AFOP Alliance Fiber Optic Products, Inc.

Alliance Fiber Optic Products, Inc. (NASDAQ:AFOP), an innovative supplier of fiber optic components, subsystems and integrated modules for the optical network equipment market, today reported its financial results for the first quarter ended March 31, 2007. Revenues for the first quarter of 2007 totaled $6,701,000, a 28% increase from revenues of $5,221,000 recorded in the first quarter of 2006. This compares with revenues of $7,746,000 for the fourth quarter of 2006. The Company recorded net income for the first quarter of 2007 of $389,000, or $0.01 per share, and improved over a net loss for the first quarter of 2006 of ($373,000), or ($0.01) per share. This compares with net income for the fourth quarter of 2006 of $653,000, or $0.02 per share. Included in net income for the quarter ended March 31, 2007 was $ 124,000 of stock-based compensation charges under FAS 123(R). Included in expenses for the quarters ended March 31, 2006 and December 31, 2006 were $77,000 and $106,000 of stock-based compensation charges under SFAS 123(R) respectively. Peter Chang, President and Chief Executive Officer, commented, �Despite a challenging first quarter due to customer inventory consolidation, I am satisfied with our financial results. When compared to the year ago period, revenues increased by 28% and our gross margin percentage continued improving to above 31%. In addition, in spite of our sales decline sequentially, operating profits declined by only $120,000. Our new product sales and operating efficiency contributed to such improvements. Our operating cash flow was again positive and our balance sheet remains strong with cash and cash equivalents over $31M.� �I am particularly pleased with the progress we made in strategic markets like FTTX and Broadband. In the first quarter, we began to receive new volume orders for our outdoor SCOUTTM products for FTTX deployment. Based on current order activities, we expect that revenues will grow 15% sequentially in the second quarter of 2007. Additionally, as we continue our focus on operational efficiencies, we are targeting higher net profits in the coming quarters,� concluded Mr. Chang. Conference Call Management will host a conference call at 1:30 p.m. Pacific Time on April 24, 2007 to discuss AFOP�s first quarter 2007 financial results. To participate in AFOP�s conference call, please call 877-407-9210 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 236629. AFOP will also provide a live webcast of its first quarter 2007 conference call at AFOP�s website www.afop.com. An audio replay will be available until May 1. The dial in for the replay is 877-660-6853. The replay pass codes (account # 286; conference ID#: 236629) are both required for the replay. About AFOP Founded in 1995, Alliance Fiber Optic Products, Inc. designs, manufactures and markets a broad range of high performance fiber optic components and integrated modules. AFOP's products are used by leading and emerging communications equipment manufacturers to deliver optical networking systems to the long-haul, enterprise, metropolitan and last mile access segments of the communications network. AFOP offers a broad product line of passive optical components including interconnect systems, couplers and splitters, thin film DWDM components and modules, fixed and variable optical attenuators, and depolarizers. AFOP is headquartered in Sunnyvale, California, with manufacturing and product development capabilities in the United States, Taiwan and China. AFOP's website is located at http://www.afop.com. Except for the historical information contained herein, the matters set forth in this press release, including statements as to our future prospects, our beliefs regarding factors contributing to quarterly results, our ability to control expenses, our ability to improve operational efficiencies, our order trends and customer activity, and expected revenue growth and increased net profits, are forward looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to general economic conditions and trends, the impact of competitive products and pricing, timely introduction of new technologies, timely design acceptance by our customers, the acceptance of new products and technologies by our customers, customer demand, the timing of customer orders, loss of key customers, ability to ramp new products into volume production, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity, failure of cost control initiatives, financial stability in foreign markets, and other risks detailed from time to time in our SEC reports, including AFOP's Form 10-K for the year ended December 31, 2006. These forward-looking statements speak only as of the date hereof. AFOP disclaims any intention or obligation to update or revise any forward-looking statements. ALLIANCE FIBER OPTIC PRODUCTS, INC. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) � Mar. 31 Dec. 31, 2007� 2006� � ASSETS Current assets: Cash and short-term investments $ 31,221� $ 31,178� Accounts receivable 4,406� 4,009� Inventories 4,943� 4,465� Other current assets 597� 601� Total current assets 41,167� 40,253� � Property and equipment, net 4,166� 4,264� � Other assets 170� 176� � � Total assets $ 45,503� $44,693� � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,637� $ 2,950� Accrued expenses and other liabilities 2,469� 2,909� Total current liabilities 6,106� 5,859� � Long-term liability 908� 930� Total liabilities 7,014� 6,789� � Stockholders' equity 38,489� 37,904� � � Total liabilities and stockholders' equity $ 45,503� $44,693� ALLIANCE FIBER OPTIC PRODUCTS, INC. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) � � Three Months Ended Mar. 31, Dec. 31, Mar. 31, 2007� 2006� 2006� � Revenues $ 6,701� $ 7,746� $ 5,221� � Cost of revenues 4,602� 5,473� 3,884� Gross profit 2,099� 2,273� 1,337� � Operating expenses: Research and development 689� 798� 759� Sales and marketing 569� 571� 586� General and administrative 861� 805� 763� Total operating expenses 2,119� 2,174� 2,108� � Income (loss) from operations (20) 99� (771) Interest and other income, net 409� 554� 398� � � � Net income (loss) $ 389� $ 653� $ (373) � Net income (loss) per share: Basic $ 0.01� $ 0.02� $ (0.01) Diluted $ 0.01� $ 0.01� $ (0.01) � Shares used in per share calculation: Basic 40,539� 40,400� 39,771� Diluted 44,664� 45,196� 39,771� � Included in costs and expenses above: Stock based compensation charges Cost of revenue $ 51� $ 44� $ 23� Research and development 20� 19� 14� Sales and marketing 12� 10� 12� General and administrative 41� 33� 28� Total $ 124� $ 106� $ 77�