What changed in this filing

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Item 1. Financial Statements

2021-01-14 compared with 2020-07-13 · 140 added, 165 removed, 309 unchanged (50% of the section changed)

1 unchanged sentence

SEMILEDS CORPORATION AND SUBSIDIARIES

U naudited Condensed Consolidated Balance Sheets

Condensed Consolidated Balance Sheets

(In thousands of U.S.

3 unchanged sentences

Restricted cash and cash equivalents

Accounts receivable (including related parties), net of allowance for doubtful accounts of $184 and $195 as of May 31, 2020 and August 31, 2019, respectively

Accounts receivable (including related parties), net of allowance for doubtful accounts of $192 and $187 as of November 30, 2020 and August 31, 2020, respectively

Prepaid expenses and other current assets

10 unchanged sentences

Accrued expenses and other current liabilities

Operating lease liabilities, current

Other payable to related parties

Operating lease liabilities, current portion

Total current liabilities

5 unchanged sentences

Common stock, $0.0000056 par value—7,500 shares authorized;

4,006 shares and 3,594 shares issued and outstanding as of May 31, 2020 and August 31, 2019, respectively

4,011 shares issued and outstanding as of both November 30, 2020 and August 31, 2020

Additional paid-in capital

9 unchanged sentences

dollars and shares, except per share data)

Three Months Ended

Nine Months Ended

Three Months Ended November 30,

Revenues, net

Cost of revenues

Gross profit (loss)

Operating expenses:

1 unchanged sentence

Selling, general and administrative

Gain on disposals of long-lived assets, net

Gain on disposals of long-lived assets

Total operating expenses

1 unchanged sentence

Other income (expenses):

Gain on disposal of investment

Interest expenses, net

Other income (losses), net

Foreign currency transaction (losses) gain, net

Total other income (expenses), net

Other income, net

Foreign currency transaction gain, net

Total other income, net

Loss before income taxes

Income tax expense

Net gain (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net loss attributable to SemiLEDs stockholders

7 unchanged sentences

(In thousands of U.S.

Three Months Ended

Nine Months Ended

Other comprehensive loss, net of tax:

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

Three Months Ended November 30,

Other comprehensive gain (loss), net of tax:

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

Comprehensive loss

3 unchanged sentences

SEMILEDS CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Unaudited Condensed Consolidated Statements of Changes in Equity

(In thousands of U.S.

2 unchanged sentences

Shareholders'

BALANCE—September 1, 2018

Issuance of common stock under equity incentive plans

Stock-based compensation

Common stock issued by SBDI*

Comprehensive loss:

Other comprehensive income (loss)

BALANCE—November 30, 2018

Issuance of common stock under equity incentive plans

Stock-based compensation

Comprehensive loss:

Other comprehensive income (loss)

BALANCE—February 28, 2019

BALANCE at September 1, 2020

Stock-based compensation

Change ownership in SBDI*

Comprehensive loss:

Other comprehensive income (loss)

BALANCE—May 31, 2019

BALANCE at November 30, 2020

Comprehensive

Shareholders'

BALANCE—September 1, 2019

Issuance of common stock under equity incentive plans

Stock-based compensation

Comprehensive loss:

Other comprehensive income (loss)

BALANCE—November 30, 2019

BALANCE at September 1, 2019

Issuance of common stock under equity incentive plans

Stock-based compensation

Issuance of common stock for private placement

Issuance of convertible notes

Comprehensive loss:

Other comprehensive income (loss)

BALANCE—February 29, 2020

Stock-based compensation

Issuance of common stock for private placement

Conversion of notes into common stocks

Change ownership in SBDI*

Comprehensive loss:

Other comprehensive loss

BALANCE—May 31, 2020

BALANCE at November 30, 2019

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(In thousands of U.S.

Nine Months Ended

Three Months Ended November 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Provisions for inventory write-downs

Gain on disposals of long-lived assets, net

Gain on disposals of investments

Accounts receivable, net

Prepaid expenses and other

Gain on disposals of long-lived assets

Accounts receivable

Prepaid expenses and other assets

Accounts payable

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

Return the received-in-advance

Payments for development of intangible assets

Net cash used in investing activities

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term debt

Repayments of long-term debt

Issuance of common stock for private placement

Acquisition of noncontrolling interests

Net cash provided by financing activities

Changes in cash balance included in deconsolidated subsidiaries

Net cash used in financing activities

Change in cash balances included in current assets held for sale

Effect of exchange rate changes on cash and cash equivalents

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS—Beginning of period

CASH AND CASH EQUIVALENTS—End of period

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—End of period

NONCASH INVESTING AND FINANCING ACTIVITIES:

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SEMILEDS CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Notes to Condensed Consolidated Financial Statements

SemiLEDs Corporation (“SemiLEDs” or the “parent company”) was incorporated in Delaware on January 4, 2005 and is a holding company for various wholly owned subsidiaries.

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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 Taiwan, the United States and China.

As of May 31, 2020, SemiLEDs had two wholly owned subsidiaries.

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

As of November 30, 2020, 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 our research, development, manufacturing and sales activities take place.

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The Purchaser paid $140,000 to the Company, and the transaction was completed in January 2020.

The Purchaser also subscribed approximately 4% of the Company’s outstanding common shares on January 17, 2020 (see Note 6).

SemiLEDs’ common stock began trading on the NASDAQ Global Select Market under the symbol “LEDS”.

The Purchaser also subscribed for approximately 4% of the Company’s outstanding common shares on January 17, 2020 (see Note 7).

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

Summary of Significant Accounting Policies

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The unaudited condensed consolidated balance sheet as of August 31, 2020 included herein was derived from the audited consolidated financial statements as of that date.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated balance sheet as of May 31, 2020, the statements of operations and comprehensive loss for the three and nine months ended May 31, 2020 and 2019, the statement of changes in equity for the three and nine months ended May 31, 2020 and 2019, and the statements of cash flows for the nine months ended May 31, 2020 and 2019.

The results for the three or nine months ended May 31, 2020 are not necessarily indicative of the results to be expected for the year ending August 31, 2020.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s unaudited condensed consolidated balance sheet as of November 30, 2020, the unaudited condensed statements of operations and comprehensive loss for the three months ended November 30, 2020 and 2019, changes in equity for the three months ended November 30, 2020, and cash flows for the three months ended November 30, 2020 and 2019.

The results for the three months ended November 30, 2020 are not necessarily indicative of the results to be expected for the year ending August 31, 2021.

Going Concern —The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

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 suffered losses from operations of $3 .7 million and $ 3.7 million, and net cash used in operating activities of $ 3.5 million and $ 1.2 million for the years ended August 31, 201 9 and 201 8 , respectively.

Gross profit on product sales was $ 4 52 thousand fo r the year ended August 31, 201 9 , and gross loss was $ 435 thousand fo r the year ended August 31, 201 8 .

Loss from operations for the three and nine months ended May 31 , 20 20 were $ 741 thousan d and $ 1 .

7 million, respectively.

N et cash used in operating activities for the nine months ended May 31 , 20 20 was $ 786 thousand .

These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern.

However, on May 31, 2020, the Company’s cash and cash equivalents increased to $2.5 million , mainly due to the issuance of convertible notes.

Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provi de 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 Company s uffered losses from operations of $ 2.1 million and $ 3.7 million, and used net cash in operating activities of $ 1.0 million and $ 3.5 million for the years ended August 31, 20 20 and 201 9 , 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 $ 1.6 million fo r the year ended August 31, 20 20 compared to $ 452 thousand fo r the year ended August 31, 201 9 .

On November 30, 2020, the Company’s cash and cash equivalents had increased to $ 2.7 million compared to $ 688 thousand on November 30, 2019, mainly due to the issuance of convertible notes and common stock in private placement s .

Further, l oss from operations and net cash provided by operating activities for the thre e months ended November 30, 20 20 were $ 972 thousand and $ 88 thousand , respectivel y.

However, 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.

Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of new higher margin products.

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 focused on product enhancement and developing its LED product into many other applications or devices.

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

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

As of May 31, 2020 and August 31, 2019, the Company’s restricted cash equivalents at current portion amounted $85 thousand and $19 thousand, respectively.

As of May 31, 2020 and August 31, 2019, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $93 thousand and $89 thousand, respectively.

As of November 30, 2020 and August 31, 2020, the Company’s restricted cash equivalents at current portion amounted $87 thousand and $85 thousand, respectively.

As of November 30, 2020 and August 31, 2020, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $97 thousand and $95 thousand, respectively.

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

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The standard also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period.

Investments in which the Company has the ability to exercise significant influence over the i nvestee but not a controlling financial interest, are accounted for using the equity method of accounting and are not consolidated.

These investments are in joint ventures that are not subject to consolidation under the variable interest model, and for whi ch the Company:

(i) does not have a majority voting interest that would allow it to control the investee, or (ii) has a majority voting interest but for which other shareholders have significant participating rights, but for which the Company has the abili ty to exercise significant influence over operating and financial policies.

Investments in which the Company has the ability to exercise significant influence over the investee but not a controlling financial interest, are accounted for using the equity method of accounting and are not consolidated.

These investments are in joint ventures that are not subject to consolidation under the variable interest model, and for which the Company:

(i) does not have a majority voting interest that would allow it to control the investee, or (ii) has a majority voting interest but for which other shareholders have significant participating rights, but for which the Company has the ability to exercise significant influence over operating and financial policies.

Under the equity method, investments are stated at cost after adding or removing the Company’s portion of equity in undistributed earnings or losses, respectively.

The Company’s in vestment in these equity ‑ method entities is reported in the consolidated balance sheets in investments in unconsolidated entities, and the Company’s share of the income or loss of these equity ‑ method entities, after the elimination of unrealized intercompany profits, is reported in the consolidated statements of operations in equity in losses from unconsolidated entities.

The Company’s investment in these equity ‑ method entities is reported in the consolidated balance sheets in investments in unconsolidated entities, and the Company’s share of the income or loss of these equity ‑ method entities, after the elimination of unrealized intercompany profits, is reported in the consolidated statements of operations in equity in losses from unconsolidated entities.

When net losses from an equity ‑ method investee exceed its carrying amount, the carrying amount of the investment is reduced to zero.

The Company then suspends using the equity method to provide for additional losses unless the Company has guaranteed obligations or is otherwise committed to provide further financial support to the equity ‑ method investee.

The Company resumes account ing for the investment under the equity method if the investee subsequently returns to profitability and the Company’s share of the investee’s income exceeds its share of the cumulative losses that have not been previously recognized during the period the equity method is suspended.

The Company resumes accounting for the investment under the equity method if the investee subsequently returns to profitability and the Company’s share of the investee’s income exceeds its share of the cumulative losses that have not been previously recognized during the period the equity method is suspended.

Investments in entities that are not consolidated or accounted for under the equity method are recorded as investments without readily determinable fair values.

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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:

it has incurred significant losses over the past years, any inability of the Company to compete in a rapidly evolving market and to respond quickly and effectively to changing market requirements, any inability of the Company to grow its revenue and/or maintain or increase its margins, it may experience fluctuations in its revenues and operating results, any inability of the Company to protect its intellectual property rights, claims by others that the Company infringes their proprietary technology, and any inability of the Company to raise additional funds in the future.

it has incurred significant losses over the past several years, any inability of the Company to compete in a rapidly evolving market and to respond quickly and effectively to changing market requirements, any inability of the Company to grow its revenue and/or maintain or increase its margins, it may experience fluctuations in its revenues and operating results, any inability of the Company to protect its intellectual property rights, claims by others that the Company infringes their proprietary technology, and any inability of the Company to raise additional funds in the future.

Concentration of Supply Risk —Some of the components and technologies used in the Company’s products are purchased and licensed from a limited number of sources and some of the Company’s products are produced by a limited number of contract manufacturers.

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Concentration of Credit Risk —Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable.

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

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.

Deposits held with banks may exceed the amount of insurance provided on such deposits.

As of May 31 , 20 20 and August 31, 201 9 , cash and cash equivalents of the Company consisted of the following (in thousands):

As of November 30, 20 20 and August 31, 20 20 , cash and cash equivalents of the Company consisted of the following (in thousands):

Cash and Cash Equivalents by Location

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Denominated in U.S.

Denominated in New Taiwan dollars

Denominated in New Taiwan dollars (NT$)

Denominated in other currencies

China (including Hong Kong);

Denominated in U.S.

Denominated in Renminbi

Denominated in H.K.

Total cash and cash equivalents

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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.

Net revenues generated from sales to the top ten customers represented 89% and 83 % of the Company’s total net revenues for the three and nine months ended May 31, 2020, respectively, and 80% and 73% of the Company’s net revenues for the three and nine months ended May 31, 2019, respectively.

The Company’s revenues have been concentrated in a few select markets, including the Netherlands, Ireland, Taiwan, Japan, German, the United States, and India.

Net revenues generated from sales to customers in these markets, in the aggregate, accounted for 89% and 90% of the Company’s net revenues for the three and nine months ended May 31, 2020, respectively, and 86% and 88 % of the Company’s net revenues for the three and nine months ended May 31, 2019, respectively.

Net revenues generated from sales to the top ten customers represented 85% of the Company’s total net revenues for both the three months ended November 30, 2020 and 2019.

The Company’s revenues have been concentrated in a few select markets, including the Netherlands, Ireland, Taiwan, Japan, the United States, Germany and India.

Net revenues generated from sales to customers in these markets, in the aggregate, accounted for 75% and 89% of the Company’s net revenues for the three months ended November 30, 2020 and 2019, respectively.

Noncontrolling Interests —Noncontrolling interests are classified in the consolidated statements of operations as part of consolidated net income (loss) and the accumulated amount of noncontrolling interests in the consolidated balance sheets as part of equity.

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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.

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

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 issued common stock from 12,087,715 to 12,501,715.

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 the newly issued common shares, and, as a result, noncontrolling interest in SBDI was increased from zero to 3.31%.

In December 2018 and in March 2020, Taiwan SemiLEDs purchased 3,000 and 5,000 common shares of SBDI from non-controlling interests, respectively.

As of May 31, 2020, noncontrolling interest in SBDI was down to 3.25%.

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

From January 2019 to November 2020, the Company purchased an additional 33,000 shares of Taiwan Bandaoti Zhaoming Co., Ltd.

from non-controlling shareholders.

Therefore, noncontrolling interest in SBDI was down to 3.05% as of November 30, 2020.

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Change to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”).

ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, “Fair Value Measurement.” ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements.

ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020.

The Company is currently evaluating the impact ASU 2018-13 will have on the disclosures included in its consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards.

The amendments in the ASU are effective for f iscal years beginning after December 15, 2020, including interim periods therein.

The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein.

Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued.

The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

The Company is currently evaluating the impact ASU 2019-12 will have on the disclosures included in its consolidated financial statements.

Balance Sheet Components

Inventories as of May 31, 2020 and August 31, 2019 consisted of the following (in thousands):

Inventories as of November 30, 2020 and August 31, 2020 consisted of the following (in thousands):

Raw materials

1 unchanged sentence

Finished goods

Inventory write-downs to estimated net realizable values were $251 thousand and $571 thousand for the three and nine months ended May 31, 2020, respectively, and $248 thousand and $560 thousand for the three and nine months ended May 31, 2019, respectively.

Inventory write-downs to estimated net realizable values were $196 thousand and $119 thousand for the three months ended November 30, 2020 and 2019, respectively.

Property, Plant and Equipment

Property, plant and equipment as of May 31, 2020 and August 31, 2019 consisted of the following (in thousands):

Property, plant and equipment as of November 30, 2020 and August 31, 2020 consisted of the following (in thousands):

Buildings and improvements

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Intangible Assets

Intangible assets as of May 31, 2020 and August 31, 2019 consisted of the following (in thousands):

Intangible assets as of November 30, 2020 and August 31, 2020 consisted of the following (in thousands):

November 30, 2020

Period (Years)

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Investments in Unconsolidated Entities

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of May 31, 2020 and August 31, 2019 consisted of the following (in thousands, except percentages):

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of November 30, 2020 and August 31, 2020 consisted of the following (in thousands, except percentages):

November 30, 2020

August 31, 2020

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Total investments in unconsolidated entities

There were no dividends received from unconsolidated entities through May 31, 2019.

There were no dividends received from unconsolidated entities through November 30, 2020.

Equity Investments without readily determinable fair value

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.

Assets and Liabilities held for sale

In November 2019, the Company entered into a stock purchase agreement to sell all of the outstanding shares of the Company’s Hong Kong Subsidiary, Semileds International Corporation Limited, and its wholly owned subsidiary Xuhe Guangdian Co Ltd.

The Company closed the transaction in January 2020.

As of November 30, 2019, all the assets and liabilities relating to the Company’s Hong Kong Subsidiary were reported as assets and liabilities held-for-sale in the consolidated balance sheets.

The following is a summary of the major classes of assets and liabilities included as assets and liabilities held for sale as of November 30, 2019.

November 30, 2019

Cash and cash equivalents

Accounts receivable, net

Prepaid expenses and other current assets

Accounts payable

Accrued expenses and other current liabilities

Commitments and Contingencies

Operating Lease Agreements —The Company has several operating leases with unrelated parties, primarily for land, plant and office spaces in Taiwan, which include cancelable and noncancelable and which expire at various dates between December 2020 and December 2029.

Operating Lease Agreements —The Company has several operating leases with unrelated parties, primarily for land, plant and office spaces in Taiwan, which include cancellable and noncancellable leases and which expire at various dates between December 2020 and December 2029.

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

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Most leases do not include options to renew.

The exercise of lease renewal options has to be agreed by the lessors.

The exercise of lease renewal options has to be agreed by the leasers.

The depreciable life of assets and leasehold improvements are limited by the term of leases, unless there is a transfer of title or purchase option reasonably certain of exercise.

Lease expense is recognized on a straight-line basis over the term of the lease.

Lease expense related to these noncancelable operating leases were $39 thousand and $115 thousand for three months and nine months ended May 31, 2020.

Lease expense is recognized on a straight-line basis over the term of the leases.

Lease expense

related to these noncancellable operating leases were $ 40 and $ 38 thousand for three months ended November 30, 20 20 and 201 9, respectively .

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

November 30, 2020

Operating lease right of use assets

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

Nine Months Ended

Three Months Ended

November 30, 2020

Operating lease expenses, net

Other information related to leases is presented below:

Nine Months Ended

Three Months Ended

November 30, 2020

Cash Paid for amounts Included In Measurement of Liabilities:

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As most of the Company’s leases do not provide an implicit rate, the Company uses its average borrowing rate from non-related parties of 1.76% based on the information available at commencement date in determining the present value of lease payments.

The aggregate future noncancelable minimum rental payments for the Company’s operating leases as of May 31, 2020 consisted of the following (in thousands):

The aggregate future noncancellable minimum rental payments for the Company’s operating leases as of November 30, 2020 consisted of the following (in thousands):

Years Ending August 31,

Operating Leases

Remainder of 2021

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Present value of future minimum lease payments

Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $83 thousand and $158 thousand as of May 31, 2020 and August 31, 2019, respectively.

Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $145 thousand and $33 thousand as of November 30, 2020 and August 31, 2020, respectively.

Litigation —The Company is directly or indirectly involved from time to time in various claims or legal proceedings arising in the ordinary course of business.

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(“Well Thrive”) filed a complaint against SemiLEDs Corporation in the United States District Court for the District of Delaware.

The complaint alleges that Well Thrive is entitled to return of $500 thousand paid toward a note purchase pursuant to a purchase agreement (the “Purchase Agreement”) effective July 6, 2016 with Dr.

The complaint alleged that Well Thrive wa s entitled to the return of $ 500 thousand paid toward a note purchase pursuant to a purchase agreement (the “Purchase Agreement”) effective July 6, 2016 with Dr.

Peter Chiou, which was assigned to Well Thrive on August 4, 2016.

Pursuant to the terms of the Purchase Agreement, we have retained the $500 thousand payment as liquidated damages.

Well Thrive alleges that the liquidated damages provision is unenforceable as an illegal penalty and does not reflect the amount of purported damages.

Pursuant to the terms of the Purchase Agreement, the Company retained the $500 thousand payment as liquidated damages.

Well Thrive allege d that the liquidated damages provision wa s unenforceable as an illegal penalty and d id not reflect the amount of purported damages.

On March 13, 2018, the Company filed a motion to enforce a settlement agreement between the parties to dismiss the lawsuit with prejudice.

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Chang Sheng-Chun, Well Thrive’s director, and to request documents relating to the issues surrounding the settlement.

Based on this order, the Company arranged the depositions to obtain more evidence in support of a motion to enforce the settlement agreement.

On October 25, 2019, Well Thrive filed a motion to modify the

Court’s scheduling order and to allow it to file a motion for summary j udgment, and the Company filed an opposition to the motion.

On November 13, 2019, the Court denied Well Thrive’s motion.

Based on this order, the Company arrange d the depositions to obtain more evidence in support of a motion to enforce the settlement agreement.

The Court held a trial on March 2, 2020.

After the trial, judge ordered both sides to prepare post-trial briefs and proposed findings o f fact for the Court to be submitted before end of April 2020.

On April 30, 2020, both sides submitted post-trail briefs and proposed findings of fact, and as of today, the judge has not rendered a verdict on this case.

On December 28, 2018, the Company received a notification from the Court in Miao-Li County, Taiwan that Epistar Corporation (the successor to Formosa Epitaxy Incorporation, the “Plaintiff”) filed a motion requesting that the Company return the $3 million prepayment plus value-added-tax for the headquarters building sale and pay interest during this period and litigation fee.

The Plaintiff also petitioned the Court to do a provisional execution upon the Company, which would permit the Plaintiff to sell the building and/or other assets belonging to the Company to recover the prepayment.

On January 4, 2019, the Company filed a statement of defense arguing that the Plaintiff’s action and motion for provisional execution should be dismissed and the litigation fees should be borne by the Plaintiff.

On January 25, 2019, the Company and the Plaintiff entered into a settlement, agreeing that the Company would return the $3 million plus value-added-tax of $150 thousand and penalty of $200 thousand, and on February 1, 2019, the Plaintiff withdrew the motion.

As of May 31, 2020, the Company has paid the $3.35 million in full.

On March 11, 2019, a former employee (the “Plaintiff”) of Taiwan Bandaoti Zhaoming Co., Ltd.

(“Taiwan Bandaoti”) filed a civil complaint against Taiwan Bandaoti in the Taiwan Miao-Li District Court.

The Plaintiff alleged the following causes of action under the Labor Standards Act of Taiwan:

(1) failure to pay the annual bonus;

and (2) failure to pay transportation allowance.

The Plaintiff is seeking compensation in the aggregate of approximately $9 thousand (NT$293 thousand).

On May 24, 2019, Taiwan Miao-Li District Court determined on its own initiative to transfer the case to the Taiwan Hsin-Chu District Court due to a lack of jurisdiction over the action in whole or in part.

On February 10, 2020, the Taiwan Hsin-Chu District made a determination in favor of the Company.

As of May 31, 2020, the term of appeal expired and the determination is affirmed.

Except as described above, as of May 31 2020, there was no pending or threatened litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.

After the trial, judge ordered both sides to prepare post-trial briefs and proposed findings of fact for the Court to be submitted before the end of April 2020.

Both sides submitted post-tr ia l briefs and proposed findings of fact on April 30, 2020.

On December 21, 2020, the judge, following a hearing, issued her judgment , which orders SemiLEDs to return the $ 500,000 to Well Thrive, and require d both parties, on or before January 6, 2021, to submit information on the appropriate amount of interest to be added.

On January 6, 2021, the Company filed a brief arguing that there should not be an award of prejudgment interest and Well Thrive is arguing for the amount of $ 135,77 4 in pre-judgment interest.

The Company recorded the $ 500,000 in Advance receipt toward the convertible note under current liabilities as of November 30, 2020.

Except as described above, as of November 30, 2020, there was no pending or threatened litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.

On January 17, 2020, the Company entered into a definitive common stock purchase agreement with XianChang Ma.

7 unchanged sentences

On May 25, 2020, J.R.

Simplot Company, the largest shareholder of the Company, and Trung Doan, the Chairman and Chief Executive Officer of the Company, each converted $300,000 of convertible unsecured promissory notes (the “Notes”) into 100,000 shares of the Company’s common stock.

Simplot Company, the largest shareholder of the Company, and Trung Doan, the Chairman and Chief Executive Officer of the Company, each converted $300,000 of convertible unsecured promissory notes into 100,000 shares of the Company’s common stock (see Note 11).

Stock-based Compensation

2 unchanged sentences

On July 31, 2019, the stockholders approved an increase in the authorized share reserve under the 2010 plan by an additional 500 thousand shares, to extend expiration of the 2010 Plan to November 3, 2023, to remove the IRS Code section 162(m) provisions, and to modify the maximum grant limit to 35 thousand shares to one person in a one year period.

On September 25, 2020, stockholders approved the amended 2010 Equity Incentive Plan to increase the authorized shares reserve by an additional 400,000 shares.

Prior to SemiLEDs’ initial public offering, the Company had another stock‑based compensation plan (the “2005 Plan”), but awards are made from the 2010 Plan after the initial public offering.

Options outstanding under the 2005 Plan continue to be governed by its existing terms.

A total of 1,021 thousand and 521 thousand shares was reserved for issuance under the 2010 Plan, respectively, as of May 31, 2020 and 2019.

As of May 31, 2020 and 2019, there were 548 thousand and 191 thousand shares of common stock available for future issuance under the equity incentive plans, respectively.

In January 2020, SemiLEDs g ranted 136 thousand restricted stock units to its employees , which vest 25% each year on January 10 of 2021, 2022, 2023 and 2024 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $2.39 per un it.

In September 2019, SemiLEDs granted 5 thousand restricted stock units to its directors that will vest 100% on the earlier of July 31, 2020 and the date of the 2020 annual meeting.

A total of 1,421 and 1,021 thousand shares was reserved for issuance under and 2010 Plan as of November 30, 2020 and 2019, respectively.

As of November 30, 2020 and 2019, there were 1,092 thousand and 684 thousand shares of common stock available for future issuance under the equity incentive plans.

In November 2020, SemiLEDs granted 15 thousand restricted stock units to its directors, which vest 25% every three months on February 12, 2021, May 12, 2021, August 12, 2021 and November 12, 2021.

In the event that the 2021 annual meeting falls before

November 12, 2021, 100% of the stock units shall immediately vest on the date of the 2021 annual meeting.

The grant-date fair value of the restricted stock units was $ 3.00 per unit.

In September 2019, SemiLEDs granted 2.5 thousand restricted stock units to a director that will vest 100% on the earlier of September 5, 2020 and the date of the 2020 annual meeting.

In November 2020, SemiLEDs granted 33 thousand restricted stock units to its employees, which vest 25% every three months on February 12, 2021, May 12, 2021, August 12, 2021 and November 12, 2021 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $3.00 per unit.

In January 2020, SemiLEDs granted 136 thousand restricted stock units to its employees, which vest 25% each year on January 10 of 2021, 2022, 2023 and 2024 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $2.39 per unit.

In September 2019, SemiLEDs granted 5 thousand restricted stock units to its directors, which vested 100% on July 31, 2020.

The grant-date fair value of the restricted stock units was $2.45 per unit.

In September 2019, SemiLEDs granted 2.5 thousand restricted stock units to a director, which vested 100% on September 5, 2020.

The grant-date fair value of the restricted stock units was $2.45 per unit.

The grant date fair value of stock options is determined using the Black-Scholes option-pricing model.

6 unchanged sentences

A forfeiture rate of zero is estimated for stock-based awards with vesting term that is less than or equal to one year from the date of grant.

A summary of the stock-based compensation expense for the three and nine months ended May 31, 2020 and 2019 was as follows (in thousands):

Three Months Ended

Nine Months Ended

A summary of the stock-based compensation expense for the three months ended November 30, 2020 and 2019 was as follows (in thousands):

Three Months Ended November 30,

Cost of revenues

3 unchanged sentences

The following stock-based compensation plan awards were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive (in thousands of shares):

Three Months Ended

Nine Months Ended

Three Months Ended November 30,

Stock units and stock options to purchase common stock

The Company’s income (loss) before income taxes for the three and nine months ended May 31, 2020 and 2019 consisted of the following (in thousands):

Three Months Ended

Nine Months Ended

The Company’s loss before income taxes for the three months ended November 30, 2020 and 2019 consisted of the following (in thousands):

Three Months Ended November 30,

Foreign operations

10 unchanged sentences

Provisional estimate of the Company is that no tax will be due under this provision.

As of both May 31 2020 and August 31, 2019, the Company had no unrecognized tax benefits related to tax positions taken in prior periods.

As of both November 30, 2020 and August 31, 2020, the Company had no unrecognized tax benefits related to tax positions taken in prior periods.

The Company files income tax returns in the United States, various U.S.

1 unchanged sentence

The tax years 2016 through 2019 remain open in most jurisdictions.

With few exceptions, as of May 31, 2020, the Company is no longer subject to U.S.

With few exceptions, as of November 30, 2020, the Company is no longer subject to U.S.

federal, state, local, or foreign examinations by tax authorities for tax years before 2015.

6 unchanged sentences

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 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 both 8%.

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

The Company is required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively, unless the loans are sooner accelerated pursuant to the loan agreements.

As of November 30, 2020 and August 31, 2020, these loans totaled $3.2 million.

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

Subsequent Events

The Company has analyzed its operations subsequent to May 31, 2020 to the date these unaudited condensed consolidated financial statements were issued, finding that the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company.

Except for the above, the Company has determined that it does not have any material subsequent events to disclose in these unaudited condensed consolidated financial statements.

On December 21, 2020, the judge, following a hearing, issued her judgment, which orders SemiLEDs to return $500,000 to Well Thrive Ltd., and required both parties, on or before January 6, 2021, to submit information on the appropriate amount of interest to be added.

On January 6, 2021, the Company filed a brief arguing that there should not be an award of prejudgment interest and Well Thrive is arguing for the amount of $135,774 in pre-judgment interest.

The $500,000 was paid toward a note purchase pursuant to a purchase agreement (see Note 6), and the Company recorded the $500,000 as ‘Advance receipt toward the convertible note’.

The Company has analyzed its operations subsequent to November 30, 2020 to the date these unaudited condensed consolidated financial statements were issued, finding that the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company.

Except for the above, the Company has determined that it does not have any other material subsequent events to disclose in these unaudited condensed consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements