AFOP Alliance Fiber Optic Products, Inc.

Alliance Fiber Optic Products, Inc. (Nasdaq CM: 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 second quarter ended June 30, 2010.

Revenues for the second quarter of 2010 totaled $12,086,000, a 43.8% increase from revenues of $8,406,000 reported in the previous quarter, and a 56.5% increase from revenues of $7,723,000 reported in the second quarter of 2009. The Company recorded net income for the second quarter of 2010 of approximately $1,606,000, or $0.04 per share based on 42.7 million shares outstanding, compared to $641,000, or $0.02 per share based on 42.5 million shares outstanding, for the first quarter of 2010. This compares to net income for the second quarter of 2009 of $432,000, or $0.01 per share based on 42.0 million shares outstanding.

Included in expenses for the quarter ended June 30, 2010 was $51,000 of stock-based compensation. Included in expenses for the quarter ended June 30, 2009 and the quarter ended March 31, 2010 were $22,000 and $33,000 of stock-based compensation charges.

Peter Chang, President and Chief Executive Officer, commented, “We are very pleased with the financial performance and progress AFOP made in the quarter ended June 30, 2010. With strong customer demand and improved operational efficiency, we delivered record quarterly sales and higher margins, and generated record profits in the quarter. In addition, subsequent to quarter-end, we resolved outstanding ARS issues successfully and the full cash value of our auction rate securities was redeemed, as we reported previously. On July 1, 2010, our cash and short-term investments were about $41.5 million.”

“Based on input from our customers and current backlog, we expect that revenues in the third quarter of 2010 will continue at a similar level as the last quarter. Additionally, we remain optimistic about market conditions, revenue growth potential and profit improvements in the remainder of 2010, which we believe should result in a record year for AFOP in both revenues and profits,” concluded Mr. Chang.

Conference Call

Management will host a conference call at 1:30 p.m. Pacific Time on July 22, 2010 to discuss AFOP’s second quarter 2010 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 352601. AFOP will also provide a live webcast of its second quarter 2010 conference call at AFOP’s website www.afop.com. An audio replay will be available until August 5, 2010. The dial in number for the replay is 877-660-6853 or 201-612-7415. The replay passcodes (account # 286; conference ID#: 352601) 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 CWDM and DWDM components and modules, optical attenuators, and micro-optics devices. 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 expectations regarding future revenue levels, our ability to generate profits from operations and the levels and time periods thereof, our beliefs regarding business and market conditions, our customer base, our product portfolio, our ability to continue to focus on our operational efficiencies or our successes in doing so, and our ability to continue to achieve record year revenue and 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 for our products, the timing of customer orders, loss of key customers or orders, our ability to ramp new products into volume production, the costs associated with running our operations, 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 quarterly report on Form 10-Q for the quarter ended March 31, 2010. 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)   Jun. 30,   Dec. 31,   2010   2009 ASSETS (Unaudited) Current assets: Cash and short-term investments $ 40,947 $ 40,493 Other current asset - ARS Right 575 1,778 Accounts receivable 7,733 4,952 Inventories 6,756 4,984 Other current assets   674   515 Total current assets 56,685 52,722   Property and equipment, net 5,784 4,434 Other assets   176   233 Total assets $ 62,645 $ 57,389     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,688 $ 3,701 Accrued expenses   3,580   3,936 Total current liabilities 10,268 7,637 Long-term liabilities Other long-term liabilities   791   813 Total long term liabilities 11,059 8,450 Stockholders' equity 51,586 48,939     Total liabilities and stockholders' equity $ 62,645 $ 57,389 ALLIANCE FIBER OPTIC PRODUCTS, INC. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)           Three Months Ended Six Months Ended Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,   2010   2010   2009   2010   2009   Revenues $ 12,086 $ 8,406 $ 7,723 $ 20,492 $ 15,366   Cost of revenues   8,035   5,711   5,322   13,746   10,667 Gross profit 4,051 2,695 2,401 6,746 4,699   Operating expenses: Research and development 870 709 762 1,579 1,491 Sales and marketing 636 561 577 1,197 1,211 General and administrative   971   933   770   1,904   1,615 Total operating expenses 2,477 2,203 2,109 4,680 4,317   Income from operations 1,574 492 292 2,066 382 Interest and other income, net   106   150   172   256   394 Net income before tax $ 1,680 $ 642 $ 464 $ 2,322 $ 776 Income tax   74   1   32   75   42 Net income $ 1,606 $ 641 $ 432 $ 2,247 $ 734   Net income per share: Basic $ 0.04 $ 0.02 $ 0.01 $ 0.05 $ 0.02 Diluted $ 0.04 $ 0.01 $ 0.01 $ 0.05 $ 0.02   Shares used in per share calculation: Basic 42,707 42,467 41,979 42,588 41,926 Diluted 43,720 43,241 42,115 43,484 41,969   Included in costs and expenses above: Stock based compensation charges Cost of revenue $ 22 $ 12 $ 11 $ 34 $ 25 Research and development 7 5 5 12 11 Sales and marketing 6 4 2 10 6 General and administrative   16   12   4   28   8 Total $ 51 $ 33 $ 22 $ 84 $ 50