What changed in this filing

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Item 1. Business

2021-11-29 compared with 2020-11-17 · 152 added, 204 removed, 648 unchanged (35% of the section changed)

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We are a holding company for various wholly owned subsidiaries.

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

Taiwan SemiLEDs owns a 97 % 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, including lighting fixtures and systems, and w here most of our employees are based.

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

Our Technology

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Our LED chips may be used in specialty industrial applications, such as UV curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, and architectural lighting.

Currently, we focus mostly on UVLED applications.

Currently, we focus mostly on UV LED applications.

LED Components

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These are used in surveillance, IP cameras and night vision applications.

To differentiate ourselves from other LED package manufacturers, we are p utting more resources towards module and system design.

To differentiate ourselves from other LED package manufacturers, we are putting more resources towards module and system design.

Along with our technical know-how in the chip and package sectors, we are able to further integrate electrical, thermal and mechanical manufacturing resources to provide customers with one-stop system services.

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Key markets that we set 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.

Recently, we introduce d multi-pixel Mini-LED package (16 RGB pixels in one package) for fine pitch Mini-LED display market.

Recently, we introduced multi-pixel Mini-LED package (16 RGB pixels in one package) for fine pitch Mini-LED display market.

In 2019, we expanded our UVC portfolio for disinfection markets.

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We provide design and manufacturing services at the modular and system level.

Currently, most of the design projects involve high power UVLED lamps to be incorporated/retrofitted into large scale press equipment.

Currently, most of the design projects involve high power UV LED lamps to be incorporated/retrofitted into large scale press equipment.

Besides hardware, we also provide software development to lamp control and equipment-to-lamp signal communication.

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Our manufacturing operations are located in Taiwan.

Since late fiscal 2011, we have suffered from the underutilization of our manufacturing capacity, primarily for our LED chips.

Since late 2011, we have suffered from the underutilization of our manufacturing capacity, primarily for our LED chips.

Consequently, a portion of our manufacturing equipment was idled, resulting in significant excess capacity charges.

We also use contract manufacturers to produce 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 moving toward a fabless business model in which we would utilize foundry fabs to ODM our chips using our developed technology.

We have moved toward a fabless business model in which we would utilize foundry fabs to ODM our chips using our developed technology.

As part of the restructuring, we continue to explore opportunities to sell our chip manufacturing equipment, which will help us to reduce the idle capacity costs.

As part of our cost reduction efforts, we moved and consolidated our LED packaging facility to our headquarters in Chunan, Taiwan in February 2018.

While we intend to focus on managing our costs and expenses, over the long term we expect to be required to invest substantially in LED component products development and production equipment if we are to grow.

While we intend to focus on managing our costs and expenses.

Over the long term, we expect to be required to invest substantially in LED component products development and production equipment if we are to grow.

Raw Materials and Components

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Historically, we have never experienced any significant delay or shortage in the supply of our raw materials and components.

W hile the COVID-19 pandemic did not have a material impact on our supply chain, it has the potential to have a meaningful impact on our supply chain if the factories that produce our raw materials and components are disrupted, temporarily closed or experience worker shortages.

We may also see disruptions or delays in shipments and negative impacts to pricing of certain products as a result of such disruptions.

Quality Management

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We also inspect all final products prior to delivery to our customers to ensure that production standards are met.

If we encounter defects, we conduct an analysis in an effort to identify the cause of the defect and take appropriate corrective and preventative measures.

If we encounter defects, we conduct an analysis in an effort to identify the cause of the defect and take

appropriate corrective and preventative measures.

We provide standard product warranties on our products, which generally range from three months to two years.

Our manufacturing facility located in Hsinchu Science Park, Taiwan, are certified in compliance with ISO9001:2015.

The facility is subject to periodic inspection by the relevant governmental authorities for safety, environmental and other regulatory compliance.

Our manufacturing fa cility located in Hsinchu Science Park, Taiwan, are certified in compliance with ISO9001:20 15 .

The facilit y is subject to periodic inspection by the relevant governmental authorities for safety, environmental and other regulatory compliance.

We require all of our employees involved in the manufacturing and engineering process to receive quality control training, according to a certification system depending on the level of skills and knowledge required.

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We rely on a variety of marketing strategies, including participation in industry conferences and trade shows, to share our technical message with customers, as well as public relations, industry research and online advertising.

Starting in 2020, we have plans to approach B2C markets by launching our first consumer handheld UVCLED sterilization device.

We plan to launch more UVCLED consumer devices in the next years.

We package our LED chips into LED components, which we sell to distributors and end-customers in selected markets.

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For the year ended August 31, 2021, sales to Revlon, Inc.

and INDEL Distribution BV accounted for 30% and 17% of our total revenues, respectively.

and INDEL Distribution B.V.

accounted for 15% and 27% of our total revenues, respectively.

For the year ended August 31, 2020, sales to Revlon, Inc.

and Oreon Holding B.V.

and INDEL Distribution B.V.

accounted for 30% and 17% of our total revenues, respectively.

Our revenues are concentrated in a few select markets, including Netherlands, Taiwan, the United States and India.

Our revenues are concentrated in a few select markets.

We expect that our revenues will continue to be substantially derived from these countries for the foreseeable future.

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We rely, and expect to continue to rely, on a combination of confidentiality and license agreements with our employees, licensees and third parties with whom we have relationships, and trademark, copyright, patent and trade secret protection laws, to protect our intellectual property, including our proprietary technologies and trade secrets.

As of August 31, 2020, we had 122 patents issued and nine patents pending with the United States Patent and Trademark Office covering various aspects of our core technologies.

As of August 31, 2020, we also had 124 patents issued and two patents pending before patent and trademark offices outside the United States.

Of these 246 issued patents, 96 expire between 2021 and 2025, 100 expire between 2026and 2030, 50 expire between 2031 and 2037, and none expire after 2037.

Sixty-two of our issued patents are design patents and one of our pending patents is a design patent.

As of August 31, 2021, we had 111 patents issued and ten patents pending with the United States Patent and Trademark Office covering various aspects of our core technologies.

As of August 31, 2021, we also had 121 patents issued and three patents pending before patent and trademark offices outside the United States.

Of these 232 issued patents, 112 expire between 2022 and 2026, 86 expire between 2027 and 2031, 32 expire between 2032 and 2038, and two expire after 2038.

Fifty-four of our issued patents are design patents and one of our pending patents is a design patent.

We believe that factors such as the technological and innovative abilities of our personnel, the success of our ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.

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producing UVA LED for niche markets where customers value quality and performance more than cost;

providing unique and high performance UVLED systems to replace mercury lamp;

providing unique and high performance UV LED systems to replace mercury lamp;

our sales channels.

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

Environmental Regulation

Government Regulation

In our research and development and manufacturing processes, we use a variety of hazardous materials and industrial chemicals.

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Failure to comply with any new or existing laws, whether intentional or inadvertent, could subject us to fines, penalties and other material liabilities to the government or third

parties, injunctions requiring the suspension of operations, redemption costs or other remedies, and the need for additional capital, equipment or o ther process requirements, any of which could have a material adverse effect on our business and reputation.

Working Capital

For a discussion of our working capital practices, see “Liquidity and Capital Resources” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report.

parties, injunctions requiring the suspension of operations, redemption costs or other remedies, and the need for additional capital, equipment or other process requirements, any of which could have a material adverse effect on our business and reputation.

Human Capital Resources

Talent is the catalyst for our success.

We are fortunate to have great talent and outstanding employees.

As we approach a big turning point in the development of our company, employee retention and motivation is a critical issue in 2020.

To retain talented people who share our goals and interests, we work hard to foster a dynamic and enjoyable work environment.

For many of our employees, participating in a challenging and enjoyable working environment full of opportunities to learn new skills is even more important than monetary rewards.

At the same time, creating open communication between employees and management fosters a sense of community and a shared purpose.

We stress teamwork.

High-performance teams are crucial for our company when it comes to achieving success.

Different ideas are generated to help achieve the goal.

These ideas are then processed and combined, resulting in the best ones being selected.

Team members can generate ideas that are different while feeling comfortable bringing these up and discussing them.

We link individual employee rewards with the different types of contributions that employees make.

We use performance-based rewards, including cash and equity such as stock options and restricted share units.

Equity creates a sense of ownership for the employee and employee commitment to the company’s long-term vision, while helping to retain high potential employees.

We are fortunate to have talented and outstanding employees.

To retain talented people who share our goals and interests, we work hard to cultivate a dynamic and enjoyable work environment full of opportunities to learn new skills.

To that end, we aim to foster open communication between employees and management to create a sense of community and a shared purpose.

We stress teamwork, and we believe that high-performing teams are crucial to our success.

We encourage our employees to brainstorm, develop and refine new ideas to help us innovate and achieve our goals.

We award each employee according to their contributions.

We use performance-based awards, including cash and equity such as stock options and restricted share units.

We believe these equity awards create a sense of ownership for the employee and furthers employee commitment to the company’s long-term vision, while simultaneously helping to retain talented employees.

As of August 31, 2021, we had approximately 129 employees.

All of these employees were based in Taiwan.

None of our employees is represented by a labor union.

All of our employees are based in Taiwan.

None of our employees are represented by a labor union.

We consider relations with our employees to be good.

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Investor Relations, SemiLEDs Corporation, 3F, No.11 Ke Jung Rd., Chu‑Nan Site, Hsinchu Science Park, Chu‑Nan 350, Miao‑Li County, Taiwan, R.O.C.

Ri sk Factors

A wide range of factors could materially affect our performance.

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Risks Related to Our Business

If we are ordered to return a $500 thousand payment, we may not be able to continue as a going concern.

On June 21, 2017, Well Thrive Ltd.

(“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 a 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.

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

On March 27, 2018, Well Thrive filed an answering brief in opposition to our motion on the basis that Well Thrive never consented to dismiss the case.

On January 2, 2019, the judge denied without prejudice the motion filed by us, because there remains some question as to whether Well Thrive’s former lawyers and Dr.

Chiou had authority from Well Thrive to settle this case.

The judge’s order allowed us to conduct depositions of Well Thrive’s former lawyer, Dr.

Chiou, and Mr.

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

Based on this order, we 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 judgment, and we filed an opposition to the motion.

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

The Court held a trial on March 2, 2020.

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

Both sides submitted post-trail briefs and proposed findings of fact on April 30, 2020, and then the judge set a hearing for November 18, 2020.

If we are ordered to return the $500 thousand payment, we may not be able to continue as a going concern.

The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

The novel coronavirus disease 2019 (“COVID-19”) pandemic and related restrictions have resulted in a widespread health crisis that have adversely affected businesses, economies and financial markets worldwide, and have caused significant volatility in U.S.

The novel coronavirus (“COVID-19”) pandemic and related restrictions have resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility in U.S.

and international debt and equity markets.

As of the date of filing this report, we have not had to close any of our offices due to the pandemic.

To date, we have not had to close any of our offices due to the pandemic.

However, 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 has adversely affected our customers’ ability or willingness to purchase our products or services, delay prospective customers’ purchasing decisions, adversely impact our ability to provide or deliver products and on-site services to our customers, delay the provisioning of our offerings, or lengthen payment terms, all of which could adversely affect our future sales, operating results and overall financial performance.

The conditions caused by the COVID-19 pandemic has 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, and lengthened payment terms, all of which 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 is expected to decrease our sales revenue for the first quarter ended November 30, 2020, and even for the quarters after that if the COVID-19 pandemic continues.

While the potential economic impact brought by the COVID-19 may be difficult to assess or predict, the pandemic has resulted in significant disruption of global financial markets, and a recession or long-term market correction resulting from the spread of COVID-19 could materially impact the value of our common stock, impact our access to capital and affect our business in the near and long-term.

For example, our largest customer, Revlon, Inc., postponed its regular orders, which is expected to decrease our sales revenue for the quarter ended November 30, 2021, and potentially for future quarters if the COVID-19 pandemic continues.

While the potential economic impact of COVID-19 may be difficult to assess or predict, the pandemic has resulted in significant disruption of global financial markets, and a recession or long-term market correction resulting from the spread of COVID-19 could materially impact the value of our common stock, impact our access to capital and affect our business in the near and long-term.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and vendors.

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If financing is not available, we may be required to further downsize or discontinue operations.

We incurred net losses attributable to SemiLEDs stockholders of $544 thousand and $3.6 million for the years ended August 31, 2020 and 2019, respectively.

We incurred net losses attributable to SemiLEDs stockholders of $2.9 million and $544 thousand for the years ended August 31, 2021 and 2020, respectively.

We can give no assurance that we will not continue to incur net losses in future periods.

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As of August 31, 2021, we had an accumulated deficit of $181.2 million.

Even though at August 31, 2020, our cash and cash equivalents had increased to $2.8 million, these facts and conditions raise substantial doubt about our ability to continue as a going concern, and our independent registered public accounting firm has included an explanatory paragraph regarding going concern qualification in its audit report.

Even though our cash and cash equivalents had increased to $4.8 million at August 31, 2021, these facts and conditions raise substantial doubt about our ability to continue as a going concern, and our independent registered public accounting firm has included an explanatory paragraph regarding going concern qualification in its audit report.

However, our management believes it has liquidity plan, as further described in elsewhere in this annual report that if executed successfully should provide sufficient liquidity to meet our obligations as they become due for a reasonable period of time.

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If we do not become consistently profitable, our accumulated deficit will grow larger and our cash balances will decline further, and we will require additional financing to continue operations.

Any such financing may not

be accessible on acceptable terms, if at all.

If we cannot generate sufficient cash or obtain additional financing, we may be require d to downsize our business further or discontinue our operations altogether.

Any such financing may not be accessible on acceptable terms, if at all.

If we cannot generate sufficient cash or obtain additional financing, we may be required to downsize our business further or discontinue our operations altogether.

We depend on contract manufacturing for portions of our supply chain.

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the possible breach of the manufacturing agreement by the contract manufacturers because of factors beyond our control.

While the COVID-19 pandemic did not have a material impact on our supply chain, it has the potential to have a meaningful impact on our supply chain if the factories that produce our raw materials and components are disrupted, temporarily closed or experience worker shortages.

We may also see disruptions or delays in shipments and negative impacts to pricing of certain products as a result of such disruptions.

If these contract manufacturers fail to deliver products on time and at a satisfactory level of quality, we could have difficulties fulfilling our customer orders and our net revenues could decline.

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In such events, our customer relationships, business, financial condition and results of operations would be adversely affected.

Our success depends on the successful development, introduction, commercialization and acceptance of new generations of products and enhancements to existing product lines.

Our success depends on the successful development, introduction, commercialization and acceptance of new products and enhancements to existing product lines.

Rapid change and technical innovation characterize the LED chips and components market.

Our success depends on the successful development, introduction, commercialization and acceptance of new generations of products and enhancements to existing product lines.

Our success depends on the successful development, introduction, commercialization and acceptance of new products and enhancements to existing product lines.

We have made and continue to make significant investments in growth initiatives.

For example, beginning in fiscal 2017, we moved down the supply chain, supplying customers with full UVLED lamp systems.

For example, beginning in 2017, we moved down the supply chain, supplying customers with full UV LED lamp systems.

We expect to continue our efforts at further research and development of innovative products.

We may need to spend more time and money than we expect or have to develop and introduce new products or enhancements and, even if we succeed, they may not be sufficiently profitable for us to recover all or a meaningful part of our investment.

We may need to spend more time and money than we expect to develop and introduce new products or enhancements and, even if we succeed, these new products or enhancements may not be sufficiently profitable for us to recover all or a meaningful part of our investment.

In addition, our new products or enhancements may need certifications or require qualifications by our customers or potential customers.

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As a result, any reductions or delays in, or cancellations of, orders from any of our distributors may have a negative impact on our sales and budgeting process.

In addition, we have entered and may from time to time enter into exclusivity or other restrictions or arrangements of a similar natu re as part of our agreements with our distributors.

In addition, we have entered and may from time to time enter into exclusivity or other restrictions or arrangements of a similar nature as part of our agreements with our distributors.

Such restrictions or arrangements may significantly hinder our ability to sell additional products, or enter into agreements with new or existing customers or distributors that plan to sell our products, in certain markets, which may have a material adverse effect on our business, financial condition and results of operations.

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Revenues attributable to the sales of our LED components represented 69% and 65% of our revenues for the years ended August 31, 2021 and 2020, respectively.

Revenues attributable to the sale of LED lighting products accounted for 9% and 11% of our revenues for the years ended August 31, 2020 and 2019.

Revenues attributable to the sale of LED lighting products accounted for 15% and 9% of our revenues for the years ended August 31, 2021 and 2020, respectively.

We expect to continue to generate our revenues mainly from the sales of LED components for the foreseeable future.

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If market demand increases and we are not able to increase our capacity or if we experience delays or unforeseen costs in increasing our capacity levels, we may not be able to achieve our financial targets.

Alternatively, as market demand decreases or as market supply surpasses

demand, we may not be able to reduce manufacturing expenses or overhead costs proportionately.

Alternatively, as market demand decreases or as market supply surpasses demand, we may not be able to reduce manufacturing expenses or overhead costs proportionately.

If an increase in supply outpaces the increase in market demand, or if demand decreases, the resulting oversupply could adversely impact our sales and result in the underutilization of manufacturing capacity, high inventory levels, changes in revenue mix and rapid price erosion, which would lower our margins and adversely impact our financial results.

For example, over the past few years, we recorded significant e xcess capacity charges as we suffered from underutilization of our manufacturing capacity as a result of a decrease in customer demand, and significant write - downs of inventories as a result of a decline in their average selling prices.

We may experience s imilar problems in the future, and we cannot predict when they may occur or the severity of such difficulties and the impact on our margins and operating results.

Our restructuring plan and ongoing cost and capital expenditure reduction efforts may not be effective, might have unintended consequences, and could negatively impact our business.

For example, over the past few years, we recorded significant excess capacity charges as we suffered from underutilization of our manufacturing capacity as a result of a decrease in customer demand, and significant write-downs of inventories as a result of a decline in their average selling prices.

We may experience similar problems in the future, and we cannot predict when they may occur or the severity of such difficulties and the impact on our margins and operating results.

Our ongoing cost and capital expenditure reduction efforts may not be effective, might have unintended consequences, and could negatively impact our business.

We have implemented certain actions to accelerate operating cost reductions and improve operational efficiencies in response to changes in the economic environment, our industry and demand.

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This plan reflects our strategy of controlling capital costs and maintaining financial flexibility.

We also disposed of a certain level of our idle equipment to reduce the excess capacity charges that we have suffered for a few years.

We also disposed of a certain level of our idle equipment to reduce the excess capacity charges that we have suffered for many years.

In addition, to provide sufficient liquidity to meet our obligations as they become due for a reasonable period of time, we reduced our capital expenditures as appropriate.

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capital expenditures for new and replacement lighting systems by end-users of LED products, which may decline during economic downturns.

Our gross margins could fluctuate as a result of changes in our product mix, decreases in the average selling p rices of our products, underutilization of our manufacturing capacity, and other factors, which may adversely impact our operating results.

Our gross margins could fluctuate as a result of changes in our product mix, decreases in the average selling prices of our products, underutilization of our manufacturing capacity, and other factors, which may adversely impact our operating results.

Our gross margins have fluctuated and may continue to fluctuate from period to period as a result of the mix of products that we sell and the utilization of our manufacturing capacity in any given period, among other things.

For example, as a strategic plan, we placed greater emphasis on the sales of LED components rather than the sales of LED chips where we have been forced to cut prices on older inventory.

The sales of our UV LED embedded components product successfully improved our gross margin, operating results and cash flows in fiscal 2017, but slightly dropped in fiscal 2018.

In fiscal 2019, sales continued to decrease but sales contributed by LED components increased, compared to fiscal 2018, which resulted in an increase in gross margin.

In fiscal 2020, sales and gross margin both increased due to other revenues rather than LED components.

We intend to continue to pursue opportunities for profitable growth in areas of business where we see the best opportunity for our UV market, focus on product enhancement and developing our UV LED into many other applications or devices.

As we expand and diversify our product offerings and with varying average selling prices, or execute new business initiatives, a change in the mix of products that we sell in any given period may increase volatility in our revenues and gross margin from period to period.

In 2019, sales continued to decrease but sales contributed by LED components increased, compared to 2018, which resulted in an increase in

gross margin.

I n both 2020 and 2021 , sales and gross margin both increased due to other revenues rather than LED components.

W e intend to continue to pursue opportunities for profitable growth in areas of business where we see the best opportunity for our UV market, focus on product enhancement and developing our UV LED into many other applications or devices.

A s we expand and diversify our product offerings and with varying average selling prices, or execute new business initiatives, a change in the mix of products that we sell in any given period may increase volatility in our revenues and gross margin from period to period.

Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand, over-capacity in the market and other factors has led to price erosion and, as a result, lower product margins and lower revenues.

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In addition, many of our existing customers who purchase our LED chips and LED components develop and manufacture lighting fixtures using those chips and components.

we continue to operate in that market, our customers may respond by reducing or discontinuing their orders for our products.

As we continue to operate in that market, our customers may respond by reducing or discontinuing their orders for our products.

This could prevent us from growing or even maintaining our revenues from the sale of LED chips and LED components, which would negatively impact our business, financial condition and results of operations.

As with our LED components, to minimize the likelihood that one of our lighting fixture competitors or another third party will assert an intellectual property right related to our lighting fixtures, we have sought to market these products only in countries in which we believe enforcement of intellectual property rights has been more limited.

Our sales of lighting products to customers in the United States decreased significantly in recent years.

Our sales of lighting products to customers in the United States decreased

significantly in recent years.

This distribution strategy may limit our sales to countries that do not have the highest demand or market potential, and raise similar issues and risks to those raised with respect to our use of this strategy in connection with marketing our LED components.

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Defects or other difficulties in the manufacturing process can prevent us from achieving maximum capacity utilization, which is the actual number of wafers that we are able to produce in relation to our capacity, and also can prevent acceptable yields of quality LED chips from those wafers.

Our operations involve the use of hazardous materials and we must comply with environmental laws, which can result in significant costs, and may affect our business and operating results.

Our research and development and manufacturing activities involve the use of hazardous materials, including acids, adhesives and other industrial chemicals.

As a result, we are subject to a variety of environmental, health and safety laws and regulations governing the use, storage, handling, transportation, emission, discharge, exposure to, and disposal of such hazardous materials.

Compliance with applicable environmental laws and regulations in each of the jurisdictions in which we operate can be costly, and there can be no assurance that violations of these laws will not occur in the future as a result of human error, accident, equipment failure, or other causes.

Liability under environmental and health and safety laws can be joint and several, and without regard to fault or negligence.

The failure to comply with past, present, or future laws could subject us to increased costs and significant fines and penalties, damages, legal liabilities, suspension of production or operations, alteration of our manufacturing facilities or processes, curtailment of our sales and adverse publicity.

Any of these events could harm our business and financial condition.

Furthermore, environmental protection and workplace safety regulations may become more stringent in the future, and although we cannot predict the ultimate impact of any such new laws, they may impose greater compliance costs or result in increased risks or penalties, which could harm our business.

Existing and future environmental laws and regulations could also require us to acquire pollution abatement or remediation equipment, modify our product designs or incur other expenses associated with such laws and regulations.

As our industry continues to evolve, we may be required to evaluate and use new materials in our manufacturing process that may be subject to regulation under existing or future environmental laws and regulations, and our use of such new materials may be restricted.

Any such restriction could require us to alter our manufacturing processes or increase our expenses.

If we fail to comply with current and future environmental laws and regulations, whether intentional or inadvertent, we may be required to pay fines and other liabilities to the government or third parties, suspend production or even cease operation.

Risks Relating to Intellectual Property

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We expect to continue to seek patent and trademark protection for our technologies and know-how.

However, we will only be able to protect such technologies and know-how from unauthorized use by third parties to the extent that valid, protectable and enforceable rights cover them.

However, we will only be able to protect such technologies and know-how from unauthorized use by third parties to the extent

that valid, protectable and enforceable rights cover them.

We cannot be certain that our patent and trademark applications will lead to patents being issued and registered trademarks being granted in a timely manner, or at all.

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We also expect that the more successful we are, the more likely it will be that competitors will try to develop or patent similar or superior technologies, products and services.

In the event that our competitors or others a re able to obtain knowledge of our know - how, trade secrets and technologies through independent development, our failure to protect such know - how, trade secrets and technologies and/or our other intellectual property and proprietary rights may undermine ou r competitive position.

In addition, third parties may knowingly or unknowingly infringe our trademarks and other intellectual property rights, and litigation may be necessary to protect and enforce our intellectual property rights or determine the validit y and scope of our proprietary rights.

In the event that our competitors or others are able to obtain knowledge of our know-how, trade secrets and technologies through independent development, our failure to protect such know-how, trade secrets and technologies and/or our other intellectual property and proprietary rights may undermine our competitive position.

Any such litigation could be very costly and could divert management attention and resources away from our business, and the outcome of such litigation may not be in our favor.

If the protection of our intellectual pr operty, including our proprietary technologies and trade secrets, is inadequate to prevent use or appropriation by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our products and methods of operation.

If the protection of our intellectual property, including our proprietary technologies and trade secrets, is inadequate to prevent use or appropriation by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our products and methods of operation.

Any of these events may have a material adverse effect on our business, financial condition, reputation and competitive position.

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Reductions in, or eliminations of, government investment and favorable energy policies could result in decreased demand for our products and decrease our revenues, profits, margins and prospects.

General Risks

Our operating results may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock.

Our quarterly operating results are difficult to predict and may fluctuate significantly in the future.

We have experienced seasonal and quarterly fluctuations in the past.

As such, our past quarterly operating results may not be good indicators of future performance.

The following factors could cause our operating results to fluctuate:

our ability to retain existing customers, attract new customers and successfully enter new geographic markets;

changes in supply and demand and other competitive market conditions, including pricing actions by our competitors and our customers’ competitors;

timing of orders from and shipments to major customers and end-customers, including as part of LED project-based orders, and our ability to forecast demand and manage lead times for the manufacturing of our products;

seasonal fluctuations in our customers’ purchasing patterns.

For these or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our future performance, and our actual revenue and operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have a severe adverse effect on the trading price of our common stock.

We r ely on certain key personnel.

Risks Related to Human Capital

We rely on certain key personnel.

The loss of any of our key personnel, or our failure to attract, assimilate and retain other highly qualified personnel in the future, could harm our business.

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Doan or other key personnel, including other key members of our management team and certain of our key marketing, sales, product development or technology personnel, could significantly disrupt our operations and prevent the timely achievement of our development strategies and growth, which would likely have an adverse effect on our financial condition, operating results and prospects.

Moreover, we may lose some of our customers if any of our officers or key employees were to join a competitor or forma competing company.

Moreover, we may lose some of our customers if any of our officers or key employees

were to join a competitor or form a competing company.

The loss of the services of our senior management for any reason could adversely affect our business, operating results and financial condition.

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Layoffs during an industry downturn could make it more difficult for us to retain key talent and staff members, or to rehire employees should business improve.

Risks Related to Taxation

activities of our non-U.S.

subsidiaries may be subject to U.S.

On December 22, 2017, the U.S.

Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S.

federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S.

subsidiaries that is payable over eight years, makes the receipt of future non-U.S.

sourced income of non-U.S.

subsidiaries tax-free to U.S.

companies and creates a new minimum tax on the earnings of non-U.S.

subsidiaries relating to the parent’s deductions for payments to the subsidiaries.

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

However, there can be no assurance as to accuracy of the estimation.

If the ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s financial condition, operating results and cash flows could be materially adversely affected.

General Risks

Our quarterly operating results are difficult to predict and may fluctuate significantly in the future.

We have experienced seasonal and quarterly fluctuations in the past.

As such, our past quarterly operating results may not be good indicators of future performance.

The following factors could cause our operating results to fluctuate:

our ability to retain existing customers, attract new customers and successfully enter new geographic markets;

changes in supply and demand and other competitive market conditions, including pricing actions by our competitors and our customers’ competitors;

seasonal fluctuations in our customers’ purchasing patterns.

Our stock price has been and may continue to be volatile and you may be unable to resell shares of our common stock at or above the price you paid.

The trading price of our common stock has been and may continue to be subject to broad fluctuations.

The market price of shares of our common stock could be subject to wide fluctuations in response to various risk factors listed in this section and others beyond our control, including:

actual or anticipated fluctuations in our key operating metrics, financial condition and operating results;

changes in the composition of and the orders received from our customers;

actual or anticipated changes in our growth rate;

issuance of new or updated research or reports by securities analysts that have a change in outlook regarding the performance of our business or the future trading price of our common stock;

our announcement of actual results for a fiscal period that are higher or lower than projected or expected results or our announcement of revenue or earnings guidance that is higher or lower than expected;

fluctuations in the valuation of companies perceived by investors to be comparable to us;

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

sales or expected sales of additional common stock;

announcements from, or operating results of, our competitors;

general economic and market conditions.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.

These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.

These broad market and industry fluctuations, as well as general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may cause the market price of shares of our common stock to decline.

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.

We had ever been a defendant in two filed actions and may be the target of this type of litigation in the future.

Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

We do not anticipate paying any cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock or convertible preferred stock and do not intend to do so for the foreseeable future.

We currently intend to invest our future earnings, if any, to fund our growth.

Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon future appreciation in their value.

There is no guarantee that shares of our common stock will appreciate in value or maintain the price at which our stockholders purchased their shares.

We may be exposed to litigation, which could adversely affect our financial condition and results of operations.

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Moreover, if we fail to remedy any material weakness, our financial statements may be inaccurate, our ability to report our financial results on a timely and accurate basis may be adversely affected, our access to the capital markets may be restricted, we may be subject to sanctions or investigation by regulatory authorities, including the SEC and The Nasdaq Stock Market, or Nasdaq, and our stated results of operations and reputation may be materially and adversely affected.

Impairment of our long-lived assets, cost-method investments could reduce our earnings.

As part of our business strategy, we have and may continue to pursue acquisitions of businesses and assets, strategic alliances and joint ventures.

Long-lived assets, including property, plant and equipment and intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable.

In addition, some of our investments are accounted for under the equity method of accounting, which we record our proportionate share of their net income or loss, or using the cost method.

Cost-method investments could reduce our earnings.

Some of our investments are accounted for under the equity method of accounting, which we record our proportionate share of their net income or loss, or using the cost method.

However, they must also be tested for impairment.

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Such undertakings may not be successful or may take a substantially longer period than initially expected to become successful, and we may never recover our investments or achieve desired synergies or economies from these undertakings.

This notwithstanding, we may in the future continue to seek to grow our operations in par t by entering into joint ventures, undertaking acquisitions or establishing other strategic alliances with third parties in the LED and LED - related industries.

These activities involve challenges and risks in negotiation, execution, valuation and integrati on, and closing of the transactions could be delayed or prevented by regulatory approval requirements, including antitrust review, or other conditions.

This notwithstanding, we may in the future continue to seek to grow our operations in part by entering into joint ventures, undertaking acquisitions or establishing other strategic alliances with third parties in the LED and LED-related industries.

These activities involve challenges and risks in negotiation, execution, valuation and integration, and closing of the transactions could be delayed or prevented by regulatory approval requirements, including antitrust review, or other conditions.

Any future agreements that we may enter into also could expose us to new operational, regulatory, market, litigation and geographical risks as well as risks associated with significant capital requirements, the diversion of management and financial resources, unforeseen operating difficulties and expenditures, sharing of proprietary information, loss of control over day - to - day operations, non - performance by a counterparty and potential competition and conflicts of interest.

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We are also exposed to liquidity risk in the event of non-performance by the counterparty to the convertible note in the purchase agreement.

Our operations depend on an adequate and timely supply of electricity and water.

We consume significant amounts of electricity and water in our manufacturing process.

We may experience future disruptions or shortages in our electricity or water supply, which could result in a drop in or loss of throughput and product yield or even the loss of an entire production run, depending on the duration of disruption or shortage.

Although we maintain generators and other backup sources of electricity, these replacement sources are only capable of providing effective backup supplies for limited periods of time.

We do not currently have any alternative sources of water nor do we maintain backup tanks.

We cannot assure you that we will not experience disruptions or shortages in our electricity or water supply or that there will be sufficient electricity and water available to us to meet our future requirements.

Any material disruption could significantly impact our normal business operations, cause us to incur additional costs and adversely affect our financial condition and results of operations.

Our operations involve the use of hazardous materials and we must comply with environmental laws, which can result in significant costs, and may affect our business and operating results.

Our research and development and manufacturing activities involve the use of hazardous materials, including acids, adhesives and other industrial chemicals.

Liability under environmental and health and safety laws can be joint and several, and without regard to fault or negligence.

Any of these events could harm our business and financial condition.

Any such restriction could require us to alter our manufacturing processes or increase our expenses.

We have operations and sales in various jurisdictions globally, which may subject us to increasingly complex taxation laws and regulations.

As a multinational organization with operations and sales in various jurisdictions, we may be subject to taxation in such jurisdictions.

The various tax laws and regulations are becoming increasingly complex, with the interpretation and application of such laws and regulations becoming more challenging and uncertain.

We may be subject to additional taxes, fines and penalties to the extent we are not correct in our interpretation and the amount of taxes we declare and pay.

In addition, given the continuing global economic slowdown, as well as high government debt levels of many countries, there is an increasing likelihood that the amount of taxes we pay in these jurisdictions could increase substantially.

Any such events would have a material impact on our reputation, financial condition and results of our operations.

Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.

We conduct operations through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between our subsidiaries.

If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to

support the transfer prices.

While we believe t hat we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities.

If tax authorities in any of these countries were to successfully challenge o ur transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which would result in a higher tax liability to us.

In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, resulting in double taxation.

If tax authorities were to allocate income to a higher tax jurisdiction, subject our income t o double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.

activities of our non-U.S.

subsidiaries may be subject to U.S.

On December 22, 2017, the U.S.

Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S.

federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S.

subsidiaries that is payable over eight years, makes the receipt of future non-U.S.

sourced income of non-U.S.

subsidiaries tax-free to U.S.

companies and creates a new minimum tax on the earnings of non-U.S.

subsidiaries relating to the parent’s deductions for payments to the subsidiaries.

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

However, there can be no assurance as to accuracy of the estimation.

Risks Relating to Our Holding Company Structure

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In addition, before distributing a dividend to stockholders following the end of a fiscal year, the company must recover any past losses, pay all outstanding taxes and set aside 5% of its annual net income (less prior years’ losses and outstanding taxes) as a legal reserve until the accumulated legal reserve equals its paid-in capital, and may set aside a special reserve.

Our ability to operate our holding company in the US is dependent on Taiwan SemiLEDs’ ability to repay its obligations to SemiLEDs Corporation.

Our cash position in SemiLEDs Corporation’s bank account has declined significantly.

Our ability to operate our holding company in the U.S.

is dependent on Taiwan SemiLEDs’ ability to repay its obligations to SemiLEDs Corporation.

SemiLEDs Corporation has substantial intercompany receivables from Taiwan SemiLEDs.

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We may fail to qualify for continued listing on Nasdaq which could make it more difficult for investors to sell their shares.

In December 2010, our common stock was initially approved for listing on the Nasdaq Global Select Market but was transferred to the Nasdaq Capital Market effective November 5, 2015.

In December 2010, our common stock was initially approved for listing on the Nasdaq Global Select Market and was transferred to the Nasdaq Capital Market effective November 5, 2015.

To maintain that listing, we must satisfy the continued listing requirements of Nasdaq for inclusion in the Nasdaq Capital Market, including among other things, a minimum stockholders’ equity of $2.5 million and a minimum bid price for our common stock of $1.00 per share, that a majority of the members of our board of directors are independent under the Nasdaq

Listing Rules and that our audit committee consist of three independent directors who satisfy additional requirements under the Exchange Act.

On November 25, 2019, we received a notice from The N asdaq Stock Market indicating that we did not meet the minimum of $2,500,000 in stockholders’ equity required b y Listing Rule 5550(b)(1) for continued listing.

We also did not meet the alternatives of market value of listed securities or net income from continuing operations.

On May 27, 2020, N asdaq determined, based on 8-K we filed on the same day, that we comply with the Listing Rule 5550(b)(1).

Even though our stockholders’ equity exceeded the minimum of $2,500,000 as of August 31, 2020, there can be no assurance that we will maintain compliance with the continued listing requirements if we continue to incur losses or that our common stock will not be delisted from Nasdaq in the future.

On January 21, 2021 , we received a notice from The N asdaq Stock Market indicating that we did not meet the minimum of $2,500,000 in stockholders’ equity required by Listing Rule 5550(b)(1) for continued listing .

On June 23, 2021 , N asdaq sent a notice stating that were gained compliance with Listing Rule 5550(b)(1 ) following 20 consecutive business days where our market value of listed securities was at least $35,000,000.

Even though we are currently in compliance with Nasdaq’s continued listing requirements, there can be no assurance that we will maintain compliance these requirements if we continue to incur losses or that our common stock will not be delisted from Nasdaq in the future.

If our common stock is delisted by Nasdaq, we expect prices for our common stock to be quoted one of the OTC Markets or the OTC Bulletin Board.

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We may require additional capital due to continuing losses, deteriorating business conditions or other future developments.

If our current sources of capital are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain bank loans and credit facilities.

If our current sources of capital are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities, including through our at-the-market equity program, or obtain bank loans and credit facilities.

The sale of convertible debt securities or additional equity securities could result in dilution to our stockholders.

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the state of global credit markets and our creditworthiness;

raising additional cash through potential equity offerings, including sales through an at-the-market, or ATM program, sales of assets and/or issuance of debt as considered necessary and looking at other potential business opportunities;

general market conditions for financing activities by companies in our industry;

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We cannot assure you that financing, if needed, would be available in amounts or on terms acceptable to us, if at all.

Our stock price has been and may continue to be volatile and you may be unable to resell shares of our common stock at or above the price you paid.

The trading price of our common stock has been and may continue to be subject to broad fluctuations.

The market price of shares of our common stock could be subject to wide fluctuations in response to various risk factors listed in this section and others beyond our control, including:

actual or anticipated fluctuations in our key operating metrics, financial condition and operating results;

changes in the composition of and the orders received from our customers;

actual or anticipated changes in our growth rate;

issuance of new or updated research or reports by securities analysts that have a change in outlook regarding the performance of our business or the future trading price of our common stock;

fluctuations in the valuation of companies perceived by investors to be comparable to us;

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

sales or expected sales of additional common stock;

announcements from, or operating results of, our competitors;

general economic and market conditions.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.

These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.

We had ever been a defendant in two filed actions and may be the target of this type of litigation in the future.

Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

Future sales of shares of our common stock by existing stoc kholders could cause our stock price to fall.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

As of November 13, 2020, 4.0 million shares of common stock were issued and outstanding, which are freely tradable without restriction by non-affiliates.

As of November 13, 2020, $1.4 million convertible notes were outstanding which can be converted into 467 thousand shares of common stock.

Certain stockholders, including stockholders owning a majority of our outstanding shares as well as current and former employees, are eligible to resell shares of common stock in the public market under Rule 144, which, in the case of our affiliate and persons who have been affiliates in the last three months, would be subject to volume limitations and certain other restrictions under Rule 144, including that we are current in our SEC filings.

In general, Rule 144 provides that any of our non-affiliates, who have held restricted common stock for at least six-months, are entitled to sell their restricted stock freely, provided that we are current in our SEC filings.

After one year, a non-affiliate may sell without any restrictions.

We have also filed registration statements on Form S-8 under the Securities Act to register approximately 565 thousand shares for issuance pursuant to options or other rights to purchase common stock under our equity incentive plans.

These shares can be freely sold in the public market upon issuance and once vested, subject to the applicable plan and/or the agreements entered into with holders of options or other rights to purchase common stock in connection with the issuance of such options or other rights to purchase common stock.

Our directors, executive officers and principal stockholders have substantial control over us and will be able to influence corporate matters.

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There can be no assurance that our interests will not conflict with those of these stockholders, who may also take actions that are not in line, or may conflict, with our other stockholders’ best interests.

We do not anticipate paying any cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock or convertible preferred stock and do not intend to do so for the foreseeable future.

We currently intend to invest our future earnings, if any, to fund our growth.

There is no guarantee that shares of our common stock will appreciate in value or maintain the price at which our stockholders purchased their shares.

Delaware law and our certificate of incorporation and bylaws will contain anti - takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

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These provisions in our certificate of incorporation and bylaws and under Delaware law could discourage potential takeover attempts and could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in our market price being lower than it would be without these provisions.

Unresolv ed Staff Comments

Unresolved Staff Comments

Not applicable.

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-K

Item 1. Business