What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-13 compared with 2021-04-12 · 96 added, 118 removed, 298 unchanged (42% of the section changed)

9 unchanged sentences

Declining cash position.

The outcome of the pending appeal of the trial verdict ordering us to return the $500,000 partial payment of the uncompleted $1.6 million note financing and potentially pay pre-judgment interest.

Our ability to improve our liquidity, access alternative sources of funding and obtain additional equity capital or credit when necessary for our operations, the difficulty of which may increase if our common stock is delisted from the NASDAQ Stock Market.

Our ability to regain compliance with the minimum stockholders’ equity requirement to avoid our stock being delisted from the Nasdaq Capital Market.

Our ability to maintain compliance with the continued listing requirements to avoid our stock being delisted from the Nasdaq Capital Market.

The impact of the COVID-19 pandemic on our business and the business of our customers.

13 unchanged sentences

Difficulty in managing our future growth or in responding to a need to contract operations, and the associated changes to our operations.

Adverse development in those selected markets, including the N etherlands, Ireland, Taiwan, Japan, the United States , Germany and India , where our revenues are concentrated , including the impact of the COVID-19 pandemic on customer demand .

Adverse development in those selected mark ets, including the Netherlands, Ireland, Taiwan, Japan, the United States , Germany and India , where our revenues are concentrated, including the impact of the COVID-19 pandemic on customer demand.

Our ability to develop and execute upon a new strategy to exploit the China and India market.

58 unchanged sentences

Our business, financial condition, liquidity and operating results have been, and will continue to be, adversely affected by COVID-19 and related restrictions.

The conditions caused by the COVID-19 pandemic have adversely affected our customers’ ability or willingness to purchase our products or services, delayed prospective customers’ purchasing decisions, adversely impacted our ability to provide or deliver products and on-site services to our customers, delayed the provisioning of our offerings, or lengthened payment terms, all of which could adversely affect our future sales, operating results and overall financial performance.

could adversely affect our future sales, operating results and overall financial performance.

Our operations have also begun to be negatively affected by a range of external factors related to the COVID-19 pandemic that are not within our control.

For example, our largest customer, Revlon, Inc., postponed its regular orders, which has decreased our sales revenue for the six months ended February 28, 2021, and we cannot foresee any order from Revlon after the ordered products being shipped.

For example, our largest customer, Revlon, Inc., postponed its regular orders, which has decreased our sales revenue for the nine months ended May 31, 2021, and we cannot foresee any order from Revlon after the ordered products being shipped.

To avoid cash shortage due to the pandemic, we applied and received subsidies from the Taiwan government.

Our bank granted us a deferment period for twelve months starting from May 2020.

During this period, we do not need to pay the monthly payments of the principal but only the interest.

During this period, we d id not need to pay the monthly payments of the principal but only the interest.

We have also devoted ourselves to new product development and expect these new products could bring in new revenue, offsetting the losses resulted from existing customers’ delayed purchasing.

1 unchanged sentence

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

We may need to improve our liquidity, access alternative sources of funding and obtain additional equity capital or credit when necessary for our operations.

We need to improve our liquidity, access alternative sources of funding and obtain additional equity capital or credit when necessary for our operations.

However, we may not be able to obtain such debt funding or sell equity securities on terms that are favorable to us, or at all.

10 unchanged sentences

LEDs for efficient generation of UV light are also starting to gain attention for various medical, germicidal and industrial applications.

Since a substantial portion of our LED chips, LED components and our lighting products are used by end- users in general lighting applications and specialty industrial applications such as UV curing, medical/cosmetic, counterfeit detection, horticulture, architectural lighting and entertainment lighting the adoption of LEDs into these applications will have a strong impact on the demand of LED chips generally and, as a result, for our LED chips, LED components and LED lighting products.

Since a substantial portion of our LED chips, LED components and our lighting products are used by end- users in general lighting applications and specialty industrial applications such as UV curing, medical/cosmetic, counterfeit detection, horticulture, architectural lighting and entertainment lighting the adoption of LEDs into these applications should have a strong impact on the demand of LED chips generally and, as a result, for our LED chips, LED components and LED lighting products.

Average selling price of our products.

26 unchanged sentences

Key markets that we intend to target at the system end include different types of UV LED industrial printers, aquarium lighting, medical applications, niche imaging light engines, horticultural lighting and high standard commercial lighting.

The modules are designed for various printing, curing, and PCB exposure industrial equipment, providing uncompromised reliability and optical output.

The modules are designed for various printing, curing, and PCB exposure industrial equipments, providing uncompromised reliability and optical output.

Our LED components include different sizes and wattage to accommodate different demands in the LED market.

10 unchanged sentences

Some of our largest customers and what we produce/have produced for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project‑based purchases and broadening customer base, among other things.

For the three and the six months ended February 28, 2021, sales to our three largest customers, in the aggregate, accounted for 64% and 54% of our revenues, respectively.

For the three and the nine months ended May 31, 2021, sales to our three largest customers, in the aggregate, accounted for 51% and 52% of our revenues, respectively.

Intellectual property issues.

9 unchanged sentences

Cash position.

Our cash and cash equivalents decreased to $2.1 million as of February 28, 2021 primarily due to the net cash used in operating activities.

Our cash and cash equivalents decreased to $1.7 million as of May 31, 2021 primarily due to the net cash used in operating activities.

We have implemented actions to accelerate operating cost reductions and improve operational efficiencies.

15 unchanged sentences

There was no material impact on our consolidated financial position, results of operations or cash flows due to the adoption.

Except as described above, there have been no material changes in the matters for which we make critical accounting policies and estimates in the preparation of our unaudited interim condensed consolidated financial statements for the three months and six months ended February 28, 2021 as compared to those disclosed in our 2020 Annual Report.

Except as described above, there have been no material changes in the matters for which we make critical accounting policies and estimates in the preparation of our unaudited interim condensed consolidated financial statements for the three months and nine months ended May 31, 2021 as compared to those disclosed in our 2020 Annual Report.

Exchange Rate Information

9 unchanged sentences

dollars were made at the exchange rates as set forth in the statistical release of the Bank of Taiwan.

On February 28 , 202 1 , the exchange rate was 28.28 NT dollar s to one U.S.

On April 6 , 20 2 1 , the exchange rate was 28.49 NT dollars to one U.S.

On May 31 , 20 2 1 , the exchange rate was 27 .

64 NT dollar s to one U.S.

On July 6 , 20 2 1 , the exchange rate was 27.91 NT dollars to one U.S.

No representation is made that the NT dollar or U.S.

2 unchanged sentences

Results of Operations

Three Months Ended February 28, 2021 Compared to the Three Months Ended February 29, 2020

Three Months Ended May 31, 2021 Compared to the Three Months Ended May 31, 2020

Three Months Ended

February 28, 2021

February 29, 2020

(in thousands)

6 unchanged sentences

Revenues, net

Our revenues decreased by 22% to $1.2 million for the three months ended February 28, 2021 from $1.5 million for the three months ended February 29, 2020.

The decrease in revenues was driven primarily by a $56 thousand decrease in sales of LED components and a $317 thousand decrease in other revenue, offset in part by a $14 thousand increase in LED chips and a $28 thousand increase in lighting products.

Revenues attributable to the sales of our LED chips were $50 thousand and $36 thousand, representing 4% and 2%, respectively, of our revenues for the three months ended February 28, 2021 and February 29, 2020, the increase was primarily due to varying volumes sold for the LED chips.

Our revenues decreased by 8% to $1.4 million for the three months ended May 31, 2021 from $1.6 million for the three months ended May 31, 2020.

The decrease in revenues was driven primarily by a $330 thousand decrease in other revenues, offset in part by a $21 thousand increase in LED chips, a $128 thousand increase in sales of LED components and a $51 thousand increase in lighting products.

Revenues attributable to the sales of our LED chips were $32 thousand and $11 thousand, representing 2% and 1%, respectively, of our revenues for the three months ended May 31, 2021 and 2020, the increase was primarily due to varying volumes sold for the LED chips.

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 profitable products.

Revenues attributable to the sales of our LED components were $752 thousand and $808 thousand, representing 62% and 53%, respectively, of our revenues for the three months ended February 28, 2021 and February 29, 2020.

The decrease in revenues attributable to sales of LED components was primarily due to the impact of COVID-19 pandemic on customer demand for UV LED components products.

Revenues attributable to the sales of lighting products represented 13% and 8% of our revenues for the three months ended February 28, 2021 and February 29, 2020, respectively.

Revenues attributable to the sales of lighting products were slightly higher for the three months ended February 29, 2020 primarily due to more volumes sold.

Revenues attributable to other revenues represented 21% and 37% of our revenues for the three months ended February 28, 2021 and February 29, 2020, respectively.

The decrease in revenues attributable to other revenues was primarily due to no sale of raw materials in the three months ended February 28, 2021.

Revenues attributable to the sales of our LED components were $1,057 thousand and $929 thousand, representing 74% and 59%, respectively, of our revenues for the three months ended May 31, 2021 and 2020.

Revenues attributable to sales of LED components were higher for the three months ended May 31, 2021 primarily due to more volumes sold.

Revenues attributable to the sales of lighting products represented 14% and 10% of our revenues for the three months ended May 31, 2021 and 2020, respectively.

Revenues attributable to the sales of lighting products were slightly higher for the three months ended May 31, 2021 primarily due to higher volumes sold.

Revenues attributable to other revenues represented 10% and 30% of our revenues for the three months ended May 31, 2021 and 2020, respectively.

The decrease in revenues attributable to other revenues was primarily due to decreases in the provision of services and sales of raw materials in the three months ended May 31, 2021.

Cost of Revenues

Our cost of revenues decreased by 2% from $989 thousand for the three months ended February 29, 2020 to $965 thousand for the three months ended February 28, 2021.

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

Our gross profit decreased from $548 thousand for the three months ended February 29, 2020 to $241 thousand for the three months ended February 28, 2021.

The decrease was primarily a consequence of the COVID-19 pandemic impact on customer demand, as more fully described above.

Our cost of revenues decreased by 33% from $1.2 million for the three months ended May 31, 2020 to $775 thousand for the three months ended May 31, 2021.

The decrease in cost of revenues was primarily due to focusing on profitable products and services.

Our gross profit increased from $416 thousand for the three months ended May 31, 2020 to $664 thousand for the three months ended May 31, 2021.

Our gross margin percentage increased from 27% to 46% for the three months ended May 31, 2021 as a consequence of focusing on profitable products.

Operating Expenses

Three Months Ended

February 28, 2021

February 29, 2020

(in thousands)

3 unchanged sentences

Total operating expenses

Research and development

Our research and development expenses were $288 thousand and $307 thousand for the three months ended February 28, 2021 and February 29, 2020, respectively.

The decrease was primary due to an $11 thousand decrease in payroll and compensation and a $21 thousand decrease in material and supplies used for our new products, offset partially by an increase in depreciation and amortization.

Selling, general and administrative

Our selling, general and administrative expenses increased from $633 thousand for the three months ended February 29, 2020 to $667 thousand for the three months ended February 28, 2021.

The increase was mainly attributable to increases in stock-based compensation and in various other expenses.

Gain on disposal of long-lived assets, net

We recognized a net gain of $207 thousand on the disposal of long-lived assets for the three months ended February 28, 2021.

Research and development Our research and development expenses were $528 thousand and $375 thousand for the three months ended May 31, 2021 and 2020, respectively.

The increase was primary due to a $132 thousand increase in out-source manufacturing, an $8 thousand increase in materials and supplies used for our new products, and a $5 thousand increase in payroll and compensation plus increases in depreciation and amortization expense and various other expenses.

Selling, general and administrative Our selling, general and administrative expenses decreased from $782 thousand for the three months ended May 31, 2020 to $730 thousand for the three months ended May 31, 2021.

The decrease was mainly attributable to a $111 thousand decrease in professional services fees offset partially by a $63 thousand increase in payroll and in various expenses.

Gain on disposal of long-lived assets, net We recognized a net gain of $2 thousand on the disposal of long-lived assets for the three months ended May 31, 2021.

Due to the excess capacity charges that we have experienced for the last few years, 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.

1 unchanged sentence

Three Months Ended

February 28, 2021

February 29, 2020

(in thousands)

Gain on disposal of investment

Interest expenses, net

Other income (expenses), net

Other income, net

Foreign currency transaction gain, net

Total other income (expenses), net

Gain on disposal of investment We recognized a gain of $634 thousand for the three months ended February 29, 2020.

On November 27, 2019, we entered into a stock purchase agreement to sell all of the outstanding shares of our Hong Kong Subsidiary, Semileds International Corporation Limited, and its wholly owned subsidiary Xuhe Guangdian Co Ltd for $100,000 and an additional $40,000 for the transaction cost.

The $140,000 was fully received in November 2019, and the transaction was approved by the authority and closed in January 2020.

Interest expenses, net The de crease in interest expenses, net was primarily due to the de crease in debt balance, resulting from the conver sion of $ 6 00,000 of convertible notes into 2 00,000 shares of the Company’s common stock in May 2020 .

Other income (expenses), net Other income (expenses), net increase from $167 thousand for the three months ended February 29, 2020, to $307 thousand for the three months ended February 28, 2021, primarily due to subsidies received from the Taiwan government for the COVID-19 pandemic.

Foreign currency transaction gain, net We recognized a net foreign currency transaction gain of $38 thousand and $41 thousand for the three months ended February 28, 2021 and February 29, 2020, respectively, primarily due to the depreciation of the U.S.

Total other income, net

Interest expenses, net The decrease in interest expenses, net was primarily due to a decrease in debt balance, resulting from the conversion of $600,000 of convertible notes into 200,000 shares of the Company’s common stock in May 2020.

Other income, net Other income, net increased from $270 thousand for the three months ended May 31, 2020 to $474 thousand for the three months ended May 31, 2021, primarily due to subsidies received from the Taiwan government for the COVID-19 pandemic.

Foreign currency transaction loss, net We recognized a net foreign currency transaction gain of $155 thousand and $57 thousand for the three months ended May 31, 2021 and 2020, respectively, primarily due to the depreciation of the U.S.

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

11 unchanged sentences

Three Months Ended

February 28, 2021

February 29, 2020

(in thousands)

Net income attributable to noncontrolling interests

We recognized net income attributable to non-controlling interests of $1 thousand and $2 thousand for the three months ended February 28, 2021 and February 29, 2020, respectively, which was attributable to the share of the net losses of Taiwan Bandaoti Zhaoming Co., Ltd held by the remaining non-controlling holders.

Non-controlling interests represented 3.05% and 3.29% equity interest in Taiwan Bandaoti Zhaoming CO., Ltd, as of February 28, 2021 and February 29, 2020, respectively.

Six Months Ended February 28, 2021 Compared to the Six Months Ended February 29, 2020

Six Months Ended

February 28, 2021

February 29, 2020

We recognized net income attributable to non-controlling interests of $7 thousand and $4 thousand for the three months ended May 31, 2021 and 2020, respectively , which was attributable to the share of the net losses of Taiwan Bandaoti Zhaoming Co., Ltd held by the non-controlling holders.

Non-controlling interests represented 3.05% and 3.25% equity interest in Taiwan Bandaoti Zhaoming CO., Ltd as of May 31, 2021 and 2020, respectively.

Nine months Ended May 31, 2020 Compared to the Nine months Ended May 31, 2019

Nine Months Ended

(in thousands)

6 unchanged sentences

Revenues, net

Our revenues decreased by 38% from $3.1 million for the six months ended February 29, 2020 to $1.9 million for the six months ended February 28, 2021.

The $1.2 million decrease in revenues reflects a $624 thousand decrease in sales of LED components and a $713 thousand decrease in revenues attributable to other revenue, offset by a $43 thousand increase in sales of LED chips and a $119 thousand increase in revenues attributable to sales of lighting products.

Revenues attributable to the sales of our LED chips represented 4% and 1% of our revenues for the six months ended February 28, 2021 and February 29, 2020, respectively.

Our revenues decreased by 28% from $4.7 million for the nine months ended May 31, 2020 to $3.4 million for the nine months ended May 31, 2021.

The $1.3 million decrease in revenues reflects a $496 thousand decrease in sales of LED components and a $1.0 million decrease in revenues attributable to other revenue, offset by a $64 thousand increase in sales of LED chips and a $170 thousand increase in revenues attributable to sales of lighting products.

Revenues attributable to the sales of our LED chips represented 3% and 1% of our revenues for the nine months ended May 31, 2021 and 2020, respectively.

The increase in revenues attributable to sales of LED chips was a result of an increase in the volume of LED chips sold.

Revenues attributable to the sales of our LED components were $1.3 million and $1.9 million, representing 65% and 61%, respectively, of our revenues for the six months ended February 28, 2021 and February 29, 2020.

Revenues attributable to the sales of ou r LED components were $2.3 million and $2.8 million, representing 6 9 % and 60 % , respectively, of our revenues for the nine months ended May 31 , 20 2 1 and May 31, 20 20 .

The decrease in revenues attributable to sales of LED components was primarily due to the impact of COVID-19 pandemic on customer demand for UV LED components products.

Revenues attributable to the sales of lighting products represented 17% and 7% of our revenues for the six months ended February 28, 2021 and February 29, 2020, respectively.

Revenues attributable to the sales of lighting products was $119 thousand higher for the six months ended February 28, 2021 primarily due to a seasonal swing in demand on LED luminaries.

Revenues attributable to other revenues represented 14% and 31% of our revenues for the six months ended February 28, 2021 and February 29, 2020, respectively.

The decrease in revenues attributable to other revenues was primarily due to no sale of raw materials in the six months ended February 28, 2021.

Revenues attributable to the sales of lighting products represented 16% and 8% of our revenues for the nine months ended May 31, 2021 and 2020, respectively.

Revenues attributable to the sales of lighting products was $170 thousand higher for the nine months ended May 31, 2021 primarily due to a seasonal swing in demand on LED luminaries.

Revenues attributable to other revenues represented 12% and 31% of our revenues for the nine months ended May 31, 2021 and 2020, respectively.

The decrease in revenues attributable to other revenues was primarily due to decreases in the provision of services and sales of raw materials in the nine months ended May 31, 2021.

Cost of Revenues

Our cost of revenues decreased by 16% from $2.0 million for the six months ended February 29, 2020 to $1.7 million for the six months ended February 28, 2021.

Our cost of revenues decreased by 22% from $3.2 million for the nine months ended May 31, 2020 to $2.5 million for the nine months ended May 31, 2021.

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

Our gross profit decreased from $1.1 million for the six months ended February 29, 2020 to $219 thousand for the six months ended February 28, 2021.

Our gross margin percentage was 11% for the six months ended February 28, 2021, as compared to 34% for the six months ended February 29, 2020 as a consequence of the COVID-19 pandemic impact on customer demand, as more fully described above.

Our gross profit decreased from $1.5 million for the nine months ended May 31, 2020 to a gross profit of $883 thousand for the nine months ended May 31, 2021.

Our gross margin percentage was 26% for the nine months ended May 31, 2021, as compared to 32% for the nine months ended May 31, 2020 as a consequence of the COVID-19 pandemic impact on customer demand, as more fully described above.

Operating Expenses

Six Months Ended

February 28, 2021

February 29, 2020

Nine Months Ended

(in thousands)

3 unchanged sentences

Total operating expenses

Research and development

Our research and development expenses were $634 thousand and $737 thousand for the six months ended February 28, 2021 and February 29, 2020, respectively.

The decrease was primary due to a $105 thousand decrease in materials and supplies used for our new products and a $9 decrease in payroll and compensation expense, offset partially by an increase in depreciation and amortization expense.

Selling, general and administrative

Our selling, general and administrative expenses were $1.4 million for both the six months ended February 29, 2020 and February 28, 2019.

The slight decrease was mainly attributable to a $33 thousand decrease in professional service fee, offset partially by increases in stock-based compensation and in various other expenses.

Research and development Our research and development expenses were $1.2 million and $1.1 million for the nine months ended May 31, 2021 and 2020, respectively.

The increase was primary due to a $140 thousand increase in out-source manufacturing, a $26 thousand increase in materials and supplies used for our new products and a $9 thousand increase in depreciation and amortization expense, offset partially by decreases in payroll and compensation.

Selling, general and administrative Our selling, general and administrative expenses were $2.1 million for both the nine months ended May 31, 2021 and May 31, 2020.

The slight decrease was mainly attributable to a $144 thousand decrease in professional service fee, offset partially by a $83 thousand increase in payroll and in various expenses.

Gain on disposal of long-lived assets, net

We recognized a net gain of $284 thousand and $79 thousand on the disposal of long-lived assets for the six months ended February 28, 2021 and February 29, 2020, respectively.

We recognized a net gain of $286 thousand and $79 thousand on the disposal of long-lived assets for the nine months ended May 31, 2021 and 2020, respectively.

Other Income (Expenses)

Six Months Ended

February 28, 2021

February 29, 2020

Nine Months Ended

(in thousands)

1 unchanged sentence

Interest expenses, net

Other income (expenses), net

Other income, net

Foreign currency transaction gain, net

Total other income (expenses), net

Gain on disposal of investment We recognized a gain of $634 thousand for the six months ended February 29, 2020.

Total other income, net

Gain on disposal of investment We recognized a gain of $634 thousand for the nine months ended May 31, 2020.

1 unchanged sentence

Interest expenses, net The increase in interest expenses, net was primarily due to the issuance of $2 million of convertible notes in December 2019, and our entry into an aggregate amount of $3.2 million of loan agreements in January 8, 2019, with each of our Chairman and Chief Executive Officer and our largest shareholder, offset by the conversion of $600,000 of convertible notes into 200,000 shares of the Company’s common stock in May 2020.

Other income (expenses), net Other income for the six months ended February 28, 2021 primarily consist of rental income from the lease of spare space in our Hsinchu building and subsidies received from the Taiwan government for COVID-19 pandemic.

Other income for the six months ended February 29, 2020 primarily consist of rental income from the lease of spare space in our Hsinchu building.

Foreign currency transaction gain, net We recognized net foreign currency transaction gain of $225 thousand and $199 thousand for the six months ended February 28, 2021 and February 29, 2020, respectively, primarily due to the depreciation of the U.S.

Other income, net The increase in other income for the nine months ended May 31, 2021 primarily consists of additional subsidies received from the Taiwan government for COVID-19 pandemic and rental income from the lease of spare space in our Hsinchu building, compared to the nine months ended May 31, 2020.

Foreign currency transaction gain, net We recognized net foreign currency transaction gain of $380 thousand and $256 thousand for the nine months ended May 31, 2021 and 2020, respectively, primarily due to the depreciation of the U.S.

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

2 unchanged sentences

Our effective tax rate is expected to be approximately zero for fiscal 2021 and was zero for fiscal 2020, 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.

Net Loss Attributable to Noncontrolling Interests

Six Months Ended

February 28, 2021

February 29, 2020

Net (Loss) Income Attributable to Noncontrolling Interests

Nine Months Ended

(in thousands)

Net loss attributable to noncontrolling interests

We recognized net loss attributable to non-controlling interests of $9 thousand $3 thousand for the six months ended February 28, 2021 and February 29, 2020, respectively, which was attributable to the share of the net losses of Taiwan Bandaoti Zhaoming Co., Ltd held by the remaining non-controlling holders.

Non-controlling interests represented 3.05% and 3.29% equity interest in Taiwan Bandaoti Zhaoming CO., Ltd., as of February 28, 2021 and February 29, 2020.

Net income (loss) attributable to noncontrolling interests

We recognized net loss attributable to non-controlling interests of $2 thousand and net gain of $1 thousand for the nine months ended May 31, 2021 and 2020, respectively, which was attributable to the share of the net losses of Taiwan Bandaoti Zhaoming Co., Ltd held by the non-controlling holders.

Non-controlling interests represented 3.05% and 3.25% equity interest in Taiwan Bandaoti Zhaoming CO., Ltd, as of May 31, 2021 and May 31, 2020, respectively.

Liquidity and Capital Resources

As of February 28, 2021 and August 31, 2020, we had cash and cash equivalents of $2.1 million and $2.8 million, respectively, which were predominately held in U.S.

As of May 31, 2021 and August 31, 2020, we had cash and cash equivalents of $1.7 million and $2.8 million, respectively, which were predominately held in U.S.

dollar denominated demand deposits and/or money market funds.

As of April 6, 2021, we had no available credit facility.

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 $7.8 million and $7.7 million as of February 28, 2021 and August 31, 2020, respectively.

Our NT dollar denominated long-term notes totaled $3.2 million and $3.1 million as of February 28, 2021 and August 31, 2020, respectively.

As of July 6, 2021, we had no available credit facility.

Our NT dollar denominated long-term notes, totaled $3.2 million and $3.1 million as of May 31, 2021 and August 31, 2020, 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).

1 unchanged sentence

The second loan originally for $1.2 million (NT$38 million) has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 1.820% currently) and is available for operating capital.

These loans are secured by an $88 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.

These loans are secured by a $90 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.

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

During this period, we don’t need to pay the monthly payments of the principal but only the interest.

Starting from May 2021, the first note payable requires monthly payments of principal in the amount of $23 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of February 28, 2021, our outstanding balance on this note payable was approximately $2.0 million.

Starting from May 2021, the second note payable requires monthly payments of principal in the amount of $14 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of February 28, 2021, our outstanding balance on this note payable was approximately $1.2 million.

Property, plant and equipment pledged as collateral for our notes payable were both $3.6 million as of February 28, 2021 and August 31, 2020.

Starting from May 2021, the first note payable requires monthly payments of principal in the amount of $23 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of May 31, 2021, our outstanding balance on this note payable was approximately $2.0 million.

Starting from May 2021, the second note payable requires monthly payments of principal in the amount of $14 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of May 31, 2021, our outstanding balance on this note payable was approximately $1.2 million.

Property, plant and equipment pledged as collateral for our notes payable were both $3.6 million as of May 31, 2021 and August 31, 2020, respectively.

On January 8, 2019, we entered into loan agreements with each of our Chairman and Chief Executive Officer and our largest shareholder, with aggregate amounts of $3.2 million, and an annual interest rate of 8%.

2 unchanged sentences

In February 2021, the loan agreements were extended with the same principal amount and interest rate for one year, which is due on January 15, 2022.

As of February 28, 2021 and August 31, 2020, these loans totaled $3.2 million.

As of May 31, 2021 and August 31, 2020, these loans totaled $3.2 million.

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

3 unchanged sentences

On May 25, 2020, the Holders each converted $300 thousand of notes into 100,000 shares of our Common stock.

As of February 28, 2021 and August 31, 2020, the outstanding principal of these notes totaled $1.4 million.

On May 26, 2021, the Notes were extended with the same terms and interest rate for one year, which is mature on May 30, 2021.

As of May 31, 2021 and August 31, 2020, the outstanding principal of these notes totaled $1.4 million.

We have incurred significant losses since inception, including net losses attributable to SemiLEDs stockholders of $544 thousand and $3.6 million during the years ended August 31, 2020 and 2019, respectively.

3 unchanged sentences

In addition, we are planning to issue additional equity to our stockholders.

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

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

Sales of the Placement Shares, if any, will be 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 will pay a commission to the Agent of 3.0% of the gross proceeds of the sale of the Placement Shares sold under the Agreement and reimburse the Agent for certain expenses.

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.

3 unchanged sentences

The following summary of our cash flows for the periods indicated has been derived from our unaudited interim condensed consolidated financial statements, which are included elsewhere in this Quarterly Report (in thousands):

Six Months Ended

February 28, 2021

February 29, 2020

Nine Months Ended

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Cash Flows Used In Operating Activities

Net cash used in operating activities for the six months ended February 28, 2021 and February 29, 2020 were $625 thousand and $194 thousand, respectively.

The $431 thousand increase in cash flows used in operating activities for the six months ended February 28, 2021 was primary attributable to an increase of $725 thousand in inventories and a decrease of $340 thousand in accrued expenses and other current liabilities, offset partially by $810 thousand in cash collected from customers.

Net cash used in operating activities for the nine months ended May 31, 2021 and May 31, 2020 was $826 thousand and $786 thousand, respectively.

The $40 thousand increase in cash flows used in operating activities for the nine months ended May 31, 2021 was primary attributable to an increase in net loss

Cash Flows Provided by (Used In) Investing Activities

Net cash provided by investing activities for the six months ended February 28, 2021 was $177 thousand, consisting primarily of $284 thousand of proceeds from the sales of machinery and equipment, offset in part by $97 thousand of purchases of machinery and equipment.

Net cash used in investing activities for the six months ended February 29, 2020 was $88 thousand, consisting primarily of $159 thousand of purchases of machinery and equipment, offset in part by the proceeds from the sales of machinery and equipment.

Net cash provided by investing activities for the nine months ended May 31, 2021 was $168 thousand, consisting primarily of $291 thousand of proceeds from the sales of machinery and equipment, offset in part by $111 thousand of purchases of machinery and equipment.

Net cash used in investing activities for the nine months ended May 31, 2020 was $161 thousand, consisting primarily of $226 thousand of the purchases of machinery and equipment and $14 thousand of payments for development of intangible assets, offset in part by $79 thousand of proceeds from sales of machinery and equipment.

Cash Flows Provided by (Used In) Financing Activities

Net cash used in financing activities for the six months ended February 28, 2021 was $12 thousand for acquisition of noncontrolling interest.

Net cash provided by financing activities for the six months ended February 29, 2020 was $2.4 million, consisting primarily of $2 million of proceeds from convertible notes, and $600 thousand of issuance of common stocks, offset in part by the repayments on long-term debt.

Net cash used in financing activities for the nine months ended May 31, 2021 was $55 thousand, consisting primarily of $$43 thousand of repayments on long-term debt and $12 thousand for acquisition of noncontrolling interest.

Net cash provided by financing activities for the nine months ended May 31, 2020 was $2.4 million, consisting primarily of $2 million of proceeds from convertible notes, and $700 thousand of issuance of common stocks, offset in part by $279 thousand of repayments on long-term debt.

Capital Expenditures

We had capital expenditures of $97 thousand and $159 thousand for the six months ended February 28, 2021 and February 29, 2020, respectively.

We had capital expenditures of $111 thousand and $226 thousand for the nine months ended May 31, 2021 and 2020, respectively.

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.

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Off-Balance Sheet Arrangements

As of February 28, 2021, we did not engage in any off-balance sheet arrangements.

As of May 31, 2021, we did not engage in any off-balance sheet arrangements.

We do not have any interests in variable interest entities.

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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 2. Management’s Discussion and Analysis