What changed in this filing

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Item 1. Financial Statements

2022-01-12 compared with 2021-07-13 · 133 added, 187 removed, 293 unchanged (52% of the section changed)

7 unchanged sentences

Restricted cash and cash equivalents

Accounts receivable (including related parties), net of allowance for doubtful accounts of $ 200 and $ 187 as of May 31, 2021 and August 31, 2020, respectively

Accounts receivable (including related parties), net of allowance for doubtful accounts of $ 199 and $ 199 as of November 30, 2021 and August 31, 2021, respectively

Prepaid expenses and other current assets

8 unchanged sentences

Accounts payable

Advance receipt toward convertible note

Accrued expenses and other current liabilities

Other payable to related parties

Operating lease liabilities, current

Operating lease liabilities, current portion

Total current liabilities

5 unchanged sentences

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

4,069 shares and 4,011 shares issued and outstanding as of May 31, 2021 and August 31, 2020, respectively

4,460 shares issued and outstanding as of both November 30, 2021 and August 31, 2021

Additional paid-in capital

9 unchanged sentences

dollars and shares, except per share data)

Three Months Ended

Nine Months Ended

Three Months Ended November 30,

Revenues, net

Cost of revenues

Gross profit (loss)

Operating expenses:

1 unchanged sentence

Selling, general and administrative

Gain on disposals of long-lived assets, net

Gain on disposals of long-lived assets

Total operating expenses

1 unchanged sentence

Other income (expenses):

Gain on disposal of investment

Interest expenses, net

Other income, net

Foreign currency transaction gain, net

Foreign currency transaction (loss) gain, net

Total other income, net

1 unchanged sentence

Income tax expense

Net (loss) income attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net loss attributable to SemiLEDs stockholders

7 unchanged sentences

(In thousands of U.S.

Three Months Ended

Nine Months Ended

Other comprehensive loss, net of tax:

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

Three Months Ended November 30,

Other comprehensive gain (loss), net of tax:

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

Comprehensive loss

3 unchanged sentences

SEMILEDS CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Unaudited Condensed Consolidated Statements of Changes in Equity

(In thousands of U.S.

2 unchanged sentences

Shareholders'

BALANCE—September 1, 2019

Issuance of common stock under equity incentive plans

Stock-based compensation

Comprehensive income (loss):

Other comprehensive income (loss)

BALANCE—November 30, 2019

Issuance of common stock under equity incentive plans

BALANCE at September 1, 2021

Stock-based compensation

Issuance of common stock for private placement

Issuance of convertible notes

Comprehensive income (loss):

Comprehensive loss:

Other comprehensive income (loss)

BALANCE—February 29, 2020

Stock-based compensation

Issuance of common stock for private placement

Conversion of notes into common stocks

Change ownership in SBDI*

Comprehensive income (loss):

Other comprehensive loss

Net income (loss)

BALANCE—May 31, 2020

BALANCE at November 30, 2021

Comprehensive

Shareholders'

BALANCE—September 1, 2020

BALANCE at September 1, 2020

Stock-based compensation

Change ownership in SBDI*

Comprehensive income (loss):

Other comprehensive income (loss)

BALANCE—November 30, 2020

Issuance of common stock under equity incentive plans

Stock-based compensation

Comprehensive income (loss):

Other comprehensive income (loss)

Net income (loss)

BALANCE—February 28, 2021

Issuance of common stock under equity incentive plans

Stock-based compensation

Comprehensive loss:

Other comprehensive loss

Net (loss) income

BALANCE—May 31, 2021

Other comprehensive income (loss)

BALANCE at November 30, 2020

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(In thousands of U.S.

Nine Months Ended

Three Months Ended November 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Provisions for inventory write-downs

Gain on disposals of long-lived assets, net

Gain on disposals of investments

Accounts receivable, net

Prepaid expenses and other

Gain on disposals of long-lived assets

Accounts receivable

Prepaid expenses and other assets

Accounts payable

Accrued expenses and other current liabilities

Net cash used in operating activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Payments for development of intangible assets

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term debt

Repayments of long-term debt

Issuance of common stock for private placement

Acquisition of noncontrolling interests

Net cash (used in) provided by financing activities

Changes in cash balance included in deconsolidated subsidiaries

Effect of exchange rate changes on cash and cash equivalents and restricted cash

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

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period

10 unchanged sentences

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

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

As of May 31, 2021, SemiLEDs had two wholly owned subsidiaries.

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

As of November 30, 2021, SemiLEDs had two wholly owned subsidiaries.

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

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, manufacturing and a substantial portion of marketing and sale of LED components, and where most of the Company’s employees are based.

On November 27, 2019, SemiLEDs entered into a stock purchase agreement (the “Agreement”) with XianChang Ma (the “Purchaser”) pursuant to which the Purchaser agreed to purchase all of the outstanding shares of the Company’s Hong Kong subsidiary, Semileds International Corporation Limited, and its wholly owned subsidiary Xuhe Guangdian Co Ltd.

for $ 100,000 and an additional $ 40,000 for the transaction costs.

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

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

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

7 unchanged sentences

The unaudited condensed consolidated balance sheet as of August 31, 2021 included herein was derived from the audited consolidated financial statements as of that date.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated balance sheet as of May 31, 2021, the statements of operations and comprehensive loss for the three and nine months ended May 31, 2021 and 2020, the statement of changes in equity for the three and nine months ended May 31, 2021 and 2020, and the statements of cash flows for the nine months ended May 31, 2021 and 2020.

The results for the three or nine months ended May 31, 2021 are not necessarily indicative of the results to be expected for the year ending August 31, 2021.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s unaudited condensed consolidated balance sheet as of November 30, 2021, the unaudited condensed statements of operations and comprehensive loss for the three months ended November 30, 2021 and 2020, the statements of changes in equity for the three months ended November 30, 2021 and 2020, and the statements of cash flows for the three months ended November 30, 2021 and 2020.

The results for the three months ended November 30, 2021 are not necessarily indicative of the results to be expected for the year ending August 31, 2022.

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

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

The Company suffered losses from operations of $ 2.1 million and $ 3.7 million, and net cash used in operating activities of $ 1.0 million and $ 3.5 million for the years ended August 31, 2020 and 2019, respectively.

These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern, even though gross profit on product sales was $ 1.6 million for the year ended August 31, 2020 compared to $ 452 thousand for the year ended August 31, 2019.

Loss from operations for the three and nine months ended May 31, 2021 was $ 592 thousand and $ 2.1 million, respectively.

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

Moreover, at May 31, 2021, the Company’s cash and cash equivalents had decreased to $ 1.7 million.

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

The Company suffered losses from operations of $ 3.9 million and $ 2.1 million, and used net cash in operating activities of $ 1.7 million and $ 1.0 million for the years ended August 31, 2021 and 2020, respectively.

These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern, even though gross profit on product sales was $ 1.0 million for the year ended August 31, 2021 compared to $ 1.6 million for the year ended August 31, 2020.

On November 30, 2021, the Company’s cash and cash equivalents had increased to $ 4.1 million compared to $ 2.7 million November 30, 2020 mainly due to the issuance of common stock.

Further, loss from operations for the three months ended November 30, 2021 and 2020 was $ 978 thousand and $ 972 thousand, respectively.

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

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

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

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

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

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

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

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.

Raising additional cash through further 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.

While the Company's management believes that the measures described in the above liquidity plan will be adequate to satisfy its liquidity requirements for the twelve months after the date that the financial statements are issued, there is no assurance that the liquidity plan will be successfully implemented.

2 unchanged sentences

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

As of May 31, 2021 and August 31, 2020, the Company’s restricted cash equivalents at current portion amounted $ 90 thousand and $ 85 thousand, respectively.

As of May 31, 2021 and August 31, 2020, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $ 105 thousand and $ 95 thousand, respectively.

As of November 30, 2021 and August 31, 2021, the Company’s restricted cash equivalents at current portion were amounted both $ 90 thousand.

As of November 30, 2021 and August 31, 2021, the Company’s restricted cash at noncurrent portion, which was recorded as other assets were amounted both $ 105 thousand.

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

38 unchanged sentences

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

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

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

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

5 unchanged sentences

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

As of May 31, 2021 and August 31, 2020, cash and cash equivalents of the Company consisted of the following (in thousands):

As of November 30, 20 2 1 and August 31, 20 2 1 , cash and cash equivalents of the Company consisted of the following (in thousands):

Cash and Cash Equivalents by Location

2 unchanged sentences

Denominated in U.S.

Denominated in New Taiwan dollars

Denominated in New Taiwan dollars (NT$)

Denominated in other currencies

6 unchanged sentences

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

Net revenues generated from sales to the top ten customers represented 89 % and 78 % of the Company’s total net revenues for the three and nine months ended May 31, 2021, respectively, and 89 % and 83 % of the Company’s net revenues for the three and nine months ended May 31, 2020, respectively.

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

Net revenues generated from sales to customers in these markets, in the aggregate, accounted for 86 % and 83 % of the Company’s net revenues for the three and nine months ended May 31, 2021, respectively, and 89 % and 90 % of the Company’s net revenues for the three and nine months ended May 31, 2020, respectively.

Net revenues generated from sales to the top ten customers represented 90 % and 85 % of the Company’s total net revenues for both the three months ended November 30, 2021 and 2020, respectively.

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

Net revenues generated from sales to customers in these markets, in the aggregate, accounted for 76 % and 57 % of the Company’s net revenues for the three months ended November 30, 2021 and 2020, respectively.

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

1 unchanged sentence

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

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

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

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

The Company did not subscribe for any newly issued common shares at the issuance date;

as a result, noncontrolling interest in SBDI increased from zero to 3.31 %.

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

Therefore, noncontrolling interest in SBDI declined to 3.05 % as of May 31, 2021.

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

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

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

From January 2019 to September 2020, the Company purchased an additional 33,000 shares of Taiwan Bandaoti Zhaoming Co., Ltd., from non-controlling shareholders.

Therefore, noncontrolling interest in SBDI was down to 3.05 % as of November 30, 2021.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

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

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

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

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), to reduce the complexity associated with applying U.S.

GAAP principles for certain financial instruments with characteristics of liabilities and equity.

The amendments in this ASU reduce the number of accounting models for convertible instruments and expand the existing disclosure requirements over earnings per share as it relates to convertible instruments.

This ASU will be effective for the fiscal year beginning January 1, 2022 and interim periods therein.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The amendments may be

adopted through either a modified retrospective method, or a fully retrospective method.

The Company is currently evaluating the impact of adopting ASU 2020-06.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

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

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models.

Upon adoption of ASU 2020-06, convertible debt, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components.

This modification will reduce the issue discount and result in less non-cash interest expense in financial statements.

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

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

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

Early adoption is permitted, but only if adopted as of the beginning of such fiscal year.

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

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

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

ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument.

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

ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

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

Early adoption is permitted for all entities, including adoption in an interim period.

If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period.

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

Balance Sheet Components

Inventories as of May 31, 2021 and August 31, 2020 consisted of the following (in thousands):

Inventories as of November 30, 2021 and August 31, 2021 consisted of the following (in thousands):

Raw materials

1 unchanged sentence

Finished goods

Inventory write-downs to estimated net realizable values were $ 159 thousand and $ 555 thousand for the three and nine months ended May 31, 2021, respectively, and $ 251 thousand and $ 571 thousand for the three and nine months ended May 31, 2020, respectively.

Inventory write-downs to estimated net realizable values were $ 231 and $ 196 thousand for the three months ended November 30, 2021 and 2020, respectively.

Property, Plant and Equipment

Property, plant and equipment as of May 31, 2021 and August 31, 2020 consisted of the following (in thousands):

Property, plant and equipment as of November 30, 2021 and August 31, 2021 consisted of the following (in thousands):

Buildings and improvements

2 unchanged sentences

Other equipment

Construction in progress

Total property, plant and equipment

2 unchanged sentences

Intangible Assets

Intangible assets as of May 31, 2021 and August 31, 2020 consisted of the following (in thousands):

Intangible assets as of November 30, 2021 and August 31, 2021 consisted of the following (in thousands):

November 30, 2021

Period (Years)

6 unchanged sentences

Investments in Unconsolidated Entities

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of May 31, 2021 and August 31, 2020 consisted of the following (in thousands, except percentages):

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of November 30, 2021 and August 31, 2021 consisted of the following (in thousands, except percentages):

November 30, 2021

August 31, 2021

1 unchanged sentence

Total investments in unconsolidated entities

There were no dividends received from unconsolidated entities through May 31, 2021.

There were no dividends received from unconsolidated entities through November 30, 2021.

Equity Investments without readily determinable fair value

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

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

Commitments and Contingencies

Operating Lease Agreements — The Company has several operating leases with unrelated parties, primarily for land, plant and office spaces in Taiwan, which include cancelable and noncancelable and which expire at various dates between December 2021 and December 2040 .

Operating Lease Agreements — The Company has several operating leases with unrelated parties, primarily for land, plant and office spaces in Taiwan, which include cancellable and noncancellable leases and which expire at various dates between December 2021 and December 2040 .

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

2 unchanged sentences

Most leases do not include options to renew.

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

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

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

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

Lease expense related to these noncancelable operating leases was $ 42 thousand and $ 123 thousand for three months and nine months ended May 31, 2021, respectively.

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

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

Lease expense related to these noncancellable operating leases were $ 42 and $ 40 thousand for three months ended November 30, 2021 and 2020, respectively.

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

November 30, 2021

August 31, 2021

Operating lease right of use assets

2 unchanged sentences

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

Nine Months Ended

Three Months Ended November 30,

Operating lease expenses

Other information related to leases is presented below:

Nine Months Ended

Three Months Ended November 30,

Cash Paid for amounts Included In Measurement of Liabilities:

5 unchanged sentences

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

The aggregate future noncancelable minimum rental payments for the Company’s operating leases as of May 31, 2021 consisted of the following (in thousands):

The aggregate future noncancellable minimum rental payments for the Company’s operating leases as of November 30, 2021 consisted of the following (in thousands):

Years Ending August 31,

Operating Leases

Remainder of 2022

2 unchanged sentences

Present value of future minimum lease payments

Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $ 101 thousand and $ 33 thousand as of May 31, 2021 and August 31, 2020, respectively.

Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $ 133 thousand and $ 101 thousand as of November 30, 2021 and August 31, 2021, respectively.

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

1 unchanged sentence

There is significant judgment required in assessing both the likelihood of an unfavorable outcome and whether the amount of loss, if any, can be reasonably estimated.

However, the Company cannot predict the outcome of any litigation or the potential for future litigation.

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 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, the Company retained the $500 thousand payment as liquidated damages.

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

The Court held a trial on March 2, 2020.

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

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

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

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

On April 8, 2021, the judge issued a ruling requiring the Company to pay pre-judgment interest in the amount of $ 123,000 to Well Thrive.

On May 7, 2021, the Court of Appeal issued an order requiring the parties to mediate on June 28, 2021.

The Company and Well Thrive Ltd entered into an Agreement Regarding Satisfaction of Judgment dated June 14, 2021, as amended on June 16, 2021 and June 21, 2021 (collectively, the “Settlement Agreement”), pursuant to which the Company issued 35,365 shares (the “Shares”) of its common stock to Well Thrive Ltd.

The Shares were issued to satisfy the amount payable under the Settlement Agree ment and, accordingly, no cash proceeds were received by the Company from the issuance of the Shares.

Except as described above, as of May 31 20 2 1 , there was no pending or threatened litigation that could have a material impact on the Company’s financial position, resul ts of operations or cash flows.

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

Pursuant to the terms of the Agreement, Mr.

Ma purchased 150,000 shares of the Company’s common stock at $ 4.00 per share, representing approximately 4 % of the outstanding shares of the Company at the time of purchase.

The Company received the $ 600,000 purchase price in full on January 17, 2020.

On May 25, 2020, the Company entered into a definitive common stock purchase agreement (the “Agreement”) with FengShuang Zhu.

Pursuant to the terms of the Agreement, Mr.

Zhu purchased 33,333 shares of the Company’s common stock at $ 3.00 per share for an aggregate purchase price of $100,000.

The Company received the $ 100,000 purchase price in full on May 25.

On May 25, 2020, J.R.

Simplot Company, the largest shareholder of the Company, and Trung Doan, the Chairman and Chief Executive Officer of the Company, each converted $ 300,000 of convertible unsecured promissory notes into 100,000 shares of the Company’s common stock (see Note 10).

As of November 30, 2021, there was no pending or threatened litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.

In June 2021, the Company and Well Thrive Ltd., entered into an Agreement Regarding Satisfaction of Judgment dated June 14, 2021 (the “Settlement Agreement”) pursuant to which the Company issued 35,365 shares (the “Shares”) of common stock to Well Thrive Ltd., valued at $ 650,000 .

The Shares were issued to satisfy the amount payable under the Settlement Agreement and, accordingly, no cash proceeds were received by the Company from the issuance of the Shares.

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

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

Sales of the Placement Shares, 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.

In July 2021, 344,391 shares of the Company’s common stock were issued for gross proceeds of $ 4,175,225 , before placement agent fees and legal fees of $ 126,576 .

No sales were made during the quarter ended November 30, 2021.

Stock-based Compensation

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

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

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

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

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

A total of 1,421 thousand and 1,021 thousand shares was reserved for issuance under the 2010 Plan, respectively, as of May 31, 2021 and 2020.

As of May 31, 2021 and 2020, there were 1,037 thousand and 548 thousand shares of common stock available for future issuance under the equity incentive plans, respectively.

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

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

A total of 1,421 and 1,421 thousand shares was reserved for issuance under and 2010 Plan as of November 30, 2021 and 2020, respectively.

As of November 30, 2021 and 2020, there were 1,015 thousand and 1,092 thousand shares of common stock available for future issuance under the equity incentive plans.

In November 2021, SemiLEDs granted 15 thousand restricted stock units to its directors that will vest 25 % every three months on February 12, 2022, May 12, 2022, August 12, 2022 and November 12, 2022.

In the event that the 2022 annual meeting falls before November 12, 2022, 100% of the stock units shall immediately vest on the date of the 2022 annual meeting.

The grant-date fair value of the restricted stock units was $ 7.10 per unit.

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

In November 2021, SemiLEDs granted 98.5 thousand restricted stock units to its employees, which will vest 12.5 % every three months on the vesting commencement date of November 2021 and will become fully vested upon a change in control.

The grant-date fair value of the restricted stock units was $ 7.10 per unit.

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

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

The remaining stock units vested on September 24, 2021, the date of the 2021 annual meeting.

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

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

In November 2020, SemiLEDs granted 33 thousand restricted stock units to its employees, which vested 25 % every three months on February 12, 2021, May 12, 2021, August 12, 2021 and November 12, 2021.

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

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

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

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

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

A summary of the stock-based compensation expense for the three and nine months ended May 31, 2021 and 2020 was as follows (in thousands):

Three Months Ended

Nine Months Ended

A summary of the stock-based compensation expense for the three months ended November 30, 2021 and 2020 was as follows (in thousands):

Three Months Ended November 30,

Cost of revenues

3 unchanged sentences

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

Three Months Ended

Nine Months Ended

Three Months Ended November 30,

Stock units and stock options to purchase common stock

The Company’s income (loss) before income taxes for the three and nine months ended May 31, 2021 and 2020 consisted of the following (in thousands):

Three Months Ended

Nine Months Ended

The Company’s loss before income taxes for the three months ended November 30, 2021 and 2020 consisted of the following (in thousands):

Three Months Ended November 30,

Foreign operations

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

As of both May 31 2021 and August 31, 2020, the Company had no unrecognized tax benefits related to tax positions taken in prior periods.

As of both November 30, 2021 and August 31, 2021, the Company had no unrecognized tax benefits related to tax positions taken in prior periods.

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

1 unchanged sentence

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

With few exceptions, the Company is no longer subject to U.S.

With few exceptions, as of November 30, 2021, the Company is no longer subject to U.S.

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

The Company is not currently under examination by income tax authorities in federal, state or foreign jurisdictions.

Related Party Transactions

On December 6, 2019 and on December 10, 2019, the Company issued convertible unsecured promissory notes (the “Notes”) to each of J.R.

On December 6, 2019 and on December 10, 2019, the Company issued convertible unsecured promissory notes (the “Notes”) to J.R.

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

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

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

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

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

On May 26, 2021, the Notes were extended with the same terms and interest rate for one year, which is mature on May 30, 2022 .

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

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

On May 26, 2021, the Notes were extended with the same terms and interest rate for one year and now mature on May 30, 2022 .

As of November 30, 2021 and August 31, 2021, the outstanding principal of these notes totaled $ 1.4 million.

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

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

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

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

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

As of November 30, 2021 and August 31, 2021, these loans totaled $ 3.2 million.

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

Subsequent Events

The Company has analyzed its operations subsequent to May 31, 2021 to the date these unaudited condensed consolidated financial statements were issued, finding that the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company.

On June 22, 2021, the Company issued 35,365 shares of the Company’s common stock pursuant to an Agreement Regarding Satisfaction of Judgment dated June 14, 2021, as amended on June 16, 2021 and June 21, 2021 (collectively, the “Settlement Agreement”), by and between the Company and Well Thrive Ltd.

(“Well Thrive”).

The shares were issued in consideration of the amount payable under the terms of the Settlement Agreement accordingly, no cash proceeds were received by the Company from the issuance of the shares (see Note 5).

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

The Placement Shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (Registration No.

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.

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

The Company has analyzed its operations subsequent to November 30, 2021 to the date these unaudited condensed consolidated financial statements were issued, finding that the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company.

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

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

What changed 10-Q

Item 1. Financial Statements