grow our business, expand our marketing activities, increase the number of sales and marketing professionals and incur employee-related costs accordingly. As a percentage of total revenue, our sales and marketing expense may vary as our revenue changes over time.

General and administrative

General and administrative expense consists primarily of personnel costs, including stock-based compensation, for our finance, legal, human resources and information technology personnel and certain executive officers, as well as professional services costs related to accounting, tax, banking, legal and information technology services, depreciation, facility costs and restructuring charges.

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General and administrative expense increased by $3.9 million in the three months ended March 31, 2014 compared to the same period in 2013, representing a 78% increase.  Audit and consulting fees represented $2.7 million of the increase, with the remainder related primarily to costs from NeoPhotonics Semiconductor which was acquired at the end of the 2013 quarter.  The higher audit and consulting fees related to the restatement of our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2013 and resources to provide technical accounting support and to assist us in the process of strengthening our internal controls.

We anticipate continuing to incur higher general and administrative expenses, in-line with the March 2014 quarter, through the second quarter of 2014 as we complete our audit work and continue to enhance our internal controls, after which we anticipate quarterly general and administrative costs to be approximately $1.0 million lower.  

Amortization of purchased intangible assets

Our intangible assets are being amortized over their estimated useful lives.  Amortization expense relating to technology, patents and leasehold interests are included within cost of goods sold, and expense from amortization of customer relationships is recorded within operating expenses.  Amortization of purchased intangibles included in operating expenses increased by $0.1 million in the three months ended March 31, 2014 due to intangible assets from our acquisition of NeoPhotonics Semiconductor in 2013.

Restructuring charges

In the first quarter of 2013, we exited and closed one facility at our headquarters location to align our facilities usage with our current size.  As a result, we recorded a restructuring charge of $0.3 million.

Acquisition-related transaction costs

In connection with our acquisition of NeoPhotonics Semiconductor in 2013, we incurred $4.5 million in acquisition-related transaction costs during the three months ended March 31, 2013 related to investment banking, legal, accounting and other professional services as well as transfer and acquisition taxes related to real property acquired.

Interest and other expense, net

Interest income consists of income earned on our cash, cash equivalents and short-term investments. Interest expense consists of amounts paid for interest on our bank and other borrowings. Other income (expense), net is primarily made up of government subsidies, and foreign currency transaction gains and losses. The functional currency of our subsidiaries in China is the RMB and of our subsidiaries in Japan is the JPY.  The foreign currency transaction gains and losses of our subsidiaries in China and Japan primarily result from their transactions in U.S. dollars.

	Three Months Ended March 31,
(in thousands)	2014			2013			$ Change			% Change
Interest income	$	65		$	131		$	(66	)		(50	)	%
Interest expense		(251	)		(163	)		(88	)		54		%
Other income (expense), net		(607	)		(274	)		(333	)		122		%
Total	$	(793	)	$	(306	)	$	(487	)		159		%

Total interest and other expense, net, increased by $0.5 million in the three months ended March 31, 2014 compared to the same period in 2013, largely due to a $0.2 million adjustment to the fair value of a penalty payment derivative (see Note 10), a $0.1 million increase in interest expense resulting from higher interest rates in the 2014 period and a $0.1 million decrease in interest income on lower invested balances.

Income taxes

We conduct our business globally. Therefore, our operating income is subject to varying rates of tax in the United States, China, Japan and other various foreign jurisdictions. Consequently, our effective tax rate is dependent upon the geographic distribution of our earnings or losses and the tax laws and regulations in each geographical region. We expect that our income taxes will vary in relation to our profitability and the geographic distribution of our profits. Historically, we have experienced net losses in the U.S. and in the short term, we expect this trend to continue. In China, one of our subsidiaries has historically qualified for a preferential 15% tax rate available for high technology enterprises as opposed to the statutory 25% tax rate. We are in the process of reapplying for the preferential rate for 2014-2016.

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	Three Months Ended March 31,
(in thousands)	2014		2013
Provision for income taxes	$	762	$	183

Our income tax expense for the three months ended March 31, 2014 was primarily related to income taxes of our non-U.S. operations.

Liquidity and capital resources

At March 31, 2014, we had working capital of $110.7 million and total cash, cash equivalents and short-term investments of $61.3 million, of which 23% was held in accounts by our subsidiaries in China and 31% was held in accounts by our subsidiaries in Japan.  As of May 19, 2014, $21.1 million of our cash and short-term investments was moved to compensating balance accounts in accordance with an amendment to our credit agreement (see below).

Approximately $6.5 million of our accumulated deficit at December 31, 2013 was subject to restriction due to the fact that our subsidiaries in China are required to set aside at least 10% of their respective accumulated profits each year to fund statutory common reserves as well as allocate a discretional portion of their after-tax profits to their staff welfare and bonus fund. This restricted amount is not distributable as cash dividends except in the event of liquidation.

We have a bank credit agreement with Comerica Bank as the lead bank.  As of March 31, 2014 this credit agreement included the following:

— A revolving credit facility under which there was no amount outstanding at March 31, 2014 or December 31, 2013 and $20.0 million was available for borrowing at March 31, 2014, subject to covenant requirements. Amounts borrowed are due on or before March 2016 and borrowings bear interest at an interest rate option of a base rate as defined in the agreement plus 1.75% or LIBOR plus 2.75%. As of March 31, 2014 the rate on the LIBOR option was 2.90%.

— A term loan facility under which $22.8 million was outstanding at March 31, 2014. Interest is payable quarterly in arrears and the principal is paid in equal quarterly installments over the term of the loan ending in June 2017. Borrowings under the term loan bear interest at an interest rate option of a base rate as defined in the agreement plus 2.0% or LIBOR plus 3.0%. As of March 31, 2013 the rate on the LIBOR option was 3.15%.

Our credit agreement requires the maintenance of specified financial covenants, including a debt to EBITDA ratio and liquidity ratios.  The agreement also restricts our ability to incur certain additional debt or to engage in specified transactions, restricts the payment of dividends and is secured by substantially all of our U.S. assets, other than intellectual property assets. We were not in compliance with the debt to EBITDA covenant at March 31, 2014, which noncompliance was effectively waived in the amendment described below.

On May 19, 2014 we executed an amendment to the credit agreement that waived the testing of certain covenants for compliance,  including the March 31, 2014 debt to EBITDA covenant, provided that we maintain compensating balances equal to outstanding amounts under the credit agreement in accounts for which the bank will have sole access.  We intend to work with the bank to restructure the credit agreement, including the covenant requirements.  In the absence of a restructured agreement, we believe we may need to continue to maintain the compensating balances at least through the end of 2014.  As of May 19, 2014, the amount of our cash and short-term investments in these compensating balance accounts was $21.1 million, which will be classified as restricted cash on our June 30, 2014 condensed consolidated balance sheet.       

At March 31, 2014 our subsidiaries in China had two short-term line of credit facilities with banking institutions, which have subsequently expired. In June 2014, one of the credit facilities was renewed.  Under the renewed agreement, which expires in June 2015, the Company’s subsidiaries in China have a short-term line of credit of RMB 160.0 million ($25.7 million), of which the full amount can be used for bank acceptance drafts (with a 25% compensating balance requirement) and up to RMB 120.0 million ($19.3 million) can be used for short-term loans, which will bear interest at varying rates depending upon the term.  The second credit facility is in the process of being renewed.

We also issue notes payable to our suppliers in China in exchange for accounts payable. These notes are supported by non-interest bearing bank acceptance drafts and are due three to six months after issuance. As a condition of the notes payable arrangements, we are required to keep a compensating balance at the issuing banks that is a percentage of the total notes payable balance until the amounts are settled. These balances are classified as restricted cash on our consolidated balance sheets. As of March 31, 2014, our restricted cash totaled $3.0 million.  In May 2014, one of our subsidiaries in China issued a 90-day bank acceptance

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draft of $8.0 million to another of our subsidiaries that required a compensating balance of $2.4 million.  This bank acceptance draft can be sold for cash at a discount prior to its expiration.

On May 23, 2014, one of our subsidiaries in China borrowed CNY 50 million ($8.0 million) under a working capital loan agreement with a bank.  The loan bears interest at 7% per annum.  Interest is payable monthly and the principal is due on November 23, 2014.

In connection with the acquisition of NeoPhotonics Semiconductor on March 29, 2013, we were obligated to pay 1,050 million Japanese Yen in three equal installments on the first, second and third anniversaries of the closing date for the purchase of the real estate used by NeoPhotonics Semiconductor, of which 700 million Japanese Yen ($6.8 million) was outstanding at March 31, 2014.  The obligation bears interest at 1.5% per year, payable annually, and is secured by the acquired real estate property.

From time to time we accept notes receivable in exchange for accounts receivable from certain of our customers in China. These notes receivable are non-interest bearing and are generally due within six months. Historically, we have collected on the notes receivable in full at the time of maturity.

We believe that our existing cash, cash equivalents and cash flows from our operating activities will be sufficient to meet our anticipated cash needs for at least the next 12 months, even with the compensating balance requirement discussed above. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products, the costs to increase our manufacturing capacity and our foreign operations, the continuing market acceptance of our products and acquisitions of businesses and technology. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Private placement transaction

In connection with the 2012 private placement transaction, we agreed to certain performance obligations including establishing a wholly-owned subsidiary in Russia and making a $30.0 million investment commitment (the ‘Investment Obligation’) towards our Russian operations. The Investment Obligation can be partially satisfied by cash and/or stock investment inside or outside of Russia and/or by way of non-cash asset transfers, including but not limited to capital equipment, small tools, intellectual property, and other intangibles. A minimum of $15.0 million of the Investment Obligation is required to be satisfied by making capital expenditure investments and we expect that the remaining $15.0 million will be satisfied through cash and non-cash general working capital and research and development expenditures and commitments. All of the amount for general working capital can be spent either inside or outside of Russia. However, at least 80% of the amount expended for research and development must be spent inside Russia. General working capital can include cash or stock acquisition of technology and other businesses or portions thereof to be owned by the Russian subsidiary. Our current plan is to substantially meet the $15.0 million capital expenditure portion of the Investment Obligation by transferring non-cash assets from other entities within the consolidated Company to the Russian subsidiary, subject to the purchaser’s approval as required in the rights agreement. We expect that the remaining $15.0 million will be satisfied through some combination of working capital and research and development spending, which may include technology or other acquisitions acquired by cash or stock through March 2015. The exact timing and composition of those expenditures has not yet been determined.

The purchaser of the common stock in the private placement transaction has nontransferable veto rights over our Russian subsidiary’s annual budget during the investment period, and non-cash asset transfers to be made in satisfaction of the Investment Obligation requires approval by the purchaser. Spending and/or commitments to spend for general working capital and research and development do not require approval by the purchaser. There are no legal restrictions on the specific usage of amounts received in the private placement transaction or on withdrawal from our bank accounts for use in general corporate purposes.

We are required to satisfy the Investment Obligation by July 31, 2014, or, in the event we have not recorded aggregate revenue from sales of our products in the Russian Federation of at least $26.8 million during the period beginning July 1, 2012 and ending June 30, 2014, then by March 31, 2015. We expect the date for achievement of the Investment Obligation will be extended to March 31, 2015. Therefore, we intend to meet the Investment Obligation by March 31, 2015. If we fail to meet the Investment Obligation by the deadline, including failure to meet the Investment Obligation because the purchaser of the common stock does not approve the transfer of non-cash assets, we will be required to pay a $5.0 million penalty as the sole and exclusive remedy for damages and monetary relief available to the purchaser for failure to meet the Investment Obligation.

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Cash flow discussion

The table below sets forth selected cash flow data for the periods presented:

	Three Months Ended March 31,
(in thousands)	2014			2013
Net cash provided by (used in) operating activities	$	(7,357	)	$	1,161
Net cash provided by (used in) investing activities		6,630			(3,080	)
Net cash provided by (used in) financing activities		(3,204	)		16,311
Effect of exchange rates on cash and cash equivalents		(114	)		72
Net increase (decrease)  in cash and cash equivalents	$	(4,045	)	$	14,464

Operating activities

Net cash used in operating activities was $7.4 million in the three months ended March 31, 2014, which was an $8.5 million change from $1.2 million provided by operating activities in the 2013 quarter.  Contributing to the change was an increase in accounts receivable primarily from collection timing differences and an increase in prepaid expenses and other assets related to timing of value-added tax payments, partially offset by an increase in accounts payable related to inventory purchases during the 2014 quarter.

Investing activities

Net cash provided by investing activities was $6.6 million in the three months ended March 31, 2014, which was a $9.7 million change from $3.1 million used in investing activities in the 2013 quarter.  The change was driven by $14.1 million used in the 2013 quarter for the purchase of NeoPhotonics Semiconductor, partially offset by lower net proceeds from the sale and maturity of marketable securities.

Financing activities

Net cash used in financing activities was $3.2 million in the three months ended March 31, 2014, which was a $19.5 million change from $16.3 million provided by financing activities in the 2013 quarter.  The change was largely due to lower net borrowings in the 2014 quarter.

Contractual obligations and commitments

As of March 31, 2014, our principle commitments consist of obligations under operating leases, purchase commitments, debt, Santur contingent consideration related to our Santur acquisition and other contractual obligations. There have been no significant changes to these obligations during the three months ended March 31, 2014 compared to the contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Off-balance sheet arrangements

During the three months ended March 31, 2014, we did not have any significant off-balance sheet arrangements.

Recent accounting pronouncements

See Note 1 “Basis of presentation and significant accounting policies” in the Notes to Condensed Consolidated Financial Statements on this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements and accounting changes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposures to market risk have not changed materially since December 31, 2013. For quantitative and qualitative disclosures about market risk, see Item 7A Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014. The term “disclosure controls and procedures,” as defined in

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Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective as a result of the material weaknesses that existed in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses in our internal control over financial reporting were identified during 2013 and had not been remediated at March 31, 2014:

— Control Environment — We did not maintain an effective control environment, which is the foundation for the discipline and structure necessary for effective internal control over financial reporting, as evidenced by: (i) an insufficient number of personnel appropriately qualified to perform control monitoring activities, including the recognition of the risks and complexities of our transactions and business operations, (ii) an insufficient number of personnel with an appropriate level of GAAP knowledge and experience or ongoing training in the application of GAAP commensurate with our financial reporting requirements, which resulted in erroneous judgments regarding the proper application of GAAP and (iii) insufficient corporate involvement to identify and resolve errors in recording transactions and financial results at our non-US subsidiaries. This control environment material weakness was exacerbated by our acquisition of NeoPhotonics Semiconductor in March 2013 and contributed to the following additional material weaknesses.

— Accounting for complex transactions — We did not maintain effective internal controls related to complex transactions, including the acquisition of NeoPhotonics Semiconductor. Our controls over the accounting, process and procedures for the NeoPhotonics Semiconductor acquisition were not effective to provide reasonable assurance that (i) the business combination accounting identified and considered all known acquired liabilities, (ii) the business combination accounting reflected the appropriate application of GAAP and (iii) there was appropriate review of the purchase price allocation entries recorded in the consolidated financial statements. This material weakness resulted in the restatement of our condensed consolidated financial statements for the quarters ended March 31, 2013 and June 30, 2013.

— Preparation and review of consolidated financial statements — We did not maintain effective internal control over financial reporting related to the preparation and review of our consolidated financial statements. Specifically, we did not execute controls related to the review of transactions and balances for proper classification in our balance sheet, statement of operations and statement of cash flows. This material weakness resulted in the restatement of our condensed consolidated financial statements for the quarters ended March 31, 2013 and June 30, 2013.

Remedial Measures

Our management continued significant efforts during 2013 and the first quarter of 2014 to establish a framework to improve internal controls over financial reporting. We committed considerable resources to the design, implementation, documentation, and testing of our internal controls. Additional efforts were required to remediate and re-test certain internal control deficiencies. Our management believes that these efforts have improved our internal control over financial reporting. With the oversight of senior management and our audit committee, we have taken steps and plan to take additional measures to remediate the underlying causes of the material weaknesses described above. Our management, audit committee and board of directors have taken the following steps as part of our ongoing remediation efforts to address these material weaknesses:

— Hired a new Chief Financial Officer;

— Hired a new World-Wide Corporate Controller;

— Hired a World-Wide Operations Controller;

— Implemented enhanced communication and monitoring processes and the appropriate documentation of such to ensure the audit committee’s effectiveness in executing its oversight responsibilities; and

— Engaged an external team of experienced senior finance and accounting consultants to review and analyze our consolidated financial statement close and reporting processes.

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While these steps have helped address some of the root causes of the material weaknesses noted above, they have not been sufficient to fully remediate the material weaknesses that existed as of March 31, 2014. We intend to take the following additional steps to remediate these material weaknesses:

— Add additional key positions to the finance team;

— Increase management oversight by expanding our disclosure process to include all senior managers with responsibility for responding to issues raised during the financial reporting process and enhanced required certifications from all executive management;

— Improve the documentation, communication and periodic review of our accounting policies throughout our domestic and international locations for consistency and application with generally accepted accounting principles, and

— Enhance the training and education for our world-wide finance and accounting personnel.

Notwithstanding the identified material weaknesses, management believes that the consolidated financial statements contained in this report present fairly our financial condition, results of operations, and cash flows for the periods covered thereby in all material respects. To address the material weaknesses in our internal control over financial reporting, we also performed additional manual procedures and analysis and other post-closing procedures in order to prepare the consolidated financial statements included in this Quarterly Report on Form 10-Q.

While management is dedicated to improving our internal controls over financial reporting, the nature and significance of the outstanding material weaknesses may prevent successful remediation of all material weaknesses during 2014.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) as of March 31, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

Inherent Limitation on the Effectiveness of Internal Controls

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.  Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute assurances.  In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in litigation that we believe is of the type common to companies engaged in our line of business, including commercial disputes and employment issues. As of the date of this Quarterly Report on Form 10-Q, other than as described below, we are not involved in any pending legal proceedings that we believe could have a material adverse effect on our financial condition, results of operations or cash flows. However, as described below, a certain dispute involves a claim by a third party that our activities infringe their intellectual property rights. This and other types of intellectual property rights claims generally involve the demand by a third party that we cease the manufacture, use or sale of the allegedly infringing products, processes or technologies and/or pay substantial damages or royalties for past, present and future use of the allegedly infringing intellectual property. Claims that our products or processes infringe or misappropriate any third-party intellectual property rights (including claims arising through our contractual indemnification of our customers) often involve highly complex, technical issues, the outcome of which is inherently uncertain. Moreover, from time to time, we may pursue litigation to assert our intellectual property rights. Regardless of the merit or resolution of any such litigation, complex intellectual property litigation is generally costly and diverts the efforts and attention of our management and technical personnel which could adversely affect our business.

On January 5, 2010, Finisar Corporation, or Finisar, filed a complaint in the U.S. District Court for the Northern District of California against Source Photonics, Inc., MRV Communications, Inc., Oplink Communications, Inc. and us, or collectively, the co-defendants. In the complaint, Finisar alleged infringement of certain of its U.S. patents arising from the codefendants’ respective manufacture, importation, use, sale of or offer to sell certain optical transceiver products. On March 23, 2010, we filed an answer to the complaint and counterclaims, asserting two claims of patent infringement and additional claims asserting that Finisar has violated state and federal competition laws and violated our obligations to license on reasonable and non-discriminatory terms. On May 5, 2010, the court dismissed without prejudice all co-defendants (including us) except Source Photonics, Inc., on grounds that such claims should have been asserted in four separate lawsuits, one against each defendant. This dismissal without prejudice does not prevent Finisar from bringing a new similar lawsuit against us. On January 18, 2011, we and Finisar agreed to suspend our respective claims and not to refile the originally asserted claims against each other until at least 90 days after one or more specified events occur resulting in the partial or complete resolution of litigation involving the same Finisar patents between Oplink Communications, Inc. and Finisar. This tolling period expired on April 30, 2012. On May 3, 2012 we and Finisar agreed to further toll our respective claims until the refiling of certain of the previously asserted claims from this dispute. As a result, Finisar is permitted to bring a new lawsuit against us if it chooses to do so, and we may bring new claims against Finisar upon seven days written notice prior to filing such claims.

ITEM 1A. RISK FACTORS

The risk factors facing our company have not changed materially from those set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on June 4, 2014.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM  4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM  5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See Index to Exhibits at the end of this report.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		NeoPhotonics Corporation
Date:	June 24, 2014	By:	/S/  CLYDE RAYMOND WALLIN
			Clyde Raymond Wallin
			Chief Financial Officer and Senior Vice President (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit no.	Description of exhibit	Form	SEC File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation of NeoPhotonics Corporation.	Form 8-K	001-35061	3.1	February 10, 2011
3.2	Amended and Restated Bylaws of NeoPhotonics Corporation.	Form S-1	333-166096	3.4	November 22, 2010
4.1	Specimen Common Stock Certificate of NeoPhotonics Corporation.	Form S-1	333-166096	4.1	April 15, 2010
4.2	2008 Investors’ Rights Agreement by and between NeoPhotonics Corporation and the investors listed on Exhibit A thereto, dated May 14, 2008.	Form S-1	333-166096	4.2	April 15, 2010
4.3	Warrant to Purchase Common Stock by and between NeoPhotonics Corporation and Comerica Bank, dated December 20, 2007.	Form S-1	333-166096	4.3	April 15, 2010
10.1	First Amendment to Credit Agreement, dated January 16, 2014, by and among NeoPhotonics Corporation, Comerica Bank, as Agent, and the lenders party thereto.	Form 8-K	001-35061	10.1	January 17, 2014
10.2	Second Amendment to Credit Agreement, dated February 14, 2014, by and among NeoPhotonics Corporation, Comerica Bank, as Agent, and the lenders party thereto.	Form 8-K	001-35061	10.1	February 18, 2014
10.3	Third Amendment to Credit Agreement, dated March 6, 2014, by and among NeoPhotonics Corporation, Comerica Bank, as Agent, and the lenders party thereto.	Form 8-K	001-35061	10.1	March 10, 2014
10.4+	Severance Rights Agreement, dated January 6, 2014, by and between NeoPhotonics Corporation and Clyde R. Wallin.					X
31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a).					X
31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a).					X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

+ Management compensatory plan or arrangement.

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EX-10

Exhibit 10.4

NeoPhotonics Corporation

Severance Rights Agreement

This Severance Rights Agreement (the “Agreement”) is made and entered into by and between Ray Wallin (the “Employee”) and NeoPhotonics Corporation, a Delaware corporation (the “Company”), effective as of January 6, 2014 (or effective hire date).

RECITALS

A. The Board of Directors of the Company (the “Board”) believes that it is in the best interests of the Company and its shareholders to provide the Employee with certain severance benefits should Employee’s employment with the Company terminate under certain circumstances. Such benefits are intended to provide Employee with enhanced financial security and with sufficient incentive and encouragement for Employee to accept employment with the Company and remain with the Company.

B. Certain capitalized terms used in the Agreement are defined in Section 5 below.

AGREEMENT

The parties hereto agree as follows:

1. Term of Agreement. The terms of this Agreement shall terminate upon the date that all obligations of the parties hereunder have been satisfied, if Employee is eligible to receive benefits hereunder, or immediately upon a termination of Employee’s employment as to which he has no eligibility for benefits hereunder. A termination of the terms of this Agreement pursuant to this Section shall be effective for all purposes.

2. At-Will Employment. The Company and the Employee acknowledge that the Employee’s employment is and shall continue to be at-will, as defined under applicable law. If the Employee’s employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, and as may otherwise be available in accordance with the Company’s established employee plans and policies at the time of termination.

3. Agreement Benefits.

(a) Involuntary Termination Generally. If the Employee’s employment terminates as a result of Involuntary Termination, except by such Involuntary Termination as provided in Section 3(b) below, and provided the Employee provides a valid and effective Release of Claims not later than sixty (60) days after such termination, the Company will pay the Employee the following severance benefits:

(i) a lump sum severance payment equal to twelve (12) months of the Employee’s Base Compensation, with such amount payable within ten (10) business days after the effective date of the Release of Claims;

(ii) provided the Employee makes a timely and accurate election for continued health insurance coverage (including medical, dental, vision and prescription) under COBRA (or Cal-COBRA or any other applicable state law of similar effect), the Company will pay the premiums for such continued coverage for the Employee and his eligible dependents until the earliest of (i) the close of the twelve (12) month period following Executive’s termination of employment, (ii) the date the Employee commences new employment following his termination date, or (iii) such earlier date as the Employee (or his dependents, as applicable) cease to be eligible for such continuation coverage (such period, the “COBRA Period”); provided further that if at any time during the COBRA Period the Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will instead pay to the Employee a taxable monthly cash payment for the remainder of the COBRA Period in an amount equal to the monthly COBRA premium that the Employee would be required to pay to continue the Employee’s group health coverage in effect on the date of his termination (based on the premium for the first month of COBRA coverage) (each payment, a “Special Severance Payment”), which payments will be made regardless of whether the Employee elects COBRA continuation coverage and will be subject to applicable tax withholdings; provided that no Special Severance Payment will be made prior to the sixtieth (60th) day following the termination date, and on such date the Company will pay in a lump sum the aggregate amount of payments that the Company would have paid

NeoPhotonics Corporation Confidential Information

prior to that date had payments not been delayed during the consideration period for the Release of Claims, with the balance of the payments made thereafter on the original schedule; and

(iii) the vesting of each of Employee’s then-outstanding compensatory equity awards granted under any of the Company’s equity incentive plans, and the rate of lapsing of any repurchase right applicable to any shares received under such awards, shall automatically be accelerated (and, in the case of options, such options shall become exercisable), as of the effective date of Employee’s Involuntary Termination, as to the number of shares that would have vested, or as to which repurchase rights would have lapsed, in the ordinary course of business if Employee had maintained his employment or consulting relationship with the Company for the first eighteen (18) months following the effective date of the Involuntary Termination.

(b) Involuntary Termination Following a Change in Control. If the Employee’s employment terminates as a result of Involuntary Termination on or within twelve (12) months following a Change in Control, and provided the Employee provides a valid and effective Release of Claims not later than sixty (60) days after such termination, the Company will pay the Employee the following severance benefits:

(i) a lump sum severance payment equal to the sum of (A) twelve (12) months of the Employee’s Base Compensation and (B) 100% of the Employee’s target Bonus for the year of termination, with such amount payable within ten (10) business days after the effective date of the Release of Claims;

(ii) provided the Employee makes a timely and accurate election for continued health insurance coverage (including medical, dental, vision and prescription) under COBRA (or Cal-COBRA or any other applicable state law of similar effect), the Company will pay the premiums for such continued coverage for the Employee and his eligible dependents until the earliest of (i) the close of the twelve (12) month period following Executive’s termination of employment, (ii) the date the Employee commences new employment following his termination date, or (iii) such earlier date as the Employee (or his dependents, as applicable) cease to be eligible for such continuation coverage (such period, the “CIC COBRA Period”); provided further that if at any time during the CIC COBRA Period the Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will instead pay to the Employee a taxable monthly cash payment for the remainder of the CIC COBRA Period in an amount equal to the monthly COBRA premium that the Employee would be required to pay to continue the Employee’s group health coverage in effect on the date of his termination (based on the premium for the first month of COBRA coverage) (each payment, a “Special Severance Payment”), which payments will be made regardless of whether the Employee elects COBRA continuation coverage and will be subject to applicable tax withholdings; provided that no Special Severance Payment will be made prior to the sixtieth (60th) day following the termination date, and on such date the Company will pay in a lump sum the aggregate amount of payments that the Company would have paid prior to that date had payments not been delayed during the consideration period for the Release of Claims, with the balance of the payments made thereafter on the original schedule; and

(iii) the vesting of each of Employee’s then-outstanding compensatory equity awards granted under any of the Company’s equity incentive plans, and the rate of lapsing of any repurchase right applicable to any shares received under such awards, shall automatically be accelerated (and, in the case of options, such options shall become exercisable), as of the effective date of Employee’s Involuntary Termination, as to the number of shares that would have vested, or as to which repurchase rights would have lapsed, in the ordinary course of business if Employee had maintained his employment or consulting relationship with the Company for eighteen (18) months following the effective date of the Involuntary Termination.

(c) Voluntary Resignation; Termination For Cause. If the Employee voluntarily resigns from the Company, or if the Company terminates the Employee’s employment for Cause, then the Employee shall not be entitled to receive severance or other benefits pursuant to this Agreement, unless the voluntary resignation is for Good Reason.

(d) Disability; Death. If the Company terminates the Employee’s employment as a result of the Employee’s Disability, or if the Employee’s employment terminates due to the death of the Employee, then the Employee shall not be entitled to receive severance benefits except as provided in this Section 3(d). Nothing in this Agreement restricts the Employee’s rights to any payments under any death or disability insurance policy with the Company in effect at the time of termination. In addition, if the Employee’s employment terminates due to the death of the Employee, and his death occurs while he is outside of his country of residence (for any reason), then the Company will supplement the death benefit provided by any existing Company-provided life insurance, if necessary, so that the Employee’s estate or beneficiaries receive total death benefits equal to two times the Employee’s then-current Base Compensation. Any amount payable pursuant to this Section 3(d) will be paid in a lump sum to the Employee’s estate within thirty (30) days following the Employee’s termination date.

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NeoPhotonics Corporation Confidential Information

(e) Change in Control Benefits. In the event of a Change in Control in which the acquirer does not assume unvested compensatory equity awards, the vesting of each of Employee’s then-outstanding compensatory equity awards granted under any of the Company’s equity incentive plans, and the rate of lapsing of any repurchase right applicable to any shares received under such awards, shall automatically become accelerated (and, in the case of options, such options shall become exercisable) as to the number of shares that would have vested, or as to which repurchase rights would have lapsed, in the ordinary course of business if Employee had maintained his employment or consulting relationship with the Company for eighteen (18) months following the closing of the Change in Control, in each case as of immediately prior to the closing of the Change in Control. For purposes of clarity, this eighteen (18) month vesting acceleration is intended to be in lieu of any automatic accelerated vesting provision triggered solely on the closing of a Change in Control transaction contained in the Company’s equity incentive plans.

4. Excise Tax Payments. The Company and the Employee agree that Employee’s rights to benefits hereunder are subject to reduction in accordance with the provisions of Section 9(e) (that is, “Parachute Payments”) of the Company’s 2010 Equity Incentive Plan.

5. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Base Compensation. “Base Compensation” means an amount equal to Employee’s existing annual base salary at the time of the Involuntary Termination.

(b) Bonus. “Bonus” shall mean the target compensation amount for the fiscal year of termination under any cash incentive program approved for the year of termination as applicable to the Employee.

(c) Cause. “Cause” shall mean (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is materially injurious to the Company, and (iv) following delivery to the Employee of a written demand for performance from the Company which describes the basis for the Company’s belief that the Employee has not substantially performed his duties, continued violations by the Employee of the Employee’s obligations to the Company which are demonstrably willful and deliberate on the Employee’s part.

(d) Change in Control. “Change in Control” means the occurrence of any of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iii) the consummation of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least sixty percent (60%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii) or (iii) or in connection with an actual or threatened proxy contest relating to the election of directors of the Company.

(e) Disability. “Disability” shall mean that the Employee has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee’s legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate the Employee’s employment. In the event that the Employee resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

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NeoPhotonics Corporation Confidential Information

(f) Good Reason. “Good Reason” shall mean the Employee’s voluntary resignation from all positions he then holds with the Company, effective within ninety (90) days after the occurrence of: (i) a material reduction or other material adverse change in the named executive officer’s job duties, responsibilities, authority or requirements, including the removal of such job duties, responsibilities, authority or requirements; (ii) any material reduction of the named executive officer’s annual base compensation; (iii) our requiring the named executive officer to move his primary work location to a location that increases his one-way commute by more than 50 miles from our then-current location; or (iv) the failure of the Company to obtain the assumption, in all material respects, of this Agreement by any successors to the Company; provided, however, that the Employee must provide written notice to the Company of the existence of one of the conditions described above within sixty (60) days after its initial existence, and the Company must be provided with a period of thirty (30) days during which it may cure the circumstances giving rise to the condition (in which case, no right to resign for Good Reason shall exist). An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company promptly after receipt of notice thereof given by Employee shall not give rise to Good Reason.

(g) Involuntary Termination. “Involuntary Termination” shall mean (i) any termination of the Employee’s employment by the Company without Cause (and other than by reason of death or Disability) or (ii) Employee’s resignation for Good Reason, provided that in either case, such termination constitutes a “separation from service” as defined under Treasury Regulation Section 1.409A-1(h).

(h) Release of Claims. “Release of Claims” shall mean a waiver by Employee, in a form provided by the Company within ten (10) days after the applicable event, and reasonably acceptable to Employee, of all employment related obligations of and claims and causes of action against the Company. The Release of Claims must become effective in accordance with its terms within sixty (60) days following the event giving rise to the payment obligation hereunder. If the Release of Claims fails to become effective within the required period, Employee will not receive any of the benefits provided for under this Agreement.

6. Successors.

(a) Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) or to all or substantially all of the Company’s business and/or assets shall promptly (within fifteen (15) days after such transaction) assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Employee’s Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee shall die at a time when he is receiving payments or benefits hereunder, such payments and benefits shall continue to be paid or provided to such person or persons appointed in writing by Employee to receive such amounts or, if no person is so appointed, to the Employee’s estate.

7. Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.

8. Arbitration. To ensure the timely and economical resolution of disputes that may arise in connection with Employee’s employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Employee’s employment, or the termination of Employee’s employment, including but not limited to statutory claims, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in San Jose, California, conducted by JAMS under the then applicable JAMS rules. By agreeing to this arbitration procedure, both Employee and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Employee or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either Employee or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.

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NeoPhotonics Corporation Confidential Information

9. Miscellaneous Provisions.

(a) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(b) Whole Agreement. This Agreement sets forth the entire agreement of the parties with respect to the matters set forth herein, and supersedes all previous contracts, arrangements or understandings between the Company and Employee on the subjects set forth herein. The Agreement may be amended at any time only by mutual written agreement signed by the parties hereto.

(c) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California.

(d) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(e) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

(f) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(g) Code Section 409A. All payments upon a termination of service to be made under this Agreement may be made only upon a “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Department of Treasury regulations and other guidance promulgated thereunder. Notwithstanding any provision to the contrary in this Agreement, if Employee is deemed by the Company at the time of Employee’s separation from service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), to the extent delayed commencement of any portion of the benefits to which Employee is entitled under this Agreement that are deemed to be “deferred compensation” is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i), such portion of Employee’s benefits shall not be provided to Employee prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of Employee’s “separation from service” with the Company or (ii) the date of Employee’s death. Upon the first business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 9(g) shall be paid in a lump sum to Employee, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payments under this Agreement shall be treated as a separate payment under a right to receive a series of separate payments and, accordingly, each payment hereunder shall at all times be considered a separate and distinct payment. It is intended that all of the severance payments satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under of Treasury Regulation 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions. The Company and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A.

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NeoPhotonics Corporation Confidential Information

IN WITNESS WHEREOF, each of the parties has executed this Severance Agreement, in the case of the Company by its duly authorized officer, as of the day and year last set forth below.

COMPANY	NEOPHOTONICS CORPORATION
	By:	/s/ Timothy S. Jenks
	Title:	CEO
	Date:	12/20/13
EMPLOYEE	By:	/s/ Clyde R. Wallin
	Name:	Clyde Raymond Wallin
	Date:	12/20/13

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NeoPhotonics Corporation Confidential Information

EX-31

Exhibit 31.1

CERTIFICATION

I, Timothy S. Jenks, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NeoPhotonics Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financing reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 24, 2014

/S/ TIMOTHY S. JENKS

Timothy S. Jenks

President, Chief Executive Officer and

Chairman of the Board of Directors

EX-31

Exhibit 31.2

CERTIFICATION

I, Clyde Raymond Wallin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NeoPhotonics Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financing reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 24, 2014

/S/ CLYDE RAYMOND WALLIN

Clyde Raymond Wallin

Chief Financial Officer and Senior Vice President

(Principal Financial and Accounting Officer)

EX-32

Exhibit 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. § 1350), Timothy S. Jenks, President, Chief Executive Officer and Chairman of the Board of Directors of NeoPhotonics Corporation (the “Company”), and Clyde Raymond Wallin, Chief Financial Officer and Senior Vice President of the Company, each hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014, to which this Certification is attached as Exhibit 32.1 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, as amended; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned have set their hands hereto as of the 24th day of June, 2014.

/S/ TIMOTHY S. JENKS	/S/ CLYDE RAYMOND WALLIN
Timothy S. Jenks	Clyde Raymond Wallin
President, Chief Executive Officer and	Chief Financial Officer and Senior Vice President
Chairman of the Board of Directors	(Principal Financial and Accounting Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of NeoPhotonics Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Pro forma Information for Business Acquisition (Detail) (Business Combinations, USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Business Combinations
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]
Revenue	$ 68,754
Net loss	$ (5,277)
Basic and diluted net loss per share	$ (0.17)

XML

Periodic Pension Cost (Detail) (USD $) In Thousands, unless otherwise specified	2 Months Ended
	Feb. 28, 2014
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 53
Interest cost	13
Amortization	1
Net periodic pension costs	$ 67

XML

Other Noncurrent Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Other Non Current Liabilities [Line Items]
Pension and other employee-related	$ 6,098	$ 6,206
Penalty payment derivative		239
Other	1,346	1,542
Other noncurrent liabilities	$ 7,444	$ 7,987

XML

Commitments and Contingencies - Additional Information (Detail) (USD $)	1 Months Ended	3 Months Ended			1 Months Ended	3 Months Ended									3 Months Ended
	May 05, 2010 Defendant	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Apr. 27, 2012 Private Placement	Mar. 31, 2014 Private Placement	Mar. 31, 2014 Private Placement Embedded Derivative Financial Instruments	Mar. 31, 2014 Private Placement Capital Addition Purchase Commitments	Mar. 31, 2014 Private Placement Research and Development Arrangement	Mar. 31, 2014 Private Placement Performance Guarantee	Mar. 31, 2014 Fair Value, Inputs, Level 3	Dec. 31, 2013 Fair Value, Inputs, Level 3	Mar. 31, 2014 Santur Corporation	Dec. 31, 2013 Santur Corporation Fair Value, Inputs, Level 3	Mar. 31, 2014 Scenario, Plan Private Placement Minimum	Mar. 31, 2014 Scenario, Plan Santur Corporation
Commitments And Contingencies Disclosure [Line Items]
Number of defendants	4
Agreement period not to refile claims	90 days
Probable or reasonably possible loss		$ 0
Operating Leases, Future Minimum Payments Due		6,300,000
Rent expense		500,000	600,000
Year of acquisition		Oct. 12, 2011
Amount received from escrow ,net																1,900,000
Amount of indemnification claims by the company													3,900,000
Liabilities, fair value		1,985,000		1,985,000							1,985,000	1,985,000		2,000,000
Other non-current liability							5,000,000	15,000,000	15,000,000	30,000,000
Percentage of investment obligation that must be spent inside Russia						80.00%
Proceeds from issuance of common stock, net of issuance costs					39,800,000
Expected aggregate revenue from sales of its products in the Russian Federation															26,800,000
Targeted expansion completion date						Jul. 31, 2014
Extended date for achievement of Investment Obligation						Mar. 31, 2015
Penalty payment derivative		$ 425,000		$ 239,000							$ 425,000	$ 239,000

XML

Accrued and Other Current Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Accounts Payable And Accrued Liabilities [Line Items]
Employee-related accrued expenses	$ 14,449	$ 12,297
Other accrued expenses	11,372	11,346
Penalty payment derivative	425
Accrued and other current liabilities	$ 26,246	$ 23,643

XML

Summary of Unrealized Gains and Losses Related to Cash Equivalents and Investments in Marketable Securities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 8,295	$ 24,464
Gross Unrealized Gains	6	8
Gross Unrealized Losses		(5)
Fair Value	8,301	24,467
Cash and Cash Equivalents | Money Market Funds
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	16	11
Gross Unrealized Losses
Fair Value	16	11
Cash and Cash Equivalents | Time deposits
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost		6,540
Gross Unrealized Losses
Fair Value		6,540
Short-term Investments
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	8,279	17,913
Gross Unrealized Gains	6	8
Gross Unrealized Losses		(5)
Fair Value	8,285	17,916
Short-term Investments | Money Market Funds
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost		4,577
Gross Unrealized Losses
Fair Value		4,577
Short-term Investments | Corporate Bonds
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	4,571	6,708
Gross Unrealized Gains		3
Gross Unrealized Losses		(5)
Fair Value	4,571	6,706
Short-term Investments | Foreign Bonds and Notes
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	2,008	4,827
Gross Unrealized Gains	6	5
Gross Unrealized Losses
Fair Value	2,014	4,832
Short-term Investments | Variable Rate Demand Notes
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	1,700	1,801
Gross Unrealized Losses
Fair Value	$ 1,700	$ 1,801

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Summary of Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 1,901	$ 1,202
Cost of Goods Sold
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated share based compensation expense	330	243
Research and Development Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated share based compensation expense	707	418
Selling and Marketing Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated share based compensation expense	373	238
General and Administrative Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 491	$ 303

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Business Combination (Tables)

3 Months Ended

Mar. 31, 2014

Summary of Purchase Accounting and Tangible and Intangible Assets Acquired

The Company accounted for its acquisition of the NeoPhotonics Semiconductor assets and assumed liabilities as a business combination. NeoPhotonics Semiconductor’s tangible and identifiable intangible assets acquired and liabilities assumed were recorded based upon their estimated fair values as of the closing date of the acquisition. The estimated fair values of the identifiable assets acquired and liabilities assumed approximated the purchase price; therefore, no goodwill was recorded. The following table summarizes the acquisition accounting and the tangible and intangible assets acquired as of the date of acquisition and subsequent adjustments (in thousands):

Total purchase consideration:
Cash paid	$	14,087
Net receivable from LAPIS		(959	)
Notes payable		11,130
	$	24,258
Liabilities assumed:
Pension and retirement obligations	$	6,471
Other compensation-related liabilities		1,083
Other current liabilities		1,265
	$	8,819
Fair value of assets acquired:
Inventory	$	13,309
Other current assets		35
Land, property, plant and equipment		14,433
Intangible assets acquired:
Developed technology		2,120
Customer relationships		3,180
	$	33,077

Pro forma Information for Business Acquisition

The unaudited pro forma results do not assume any operating efficiencies as a result of the consolidation of operations (in thousands, except per share data):

	Three Months Ended March 31, 2013
Revenue	$	68,754
Net loss	$	(5,277	)
Basic and diluted net loss per share	$	(0.17	)

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Components of Debt, Obligations, Weighted Average Interest Rate and Additional Fair Value Information Relating to Outstanding Debt Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Notes payable, carrying amount	$ 11,210	$ 9,738
Long-term debt, carrying amount	29,540	34,475
Current portion of long-term debt, carrying amount	(10,395)	(10,325)
Total long-term debt, net of current portion, carrying amount	19,145	24,150
Bank borrowings
Debt Instrument [Line Items]
Long-term debt, carrying amount	22,750	24,500
Weighted Average Interest Rate	3.15%	2.92%
NeoPhotonics Semiconductor
Debt Instrument [Line Items]
Long-term debt, carrying amount	$ 6,790	$ 9,975
Weighted Average Interest Rate	1.50%	1.50%

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Inventory (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Inventory [Line Items]
Finished goods, at vendor managed inventory locations	$ 4.9	$ 5.4

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Business Combination - Additional Information (Detail) (USD $)	3 Months Ended		1 Months Ended	3 Months Ended	1 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 29, 2013 Business Combinations	Mar. 31, 2013 Business Combinations	Mar. 29, 2013 Notes Payable Business Combinations
Business Acquisition [Line Items]
Total consideration			$ 24,258,000
Cash consideration paid			14,087,000
Liabilities assumed					11,130,000
Withheld and placed into escrow			2,000,000
Net receivable from LAPIS			959,000
Acquisition-related transaction costs		4,510,000
Revenue				1,900,000
Costs related to sales	$ 54,368,000	$ 44,306,000		$ 1,800,000

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Maturities of Long -Term debt Outstanding (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule Of Short And Long Term Debt [Line Items]
2014 (remaining nine months)	$ 5,250
2015	10,395
2016	10,395
2017	3,500
Long-term debt, carrying amount	$ 29,540	$ 34,475

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Summary of Movement in Warranty Accrual (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Product Liability Contingency [Line Items]
Beginning balance	$ 1,737	$ 1,072
Warranty accruals	289	26
Settlements and adjustments	(357)	86
Ending balance	$ 1,669	$ 1,184

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Net Loss per Share

3 Months Ended

Mar. 31, 2014

Net Loss per Share

Note 2. Net loss per share

The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):

	Three months endedMarch 31,
	2014			2013
Numerator:
Net loss	$	(12,588	)	$	(12,240	)
Denominator:
Weighted average shares used to compute basic and diluted net loss per share		31,610			30,574
Basic and diluted net loss per share	$	(0.40	)	$	(0.40	)

The Company has excluded the impact of outstanding employee stock options, restricted stock units, common stock warrants and shares expected to be issued under its employee stock purchase plan from the computation of diluted net loss per share attributable to NeoPhotonics Corporation common stockholders, as their effect would have been antidilutive.  The shares potentially issuable for each of these outstanding awards at March 31, 2014 and 2013 were as follows (in thousands):

	March 31,
	2014		2013
Employee stock options		3,952		2,759
Restricted stock units		1,134		849
Employee stock purchase plan		469		484
Common stock warrants		4		4
		5,559		4,096

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Purchased Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Finite Lived Intangible Assets [Line Items]
Gross Assets	$ 51,493	$ 51,884
Accumulated Amortization	(37,521)	(36,879)
Net Assets	13,972	15,005
Technology and Patents
Finite Lived Intangible Assets [Line Items]
Gross Assets	34,250	34,524
Accumulated Amortization	(26,337)	(25,931)
Net Assets	7,913	8,593
Customer Relationships
Finite Lived Intangible Assets [Line Items]
Gross Assets	14,920	15,004
Accumulated Amortization	(9,967)	(9,732)
Net Assets	4,953	5,272
Leasehold Interest
Finite Lived Intangible Assets [Line Items]
Gross Assets	1,373	1,406
Accumulated Amortization	(267)	(266)
Net Assets	1,106	1,140
Noncompete Agreements
Finite Lived Intangible Assets [Line Items]
Gross Assets	950	950
Accumulated Amortization	$ (950)	$ (950)

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Japan Pension Plans (Tables)

3 Months Ended

Mar. 31, 2014

Periodic Pension Cost

Net periodic pension cost associated with these plans for the period from December 31, 2013 to February 28, 2014 included the following components (in thousands):

Service cost	$	53
Interest cost		13
Amortization		1
Net periodic pension costs	$	67

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Debt (Tables)

3 Months Ended

Mar. 31, 2014

Components of Debt, Obligations, Weighted Average Interest Rate and Additional Fair Value Information Relating to Outstanding Debt Instruments

The table below summarizes the carrying amount and weighted average interest rate of the Company’s notes payable and long-term debt (in thousands, except percentages): 

	March 31, 2014						December 31, 2013
	Carrying Amount			Weighted Average Interest Rate			Carrying Amount		Weighted Average Interest Rate
Notes payable	$	11,210				$	9,738		—
Long-term debt:
Acquisition-related	$	6,790		1.50	%	$	9,975		1.50	%
Bank borrowings		22,750		3.15	%		24,500		2.92	%
		29,540					34,475
Less: current portion of long-term debt		(10,395	)				(10,325	)
Total long-term debt, net of current portion	$	19,145				$	24,150

Maturities of Long-term Debt

At March 31, 2014, maturities of long-term debt were as follows (in thousands):

2014 (remaining nine months)	$	5,250
2015		10,395
2016		10,395
2017		3,500
	$	29,540

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Stockholders' Equity - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Mar. 31, 2014 Employee Stock Options	Mar. 31, 2014 Employee Stock Purchase Plan	Mar. 31, 2014 Common Stock Warrants
Class Of Stock [Line Items]
Common stock		7,076,987	969,878	4,482
Accumulated deficit subject to restriction	$ 6.5
Accumulated profits	10.00%

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Amortization Expense of Company's Purchased Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Finite Lived Intangible Assets [Line Items]
Cost of goods sold	$ 714	$ 428
Amortization of purchased intangible assets	379	321
Operating expenses
Finite Lived Intangible Assets [Line Items]
Amortization of purchased intangible assets	379	321
Cost Of Goods Sold And Operating Expense
Finite Lived Intangible Assets [Line Items]
Amortization of purchased intangible assets	$ 1,093	$ 749

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Summary of Stock Based Compensation Expense

The following table summarizes the stock-based compensation expense recognized for the three months ended March 31, 2014 and 2013 (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of goods sold	$	330	$	243
Research and development		707		418
Sales and marketing		373		238
General and administrative		491		303
	$	1,901	$	1,202

Estimated Fair Value of Certain Stock-Based Awards Using Black-Scholes-Merton Valuation Model

The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:

	Three Months Ended March 31,
Stock options	2014	2013
Weighted-average expected term (years)	5.12	6.55
Weighted-average volatility	72%	76%
Risk-free interest rate	1.75%	1.08%
Expected dividends	—  %	—  %
Stock appreciation units
Weighted-average expected term (years)	2.15	2.61
Weighted-average volatility	59%	63%
Risk-free interest rate	0.13% – 0.78%	0.20% – 0.46%
Expected dividends	—  %	—  %
ESPP
Weighted-average expected term (years)	0.76	0.74
Weighted-average volatility	54%	48%
Risk-free interest rate	0.10 – 0.13%	0.13 – 0.16%
Expected dividends	—  %	—  %

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Computation of Basic and Diluted Net Loss per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Numerator:
Net loss	$ (12,588)	$ (12,240)
Denominator:
Weighted average shares used to compute basic and diluted net loss per share	31,610	30,574
Basic and diluted net loss per share	$ (0.40)	$ (0.40)

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Basis of Presentation and Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Basis of Presentation and Significant Accounting Policies

Note 1. Basis of presentation and significant accounting policies

Basis of Presentation and Consolidation

The condensed consolidated financial statements of NeoPhotonics Corporation (“NeoPhotonics” or the “Company”) as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013, have been prepared in accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, the Company has omitted certain information and notes normally provided in the Company’s annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the interim periods. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”). These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results expected for the entire fiscal year. All significant intercompany accounts and transactions have been eliminated.

Certain Significant Risks and Uncertainties

The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors.  For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the general state of the U.S. and world economies, the highly cyclical nature of the industries the Company serves; the loss of any of a small number of its larger customers; ability to obtain additional financing; inability to meet certain debt covenants; failure to successfully integrate completed acquisitions; fundamental changes in the technology underlying the Company’s products; the hiring, training and retention of key employees; successful and timely completion of product design efforts; and new product design introductions by competitors.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Significant estimates made by management include: the useful lives of property, plant and equipment and intangible assets as well as future cash flows to be generated by those assets; fair values of identifiable assets acquired and liabilities assumed in business combinations; allowances for doubtful accounts; valuation allowances for deferred tax assets; write off of excess and obsolete inventories and the valuations, warranty reserves and recognition of stock-based compensation, among others. Actual results could differ from these estimates.

Summary of Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies for the three months ended March 31, 2014, as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended December 31, 2013.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment.  The Company is in the process of evaluating the impact of adoption on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08") which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In July 2013, the FASB issued amendments to the FASB Accounting Standard Codification on Income Taxes, to improve the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This guidance is expected to reduce diversity in practice and is expected to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exists. This guidance is effective for reporting periods beginning after December 15, 2013. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

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Potentially Dilutive Securities Excluded from Computation of Diluted Net Loss per Share Attributable to Common Stockholders (Detail) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities, excluded from computation of diluted net income (loss) per share	5,559	4,096
Employee Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities, excluded from computation of diluted net income (loss) per share	3,952	2,759
Restricted Stock Units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities, excluded from computation of diluted net income (loss) per share	1,134	849
Employee Stock Purchase Plan
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities, excluded from computation of diluted net income (loss) per share	469	484
Common Stock Warrants
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities, excluded from computation of diluted net income (loss) per share	4	4

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Accounts Receivable, Net (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Accounts Notes And Loans Receivable [Line Items]
Accounts receivable	$ 64,586	$ 57,010
Trade notes receivable	6,480	8,054
Allowance for doubtful accounts	(419)	(531)
Accounts receivable, Net ,Total	$ 70,647	$ 64,533

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Japan Pension Plans - Additional Information (Detail) (USD $)			2 Months Ended	3 Months Ended
	Mar. 31, 2014	Mar. 29, 2013 CompensationPlan	Feb. 28, 2014 DBCPP	Mar. 31, 2014 DBCPP	May 31, 2014 DBCPP Subsequent Event
Defined Benefit Plan Disclosure [Line Items]
Number of Defined Benefit Pension Plans		2
Plan assets					$ 2,000,000
Receivable from LAPIS			300,000
Defined Benefit Plan, Curtailments				100,000
Pension liability	5,700,000
Employer contributions			$ 15,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 53,056	$ 57,101
Short-term investments	8,285	17,916
Restricted cash	2,953	2,138
Accounts receivable, net of allowance for doubtful accounts	70,647	64,533
Inventories	67,949	64,908
Prepaid expenses and other current assets	12,503	9,977
Total current assets	215,393	216,573
Property, plant and equipment, net	66,115	68,851
Other intangible assets, net	13,972	15,005
Other long-term assets	1,820	1,798
Total assets	297,300	302,227
Current liabilities:
Accounts payable	56,845	48,569
Notes payable	11,210	9,738
Current portion of long-term debt	10,395	10,325
Accrued and other current liabilities	26,246	23,643
Total current liabilities	104,696	92,275
Long-term debt, net of current portion	19,145	24,150
Deferred income tax liabilities	1,205	1,004
Other noncurrent liabilities	7,444	7,987
Total liabilities	132,490	125,416
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0025 par value At March 31, 2014 and December 31, 2013: 10,000 shares authorized, no shares issued or outstanding
Common stock $0.0025 par value At March 31,2014: 100,000 shares issued and outstanding; At December 31, 2013: 100,000 shares authorized, 31,572 shares issued and outstanding	80	79
Additional paid-in capital	449,531	447,467
Accumulated other comprehensive income	10,209	11,687
Accumulated deficit	(295,010)	(282,422)
Total stockholders’ equity	164,810	176,811
Total liabilities and stockholders’ equity	$ 297,300	$ 302,227

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Estimated Future Amortization Expense of Purchased Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Expected Amortization Expense [Line Items]
2014 (remaining 9 months)	$ 3,275
2015	4,426
2016	3,682
2017	807
2018	591
Thereafter	1,191
Net Assets	$ 13,972	$ 15,005

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Condensed Consolidated Statements of Comprehensive Loss (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Foreign currency translation adjustments, tax	$ 0	$ 0
Defined benefit pension plans adjustment, tax	73
Unrealized gains (losses) on investments, tax	$ 0	$ 0

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Stock-Based Compensation - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Employee Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares granted	20,600	17,800
Weighted-average fair value of options granted	$ 4.68	$ 3.80
Unexercised stock options outstanding	3,952,356
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	113,184	14,472
Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares granted	22,500	12,200
Weighted-average fair value granted	$ 7.98	$ 5.74
Shares outstanding	1,134,317
Stock Appreciation Units (SARs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares outstanding	414,655
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation expense	$ 0.4

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Fair Value of Financial Assets (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	$ 8,301	$ 24,467
Fair Value, Inputs, Level 1
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	16	4,588
Fair Value, Inputs, Level 2
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	8,285	19,879
Money Market Funds
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	16	4,588
Money Market Funds | Fair Value, Inputs, Level 1
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	16	4,588
Time deposits
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value		6,540
Time deposits | Fair Value, Inputs, Level 2
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value		6,540
Corporate Bonds
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	4,571	6,706
Corporate Bonds | Fair Value, Inputs, Level 2
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	4,571	6,706
U.S. Federal Agencies
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value
U.S. Federal Agencies | Fair Value, Inputs, Level 1
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value
U.S. Federal Agencies | Fair Value, Inputs, Level 2
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value
U.S. Federal Agencies | Fair Value, Inputs, Level 3
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value
Foreign Bonds and Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	2,014	4,832
Foreign Bonds and Notes | Fair Value, Inputs, Level 2
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	2,014	4,832
Variable Rate Demand Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	1,700	1,801
Variable Rate Demand Notes | Fair Value, Inputs, Level 2
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	1,700	1,801
Mutual Funds Held in Rabbi Trust
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	484	442
Mutual Funds Held in Rabbi Trust | Fair Value, Inputs, Level 1
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Assets, fair value	$ 484	$ 442

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Net Loss per Share (Tables)

3 Months Ended

Mar. 31, 2014

Computation of Basic and Diluted Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):

	Three months endedMarch 31,
	2014			2013
Numerator:
Net loss	$	(12,588	)	$	(12,240	)
Denominator:
Weighted average shares used to compute basic and diluted net loss per share		31,610			30,574
Basic and diluted net loss per share	$	(0.40	)	$	(0.40	)

Potentially Dilutive Securities Excluded from Computation of Diluted Net Loss per Share Attributable to Common Stockholders

The Company has excluded the impact of outstanding employee stock options, restricted stock units, common stock warrants and shares expected to be issued under its employee stock purchase plan from the computation of diluted net loss per share attributable to NeoPhotonics Corporation common stockholders, as their effect would have been antidilutive.  The shares potentially issuable for each of these outstanding awards at March 31, 2014 and 2013 were as follows (in thousands):

	March 31,
	2014		2013
Employee stock options		3,952		2,759
Restricted stock units		1,134		849
Employee stock purchase plan		469		484
Common stock warrants		4		4
		5,559		4,096

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Fair Value of Financial Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Liabilities, fair value	$ 1,985	$ 1,985
Penalty payment derivative	425	239
Fair Value, Inputs, Level 3
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Liabilities, fair value	1,985	1,985
Penalty payment derivative	$ 425	$ 239

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Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value of Financial Assets

The following table presents the Company's assets that are measured at fair value on a recurring basis (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash, cash equivalents and short-term investments
Money market funds	$	16	$	—	$	—	$	16	$	4,588	$	—	$	—	$	4,588
Time deposits		—		—		—		—		—		6,540		—		6,540
Corporate bonds		—		4,571		—		4,571		—		6,706		—		6,706
U.S. federal agencies		—		—		—		—		—		—		—		—
Foreign bonds and notes		—		2,014		—		2,014		—		4,832		—		4,832
Variable rate demand notes		—		1,700		—		1,700		—		1,801		—		1,801
	$	16	$	8,285	$	—	$	8,301	$	4,588	$	19,879	$	—	$	24,467
Mutual funds held in Rabbi Trust	$	484	$	—	$	—	$	484	$	442	$	—	$	—	$	442

Fair Value of Financial Liabilities

The following table presents the Company's liabilities that are measured at fair value on a recurring basis (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent consideration (Note 10)	$	—	$	—	$	1,985	$	1,985	$	—	$	—	$	1,985	$	1,985
Penalty payment derivative (Note 10)	$	—	$	—	$	425	$	425	$	—	$	—	$	239	$	239

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net loss	$ (12,588)	$ (12,240)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	5,528	4,152
Stock-based compensation expense	1,901	1,202
Deferred taxes	76
Investment-related amortization and accrued interest	56	315
Loss on disposal of property and equipment	15	111
Adjustment to fair value of penalty payment derivative	186
Allowance for doubtful accounts	(84)	22
Write-down of inventories	567	30
Other, net	(333)	34
Change in assets and liabilities, net of effects of acquisitions:
Accounts receivable	(6,643)	7,155
Inventories	(4,413)	(4,682)
Prepaid expenses and other assets	(2,512)	(1,292)
Accounts payable	9,168	2,126
Accrued and other liabilities	1,719	4,228
Net cash provided by (used in) operating activities	(7,357)	1,161
Cash flows from investing activities
Purchase of property, plant and equipment	(2,070)	(5,134)
Purchase of marketable securities	(5,072)	(29,030)
Proceeds from sale of marketable securities	9,644	23,747
Proceeds from maturity of securities	5,007	20,900
Decrease (increase) in restricted cash	(879)	524
Acquisition, net of notes payable		(14,087)
Net cash provided by (used in) investing activities	6,630	(3,080)
Cash flows from financing activities
Proceeds from exercise of stock options	303	151
Tax withholding on restricted stock units	(80)	(72)
Proceeds from bank loans		26,443
Repayment of bank loans	(5,157)	(8,610)
Proceeds from issuance of notes payable	6,178	4,881
Repayment of notes payable	(4,448)	(6,482)
Net cash provided by (used in) financing activities	(3,204)	16,311
Effect of exchange rates on cash and cash equivalents	(114)	72
Net increase (decrease) in cash and cash equivalents	(4,045)	14,464
Cash and cash equivalents at the beginning of the period	57,101	36,940
Cash and cash equivalents at the end of the period	53,056	51,404
Supplemental disclosure of noncash investing and financing activities:
Issuance of notes to the seller of acquired business		$ 11,130

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Preferred stock, par value	$ 0.0025	$ 0.0025
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0025	$ 0.0025
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	31,664	31,572
Common stock, shares outstanding	31,664	31,572

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies

Note 10. Commitments and contingencies

Litigation

From time to time, the Company is subject to various claims and legal proceedings, either asserted or unasserted, that arise in the ordinary course of business. The Company accrues for legal contingencies if the Company can estimate the potential liability and if the Company believes it is more likely than not that the case will be ruled against it. If a legal claim for which the Company did not accrue is resolved against it, the Company would record the expense in the period in which the ruling was made. The Company does not believe that the ultimate amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect the Company’s financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, and unfavorable outcomes could have a material negative impact on the Company’s financial condition and operating results. Regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, negative publicity, diversion of management resources and other factors.

On January 5, 2010, Finisar Corporation, or Finisar, filed a complaint in the U.S. District Court for the Northern District of California against Source Photonics, Inc., MRV Communications, Inc., Oplink Communications, Inc. and the Company, or collectively, the co-defendants. In the complaint, Finisar alleged infringement of certain of its U.S. patents arising from the codefendants’ respective manufacture, importation, use, sale of or offer to sell certain optical transceiver products. On March 23, 2010, the Company filed an answer to the complaint and counterclaims, asserting two claims of patent infringement and additional claims asserting that Finisar has violated state and federal competition laws and violated its obligations to license on reasonable and non-discriminatory terms. On May 5, 2010, the court dismissed without prejudice all co-defendants (including the Company) except Source Photonics, Inc., on grounds that such claims should have been asserted in four separate lawsuits, one against each defendant. This dismissal without prejudice does not prevent Finisar from bringing a new similar lawsuit against the Company. On January 18, 2011, the Company and Finisar agreed to suspend their respective claims and not to refile the originally asserted claims against each other until at least 90 days after one or more specified events occur resulting in the partial or complete resolution of litigation involving the same Finisar patents between Oplink Communications, Inc. and Finisar. This tolling period expired on April 30, 2012. On May 3, 2012 the Company and Finisar agreed to further toll their respective claims until the refiling of certain of the previously asserted claims from this dispute. As a result, Finisar is permitted to bring a new lawsuit against the Company if it chooses to do so, and the Company may bring new claims against Finisar upon seven days written notice prior to filing such claims. The Company is currently unable to predict the outcome of this dispute and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. As of March 31, 2014, the Company does not have any material indemnification claims that were probable or reasonably possible.

Leases

The Company leases various facilities under non-cancelable operating leases expiring through 2023.  Future minimum payments under these operating leases totaled $6.3 million as of March 31, 2014. Rent expense was $0.5 million and $0.6 million for the three months ended March 31, 2014 and 2013, respectively.

Settlement with Santur

In May 2014, the Company entered into a settlement agreement covering the outstanding claims in connection with its 2011 acquisition of Santur Corporation (“Santur”). Under the terms of the settlement agreement, a net amount of $1.9 million was paid to the Company from the escrow account that was set up under the original merger agreement. This amount comprises $3.9 million related to certain indemnification claims by the Company (“Indemnification Amount”) which were partially offset by $2.0 million related to additional consideration for the business acquisition that was contingent upon Santur’s gross profit performance during 2012 (“Contingent Consideration Amount”).   The Company had recorded the entire $2.0 million as its estimated fair value of the Contingent Consideration Amount as of December 31, 2013. Because it is considered to be a contingent gain, the $3.9 million Indemnification Amount will not be recognized until the quarter ended June 30, 2014 (the quarter in which it was received).

Penalty Payment Derivative

In connection with a private placement transaction in 2012, the Company agreed to certain performance obligations including establishing a wholly-owned subsidiary in the Russian Federation and making a $30.0 million investment commitment (the ‘Investment Obligation’) towards the Company’s Russian operations. The Investment Obligation can be partially satisfied by investment outside of the Russian Federation and/or by way of non-cash asset transfers, including but not limited to capital equipment, small tools, intellectual property, and other intangibles.  A minimum of $15.0 million of the Investment Obligation is required to be satisfied by making capital expenditures and the remaining $15.0 million can be satisfied through general working capital and research and development expenditures.  All of the amount for general working capital can be spent either inside or outside of Russia.  However, at least 80% of the amount expended for research and development expenditure must be spent inside Russia.  General working capital can include acquisition of other businesses or portions thereof to be owned by the Russian subsidiary.

The purchaser of the common stock has non-transferable veto rights over the Company’s Russian subsidiary’s annual budget during the investment period and must approve non-cash asset transfers to be made in satisfaction of the Investment Obligation.  Spending and/or commitments to spend for general working capital and research and development do not require approval by the purchaser. There are no legal restrictions on the specific usage of the $39.8 million received in the private placement transaction or on withdrawal from the Company’s bank accounts for use in general corporate purposes.

The Company is required to satisfy the Investment Obligation by July 31, 2014 or, in the event the Company has not recorded aggregate revenue from sales of its products in the Russian Federation of at least $26.8 million during the period beginning July 1, 2012 and ending June 30, 2014, then will be automatically extended from July 31, 2014 to March 31, 2015. The Company expects the date for achievement of the Investment Obligation will be extended to March 31, 2015. Therefore, the Company intends to meet its Investment Obligation by March 31, 2015.  If the Company fails to meet the Investment Obligation by the deadline, including failure to meet the Investment Obligation because the purchaser of the common stock does not approve the transfer of non-cash assets, the Company will be required to pay a $5.0 million penalty (the ‘Penalty Payment’) as the sole and exclusive remedy for damages and monetary relief available to the purchaser for failure to meet the Investment Obligation.  

The Company has accounted for the $5.0 million Penalty Payment as an embedded derivative instrument, with the underlying being the performance or nonperformance of meeting the Investment Obligation by the extended deadline of March 31, 2015. The fair value of the Penalty Payment derivative has been estimated at the date of the original common stock sale (April 27, 2012) and at each subsequent balance sheet date using a probability-weighted discounted future cash flow approach using unobservable inputs, which are classified as Level 3 within the fair value hierarchy. The primary inputs for this approach include the probability of achieving the Investment Obligation and a discount rate that approximates the Company’s incremental borrowing rate. After the initial measurement, changes in the fair value of this derivative were recorded in other income (expense). The estimated fair value of this derivative was $0.4 million and $0.2 million at March 31, 2014 and December 31, 2013, respectively.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	Jun. 16, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Trading Symbol	NPTN
Entity Registrant Name	NEOPHOTONICS CORP
Entity Central Index Key	0001227025
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		31,780,761

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Stockholders' Equity

3 Months Ended

Mar. 31, 2014

Stockholders' Equity

Note 11. Stockholders’ equity

Common Stock

As of March 31, 2014, the Company had reserved 7,076,987common stock shares for issuance under its stock option plans, 969,878 common stock shares for issuance under its stock purchase plan and 4,482common stock shares to be issued upon exercise of the outstanding warrants.

Accumulated Deficit

Approximately $6.5 million of the Company’s accumulated deficit at December 31, 2013 was subject to restriction due to the fact that the Company’s subsidiaries in China are required to set aside at least 10% of their respective accumulated profits each year to fund statutory common reserves as well as allocate a discretional portion of their after-tax profits to their staff welfare and bonus fund.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenue	$ 68,168	$ 56,063
Cost of goods sold	54,368	44,306
Gross profit	13,800	11,757
Operating expenses:
Research and development	12,056	9,707
Sales and marketing	3,411	3,586
General and administrative	8,987	5,059
Acquisition-related transaction costs		4,510
Amortization of purchased intangible assets	379	321
Restructuring charges		325
Total operating expenses	24,833	23,508
Loss from operations	(11,033)	(11,751)
Interest income	65	131
Interest expense	(251)	(163)
Other expense, net	(607)	(274)
Total interest and other expense, net	(793)	(306)
Loss before income taxes	(11,826)	(12,057)
Income tax expense	(762)	(183)
Net loss	$ (12,588)	$ (12,240)
Basic and diluted net loss per share	$ (0.40)	$ (0.40)
Weighted average shares used to compute basic and diluted net loss per share	31,610	30,574

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Business Combination

3 Months Ended

Mar. 31, 2014

Business Combination

Note 5. Business combination

On March 29, 2013 (the “closing date”) the Company acquired certain assets and assumed certain liabilities related to the semiconductor Optical Components Business Unit (the “OCU”) of LAPIS Semiconductor Co., Ltd., a wholly owned subsidiary of Rohm Co., Ltd (“LAPIS”) of Japan with the intention of operating the OCU as an ongoing business. The business is now known as NeoPhotonics Semiconductor.

Total consideration for NeoPhotonics Semiconductor was $24.3 million, including cash of $14.1 million paid upon closing and notes payable of $11.1 million (see Note 8), partially offset by a net receivable from Lapis of $1.0 million that was received subsequent to March 31, 2013. The cash paid includes $2.0 million that was withheld and placed into escrow to cover certain indemnity obligations.

In connection with the acquisition, the Company incurred approximately $4.5 million in acquisition-related transaction costs during the three months ended March 31, 2013 related to investment banking, legal, accounting and other professional services and transfer taxes related to real property acquired. The acquisition costs were expensed as incurred and were included in operating expenses in the Company’s condensed consolidated statement of operations.

NeoPhotonics Semiconductor’s results of operations between the closing date of March 29, 2013 and the Company’s quarter end date of March 31, 2013 were immaterial.

The Company accounted for its acquisition of the NeoPhotonics Semiconductor assets and assumed liabilities as a business combination. NeoPhotonics Semiconductor’s tangible and identifiable intangible assets acquired and liabilities assumed were recorded based upon their estimated fair values as of the closing date of the acquisition. The estimated fair values of the identifiable assets acquired and liabilities assumed approximated the purchase price; therefore, no goodwill was recorded. The following table summarizes the acquisition accounting and the tangible and intangible assets acquired as of the date of acquisition and subsequent adjustments (in thousands):

Total purchase consideration:
Cash paid	$	14,087
Net receivable from LAPIS		(959	)
Notes payable		11,130
	$	24,258
Liabilities assumed:
Pension and retirement obligations	$	6,471
Other compensation-related liabilities		1,083
Other current liabilities		1,265
	$	8,819
Fair value of assets acquired:
Inventory	$	13,309
Other current assets		35
Land, property, plant and equipment		14,433
Intangible assets acquired:
Developed technology		2,120
Customer relationships		3,180
	$	33,077

The following unaudited supplemental pro forma information presents the combined results of operations of NeoPhotonics Corporation and NeoPhotonics Semiconductor for the three months ended March 31, 2013 as though the companies had been combined as of the beginning of the period presented. The pro forma financial information includes elimination of $4.5 million of transaction costs and $1.9 million of revenue and $1.8 million of costs related to sales from NeoPhotonics Semiconductor to the Company.

The unaudited pro forma results do not assume any operating efficiencies as a result of the consolidation of operations (in thousands, except per share data):

	Three Months Ended March 31, 2013
Revenue	$	68,754
Net loss	$	(5,277	)
Basic and diluted net loss per share	$	(0.17	)

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Fair Value Disclosures

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures

Note 4. Fair value disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the Company's assets that are measured at fair value on a recurring basis (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash, cash equivalents and short-term investments
Money market funds	$	16	$	—	$	—	$	16	$	4,588	$	—	$	—	$	4,588
Time deposits		—		—		—		—		—		6,540		—		6,540
Corporate bonds		—		4,571		—		4,571		—		6,706		—		6,706
U.S. federal agencies		—		—		—		—		—		—		—		—
Foreign bonds and notes		—		2,014		—		2,014		—		4,832		—		4,832
Variable rate demand notes		—		1,700		—		1,700		—		1,801		—		1,801
	$	16	$	8,285	$	—	$	8,301	$	4,588	$	19,879	$	—	$	24,467
Mutual funds held in Rabbi Trust	$	484	$	—	$	—	$	484	$	442	$	—	$	—	$	442

The Company offers a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of its highly compensated employees.  The NQDC Plan provides participants the opportunity to defer payment of certain compensation as defined in the NQDC Plan.  A Rabbi Trust has been established to fund the NQDC Plan obligation, which was fully funded at March 31, 2014.  The assets held by the Rabbi Trust are substantially in the form of exchange traded mutual funds and are included in the Company’s other long-term assets on its condensed consolidated balance sheets at March 31, 2014 and December 31, 2013.

The following table presents the Company's liabilities that are measured at fair value on a recurring basis (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent consideration (Note 10)	$	—	$	—	$	1,985	$	1,985	$	—	$	—	$	1,985	$	1,985
Penalty payment derivative (Note 10)	$	—	$	—	$	425	$	425	$	—	$	—	$	239	$	239

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

There were no assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2014 or December 31, 2013.

Assets and Liabilities Not Measured at Fair Value

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term nature and liquidity of these financial instruments.

The fair values of the Company’s long-term debt have been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of liabilities with a similar maturity and discounting the cash flows at that rate which it considers to be a level 2 fair value measurement. The fair values do not necessarily give an indication of the amount that the Company would currently have to pay to extinguish any of this debt.

The fair value of the Company’s variable rate bank borrowings and acquisition-related debt was not materially different than its carrying value at March 31, 2014 and December 31, 2013 as the interest rates approximated rates currently available to the Company.  

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Cash Equivalents and Investments (Tables)

3 Months Ended

Mar. 31, 2014

Summary of Unrealized Gains and Losses Related to Cash Equivalents and Investments in Marketable Securities

The following table summarizes the Company’s unrealized gains and losses related to the cash equivalents and investments in marketable securities designated as available-for-sale (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and cash equivalents
Money market funds	$	16	$	—	$	—	$	16	$	11	$	—	$	—		$	11
Time deposits		—		—		—		—		6,540		—		—			6,540
Short-term investments
Money market funds		—		—		—		—		4,577		—		—			4,577
Corporate bonds		4,571		—		—		4,571		6,708		3		(5	)		6,706
Foreign bonds and notes		2,008		6		—		2,014		4,827		5		—			4,832
Variable rate demand notes		1,700		—		—		1,700		1,801		—		—			1,801
Total short-term investments		8,279		6		—		8,285		17,913		8		(5	)		17,916
Total investments	$	8,295	$	6	$	—	$	8,301	$	24,464	$	8	$	(5	)	$	24,467

Maturities of Marketable Securities

As of March 31, 2014 and December 31, 2013, maturities of marketable securities were as follows (in thousands):

	March 31, 2014		December 31, 2013
Less than 1 year	$	4,587	$	20,658
Due in 1 to 2 years		2,014		2,008
Due in 2 to 5 years		—		—
Due after 5 years		1,700		1,801
Total	$	8,301	$	24,467

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

Stock-Based Compensation

Note 12. Stock-based compensation

The following table summarizes the stock-based compensation expense recognized for the three months ended March 31, 2014 and 2013 (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of goods sold	$	330	$	243
Research and development		707		418
Sales and marketing		373		238
General and administrative		491		303
	$	1,901	$	1,202

Determining Fair Value

The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:

	Three Months Ended March 31,
Stock options	2014	2013
Weighted-average expected term (years)	5.12	6.55
Weighted-average volatility	72%	76%
Risk-free interest rate	1.75%	1.08%
Expected dividends	—  %	—  %
Stock appreciation units
Weighted-average expected term (years)	2.15	2.61
Weighted-average volatility	59%	63%
Risk-free interest rate	0.13% – 0.78%	0.20% – 0.46%
Expected dividends	—  %	—  %
ESPP
Weighted-average expected term (years)	0.76	0.74
Weighted-average volatility	54%	48%
Risk-free interest rate	0.10 – 0.13%	0.13 – 0.16%
Expected dividends	—  %	—  %

Stock Options

The Company granted 20,600 and 17,800 stock options during the three months ended March 31, 2014 and 2013, with weighted-average grant-date fair values per share of $4.68 and $3.80, respectively. Options for 113,184 and 14,472 shares were forfeited during the three months ended March 31, 2014 and 2013, respectively.  As of March 31, 2014, there were 3,952,356 unexercised stock options outstanding.

Restricted Stock Units (“RSUs”)

The Company granted 22,500 and 12,200 RSUs during the three months ended March 31, 2014 and 2013, with weighted-average grant-date fair values per share of $7.98 and $5.74, respectively. As of March 31, 2014, there were 1,134,317 RSUs outstanding.

Stock appreciation units (“SAUs”)

The Company did not grant any SAUs during the three months ended March 31, 2014 or 2013. As of March 31, 2014, there were 414,655 SAUs outstanding. SAUs are liability classified share-based awards which are re-measured each reporting period at fair value.

Employee Stock Purchase Plan (“ESPP”)

At March 31, 2014 there was $0.4 millionof unrecognized stock-based compensation expense for stock purchase rights that will be recognized over the remaining offering period, through November 2014. Due to the delay in filing its Annual Report on Form 10-K, in May 2014 the Compensation Committee of the Company’s Board of Directors (the Committee) rescheduled the May 15 purchase date under the current offering period to the date that is three business days after the later of (i) the filing of its Annual Report on Form 10-K and (ii) the Company’s general public release of its revenues for the first quarter of 2014, which occurred on June 17, 2014. Additionally, the Committee waived the existing purchase limits for the upcoming purchase date only, creating a modification of the purchase price formula for the current offering period.

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Debt

3 Months Ended

Mar. 31, 2014

Debt

Note 8. Debt

The table below summarizes the carrying amount and weighted average interest rate of the Company’s notes payable and long-term debt (in thousands, except percentages): 

	March 31, 2014						December 31, 2013
	Carrying Amount			Weighted Average Interest Rate			Carrying Amount		Weighted Average Interest Rate
Notes payable	$	11,210				$	9,738		—
Long-term debt:
Acquisition-related	$	6,790		1.50	%	$	9,975		1.50	%
Bank borrowings		22,750		3.15	%		24,500		2.92	%
		29,540					34,475
Less: current portion of long-term debt		(10,395	)				(10,325	)
Total long-term debt, net of current portion	$	19,145				$	24,150

Notes payable

The Company regularly issues notes payable to its suppliers in China in exchange for accounts payable. These notes are supported by noninterest bearing bank acceptance drafts and are due three to six months after issuance. As a condition of the notes payable arrangements, the Company is required to keep a compensating balance at the issuing banks that is a percentage of the total notes payable balance until the amounts are settled. These balances are classified as restricted cash on the Company’s consolidated balance sheets. As of March 31, 2014 and December 31, 2013, restricted cash totaled $3.0 million and $2.1 million, respectively. In May 2014, one of the Company’s subsidiaries in China issued a 90-day bank acceptance draft of $8.0 million to another of the Company’s subsidiaries that required a compensating balance of $2.4 million.  This bank acceptance draft can be sold for cash at a discount prior to its expiration.

At March 31, 2014, the Company’s subsidiaries in China had two short-term line of credit facilities with banking institutions, both of which subsequently expired. In June 2014, one of the credit facilities was renewed.  Under the renewed agreement, which expires in June 2015, the Company’s subsidiaries in China have a short-term line of credit of RMB 160.0 million ($25.7 million) of which the full amount can be used for bank acceptance drafts (with a 25% compensating balance requirement) and up to RMB 120.0 million ($19.3 million) can be used for short-term loans, which will bear interest at varying rates depending upon the term.  The second credit facility is in the process of being renewed.

Acquisition-related

In connection with the acquisition of NeoPhotonics Semiconductor on March 29, 2013, the Company was obligated to pay 1,050 million Japanese Yen in three equal installments on the first, second and third anniversaries of the closing date for the purchase of the real estate used by NeoPhotonics Semiconductor, of which 700 million Japanese Yen ($6.8 million) was outstanding at March 31, 2014. The obligation bears interest at 1.5% per year, payable annually, and is secured by the acquired real estate property.

Bank borrowings

The Company has a credit agreement with Comerica Bank as lead bank in the U.S., which has been amended several times. The components of the available credit facilities are as follows:

— A revolving credit facility under which there was nothing outstanding at March 31, 2014 or December 31, 2013 and $20.0 million was available for borrowing at March 31, 2014, subject to covenant requirements. Amounts borrowed are due on or before March 2016 and borrowings bear interest at an interest rate option of a base rate as defined in the agreement plus 1.75% or LIBOR plus 2.75%. As of March 31, 2014 the rate on the LIBOR option was 2.90%.

— A term loan facility of $28.0 million, under which $22.8 million and $24.5 million was outstanding at March 31, 2014 and December 31, 2013, respectively. Interest is payable quarterly in arrears and the principal is paid in equal quarterly installments over the term of the loan ending in June 2017. Borrowings under the term loan bear interest at an interest rate option of a base rate as defined in the agreement plus 2.0% or LIBOR plus 3.0%. As of March 31, 2014 the rate on the LIBOR option was 3.15%.

The Company’s credit agreement requires the maintenance of specified financial covenants, including a debt to EBITDA ratio and liquidity ratios.  The agreement also restricts the Company’s ability to incur certain additional debt or to engage in specified transactions, restricts the payment of dividends and is secured by substantially all of its U.S. assets, other than intellectual property assets. The Company was not in compliance with the debt to EBITDA covenant at March 31, 2014, which noncompliance was effectively waived in the amendment described below.  

On May 19, 2014, the Company executed an amendment to the credit agreement that waived the testing of certain covenants for compliance, including the March 31, 2014 debt to EBITDA covenant, provided that the Company maintain compensating balances equal to outstanding amounts under the credit agreement in accounts for which the bank will have sole access.  The Company intends to work with the bank in the coming months to restructure the credit agreement, including the covenant requirements.  In the absence of a restructured agreement, the Company believes it will need to continue to maintain the compensating balances at least through the end of 2014. As of May 19, 2014, the amount of the Company’s cash and short-term investments in these compensating balance accounts was $21.1 million, which will be classified as restricted cash on the Company’s June 30, 2014 condensed consolidated balance sheet.    

At March 31, 2014, maturities of long-term debt were as follows (in thousands):

2014 (remaining nine months)	$	5,250
2015		10,395
2016		10,395
2017		3,500
	$	29,540

On May 23, 2014, one of the Company’s subsidiaries in China borrowed CNY 50 million ($8.0 million) under a working capital loan agreement with a bank.  The loan bears interest at 7% per annum.  Interest is payable monthly and the principal is due on November 23, 2014.

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Income Taxes - Additional Information (Detail) (Subsidiaries, Foreign Country)	3 Months Ended
	Mar. 31, 2014
Subsidiaries | Foreign Country
Income Taxes [Line Items]
Effective income tax rate	15.00%
Income tax statutory rate	25.00%

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Balance Sheet Components

3 Months Ended

Mar. 31, 2014

Balance Sheet Components

Note 6. Balance sheet components

Accounts receivable, net

Accounts receivable, net consists of the following (in thousands):

	March 31, 2014			December 31, 2013
Accounts receivable	$	64,586		$	57,010
Trade notes receivable		6,480			8,054
Allowance for doubtful accounts		(419	)		(531	)
	$	70,647		$	64,533

Inventories

Inventories consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Raw materials	$	27,876	$	26,379
Work in process		22,844		14,341
Finished goods (1)		17,229		24,188
	$	67,949	$	64,908

⁽¹⁾Finished goods inventory at customer vendor managed inventory locations was $4.9 million and $5.4 million as of March 31, 2014 and December 31, 2013, respectively.

Purchased intangible assets

Purchased intangible assets consist of the following (in thousands):

	March 31, 2014							December 31, 2013
	Gross Assets		Accumulated Amortization			Net Assets		Gross Assets		Accumulated Amortization			Net Assets
Technology and patents	$	34,250	$	(26,337	)	$	7,913	$	34,524	$	(25,931	)	$	8,593
Customer relationships		14,920		(9,967	)		4,953		15,004		(9,732	)		5,272
Leasehold interest		1,373		(267	)		1,106		1,406		(266	)		1,140
Noncompete agreements		950		(950	)		—		950		(950	)		—
	$	51,493	$	(37,521	)	$	13,972	$	51,884	$	(36,879	)	$	15,005

Amortization expense relating to technology and patents and the leasehold interest intangible assets is included within cost of goods sold, and customer relationships within operating expenses. The following table presents details of the amortization expense of the Company’s purchased intangible assets as reported in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of goods sold	$	714	$	428
Operating expenses		379		321
Total	$	1,093	$	749

The estimated future amortization expense of purchased intangible assets as of March 31, 2014, is as follows (in thousands):

2014 (remaining 9 months)	$	3,275
2015		4,426
2016		3,682
2017		807
2018		591
Thereafter		1,191
	$	13,972

Accrued and other current liabilities

Accrued and other current liabilities consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Employee-related accrued expenses	$	14,449	$	12,297
Other accrued expenses		11,372		11,346
Penalty payment derivative		425		—
	$	26,246	$	23,643

Warranty Accrual

The table below summarizes the movement in the warranty accrual, which is included in accrued and other current liabilities (in thousands):

	Three Months Ended March 31,
	2014			2013
Beginning balance	$	1,737		$	1,072
Warranty accruals		289			26
Settlements and adjustments		(357	)		86
Ending balance	$	1,669		$	1,184

Other noncurrent liabilities

Other noncurrent liabilities consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Pension and other employee-related	$	6,098	$	6,206
Penalty payment derivative		—		239
Other		1,346		1,542
	$	7,444	$	7,987

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Restructuring

3 Months Ended

Mar. 31, 2014

Restructuring

Note 7. Restructuring

The following table summarizes activity associated with restructuring obligations during the three months ended March 31, 2014 (in thousands):

	Facilities			Contract Termination			Total
Restructuring obligations, December 31, 2013	$	211		$	66		$	277
Restructuring costs incurred		—			—			—
Cash payments		(27	)		(66	)		(93	)
Non-cash settlements and other		—			—			—
Restructuring obligations, March 31, 2014	$	184		$	—		$	184

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Japan Pension Plans

3 Months Ended

Mar. 31, 2014

Japan Pension Plans

Note 9. Japan pension plans

In connection with its acquisition of NeoPhotonics Semiconductor on March 29, 2013, the Company assumed responsibility for two defined benefit plans that provide retirement benefits to its NeoPhotonics Semiconductor employees in Japan: the Retirement Allowance Plan (“RAP”) and the Defined Benefit Corporate Pension Plan (“DBCPP”). The RAP is an unfunded plan administered by the Company.  Effective February 28, 2014, the DBCPP was converted to a defined contribution plan (“DCP”). In May 2014, LAPIS transferred approximately $2.0 million into the newly formed DCP which is the allowable amount that can be transferred according to the Japanese regulations.   LAPIS also will pay the Company approximately $0.3 million in connection with the conversion of the plan, which the Company has included in prepaid expenses and other current assets at March 31, 2014. Additionally, the Company transferred the net unfunded projected benefit obligation amount from the DBCPP to the RAP and froze the RAP benefit at the February 28, 2014 amount.

As a result of these changes to the DBCPP and the RAP, the Company recorded a curtailment gain of $0.1 million in the quarter ended March 31, 2014. The pension liability at March 31, 2014 was $5.7 million.

The Company contributed $15,000 to the DBCPP from January 1, 2014 to February 28, 2014.  Because the DBCPP transitioned to the DCP on that date, no further contributions to the DBCPP are required.

Net periodic pension cost associated with these plans for the period from December 31, 2013 to February 28, 2014 included the following components (in thousands):

Service cost	$	53
Interest cost		13
Amortization		1
Net periodic pension costs	$	67

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Maturities of Marketable Securities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule Of Investments [Line Items]
Less than 1 year	$ 4,587	$ 20,658
Due in 1 to 2 years	2,014	2,008
Due in 2 to 5 years
Due after 5 years	1,700	1,801
Total	$ 8,301	$ 24,467

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Debt - Additional Information (Detail)	3 Months Ended		3 Months Ended		3 Months Ended			1 Months Ended			1 Months Ended	3 Months Ended		3 Months Ended				3 Months Ended		1 Months Ended					1 Months Ended
	Mar. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Mar. 31, 2014 Revolving Credit Facility USD ($)	Dec. 31, 2013 Revolving Credit Facility USD ($)	Mar. 31, 2014 Revolving Credit Facility Libor Plus Rate	Mar. 31, 2014 Revolving Credit Facility Credit Facility Base Rate	Mar. 29, 2013 NeoPhotonics Semiconductor	Mar. 29, 2013 Notes Payable NeoPhotonics Semiconductor USD ($)	Mar. 31, 2014 Notes Payable NeoPhotonics Semiconductor USD ($)	Mar. 31, 2014 Notes Payable NeoPhotonics Semiconductor JPY (¥)	Mar. 29, 2013 Notes Payable NeoPhotonics Semiconductor Notes Payable To be paid in three equal installments JPY (¥)	Mar. 31, 2014 Term Loan USD ($)	Dec. 31, 2013 Term Loan USD ($)	Mar. 31, 2014 Term Loan Libor Plus Rate	Mar. 31, 2014 Term Loan Credit Facility Base Rate	May 31, 2014 Subsequent Event USD ($)	May 19, 2014 Subsequent Event USD ($)	Mar. 31, 2014 China CreditFacility	Mar. 31, 2014 China Second Credit Facility	Jun. 30, 2014 China Subsequent Event USD ($)	Jun. 30, 2014 China Subsequent Event CNY	May 23, 2014 China Subsequent Event USD ($)	May 23, 2014 China Subsequent Event CNY	May 31, 2014 China Subsequent Event USD ($)	Jun. 30, 2014 China Subsequent Event First Credit Facility
Debt Instrument [Line Items]
Restricted cash	$ 2,953,000	$ 2,138,000														$ 2,400,000
Bank Acceptances Executed																								8,000,000
Number of short-term line of credit facilities																		2
Credit facility, expiration date																			Jun. 30, 2014						Jun. 30, 2015
Short-term line of credit facility																				25,700,000	160,000,000
Percentage of compensating balance requirement for bank acceptance drafts																				25.00%	25.00%
Short-term borrowing capacity			20,000,000									28,000,000								19,300,000	120,000,000
Notes payable								11,130,000			1,050,000,000
Notes payable outstanding									6,800,000	700,000,000
Obligation bear interest							1.50%															7.00%	7.00%
Line Of Credit Facility Amount Outstanding			0	0								22,800,000	24,500,000
Interest rate description					borrowings bear interest at an interest rate option of a base rate as defined in the agreement plus 1.75% or LIBOR plus 2.75%.							Borrowings under the term loan bear interest at an interest rate option of a base rate as defined in the agreement plus 2.0% or LIBOR plus 3.0%.
Line of credit facility, marginal interest rate					2.75%	1.75%								3.00%	2.00%
Line of credit facility, interest rate					2.90%									3.15%
Line of credit facility, expiration date			2016-03									2017-07
Debt Instrument, Covenant Compliance	The Company’s credit agreement requires the maintenance of specified financial covenants, including a debt to EBITDA ratio and liquidity ratios. The agreement also restricts the Company’s ability to incur certain additional debt or to engage in specified transactions, restricts the payment of dividends and is secured by substantially all of its U.S. assets, other than intellectual property assets. The Company was not in compliance with the debt to EBITDA covenant at March 31, 2014, which noncompliance was effectively waived in the amendment described below.
Compensating Balance, Amount																	21,100,000
Working capital Loan																						$ 8,000,000	50,000,000
Frequency of periodic payment on loan																						Monthly	Monthly
Due date of the principal																						Nov. 23, 2014	Nov. 23, 2014

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Basis of Presentation and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The condensed consolidated financial statements of NeoPhotonics Corporation (“NeoPhotonics” or the “Company”) as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013, have been prepared in accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, the Company has omitted certain information and notes normally provided in the Company’s annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the interim periods. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”). These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results expected for the entire fiscal year. All significant intercompany accounts and transactions have been eliminated.

Certain Significant Risks and Uncertainties

The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors.  For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the general state of the U.S. and world economies, the highly cyclical nature of the industries the Company serves; the loss of any of a small number of its larger customers; ability to obtain additional financing; inability to meet certain debt covenants; failure to successfully integrate completed acquisitions; fundamental changes in the technology underlying the Company’s products; the hiring, training and retention of key employees; successful and timely completion of product design efforts; and new product design introductions by competitors.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Significant estimates made by management include: the useful lives of property, plant and equipment and intangible assets as well as future cash flows to be generated by those assets; fair values of identifiable assets acquired and liabilities assumed in business combinations; allowances for doubtful accounts; valuation allowances for deferred tax assets; write off of excess and obsolete inventories and the valuations, warranty reserves and recognition of stock-based compensation, among others. Actual results could differ from these estimates.

Recent Accounting Pronouncements

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment.  The Company is in the process of evaluating the impact of adoption on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08") which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In July 2013, the FASB issued amendments to the FASB Accounting Standard Codification on Income Taxes, to improve the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This guidance is expected to reduce diversity in practice and is expected to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exists. This guidance is effective for reporting periods beginning after December 15, 2013. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

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Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2014

Accounts Receivable, Net

Accounts receivable, net consists of the following (in thousands):

	March 31, 2014			December 31, 2013
Accounts receivable	$	64,586		$	57,010
Trade notes receivable		6,480			8,054
Allowance for doubtful accounts		(419	)		(531	)
	$	70,647		$	64,533

Inventories

Inventories consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Raw materials	$	27,876	$	26,379
Work in process		22,844		14,341
Finished goods (1)		17,229		24,188
	$	67,949	$	64,908

⁽¹⁾Finished goods inventory at customer vendor managed inventory locations was $4.9 million and $5.4 million as of March 31, 2014 and December 31, 2013, respectively.

Purchased Intangible Assets

Purchased intangible assets consist of the following (in thousands):

	March 31, 2014							December 31, 2013
	Gross Assets		Accumulated Amortization			Net Assets		Gross Assets		Accumulated Amortization			Net Assets
Technology and patents	$	34,250	$	(26,337	)	$	7,913	$	34,524	$	(25,931	)	$	8,593
Customer relationships		14,920		(9,967	)		4,953		15,004		(9,732	)		5,272
Leasehold interest		1,373		(267	)		1,106		1,406		(266	)		1,140
Noncompete agreements		950		(950	)		—		950		(950	)		—
	$	51,493	$	(37,521	)	$	13,972	$	51,884	$	(36,879	)	$	15,005

Amortization Expense of Purchased Intangible Assets

Amortization expense relating to technology and patents and the leasehold interest intangible assets is included within cost of goods sold, and customer relationships within operating expenses. The following table presents details of the amortization expense of the Company’s purchased intangible assets as reported in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of goods sold	$	714	$	428
Operating expenses		379		321
Total	$	1,093	$	749

Estimated Future Amortization Expense of Purchased Intangible Assets

The estimated future amortization expense of purchased intangible assets as of March 31, 2014, is as follows (in thousands):

2014 (remaining 9 months)	$	3,275
2015		4,426
2016		3,682
2017		807
2018		591
Thereafter		1,191
	$	13,972

Accrued Expenses and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Employee-related accrued expenses	$	14,449	$	12,297
Other accrued expenses		11,372		11,346
Penalty payment derivative		425		—
	$	26,246	$	23,643

Summary of Movement in Warranty Accrual

The table below summarizes the movement in the warranty accrual, which is included in accrued and other current liabilities (in thousands):

	Three Months Ended March 31,
	2014			2013
Beginning balance	$	1,737		$	1,072
Warranty accruals		289			26
Settlements and adjustments		(357	)		86
Ending balance	$	1,669		$	1,184

Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following (in thousands):

	March 31, 2014		December 31, 2013
Pension and other employee-related	$	6,098	$	6,206
Penalty payment derivative		—		239
Other		1,346		1,542
	$	7,444	$	7,987

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Summary of Restructuring Activity (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Restructuring Cost And Reserve [Line Items]
Restructuring obligations, December 31, 2013	$ 277
Restructuring costs incurred
Cash payments	(93)
Non-cash settlements and other
Restructuring obligations, March 31, 2014	184
Facilities
Restructuring Cost And Reserve [Line Items]
Restructuring obligations, December 31, 2013	211
Restructuring costs incurred
Cash payments	(27)
Non-cash settlements and other
Restructuring obligations, March 31, 2014	184
Contract Termination
Restructuring Cost And Reserve [Line Items]
Restructuring obligations, December 31, 2013	66
Restructuring costs incurred
Cash payments	(66)
Non-cash settlements and other

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Inventory (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Inventory [Line Items]
Raw materials	$ 27,876		$ 26,379
Work in process	22,844		14,341
Finished goods	17,229	[1]	24,188	[1]
Inventories	$ 67,949		$ 64,908

[1] Finished goods inventory at customer vendor managed inventory locations was $4.9 million and $5.4 million as of March 31, 2014 and December 31, 2013, respectively.

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Condensed Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Net loss	$ (12,588)	$ (12,240)
Foreign currency translation adjustments, net of tax of zero	(1,599)	172
Defined benefit pension plans adjustment, net of tax of $73	118
Unrealized gain (loss) on investments, net of tax of zero	3	(19)
Comprehensive loss	$ (14,066)	$ (12,087)

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Cash Equivalents and Investments

3 Months Ended

Mar. 31, 2014

Cash Equivalents and Investments

Note 3. Cash equivalents and investments

The following table summarizes the Company’s unrealized gains and losses related to the cash equivalents and investments in marketable securities designated as available-for-sale (in thousands):

	As of March 31, 2014								As of December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and cash equivalents
Money market funds	$	16	$	—	$	—	$	16	$	11	$	—	$	—		$	11
Time deposits		—		—		—		—		6,540		—		—			6,540
Short-term investments
Money market funds		—		—		—		—		4,577		—		—			4,577
Corporate bonds		4,571		—		—		4,571		6,708		3		(5	)		6,706
Foreign bonds and notes		2,008		6		—		2,014		4,827		5		—			4,832
Variable rate demand notes		1,700		—		—		1,700		1,801		—		—			1,801
Total short-term investments		8,279		6		—		8,285		17,913		8		(5	)		17,916
Total investments	$	8,295	$	6	$	—	$	8,301	$	24,464	$	8	$	(5	)	$	24,467

As of March 31, 2014 and December 31, 2013, maturities of marketable securities were as follows (in thousands):

	March 31, 2014		December 31, 2013
Less than 1 year	$	4,587	$	20,658
Due in 1 to 2 years		2,014		2,008
Due in 2 to 5 years		—		—
Due after 5 years		1,700		1,801
Total	$	8,301	$	24,467

The Company may sell its investments in the future to fund future operating needs. As a result, the Company recorded all its marketable securities in short-term investment as of March 31, 2014 and December 31, 2013, regardless of the contractual maturity date of the securities.

Realized gains and losses on the sale of marketable securities during the three months ended March 31, 2014 and 2013 were immaterial. The Company did not recognize any impairment losses on its marketable securities during the three months ended March 31, 2014 or 2013. As of March 31, 2014, the Company did not have any investments in marketable securities that were in an unrealized loss position for a period in excess of 12 months.

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Estimated Fair Value of Certain Stock-Based Awards Using Black-Scholes-Merton Valuation Model (Detail)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Employee Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average expected term (years)	5 years 1 month 13 days	6 years 6 months 18 days
Weighted-average volatility	72.00%	76.00%
Risk-free interest rate	1.75%	1.08%
Expected dividends
Stock Appreciation Units (SARs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average expected term (years)	2 years 1 month 24 days	2 years 7 months 10 days
Weighted-average volatility	59.00%	63.00%
Expected dividends
Risk-free interest rate Minimum	0.13%	0.20%
Risk-free interest rate Maximum	0.78%	0.46%
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average expected term (years)	9 months 4 days	8 months 27 days
Weighted-average volatility	54.00%	48.00%
Expected dividends
Risk-free interest rate Minimum	0.10%	0.13%
Risk-free interest rate Maximum	0.13%	0.16%

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Restructuring (Tables)

3 Months Ended

Mar. 31, 2014

Restructuring and Related Costs

The following table summarizes activity associated with restructuring obligations during the three months ended March 31, 2014 (in thousands):

	Facilities			Contract Termination			Total
Restructuring obligations, December 31, 2013	$	211		$	66		$	277
Restructuring costs incurred		—			—			—
Cash payments		(27	)		(66	)		(93	)
Non-cash settlements and other		—			—			—
Restructuring obligations, March 31, 2014	$	184		$	—		$	184

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Acquisition Accounting and Tangible and Intangible Assets Acquired (Detail) (Business Combinations, USD $) In Thousands, unless otherwise specified	1 Months Ended
	Mar. 29, 2013
Business Acquisition [Line Items]
Cash paid	$ 14,087
Net receivable from LAPIS	(959)
Total consideration	24,258
Inventory	13,309
Other current assets	35
Land, property, plant and equipment	14,433
Fair Value of assets acquired	33,077
Developed Technology
Business Acquisition [Line Items]
Intangible assets acquired	2,120
Customer Relationships
Business Acquisition [Line Items]
Intangible assets acquired	3,180
Other Liability
Business Acquisition [Line Items]
Pension and retirement obligations	6,471
Other compensation-related liabilities	1,083
Other current liabilities	1,265
Liabilities assumed	8,819
Notes Payable
Business Acquisition [Line Items]
Notes payable	$ 11,130

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Taxes

Note 13. Income taxes

The Company’s income tax expense for the three months ended March 31, 2014 and 2013 was primarily related to income taxes of the Company’s non-U.S. operations.

The Company conducts its business globally and its operating income is subject to varying rates of tax in the United States, China and Japan. Consequently, the Company’s effective tax rate is dependent upon the geographic distribution of its earnings or losses and the tax laws and regulations in each geographical region. Historically, the Company has experienced net losses in the United States and in the short term, expects this trend to continue. One of the Company’s subsidiaries in China has historically qualified for a preferential 15% tax rate available for high technology enterprises as opposed to the statutory 25% tax rate. The Company intends to reapply for the preferential rate for 2014 to 2016.

Due to historic losses in the US, the Company has a full valuation allowance on its US federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

As of March 31, 2014, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2013.