What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-11-28 compared with 2024-11-27 · 308 added, 275 removed, 1060 unchanged (35% of the section changed)

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Our products are used for general specialty industrial applications, including ultraviolet, or UV, curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, architectural lighting and entertainment lighting.

We package our LED chips into LED components, which we sell to distributors and a customer base that is heavily concentrated in a few select markets, including Netherlands, Taiwan, the United States, and Japan.

We package our LED chips into LED components, which we sell to distributors and a customer base that is heavily concentrated in a few select markets, including India, Japan, the Netherlands and the United States.

We also sell our “Enhanced Vertical,” or EV, LED product series in blue, white, green and UV in selected markets.

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We also contract other manufacturers to produce for our sale certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process.

We are a holding company for various wholly owned subsidiaries.

SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, is our wholly owned operating subsidiary, where a substantial portion of our assets are held and located and where a portion of our research, development, manufacturing and sales activities take place.

Taiwan SemiLEDs owns a 97.37% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacture, and substantial portion of marketing and sale of LED products, and where most of our employees are based.

In addition, in fiscal year 2025, we entered into a number buy-sell orders for equipment that we purchased and then sold to our customer.

We are a holding company for our wholly owned operating subsidiary, Taiwan Bandaoti Zhaoming Co., Ltd., which conducts our research, development, manufacturing, marketing and sale of LED components and employs the Company’s employees.

Key Factors Affecting Our Financial Condition, Results of Operations and Business

The following are key factors that we believe affect our financial condition, results of operations and business:

• Our ability to continue or grow with buy-sell revenue.

Our recent reliance on buy-sell purchase orders of equipment has improved our gross profit, operating results and cash flows.

We anticipate our buy-sell purchase orders will continue from period to period.

However, if orders diminish or cease altogether, our gross margin, operating results, and cash flows could be adversely affected.

• Our ability to raise additional debt funding, sell additional equity securities and improve our liquidity.

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When prices decline, we must also write down the value of our inventory.

Furthermore, the average selling prices for our LED products have typically decreased over product life cycles.

Therefore, our ability to continue to innovate and offer competitive products that meet our customers’ specifications and pricing requirements, such as higher efficacy

LED products at lower costs, will have a material influence on our ability to improve our revenues and product margins, although in the near term the introduction of such higher performance LED products may further reduce the selling prices of our existing products or render them obsolete.

Furthermore, the average

selling prices for our LED products have typically decreased over product life cycles.

Therefore, our ability to continue to innovate and offer competitive products that meet our customers’ specifications and pricing requirements, such as higher efficacy LED products at lower costs, will have a material influence on our ability to improve our revenues and product margins, although in the near term the introduction of such higher performance LED products may further reduce the selling prices of our existing products or render them obsolete.

• Changes in our product mix.

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When the global economy slows or a financial crisis occurs, consumer and government confidence declines, with levels of government grants and subsidies for LED adoption and consumer spending likely to be adversely impacted.

Our revenues have been concentrated in a few select markets, including the Netherlands, Taiwan, the United States, and Japan.

Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands and the United States.

Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter.

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Our customers consist primarily of packagers, ODMs and end‑customers.

Our revenues attributable to our ten largest customers accounted for 91% of our revenues for the years ended August 31, 2024 and 2023.

Our revenues have been concentrated in a few select markets, including the Netherlands, Taiwan, the United States and Japan.

Our revenues attributable to our ten largest customers accounted for 99% and 91% of our revenues for the years ended August 31, 2025 and 2024, respectively.

Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands and the United States.

Net revenues generated from these countries, in the aggregate, accounted for 97% and 78% of our net revenues for the years ended August 31, 2025 and 2024, respectively.

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Gain on disposal of long ‑ lived assets, net.

We recognized a gain of $49 thousand and zero on the disposal of long-lived assets for the years ended August 31, 2024 and 2023, respectively.

We recognized zero and $49 thousand of gain on the disposal of long-lived assets for the years ended August 31, 2025 and 2024, respectively.

Due to the excess capacity charges that we have suffered for many years, considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of a certain level of our idle equipment.

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Foreign currency transaction gain (loss), net.

We recognized foreign currency transaction loss of $13 thousand and $52 thousand for the years ended August 31, 2024 and 2023, respectively, primarily due to the appreciation of the U.S.

dollar against the NT dollar from bank deposits and accounts payable held by Taiwan SemiLEDs and Taiwan Bandaoti Zhaoming Co., Ltd.

We recognized a foreign currency transaction gain of $464 thousand and a foreign currency transaction loss of $13 thousand for the years ended August 31, 2025 and 2024, respectively, primarily due to the impact of fluctuations in the exchange rate of the U.S.

dollar against the NT dollar from bank deposits and accounts payable held by Taiwan Bandaoti Zhaoming Co., Ltd.

in currency other than the functional currency of such subsidiaries.

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Also, any income attributable to a controlled foreign corporation and its affiliates that is not engaged in a United States trade or business is generally not subject to United States taxation until its earnings are distributed, or the stock of the foreign corporation is disposed.

All of our products are manufactured in Taiwan by Taiwan SemiLEDs, our wholly owned foreign subsidiary.

Because Taiwan SemiLEDs conducts its manufacturing activities in Taiwan, the income or loss of Taiwan SemiLEDs is included in our consolidated financial statements, but is not considered taxable income for United States taxation purposes pursuant to Section 954(d)(1)(A) of the United States Internal Revenue Code.

All of our products are manufactured in Taiwan by Taiwan Bandaoti Zhaoming Co., Ltd., our wholly owned foreign subsidiary.

Because Taiwan Bandaoti Zhaoming Co., Ltd.

conducts its manufacturing activities in Taiwan, the income or loss of Taiwan Bandaoti Zhaoming Co., Ltd.

is included in our consolidated financial statements, but is not considered taxable income for United States taxation purposes pursuant to Section 954(d)(1)(A) of the United States Internal Revenue Code.

This generally enables a United States taxpayer, such as us, to indefinitely defer United States taxation on the profits earned by its controlled foreign corporations and affiliates by retaining the earnings in such entities.

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Our provisional estimate is that no tax will be due under this provision.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

The provisions of the legislation that were effective for fiscal 2025 did not have a material impact on the Company's fiscal 2025 income tax expense.

The Company is currently assessing the impact of the provisions of the OBBBA that are effective in future years on its future consolidated financial statements.

The current presidential administration in the United States modified the rules governing taxation of controlled foreign corporations and affiliates and any such changes were not expected to result in our having to pay applicable taxes in the United States on income earned by such entities.

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Management regularly reviews the allowance by considering certain factors such as historical experience, industry data, credit quality, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

No bad debt expenses were recognized during the years ended August 31, 2024 and 2023.

Bad debt expenses were $115 thousand and zero for the years ended August 31, 2025 and 2024, respectively.

Write-down of Inventories

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At the same time, our subsidiaries use the local currency as their functional currency.

For example, the functional currency for Taiwan SemiLEDs is the NT dollar.

For example, the functional currency for Taiwan Bandaoti Zhaoming Co., Ltd.

is the NT dollar.

The assets and liabilities of the subsidiaries are, therefore, translated into U.S.

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Other income (expenses):

Investments loss

Investment loss from unconsolidated entities

Interest expenses, net

Other income, net

Foreign currency transaction loss, net

Foreign currency transaction gain (loss), net

Total other income, net

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Cost of revenues

(1) Other includes primarily revenues attributable to the sale of epitaxial wafers, scraps and raw materials, the provision of services and the lease of manufacturing as well as research and development facilities.

(1) Other revenues for the year ended August 31, 2025 primarily represent revenues attributable to buy-sell purchase orders of equipment.

Other revenues for the year ended August 31, 2024 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.

Revenues, net

Our revenues decreased by 13% from $6.0 million for the year ended August 31, 2023 to $5.2 million for the year ended August 31, 2024.

The decrease in revenues was driven primarily by a $689 thousand decrease in sales of LED components, a $109 thousand decrease in sales of LED lighting products and a $18 thousand decrease in sales of LED chips, offset by a $20 thousand increase in other revenues.

Revenues attributable to the sales of our LED components were $2.7 million and $3.3 million, representing 51% and 56% of our revenues for the years ended August 31, 2024 and 2023, respectively.

The decrease in sales of LED components was primarily due to less volumes sold.

Revenues attributable to the sales of lighting products were $212 thousand and $321 thousand, representing 4% and 5% of our revenues for the years ended August 31, 2024 and 2023, respectively.

The decrease in sales of lighting products was mainly due to less demand for LED lighting products.

Revenues attributable to the sales of our LED chips were $93 thousand and $111 thousand, representing 2% of our revenues for both the years ended August 31, 2024 and 2023.

The slight decrease was primarily due to a lower volumes of LED chips sold in the fiscal year ended August 31, 2024.

Revenues attributable to other revenues represented 43% and 37% of our revenues for the years ended August 31, 2024 and 2023, respectively.

The increase in other revenues was primarily due to the provision of services and the sale of raw materials.

We have adopted a strategy to adjust our product mix by exiting certain high volume but low unit selling price product lines in response to the general trend of lower average selling prices for products that have been available in the market for some time and to focus on the profitable products.

Our revenues increased by 730% from $5.2 million for the year ended August 31, 2024 to $43 million for the year ended August 31, 2025.

The increase in revenues was driven almost entirely by $38 million in sales of other revenues as a result of buy-sell purchase orders of equipment.

Revenues attributable to the sales of our LED components were $2.0 million and $2.7 million of our revenues for the years ended August 31, 2025 and 2024, respectively.

The decrease in sales of LED components was primarily due to less volumes sold for the LED components.

Revenues attributable to the sales of lighting products were $228 thousand and $212 thousand of our revenues for the years ended August 31, 2025 and 2024, respectively.

The increase in sales of lighting products was primarily due to varying volumes sold for lighting products.

Revenues attributable to the sales of our LED chips were $149 thousand and $93 thousand of our revenues for the years ended August 31, 2025 and 2024, respectively.

The increase in sales of LED chips was primarily due to varying volumes sold for LED chips.

Revenues attributable to other revenues were $41 million and $2 million of our revenues for the years ended August 31, 2025 and 2024, respectively.

The increase in other revenues was primarily due to buy-sell purchase orders of equipment.

Cost of Revenues

Our cost of revenues decreased by 17% from $5.0 million for the year ended August 31, 2023 to $4.1 million for the year ended August 31, 2024.

The decrease in cost of revenues was primarily due to a decrease in the volume of products sold.

Inventory write‑downs totaled $411 thousand and $627 thousand for the years ended August 31, 2024 and 2023, respectively.

A majority of our inventory write-downs during the years ended August 31, 2024 and 2023 was related to finished goods and work in process, primarily as a result of obsolescence.

Our gross profit increased from $1.0 million for the year ended August 31, 2023 to $1.1 million for the year ended August 31, 2024.

Our gross margin percentage was 20% for the year ended August 31, 2024, as compared to 17% for the year ended August 31, 2023 as a result of an increase in other revenues.

Our cost of revenues increased by 883% from $4.1 million for the year ended August 31, 2024 to $41 million for the year ended August 31, 2025.

The increase in cost of revenues was due to the cost of equipment relating to buy-sell purchase orders of equipment.

Our gross profit represented 6% and 20% of our revenues for the year ended August 31, 2025 and 2024, respectively.

The decrease in gross margin for the year ended August 31, 2025 was primarily due to the buy-sell purchase orders of equipment, which have lower margins to sales of our products.

Operating Expenses

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Research and development.

Our research and development expenses were $1.2 million and $1.4 million for the year ended August 31, 2024 and 2023, respectively.

The decrease was primarily due to a $124 thousand decrease in payroll expense and a $64 thousand decrease in materials and supplies.

Our research and development expenses were $1.2 million for both the year ended August 31, 2025 and 2024.

The slight decrease was primarily due to a $64 thousand decrease in materials and supplies, partially offset by a $10 thousand increase in payroll expense.

Selling, general and administrative.

Our selling, general and administrative expenses were $2.9 million and $3.1 million for the years ended August 31, 2024 and 2023, respectively.

The decrease was mainly attributable to a $116 thousand decrease in payroll expense, a $15 thousand decrease in insurance expenses, a $10 thousand decrease in repair and maintenance expense and a $8 thousand decrease in employee benefit.

Our selling, general and administrative expenses were $2.9 million for both the years ended August 31, 2025 and 2024.

The slight decrease was mainly attributable to a $134 thousand decrease in payroll expense, offset by a $115 thousand increase in bad debt expense.

Gain on disposal of long ‑ lived assets, net.

We recognized a gain of $49 thousand and zero on the disposal of long-lived assets for the years ended August 31, 2024 and 2023, respectively.

Due to the excess capacity charges that we have suffered for many years, and considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of certain of our idle equipment.

We recognized zero and $49 thousand of gain on the disposal of long-lived assets for the years ended August 31, 2025 and 2024, respectively.

Other Income (Expenses)

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Other income, net

Foreign currency transaction loss, net

Foreign currency transaction gain (loss), net

Total other income, net

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Interest expenses, net.

Interest expenses, net primarily consisted of accrued interest payments on convertible notes, NT dollar denominated long-term notes and $2.4 million of loans with our Chairman and Chief Executive Officer and our largest shareholder.

The decrease in interest expense, net was primarily due to lower outstanding debt.

Interest expenses, net, which primarily consisted of accrued interest payments on loans with our Chairman and Chief Executive Officer and our largest shareholder, decreased from $247 thousand for the year ended August 31, 2024 to $140 thousand for the year ended August 31, 2025.

The decrease in interest expense, net was primarily due to the repayment $1.6 million of loan principal in fiscal year 2025.

Other income, net.

Other income, net increased from $1.1 million for the year ended August 31, 2023 to $1.2 million for the year ended August 31, 2024.

Foreign currency transaction loss, net.

We recognized a net foreign currency transaction loss of $13 thousand and a net foreign currency transaction loss of $52 thousand for the years ended August 31, 2024 and 2023, respectively, primarily due to the appreciation of the U.S.

dollar against the NT dollar from bank deposits and accounts payables held by Taiwan SemiLEDs and Taiwan Bandaoti Zhaoming Co., Ltd.

in currency other than the functional currency of such subsidiaries.

Other income, net decreased from $1.2 million for the year ended August 31, 2024 to $1.1 million for the year ended August 31, 2025, primarily due to reduced payments received under the Patent Cross-License Agreement with CrayoNano AS.

Foreign currency transaction gain (loss), net.

We recognized a net foreign currency transaction gain of $464 thousand and a net foreign currency transaction loss of $13 thousand for the years ended August 31, 2025 and 2024, respectively, primarily due to the impact of fluctuations in the exchange rate of the U.S.

dollar against the NT dollar from bank deposits and accounts receivable.

Income Tax Expense (Benefit)

Our effective tax rate is expected to be approximately zero for both fiscal year 2024 and 2023, since Taiwan SemiLEDs incurred losses, and because we provided a full valuation allowance on all deferred tax assets, which consisted primarily of net operating loss carryforwards and foreign investment loss.

Our effective tax rate is expected to be approximately zero for both fiscal year 2025 and 2024, since Taiwan Bandaoti Zhaoming Co., Ltd.

incurred losses, and because we provided a full valuation allowance on all deferred tax assets, which consisted primarily of net operating loss carryforwards and foreign investment loss.

As of August 31, 2025 and 2024, we recognized full valuation allowances of $10.8 million and $13.6 million, respectively, on our net deferred tax assets to reflect uncertainties related to our ability to utilize these deferred tax assets, which consist primarily of certain net operating loss carryforwards and foreign investment loss.

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Net Income attributable to noncontrolling interests

We recognized $5 thousand net income attributable to non-controlling interests and zero net loss attributable to non-controlling interests for the year ended August 31, 2024 and 2023, respectively, which was attributable to the share of the net income of Taiwan Bandaoti Zhaoming Co., Ltd.

We recognized zero and $5 thousand net income attributable to non-controlling interests for the year ended August 31, 2025 and 2024, respectively, which was attributable to the share of the net income of Taiwan Bandaoti Zhaoming Co., Ltd.

held by the non-controlling holders.

Non-controlling interests represented 2.63% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd.

for both the years ended August 31, 2024 and 2023.

Non-controlling interests represented zero and 2.63% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., as of August 31, 2025 and 2024, respectively.

Liquidity and Capital Resources

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Contingencies

We have several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between December 2024 and December 2040.

See Note 6, "Commitments and Contingencies" in the notes to our audited consolidated financial statements in this Form 10-K.

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Our long-term debt, which consisted of NT dollar denominated long-term notes, convertible unsecured promissory notes, and loans from our Chairman and our largest shareholder, totaled $1.7 million and $3.7 million as of August 31, 2025 and 2024, respectively.

Our NT dollar denominated long-term notes, totaled $1.3 million and $1.8 million as of August 31, 2024 and 2023, respectively.

These long-term notes consisted of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million).

Our NT dollar denominated long-term notes, totaled $908 thousand and $1.3 million as of August 31, 2025 and 2024, respectively.

These long-term notes consist of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million).

The first loan originally for $2.0 million (NT$62 million) has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 2.415% currently), and was exclusively used to repay the existing loans.

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Property, plant and equipment pledged as collateral for our notes payable were $1.7 million and $2.0 million as of August 31, 2025 and 2024, respectively.

On January 8, 2019, we entered into loan agreements with each of the Chairman and Chief Executive Officer and the largest shareholder of the Company, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of 8%.

All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the proposed sale of our headquarters building pursuant to the agreement dated December 15, 2015.

We were initially required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively.

On January 16, 2021, the maturity date of these loans was extended with same terms and interest rate for one year to January 15, 2022, and on January 14, 2022, the maturity date of these loans was extended again with same terms and interest rate for one more year to January 15, 2023.

On January 13, 2023, the maturity date of these loans was further extended with same terms and interest rate for one year to January 15, 2024.

On January 8, 2019, we entered into secured loan agreements with Trung Doan, our Chairman and Chief Executive Officer and J.R.

Simplot Company, our largest shareholder, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of 8% (the “Loan Agreements”).

The Loan Agreements are secured by a second priority security interest on our headquarters building.

The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021, respectively.

On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022, and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023.

On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024.

On January 7, 2024, J.R.

Simplot Company assigned and transferred all of its right, title and interest in and to the loan agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the loan agreement.

Simplot Company entered into an assignment agreement (the “Assignment”) pursuant to which J.R.

Simplot assigned and transferred all of its right, title and interest in and to the Loan Agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the Loan Agreement.

On January 7, 2024, we entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc.

and Trung Doan (each, a “Fourth Amendment”).

The Fourth Amendment with Simplot Taiwan Inc.

(i) extended the maturity date of its loan agreement to January 15, 2025, and (ii) upon mutual agreement of we and Simplot Taiwan Inc., permitted us to repay any principal amount or accrued interest, in an amount not to exceed $400,000, by issuing shares of our common stock in the name of Simplot Taiwan Inc.

and Trung Doan.

The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc.

(i) extended the maturity date to January 15, 2025, and (ii) upon mutual agreement of us and Simplot Taiwan Inc., permitted us to repay any principal amount or accrued interest, in an amount not to exceed $400,000, by issuing shares of our common stock in the name of Simplot Taiwan Inc.

as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.

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remained the same.

On January 7, 2024, we issued 305,343 shares of our common stock at a price of $1.31 per share to repay $400,000 of accrued interest on the Loan Agreement with Simplot Taiwan Inc.

The shares of common stock were issued in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.

The Fourth Amendment to the loan agreement with Trung Doan amends the loan agreement’s maturity date with same terms and interest rate to January 15, 2025.

The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025.

All other terms and conditions of the Loan Agreement with Trung Doan remained the same.

On February 9, 2024, we and Trung Doan entered into the Fifth Amendment to the loan agreement (the “Fifth Amendment”).

The Fifth Amendment, upon the mutual agreement of we and Trung Doan, permitted us to repay any principal amount or accrued interest, in an amount not to exceed $800,000, by issuing shares of our common stock to Trung Doan as partial repayment of the loan agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.

On January 7, 2024, we issued 305,343 shares of our common stock at a price of $1.31 per share to repay $400,000 of accrued interest on the loan agreement with Simplot Taiwan Inc.

On February 9, 2024, we entered into the Fifth Amendment to the Loan Agreement with Trung Doan.

The Fifth Amendment to the Loan Agreement with Trung Doan (i) amended the Loan Agreement to permit us to repay up to $800,000 of principal under the Loan Agreement by issuing shares of the our common stock and (ii) elected to prepay $800,000 of loan principal by delivering 629,921 shares of the our common stock to Trung Doan, based on the closing price of $1.27 per share on February 8, 2024.

All other terms and conditions of the Loan Agreement remained the same.

On February 9, 2024, we repaid $800,000 of loan principal by delivering 629,921 shares of our common stock to Mr.

Doan, based on the closing price of $1.27 per share on February 8, 2024.

The shares of common stock were issued on February 9, 2024 in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.

On July 3, 2024, we and Trung Doan entered into the Sixth Amendment to the loan agreement (the “Sixth Amendment”).

The Sixth Amendment amended the loan agreement to permit, upon the mutual agreement of we and Trung Doan, us to repay a portion of the principal amount or accrued interest under the loan agreement, by issuing shares of our common stock to Trung Doan as partial repayment of the loan agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.

All other terms and conditions of the loan agreement, as amended by the Sixth Amendment, remained the same.

As of August 31, 2024 and 2023, these loans totaled $2.4 million and $3.2 million, respectively.

The loans are secured by a second priority security interest on our headquarters building.

On November 25, 2019 and on December 10, 2019, we issued convertible unsecured promissory notes (the “Notes”) to J.R.

Simplot Company, its largest shareholder, and Trung Doan, our Chairman and Chief Executive Officer, (together, the “Holders”) with a principal sum of $1.5 million and $500 thousand, respectively, and an annual interest rate of 3.5%.

Principal and accrued interest is due on demand by the Holders on and at any time after May 30, 2021.

On February 7, 2020, J.R.

Simplot Company assigned all of its right, title and interest in the Notes to Simplot Taiwan Inc.

The outstanding principal and unpaid accrued interest of the Notes may be converted into shares of our common stock at a conversion price of $3.00 per share, at the option of the Holders any time from the date of the Notes.

On May 25, 2020, each of the Holders converted $300,000 of the Notes into 100,000 shares of our common stock.

On May 26, 2021, the Notes were extended with the

same terms and interest rate for one year and a maturity date of May 30, 2022.

On May 26, 2022, the Notes were second extended with the same terms and interest rate for one year and a maturity date of May 30, 2023.

On June 6, 2023, we entered into the Third Amendment to the Notes (the “Third Amendments”) to amend the Notes to (i) extend the maturity date from May 30, 2023 to May 30, 2024, and (ii) change the conversion price from $3.00 to $2.046 per share.

All other terms and conditions of the Notes remained the same.

After the close of market on January 5, 2024, we entered into the Fourth Amendment to the Notes (the “Note Fourth Amendments”) to amend the Notes to (i) convert the total principal and accrued interest on the Notes to our common stock to be issued in the names of the Holders, and (ii) change the conversion price of the Notes from $2.046 per share to the closing price immediately preceding the signing of the Note Fourth Amendments, or $1.31 per share.

All other terms and conditions of the Notes remained the same.

On January 5, 2024, the Holders converted the total principal and accrued interest of the Notes, in an aggregate amount of $1,608,848, to 1,228,128 shares of our common stock at a conversion price of $1.31 per share.

As of August 31, 2024 and 2023, the outstanding principal of these notes totaled zero and $1.4 million, respectively.

On July 3, 2024, we and Trung Doan entered into the Sixth Amendment to the Loan Agreement.

The Sixth Amendment to the Loan Agreement amended the Loan Agreement to permit us, upon the mutual agreement of us and Trung Doan, to repay a portion of the principal amount or accrued interest under the Loan Agreement, by issuing shares of our common stock to Trung Doan as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.

All other terms and conditions of the Loan Agreement, as amended by the Sixth Amendment to the Loan Agreement, remained the same.

On January 15, 2025, we entered into the Seventh Amendment to the Loan Agreement with Trung Doan and Fifth Amendment to the Loan Agreement with Simplot Taiwan Inc.

to extend the maturity dates to January 15, 2026.

All other terms and conditions of the Loan Agreements remained the same.

On February 28, 2025, we and Simplot Taiwan Inc.

entered into the Sixth Amendment to the Loan Agreement (the “Amended Loan Agreement”).

The Amended Loan Agreement, upon the mutual agreement of us and Simplot Taiwan Inc., permits us to repay any principal amount or accrued interest, in an amount not to exceed $1,200,000, by issuing shares of our common stock to Simplot Taiwan Inc.

as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.

On February 28, 2025, we delivered payment notices indicating our intent to repay $1,200,000 and $400,000 of loan principal by delivering 722,891 shares and 240,963 shares of our common stock to Simplot Taiwan Inc.

and Trung Doan, respectively, based on the closing price of $1.66 per share on February 27, 2025.

As of August 31, 2025 and 2024, these loans totaled $800 thousand and $2.4 million, respectively.

Working Capital

We have incurred significant losses since inception, including net losses attributable to SemiLEDs stockholders of $1.1 million and $2.0 million during the years ended August 31, 2025 and 2024.

Net cash used in operating activities for the year ended August 31, 2024 was $365 thousand.

Net cash provided by operating activities for the year ended August 31, 2025 was $2.2 million.

As of August 31, 2025, we had cash and cash equivalents of $2.6 million.

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Based on our current financial projections and assuming the successful implementation of our liquidity plans, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months and beyond.

The remaining loans with each of our Chairman and Chief Executive Officer and our largest shareholder are expected to be extended upon maturity.

The remaining loans with each of our Chairman and Chief Executive Officer and our largest shareholder are expected to be extended upon maturity or repaid with equity.

However, there can be no assurances that our planned activities will be successful in raising additional capital, reducing losses and preserving cash.

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Years Ended August 31,

Net cash used in operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash used in financing activities

Cash Flows Used in Operating Activities

Net cash used in operating activities for the years ended August 31, 2024 and 2023 was $365 thousand and $984 thousand, respectively.

The decrease in cash flows used in operating activities was primary attributable to a decrease in net loss of $659 thousand and a decrease in inventory of $1.0 million, partially offset by an increase in depreciation and amortization of $396 thousand, stock-based compensation expense of $236 thousand and accounts payable of $447 thousand.

Cash Flows Provided by (Used In) Operating Activities

Net cash provided by operating activities for the years ended August 31, 2025 was $2.2 million, and net cash used in operating activities for the years ended August 31, 2024 was $365 thousand.

The increase in cash flows used in operating activities was primary attributable to an $900 thousand decrease of net loss, an $5.3 million increase of accounts payable, an $955 thousand increase of investment loss from unconsolidated entities and an $840 thousand increase of accrued expenses and other current liabilities, partially offset by a $3.6 million increase of accounts receivable, a $1.5 million increase of inventory and a $234 thousand increase of prepaid expenses and other current assets.

Cash Flows Used in Investing Activities

Net cash used in investing activities for the years ended August 31, 2024 and 2023 was $101 thousand and $321 thousand, respectively.

The decrease in cash flows used in investing activities was primary attributable to a decrease in cash used in the purchase of machinery and equipment of $78 thousand and a decrease in cash used in proceeds from sales of property, plant and equipment of $51 thousand.

Net cash used in investing activities for the years ended August 31, 2025 and 2024 was $595 thousand and $101 thousand, respectively, primarily for the purchases of property, plant and equipment during each period.

Cash Flows Used in Financing Activities

Net cash used in financing activities for the years ended August 31, 2025 and 2024 was $622 thousand and $449 thousand, respectively.

The decrease in cash flows used in financing activities was primary attributable to a decrease in cash used in repayment of long-term debt of $7 thousand.

The increase in cash flows used in financing activities was primarily due to an increase in acquisition of noncontrolling interest.

Capital Expenditures

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Our capital expenditures consisted primarily of the purchases of machinery and equipment, construction in progress, prepayments for our manufacturing facilities and prepayments for equipment purchases.

We expect to continue investing in capital expenditures in the future as we expand our business operations and invest in such expansion of our production capacity as we deem appropriate under market conditions and customer demand.

and customer demand.

However, in response to controlling capital costs and maintaining financial flexibility, our management continues to monitor prices and, consistent with its existing contractual commitments, may decrease its activity level and capital expenditures as appropriate.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:

6781 and 2851 )

CONSOLIDATED BALANCE SHEETS AS OF AUGUST 31, 2025 AND 2024

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the board of directors of SemiLEDs Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SemiLEDs Corporation and its subsidiaries (the “Company”) as of August 31, 2025, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2025 and the results of its operations and its cash flows for the year then ended in conformity with the U.S.

generally accepted accounting principles.

Consideration of the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As described in Note 2 to the consolidated financial statements, the Company incurred recurring losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern.

Management’s plans with regard to these matters are described in Note 2.

The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matter Description

As described in Note 2 to the consolidated financial statements, the Company’s revenue is derived from the delivery of its products.

The sale of products by the Company is considered complete when the products are delivered at that time the ownership and risk of loss have been transferred to the customer.

The Company considers each contract with each customer to contain one performance obligation, and the Company is entitled to the consideration when the performance obligation is satisfied at a point in time.

The amount of revenue to be recognized is determined by the contract between the Company and each customer.

The Company recognizes revenue when each product is delivered.

The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of the timing and amount of revenue recognition, is a critical audit matter involved judgment exercised by management in identifying and evaluating the performance obligation.

Auditor judgement is involved in performing our audit procedures to evaluate whether the timing and amount of revenue recognition was appropriately stated.

How the Critical Audit Matter Will Be Addressed in the Audit

Our audit procedures over determining the timing and amount of revenue recognition involved, among others, evaluation of management’s assessment in regard to the identification of performance obligations related to revenue.

We selected customer agreements and performed the following procedures:

- Evaluated the terms and conditions of each selected contract and the appropriateness of the accounting treatment within the context of the five-step model prescribed by ASC 606, Revenue from Contracts with Customers, and evaluated whether management’s conclusions were appropriate.

- Tested the accuracy of management’s recognition of revenue for the performance obligation.

/s/ YCM CPA INC.

We have served as the Company’s auditor since 2025.

PCAOB ID 6781

Irvine, California

November 28, 2025

A udit T ax C onsulting F inancial A dvisory

Registered with Public Company Accounting Oversight Board (PCAOB)

REPO RT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the board of directors of SemiLEDs Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SemiLEDs Corporation and its subsidiaries (the “Company”) as of August 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with the U.S.

We have audited the accompanying consolidated balance sheet of SemiLEDs Corporation and its subsidiaries (the “Company”) as of August 31, 2024, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with the U.S.

generally accepted accounting principles.

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Cash and cash equivalents

Restricted cash and cash equivalents

Accounts receivable (including related parties), net of allowance for doubtful accounts

of $ 173 as of both August 31, 2024 and 2023)

of $ 180 and $ 173 as of August 31, 2025 and 2024, respectively)

Inventories, net

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Noncontrolling interests

Total stockholders’ equity

TOTAL LIABILITIES AND EQUITY

See notes to consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SEMILEDS CORPORATION AND SUBSIDIARIES

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Other income (expenses):

Investments loss

Investment loss from unconsolidated entities

Interest expenses, net

Other income, net

Foreign currency transaction loss, net

Foreign currency transaction gain (loss), net

Total other income, net

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Basic and diluted

See notes to consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SEMILEDS CORPORATION AND SUBSIDIARIES

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Years Ended August 31,

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of tax of $ 0 for both periods

Comprehensive loss

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive income attributable to noncontrolling interests

Comprehensive loss attributable to SemiLEDs stockholders

See notes to consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SEMILEDS CORPORATION AND SUBSIDIARIES

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BALANCE—September 1, 2023

Issuance of common stock under equity incentive plans

Issuance of common stock upon vesting of RSUs

Stock-based compensation

Convertible notes equity component

Conversion of convertible notes payable to common stock

Issuance of common stock to repay long-term loan

Comprehensive loss

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BALANCE—August 31, 2024

Issuance of common stock under equity incentive plans

Issuance of common stock upon vesting of RSUs

Stock-based compensation

Conversion of convertible notes payable to common stock

Issuance of common stock to repay long-term loan

Change ownership in SBDI

Comprehensive loss

Other comprehensive loss

Net (loss) income

Other comprehensive income

BALANCE—August 31, 2025

See notes to consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SEMILEDS CORPORATION AND SUBSIDIARIES

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Stock-based compensation expense

Bad debt expense

Provisions for inventory write-downs

Loss on disposal of patents

Loss from unconsolidated entities

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Accrued expenses and other current liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

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Proceeds from sales of property, plant and equipment

Payments to acquire equity method investments

Payments for development of intangible assets

Placement of refundable deposits

Net cash used in investing activities

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Repayments of long-term debt

Acquisition of noncontrolling interests

Net cash used in financing activities

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Effect of exchange rate changes on cash and cash equivalents

NET DECREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of year

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Issuance of common stock to repay long-term loan

See notes to consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

SEMILEDS CORPORATION AND SUBSIDIARIES

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LED components, modules and systems have become the most important part of its business.

A portion of the Company’s business c onsists of the sale of contract manufactured LED products.

The Company’s customers are concentrated in a few select markets, including the United States, Japan, Taiwan and Netherlands.

As of August 31, 2024, SemiLEDs had two wholly owned subsidiaries.

SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, is the Company’s wholly owned operating subsidiary, where a substantial portion of the assets is held and located, and where a portion of research, development, manufacturing and sales activities take place.

Taiwan SemiLEDs owns a 97.37 % equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacturing and a substantial portion of marketing and sale of LED components, and where most of the Company’s employees are based.

A portion of the Company’s business consists of the sale of contract manufactured LED products.

The Company’s customers are concentrated in a few select markets, including India, Japan, the Netherlands, and the United States.

As of August 31, 2025, SemiLEDs had one wholly owned operating subsidiary, Taiwan Bandaoti Zhaoming Co., Ltd., which conducts its research, development, manufacturing, marketing and sale of LED components and employs the Company’s employees.

SemiLEDs’ common stock trades on the NASDAQ Capital Market under the symbol “LEDS”.

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The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.

The Company has suffered losses from operations of $ 2.9 million and $ 3.4 million, and used net cash in operating activities of $ 365 thousand and $ 984 thousand for the years ended August 31, 2024 and 2023, respectively.

The Company has suffered losses from operations of $ 1.6 million and $ 2.9 million, and net cash provided by operating activities of $ 2.2 million and net cash used in operating activities of $ 365 thousand, for the years ended August 31, 2025 and 2024, respectively.

These facts and conditions have raised substantial doubt about the Company’s ability to continue as a going concern, even though gross profit on product sales was $ 2.4 million for the year ended August 31, 2025 compared to $ 1.1 million for the year ended August 31, 2024.

On August 31, 2024, the Company’s cash and cash equivalents decreased to $ 1.7 million mainly due to operating losses.

Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s o bligations as they become due for a reasonable period of time, and allow the development of its core business.

On August 31, 2025, the Company’s cash and cash equivalents increased to $ 2.6 million mainly due to operating income.

Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business.

The plan includes:

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Steady growth of module products and the continued commercial sales of its UV LED product are expected to improve the Company’s future gross margin, operating results and cash flows.

The Company is targeting niche markets and focusing on product enhancement and developing its LED product into many other applications or devices.

The Company is targeting niche markets and focusing on product enhancement and developing its LED products into many other applications or devices.

• Growing buy-sell purchase orders of equipment to improve the Company’s future gross margin, operating results and cash flows.

• Continuing to monitor prices, work with current and potential vendors to decrease costs and, consistent with its existing contractual commitments, possibly decrease its activity level and capital expenditures further.

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These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

R estricted Cash Equivalents — Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan, including compensating balances required under the Company's long-term loan requirements.

As of August 31, 2025 and 2024, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $ 177 thousand and $ 169 thousand, respectively.

Revenue Recognition — Effective September 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method.

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however, actual results could differ materially from those estimates.

Reclassifications of prior year presentation — The Company reclassified restricted cash from current assets to non-current assets based on management’s assessment of the expected timing of the release of such restrictions.

As a result, restricted cash of $ 78 thousand as of August 31, 2024, previously presented within current assets, have been reclassified to non-current assets.

These reclassifications had no impact on total assets, total liabilities, stockholders’ equity, or net income for any of the periods presented.

Certain Significant Risks and Uncertainties — The Company is subject to certain risks and uncertainties that could have a material and adverse effect on the Company’s future financial position or results of operations, which risks and uncertainties include, among others:

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The Company keeps its cash and cash equivalents in demand deposits with prominent banks of high credit quality and invests only in money market funds.

Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation in the U.S.A or Central Deposit Insurance Corporation in Taiwan up to certain limits.

Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation in the United States or Central Deposit Insurance Corporation in Taiwan up to certain limits.

At times, such deposits may be in excess of the insurance limit.

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Total cash and cash equivalents

The Company’s revenues are substantially derived from the sales of LED products.

During fiscal year 2025, the Company’s revenues were substantially derived from buy-sell purchase orders of equipment.

Net revenues generated from buy-sell purchase orders of equipment to two customers represented 89% for the year ended August 31, 2025.

A significant portion of the Company’s revenues are derived from a limited number of customers, and sales are concentrated in a few select markets.

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Management regularly reviews the allowance by considering certain factors, such as historical experience, industry data, credit quality, ages of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

Customers that accounted for 10% or more of the Company’s total net accounts receivable as of August 31, 2024 and 2023 consist of the following:

Customers that accounted for 10% or more of the Company’s total accounts receivable as of August 31, 2025 and 2024 consist of the following:

The customers accounted for 10% or more of the Company’s total net revenues for the years ended August 31, 2025 and 2024, as follows (in thousands, except percentages):

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Total cash and cash equivalents

Restricted Cash Equivalents — Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan.

As of August 31, 2024 and 2023, the Company’s restricted cash equivalents at current portion amounted $ 78 thousand.

As of August 31, 2024 and 2023, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $ 91 thousand.

Restricted Cash Equivalents — Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan, including compensating balances required under the Company's long-term loan requirements.

As of August 31, 2025 and 2024 , the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $ 177 thousand and $ 169 thousand, respectively.

Foreign Currency — The Company’s subsidiaries use the local currency as their functional currency.

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No bad debt expenses was recognized during both the years ended August 31, 2024 and 2023.

Bad debt expenses were $ 115 thousand and zero for the years ended August 31, 2025 and 2024, respectively.

Inventories — Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value.

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In determining whether a decline in value is other‑than‑temporary, management considers the length of time and the extent to which such value has been less than the carrying amount, the financial condition and prospects of the investee, and the Company’s ability and intent to retain the equity investment for a period of time sufficient to allow for any anticipated recovery in value.

No impairment charge was recognized in the years ended August 31, 2024 and 2023.

Impairment charges of $ 930 thousand and zero were recognized for the years ended August 31, 2025 and 2024, respectively.

Income Taxes — The Company accounts for income taxes under the asset and liability method.

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Advertising Costs — Advertising costs are expensed as incurred.

Advertising costs totaled $ 3 thousand and $ 2 thousand for the years ended August 31, 2024 and 2023, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Advertising costs totaled zero and $ 3 thousand for the years ended August 31, 2025 and 2024, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Segment Reporting — The Company uses the management approach in determining reportable operating segments.

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If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.

On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd., the Company’s wholly owned operating subsidiary, issued 414,000 common shares and amended its certificate of incorporation to increase its common stock issued from 12,087,715 shares to 12,501,715 shares.

As of the issuance date, the increased capital of $ 176 thousand (NT$ 5.4 million) has been completely received in cash by Taiwan Bandaoti Zhaoming Co., Ltd.

The Company did not subscribe for any newly issued common shares, and, as a result, the noncontrolling interest in the Company increased from zero to 3.31 %.

From January 2019 to September 2020, the Company purchased an additional 33,000 common shares of SBDI from non-controlling shareholders.

From March 2022 to May 2022, the Company purchased an additional 52,000 common shares of SBDI from non-controlling shareholders.

The noncontrolling interest in SBDI were 2.63 % as of both August 31, 2024 and 2023.

On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd.

(“SBDI”), the Company’s wholly owned operating subsidiary, issued 414,000 common shares and amended its certificate of incorporation to increase its common stock issued from 12,087,715 shares to 12,501,715 shares.

As of the issuance date, the increased capital of $ 176 thousand (NT$ 5.4 million) had been completely received in cash by SBDI.

SemiLEDs Optoelectronics Co., Ltd.

(“Taiwan SemiLEDs”) did not subscribe for the newly issued common shares, and, as a result, the noncontrolling interest in Taiwan SemiLEDs increased from zero to 3.31 %.

From January 2019 to September 2020, Taiwan SemiLEDs purchased an additional 33,000 common shares of SBDI from non-controlling shareholders.

From March 2022 to May 2022, Taiwan SemiLEDs purchased an additional 52,000 common shares of SBDI from non-controlling shareholders.

On September 1, 2024, Taiwan SemiLEDs purchased the remaining 329,000 common shares of SBDI from non-controlling shareholders.

On April 1, 2025, Taiwan Bandaoti Zhaoming Co., Ltd.

merged with and into Taiwan SemiLEDs.

Taiwan Bandaoti Zhaoming Co., Ltd.

now functions as a division of Taiwan SemiLEDs with all property, obligations, and capital being transferred to Taiwan SemiLEDs.

Taiwan SemiLEDs changed its company name to Taiwan Bandaoti Zhaoming Co., Ltd.

after the merger.

The noncontrolling interest in former Taiwan Bandaoti Zhaoming Co., Ltd.

was zero and 2.63 % as of August 3 1 , 2025 and 2024, respectively.

Commitments and Contingencies — Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

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ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares.

For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06 are freestanding and e mbedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2023.

The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishme nts (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):

For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06 are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights.

ASU 2020-06 was effective for fiscal years beginning after December 15, 2023.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”).

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An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification).

ASU 2021-04 was effective for the fiscal years beginning September 1, 2022, including interim periods within those fiscal years.

ASU 2021-04 was effective for the fiscal year beginning September 1, 2022, including interim periods within those fiscal years.

An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date.

The Company concluded that the standard will have no material impact on its consolidated financial statements.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In November 2023, the FASB issued ASU No.

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ASU 2023-07 will be effective for annual reporting periods beginning after December 15, 2023, and interim periods within annual reporting periods beginning after December 15, 2024.

The Company is currently evaluating the impact of this standard on its consolidated financial statements.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

BALANCE SHEET COMPONENTS

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August 31, 2024

Equity investment without readily determinable fair value

Equity method investments, net

Equity investment without readily determinable fair value - Beginning Balance

Dissolution of investee

Equity investment without readily determinable fair value - Ending Balance

Total investments in unconsolidated entities

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Equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the Company) which do not have readily determinable fair values are recorded as equity investment without readily determinable fair value.

All equity investments without readily determinable fair value are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable, and measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

The recoverable value of the investment was determined based on the Company’s best estimate of the amount that could be realized from the investment, which considered the latest financial information.

During the years ended August 31, 2024 and 2023, no impairment losses were recognized for the equity investments without readily determinable fair value.

As of August 31, 2025, the Company held an equity investment without readily determinable fair value in High Power Optoelectronics, Inc., for which the Company recognized an impairment loss of $ 930 thousand during fiscal year 2025 based on the latest available financial information and the estimated recoverable value of the investment.

The impairment losses for the equity investments without readily determinable fair value were $ 930 thousand and zero for the years ended August 31, 2025 and 2024, respectively.

Equity Method Investments

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Loans from Chairman and Shareholders

Convertible notes issued to Chairman and Shareholders

Total long-term debt

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Total long-term debt, excluding current installments

Our long-term debt, which consisted of New Taiwan dollar (“NTD”) denominated long-term notes, convertible unsecured promissory notes and loans from the Chairman and the largest shareholder of the Company, total ed $ 3.7 million and $ 6.4 million as of August 31, 2024 and 2023, respectively.

Our long-term debt, which consisted of New Taiwan dollar (“NTD”) denominated long-term notes and loans from the Chairman and the largest shareholder of the Company, total ed $ 1.7 million and $ 3.7 million as of August 31, 2025 and 2024, respectively.

On July 5, 2019, the Company and Mega International Commercial Bank (“Mega Bank”) entered into two NTD denominated loan agreements in an aggregate amount of $ 3.2 million (NT$ 100 million).

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Income from renting the collateral must be deposited into a reserved account opened with Mega Bank, and only the balance of deposits exceeding $ 82 thousand (NT$ 2.5 million) after deducting the principal and interest payable for the current month (including the accumulated outstanding amount) may be transferred outwards.

The balance of the reserve account is $ 78 thousand as of August 31, 2024 and 2023.

The balance of the reserve account is $ 82 thousand and $ 78 thousand as of August 31, 2025 and 2024, respectively.

Due to the impact of the COVID-19 pandemic, Mega bank agreed to give the Company a deferment period for twelve months starting from May 2020 until April 2021.

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Starting from May 2021, the two notes payables to Mega Bank require monthly payments of principal in the amount of $ 24 thousand plus interest and $ 14 thousand plus interest, respectively, over the 74 -month term of the notes with final payment to occur in July 2027 .

On January 8, 2019, the Company entered into loan agreements with each of the Chairman and Chief Executive Officer and the largest shareholder of the Company, with aggregate amounts of $ 1.7 million and $ 1.5 million, respectively, and an annual interest rate of 8 %.

All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the proposed sale of the Company's headquarters building pursuant to the agreement dated December 15, 2015.

The Company were initially required to repay the loans of $ 1.5 million on January 14, 2021 and $ 1.7 million on January 22, 2021, respectively.

On January 16, 2021, the maturity date of these loans was extended with same terms and interest rate for one year to January 15, 2022 , and on January 14, 2022, the maturity date of these loans was extended again with same terms and interest rate for one more year to January 15, 2023 .

On January 13, 2023, the maturity date of these loans was further extended with same terms and interest rate for one year to January 15, 2024 .

On January 8, 2019, the Company entered into secured loan agreements with Trung Doan, its Chairman and Chief Executive Officer and J.R.

Simplot Company, its largest shareholder, with aggregate amounts of $ 1.7 million and $ 1.5 million, respectively, and an annual interest rate of 8 % (the “Loan Agreements”).

The Loan Agreements are secured by a second priority security interest on the Company’s headquarters building.

The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021 , respectively.

On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022 , and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023 .

On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024 .

On January 7, 2024, J.R.

Simplot Company entered into an assignment agreement (the “Assignment”) pursuant to which J.R.

On January 7, 2024, the Company entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc.

and Trung Doan (each, a “Fourth Amendment”).

The Fourth Amendment with Simplot Taiwan Inc.

(i) extended the maturity date of its loan agreement to January 15, 2025 , and (ii) upon mutual agreement of the Company and Simplot Taiwan Inc., permitted the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 400,000 , by issuing shares of the Company’s common stock in the name of Simplot Taiwan Inc.

and Trung Doan.

The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc.

(i) extended the maturity date to January 15, 2025 , and (ii) upon mutual agreement of the Company and Simplot Taiwan Inc., permitted the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 400,000 , by issuing shares of the Company’s common stock in the name of Simplot Taiwan Inc.

as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.

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remained the same.

On January 7, 2024, the Company issued 305,343 shares of its common stock at a price of $ 1.31 per share to repay $ 400,000 of accrued interest on the Loan Agreement with Simplot Taiwan Inc.

The shares of common stock were issued in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.

The Fourth Amendment to the loan agreement with Trung Doan amends the loan agreement’s maturity date with same terms and interest rate to January 15, 2025 .

The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025 .

All other terms and conditions of the Loan Agreement with Trung Doan remained the same.

On February 9, 2024, the Company and Trung Doan entered into the Fifth Amendment to the loan agreement (the “Fifth Amendment”).

The Fifth Amendment, upon the mutual agreement of the Company and Trung Doan, permitted the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 800,000 , by issuing shares of the Company’s common stock to Trung Doan as partial repayment of the loan agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.

On January 7, 2024, the Company issued 305,343 shares of its common stock at a price of $ 1.31 per share to repay $ 400,000 of accrued interest on the loan agreement with Simplot Taiwan Inc.

On February 9, 2024, the Company entered into the Fifth Amendment to the Loan Agreement with Trung Doan.

The Fifth Amendment to the Loan Agreement with Trung Doan (i) amended the Loan Agreement to permit the Company to repay up to $ 800,000 of principal under the Loan Agreement by issuing shares of the Company’s common stock and (ii) elected to prepay $800,000 of loan principal by delivering 629,921 shares of the Company’s common stock to Trung Doan, based on the closing price of $ 1.27 per share on February 8, 2024.

All other terms and conditions of the Loan Agreement remained the same.

On February 9, 2024, the Company repaid $ 800,000 of loan principal by delivering 629,921 shares of the Company’s common stock to Mr.

Doan, based on the closing price of $ 1.27 per share on February 8, 2024.

The shares of common stock were issued on February 9, 2024 in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.

On July 3, 2024, the Company and Trung Doan entered into the Sixth Amendment to the loan agreement (the “Sixth Amendment”).

The Sixth Amendment amended the loan agreement to permit, upon the mutual agreement of the Company and Trung Doan, the Company to repay a portion of the principal amount or accrued interest under the loan agreement, by issuing shares of the Company’s common stock to Trung Doan as partial repayment of the loan agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.

All other terms and conditions of the loan agreement, as amended by the Sixth Amendment, remained the same.

As of August 31, 2024 and 2023, these loans totaled $ 2.4 million and $ 3.2 million, respectively.

The loans are secured by a second priority security interest on the Company's headquarters building.

On November 25, 2019 and on December 10, 2019, the Company issued convertible unsecured promissory notes (the “Notes”) to J.R.

Simplot Company, its largest shareholder, and Trung Doan, our Chairman and Chief Executive Officer, (together, the “Holders”) with a principal sum of $ 1.5 million and $ 500 thousand, respectively, and an annual interest rate of 3.5 %.

Principal and accrued interest is due on demand by the Holders on and at any time after May 30, 2021 .

On February 7, 2020, J.R.

Simplot Company assigned all of its right, title and interest in the Notes to Simplot Taiwan Inc.

The outstanding principal and unpaid accrued interest of the Notes may be converted into shares of the Company’s common stock at a conversion price of $ 3.00 per share, at the option of the Holders any time from the date of the Notes.

On May 25, 2020, each of the Holders converted $ 300,000 of the Notes into 100,000 shares of the Company’s common stock.

On May 26, 2021, the Notes were extended with the same terms and interest rate for one year and a maturity date of May 30, 2022 .

On May 26, 2022, the Notes were second extended with the same terms and interest rate for one year and a maturity date of May 30, 2023 .

On June 6, 2023, the Company entered into the Third Amendment to the Notes (the “Third Amendments”) to amend the Notes to (i) extend the maturity date from May 30, 2023 to May 30, 2024 , and (ii) change the conversion price from $ 3.00 to $ 2.046 per share.

All other terms and conditions of the Notes remained the same.

After the close of market on January 5, 2024, the Company entered into the Fourth Amendment to the Notes (the “Note Fourth Amendments”) to amend the Notes to (i) convert the total principal and accrued interest on the Notes to common stock of the Company to be issued in the names of the Holders, and (ii) change the conversion price of the Notes from $ 2.046 per share to the closing price immediately preceding the signing of the Note Fourth Amendments, or $ 1.31 per share.

All other terms and conditions of the Notes remained the same.

On January 5, 2024, the Holders converted the total principal and accrued interest of the Notes, in an aggregate amount of $ 1,608,848 , to 1,228,128 shares of its common stock at a conversion price of $ 1.31 per share.

As of August 31, 2024 and 2023, the outstanding principal of these notes totaled zero and $ 1.4 million, respectively.

On July 3, 2024, the Company and Trung Doan entered into the Sixth Amendment to the Loan Agreement.

The Sixth Amendment to the Loan Agreement amended the Loan Agreement to permit the Company, upon the mutual agreement of the Company and Trung Doan, to repay a portion of the principal amount or accrued interest under the Loan Agreement, by issuing shares of the Company’s common stock to Trung Doan as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.

All other terms and conditions of the Loan Agreement, as amended by the Sixth Amendment to the Loan Agreement, remained the same.

On January 15, 2025, the Company entered into the Seventh Amendment to the Loan Agreement with Trung Doan and Fifth Amendment to the Loan Agreement with Simplot Taiwan Inc.

to extend the maturity dates to January 15, 2026 .

All other terms and conditions of the Loan Agreements remained the same.

On February 28, 2025, the Company and Simplot Taiwan Inc.

entered into the Sixth Amendment to the Loan Agreement (the “Amended Loan Agreement”) .

The Amended Loan Agreement, upon the mutual agreement of the Company and Simplot Taiwan Inc., permits the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 1,200,000 , by issuing shares of the Company’s common stock to Simplot Taiwan Inc.

as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.

On February 28, 2025, the Company delivered payment notices indicating its intent to repay $ 1,200,000 and $ 400,000 of loan principal by delivering 722,891 shares and 240,963 shares of the Company’s common stock to Simplot Taiwan Inc.

and Trung Doan, respectively, based on the closing price of $ 1.66 per share on February 27, 2025.

As of August 31, 2025 and 2024, these loans totaled $ 800 thousand and $ 2.4 million, respectively.

The scheduled principal payments for the Company’s long-term debt as of August 31, 2025 consist of the following (in thousands):

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COMMITMENTS AND CONTINGENCIES

Operating Lease Agreements — The Company has several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between December 2024 and December 2040 .

Operating Lease Agreements — The Company has several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancelable and noncancelable leases that expire at various dates between August 2026 and December 2040 .

Leases with an initial term of 12 months or less are not recorded on the balance sheet;

the Company recognizes lease expense for these leases

on a straight-line basis over the lease term.

the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

For lease agreements entered into or reassessed after the adoption of Topic 842, the Company did not combine lease and non-lease components.

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Lease expense related to these noncancelable operating leases were $ 166 thousand and $ 155 thousand for the years ended August 31, 2025 and 2024, respectively.

Balance sheet information related to the Company’s leases is presented below:

Balance sheet information related to the Company’s leases is presented below (in thousands):

Operating lease right of use assets

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Operating lease liabilities, less current portion

The following provides details of the Company’s lease expenses:

The following provides details of the Company’s lease expenses (in thousands):

Operating lease expenses

Other information related to leases is presented below:

Other information related to leases is presented below (in thousands):

Cash Paid for amounts Included In Measurement of Liabilities:

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As of August 31, 2025, there was no pending litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.

On July 6, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”).

In accordance with the terms of the Sales Agreement, the Company could offer and sell from time to time through the Agent the Company’s common stock having an aggregate offering price of up to $ 20,000,000 (the “Placement Shares”).

Sales of the Placement Shares were made on Nasdaq at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended.

The Company paid a commission to the Agent of 3.0 % of the gross proceeds of the sale of the Placement Shares sold under the Agreement and reimbursed the Agent for certain expenses.

During the year ended August 31, 2022, the Company sold 286,328 shares of common stock for gross proceeds of $ 995 thousand with $ 31 thousand paid as placement agent fees under our ATM program.

During the year ended August 31, 2024 and 2023, the C ompany did no t sell any shares of its common stock under its ATM program.

The ATM program expired in July 2024 .

and Trung Doan, respectively, based on the closing price of $ 1.66 per share on February 27, 2025.

STOCK ‑ BASED COMPENSATION

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As of August 31, 2025 and 2024, there were 444 tho usand and 544 thousand shares of common stock available for future issuance under the 2010 Plan, respectively.

In July 2023, SemiLEDs granted 10 thousand restricted stock units to its employees, which will vest 25 % every three months from the vesting commencement date of July 7, 2023 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $ 2.44 per unit.

In April 2023, SemiLEDs granted 110.5 thousand restricted stock units to its employees, which will vest 12.5 % every three months from the vesting commencement date of April 25, 2023 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $ 1.87 per unit.

In March 2023, SemiLEDs granted 20 thousand restricted stock units to its employee, which will vest 25 % every anniversary starting from the vesting commencement date of March 8, 2023 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $ 2.30 per unit.

In November 2022, SemiLEDs granted 15 thousand restricted stock units to its directors that vest 25 % every three months on February 7, 2023, May 7, 2023, August 7, 2023 and November 7, 2023.

100% of the unvested stock units was immediately vested on May 18, 2023, the date of the 2023 annual meeting.

The grant-date fair value of the restricted stock units was $ 2.33 per unit.

In November 2021, SemiLEDs granted 15 thousand restricted stock units to its directors that vest in quarterly installments on February 12, 2022, May 12, 2022, August 12, 2022 and November 12, 2022.

Because the 2022 annual meeting was held on September 13, 2022, 100% of the stock units immediately vested on the date of the 2022 annual meeting.

In July 2025, SemiLEDs granted 96 thousand restricted stock units to its employees, which vest 12.5 % every three months from the vesting commencement date of July 10, 2025 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $ 2.81 per unit.

In November 2021, SemiLEDs granted 98.5 thousand restricted stock units to its employees, which vest in eight quarterly installments commencing November 2021 and will become fully vested upon a change in control.

In November 2024, SemiLEDs granted 15 thousand restricted stock units to its directors, which vest 25 % every three months from the vesting commencement date of November 27, 2024 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $ 1.28 per unit.

Stock ‑ based Compensation Expense

The total stock-based compensation expense consists of stock-based compensation expense for stock options and restricted stock units granted to employees, directors, nonemployees and also includes stock options to purchase SemiLEDs’ common stock as part of an employment agreement related to the Company’s acquisition of SBDI (later on renamed as TSLC Corporation).

The total stock-based compensation expense consists of stock-based compensation expense for stock options and restricted stock units granted to employees, directors and nonemployees.

A summary of the stock-based compensation expense for the years ended August 31, 2025 and 2024 is as follows (in thousands):

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The Black-Scholes option-pricing model requires inputs including the market price of SemiLEDs’ common stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several of the Company’s publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend.

The expected term is derived from historical data on employee exercises and post‑vesting employment termination behavior after taking into account the contractual life of the award.

The risk‑free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant for zero coupon U.S.

Treasury notes with maturities approximately equal to the expected term of the related options.

The expected dividend has been zero for the Company’s option grants as SemiLEDs has never paid dividends and does not expect to pay dividends for the foreseeable future.

Each of these inputs is subjective and generally requires significant judgment to determine.

During the years ended August 31, 2024 and 2023, the Company has no options granted, forfeited, or exercised.

The grant date fair value of stock units is based upon the market price of SemiLEDs’ common stock on the date of the grant.

This fair value is amortized to compensation expense over the vesting term.

During the years ended August 31, 2025 and 2024, the Company has

no options granted, forfeited, or exercised.

As of August 31, 2025 and 2024, the Company has no unvested stock options and the unrecognized compensation costs related to unvested stock options were nil .

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Stock units and stock options to purchase common stock

Convertible notes to convert into common stock

Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

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The Tax Act also added many new provisions, including a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries (“transition tax”), changes to bonus depreciation, limits on deductions for executive compensation and interest expense, a tax on global intangible low-taxed income (“GILTI”), the base erosion anti-abuse tax (“BEAT”) and a deduction for foreign-derived intangible income.

The Company has elected to account for the tax on GILTI and BEAT as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax.

The Company has

elected to account for the tax on GILTI and BEAT as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax.

However, the Company has considered the potential impact of GILTI and BEAT on its U.S.

federal net operating

loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions.

federal net operating loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions.

The changes included in the Tax Act are broad and complex.

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Lighting products

(1) Other revenues for the year ended August 31, 2025 primarily represent revenues attributable to buy-sell purchase orders of equipment.

Other revenues for the year ended August 31, 2024 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.

Revenues by geography are based on the billing address of the customer.

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Years Ended August 31,

United States

Other (individually less than 5 % of total net revenues)

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RELATED PARTY TRANSACTIONS

The Company were initially required to repay the loans of $ 1.5 million on January 14, 2021 and $ 1.7 million on January 22, 2021 , respectively.