Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations is based upon and should be read in conjunction with the audited consolidated financial statements and the notes included elsewhere in this Annual Report on Form 10‑K, as well as the Risk Factors contained in Part I, Item 1A of this Annual Report on Form 10‑K, and other information provided from time to time in our other filings with the SEC.
Overview
We develop, manufacture and sell light emitting diode (LED) chips, LED components, LED modules and systems. Our products are used for general specialty industrial applications, including ultraviolet, or UV, curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, architectural lighting and entertainment lighting.
We package our LED chips into LED components, which we sell to distributors and a customer base that is heavily concentrated in a few select markets, including India, Japan, the Netherlands and the United States. We also sell our “Enhanced Vertical,” or EV, LED product series in blue, white, green and UV in selected markets. Our lighting products customers are primarily original design manufacturers, or ODMs, of lighting products and the end users of lighting devices. We also contract other manufacturers to produce for our sale certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process. In addition, in fiscal year 2025, we entered into a number buy-sell orders for equipment that we purchased and then sold to our customer.
We are a holding company for our wholly owned operating subsidiary, Taiwan Bandaoti Zhaoming Co., Ltd., which conducts our research, development, manufacturing, marketing and sale of LED components and employs the Company’s employees.
Key Factors Affecting Our Financial Condition, Results of Operations and Business
The following are key factors that we believe affect our financial condition, results of operations and business:
Our ability to continue or grow with buy-sell revenue. Our recent reliance on buy-sell purchase orders of equipment has improved our gross profit, operating results and cash flows. We anticipate our buy-sell purchase orders will continue from period to period. However, if orders diminish or cease altogether, our gross margin, operating results, and cash flows could be adversely affected.
Our ability to raise additional debt funding, sell additional equity securities and improve our liquidity. We need to improve our liquidity, access alternative sources of funding and obtain additional equity capital or debt when necessary for our operations. However, we may not be able to obtain such debt funding or sell equity securities on terms that are favorable to us, or at all. The raising of additional debt funding by us, if required and available, would result in increased debt service obligations and could result in additional operating and financing covenants, or liens on our assets, that would restrict our operations. The sale of additional equity securities, if required and available, could result in dilution to our stockholders.
Our ability to source chips from other chip suppliers. Our reliance on our chip suppliers exposes us to a number of significant risks, including reduced control over delivery schedules, quality assurance and production costs, lack of guaranteed production capacity or product supply. If our chip suppliers are unable or unwilling to continue to supply our chips at requested quality, quantity, performance and costs, or in a timely manner, our business and reputation could be seriously harmed. Our inability to procure chips from other chip suppliers at the desired quality, quantity, performance and cost might result in unforeseen manufacturing and operations problems. In such events, our customer relationships, business, financial condition and results of operations would be adversely affected.
Industry growth and demand for products and applications using LEDs. The overall adoption of LED lighting devices to replace traditional lighting sources is expected to influence the growth and demand for LED chips and component products and impact our financial performance. We believe the potential market for LED lighting will continue to expand. LEDs for efficient generation of UV light are also starting to gain attention for various medical, germicidal and industrial applications. Since a substantial portion of our LED chips, LED components and our lighting products are used by end‑users in general lighting applications and specialty industrial applications such as UV curing, medical/cosmetic, counterfeit detection, horticulture, architectural lighting and entertainment lighting the adoption of LEDs into these applications will have a strong impact on the demand of LED chips generally and, as a result, for our LED chips, LED components and LED lighting products.
Average selling price of our products. The average selling price of our products may decline for a variety of factors, including prices charged by our competitors, the efficacy of our products, our cost basis, changes in our product mix, the size of the order and our relationship with the relevant customer, as well as general market and economic conditions. Competition in the markets for LED products is intense, and we expect that competition will continue to increase, thereby creating a highly aggressive pricing environment. For example, some of our competitors have in the past reduced their average selling prices, and the resulting competitive pricing pressures have caused us to similarly reduce our prices, accelerating the decline in our revenues and the gross margin of our products. When prices decline, we must also write down the value of our inventory. Furthermore, the average
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selling prices for our LED products have typically decreased over product life cycles. Therefore, our ability to continue to innovate and offer competitive products that meet our customers’ specifications and pricing requirements, such as higher efficacy LED products at lower costs, will have a material influence on our ability to improve our revenues and product margins, although in the near term the introduction of such higher performance LED products may further reduce the selling prices of our existing products or render them obsolete.
Changes in our product mix. We anticipate that our gross margins will 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, we continue to pursue opportunities for profitable growth in areas of business where we see the best opportunity to develop as an end-to-end LED module solution supplier by providing our customers with high quality, flexible and more complete LED system solution, customer technical support and LED module/system design, as opposed to just providing customers with individual components. As a strategic plan, we have 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 growth of our module products and the continued commercial sales of our UV LED product are expected to improve our gross margin, operating results and cash flows. In addition, we have adjusted the lower-priced LED components strategy as appropriate. We have adopted a strategy to adjust our product mix by exiting certain high volume but low unit selling price product lines in response to the general trend of lower average selling prices for products that have been available in the market for some time. However, 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 in our revenues and gross margin from period to period.
Our ability to reduce cost to offset lower average selling prices. Competitors may reduce average selling prices faster than our ability to reduce costs, and competitive pricing pressures may accelerate the rate of decline of our average selling prices. To address increased pricing pressure, we have improved and increased our production yields to reduce the per-unit cost of production of our products. However, such cost savings currently have limited impact on our gross profit, as we currently suffer from the underutilization of manufacturing capacity and must absorb a high level of fixed costs, such as depreciation. 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.
Our ability to continue to innovate. As part of our growth strategy, we plan to continue to be innovative in product design, to deliver new products and to improve our manufacturing efficiencies. Our continued success depends on our ability to develop and introduce new, technologically advanced and lower cost products, such as more efficient, better performance LED component products. If we are unable to introduce new products that are commercially viable and meet rapidly evolving customer requirements or keep pace with evolving technological standards and market developments or are otherwise unable to execute our product innovation strategy effectively, we may not be able to take advantage of market opportunities as they arise, execute our business plan or be able to compete effectively. 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 to further integrate electrical, thermal and mechanical manufacturing resources to provide customers with one-stop system services. Services include design, prototyping, OEM and ODM. Key markets that we intend to target at the system end include different types of UV LED industrial printers, aquarium lighting, medical applications, niche imaging light engines, horticultural lighting and high standard commercial lighting. The modules are designed for various printing, curing, and PCB exposure industrial equipment, providing uncompromised reliability and optical output. Our LED components include different sizes and wattage to accommodate different demands in the LED market.
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General economic conditions and geographic concentration. Many countries including the United States and the European Union (the “E.U.”) members have instituted, or have announced plans to institute, government regulations and programs designed to encourage or mandate increased energy efficiency in lighting. These actions include in certain cases banning the sale after specified dates of certain forms of incandescent lighting, which are advancing the adoption of more energy efficient lighting solutions such as LEDs. When the global economy slows or a financial crisis occurs, consumer and government confidence declines, with levels of government grants and subsidies for LED adoption and consumer spending likely to be adversely impacted. Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands and the United States. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets. For example, the aggressive support by the Chinese government for the LED industry through significant government incentives and subsidies to encourage the use of LED lighting and to establish the LED‑sector companies has resulted in production in the market and intense competition. Furthermore, due to Chinese package manufacturers increasing usage of domestic LED chips, prices are increasingly competitive, to Chinese manufacturers growing market share in the global LED industry. In addition, we have historically derived a significant portion of our revenues from a limited number of customers. Some of our largest customers and what we produce/have produced for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project‑based purchases and broadening customer base, among other things. For the years ended August 31, 2025 and 2024, sales to our three largest customers, in the aggregate, accounted for 94% and 61% of our revenues, respectively.
Intellectual property issues. Competitors of ours and other third parties have in the past and will likely from time to time in the future allege that our products infringe on their intellectual property rights. Defending against any intellectual property infringement claims would likely result in costly litigation and ultimately may lead to our not being able to manufacture, use or sell products found to be infringing. However, other third parties may also assert infringement claims against our customers with respect to our products, or our customers’ products that incorporate our technologies or products. Any such legal action or the threat of legal action against us, or our customers, could such customers’ continued demand for our products. This could prevent us from growing or even maintaining our revenues, or cause us to incur additional costs and expenses, and affect our financial condition and results of operations.
Cash position. Our cash and cash equivalents were $2.6 million and $1.7 million as of August 31, 2025 and 2024, respectively. We have implemented actions to accelerate operating cost reductions and improve operational efficiencies. The plan is further enhanced through the fabless business model in which we implemented certain workforce reductions and are exploring the opportunities to sell certain equipment related to the manufacturing of vertical LED chips, in order to reduce the idle capacity charges and minimize our research and development activities associated with chips manufacturing operation. Based on our current financial projections and assuming our outstanding notes are converted or extended, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months.
Components of Consolidated Statements of Operations
Revenues, net
Our core products are LED components, LED modules and systems, which are the most important part of our business, as well as LED chips and lighting products.
Our revenues are affected by sales volumes of our LED chips, LED components and lighting products and our average selling prices for such products. In addition, as we expand and diversify our product offerings and with varying average selling prices, any change in the mix of products that we sell in any given period may affect our total revenues. For example, average selling prices for our LED components are generally higher than for LED chips and the average selling prices for our lighting products are higher than for our LED chips and LED components.
We recognize revenue on sales of our products when persuasive evidence of an arrangement exists, the price is fixed or determinable, ownership and risk of loss has transferred and collection of the sales proceeds is probable. We obtain written purchase authorizations from our customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. We typically consider delivery to have occurred at the time of shipment, unless otherwise agreed in the applicable sales terms, as this is generally when title and risk of loss for the product passes to the customer.
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Our larger customers typically provide us with non‑binding rolling forecasts of their requirements for the coming one to three months; however, recent global economic uncertainty and weakness has led to reduced spending in our target markets and made it difficult for our customers and us to accurately forecast and plan future business activities. Our customers may increase, decrease, cancel or delay purchase orders already in place, with no material consequences to the customer. As a result, we may face increased inventories and our backlog may decline as a result of any economic downturn or material change in market conditions or economic outlook. We price our products in accordance with prevailing market conditions, taking into account the technical specifications of the product being sold, the order volume, the strength and history of our relationship with the customer, our inventory levels and our capacity utilization. When average selling prices drop, as they did in recent years, inventory write‑downs to net realizable values may also result.
Our customers consist primarily of packagers, ODMs and end‑customers. Our revenues attributable to our ten largest customers accounted for 99% and 91% of our revenues for the years ended August 31, 2025 and 2024, respectively.
Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands and the United States. Net revenues generated from these countries, in the aggregate, accounted for 97% and 78% of our net revenues for the years ended August 31, 2025 and 2024, respectively. We expect that our revenues will continue to be substantially derived from these countries for the foreseeable future. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets.
Our revenues are presented net of estimated sales returns and discounts. We estimate sales returns and discounts based on our historical discounts and return rates and our assessment of future conditions.
Cost of Revenues
Our cost of revenues consists primarily of cost of materials, depreciation expenses, manufacturing overhead costs, direct labor costs and utilities cost, all related to the manufacture of our LED products. Materials include raw materials, other materials such as gases and chemicals, consumables, and assembly materials. Because our products are manufactured based on customers’ orders and specifications and we purchase materials and supplies to support such orders, we generally purchase our materials at spot prices in the marketplace and do not maintain long‑term supply contracts. We purchase materials from several suppliers. Our procurement policy is to select only a small number of qualified vendors who demonstrate quality of materials and reliability on delivery time. We are subject to variations in the cost of our materials and consumables from period to period. Moreover, because we consume a significant amount of electricity in our manufacturing process, any fluctuations in electricity costs will have an impact on our cost of revenues. We also use contract manufacturers to produce for our 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.
Direct labor costs consist of salary (including stock‑based compensation expenses), bonus, training, retirement and other costs related to our employees engaged in the manufacture of our products. Manufacturing overhead costs consist primarily of salaries, bonuses and other benefits (including stock‑based compensation expenses) for our administrative personnel allocated to manufacturing functions, repairs and maintenance costs for equipment and machinery maintenance costs and lease expenses.
Our cost of revenues also includes excess capacity charges as a result of the underutilization of our manufacturing capacity and inventory valuation adjustments to write down our inventories to their estimated net realizable values as a result of declines in their average selling prices.
Operating Expenses
Research and development. Our research and development expenses, which are expensed as incurred, consist primarily of expenses related to employee salaries, bonuses and other benefits (including stock‑based compensation expenses) for our research and development personnel, engineering charges related to product design, purchases of materials and supplies, repairs and maintenance and depreciation related expenses.
Selling, general and administrative. Selling, general and administrative expenses consist primarily of salaries, bonuses and other benefits (including stock‑based compensation expenses) for our administrative, sales and marketing personnel, expenses for professional services, which include fees and expenses for accounting, legal, tax and valuation services, amortization and depreciation related expenses, marketing related travel, lease expenses, entertainment expenses, allowance for doubtful accounts and general office related expenses, as well as compensation to our directors. We expect our selling, general and administrative expenses to decrease as we continue to implement cost reduction initiatives, such as spending controls, and as we continue to streamline our operations.
Gain on disposal of long ‑ lived assets, net. We recognized zero and $49 thousand of gain on the disposal of long-lived assets for the years ended August 31, 2025 and 2024, respectively. Due to the excess capacity charges that we have suffered for many years, considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of a certain level of our idle equipment.
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Other Income (Expense)
Interest expenses, net. Interest expenses, net consist of interest income and interest expense. Interest income represents interest earned from our cash and cash equivalents deposited with commercial banks in the United States and Taiwan. As of August 31, 2025 and 2024, we had cash and cash equivalents of $2.6 million and $1.7 million, respectively, which consisted of time deposits with initial maturity of greater than three months but less than one year. Interest expense consists primarily of interest on our convertible notes and long‑term borrowings and/or short‑term lines of credit with certain banks in Taiwan as well as with our Chairman and largest stockholder. We had long‑term debt totaling $1.7 million and $3.7 million as of August 31, 2025 and 2024, respectively.
Other income, net. Other income for the years ended August 31, 2025 and 2024 primarily consists of rental income from the lease of spare space in our Hsinchu building.
Foreign currency transaction gain (loss), net. We recognized a foreign currency transaction gain of $464 thousand and a foreign currency transaction loss of $13 thousand for the years ended August 31, 2025 and 2024, respectively, primarily due to the impact of fluctuations in the exchange rate of the U.S. dollar against the NT dollar from bank deposits and accounts payable held by Taiwan Bandaoti Zhaoming Co., Ltd. in currency other than the functional currency of such subsidiaries.
Provision for Income Taxes
United States tax treatment. We and one of our subsidiaries, Helios Crew, are United States corporations and are therefore required to file federal income tax returns with the Internal Revenue Service as well as with certain applicable state tax authorities. As our operations in the United States have been minimal, we have not to date recorded nor paid any significant federal or state corporate income tax.
We have investments in controlled foreign corporations and affiliates, which under Subpart F of the United States Internal Revenue Code, or Subpart F, may under certain circumstances subject our investments in controlled foreign corporations and affiliates to taxation in the United States. Subpart F provides that United States corporations may be required to include in their income certain undistributed earnings of the foreign corporations and affiliates as though such earnings had been distributed currently. Subpart F applies only to United States shareholders (such as us) who hold an interest in a foreign corporation and affiliates that meet the definition of a “controlled foreign corporation.” Under Section 957(a) of the United States Internal Revenue Code, a “controlled foreign corporation” means any foreign corporation if more than 50% of either (i) the total combined voting power of all classes of stock of such corporation entitled to vote, or (ii) the total value of the stock of such corporation, is owned by “United States Shareholders” on any day during the foreign corporation’s taxable year.
Subpart F does not apply, however, to the income of a controlled foreign corporation generated from the sale of goods that are manufactured in its country of incorporation. Also, any income attributable to a controlled foreign corporation and its affiliates that is not engaged in a United States trade or business is generally not subject to United States taxation until its earnings are distributed, or the stock of the foreign corporation is disposed. All of our products are manufactured in Taiwan by Taiwan Bandaoti Zhaoming Co., Ltd., our wholly owned foreign subsidiary. Because Taiwan Bandaoti Zhaoming Co., Ltd. conducts its manufacturing activities in Taiwan, the income or loss of Taiwan Bandaoti Zhaoming Co., Ltd. is included in our consolidated financial statements, but is not considered taxable income for United States taxation purposes pursuant to Section 954(d)(1)(A) of the United States Internal Revenue Code. This generally enables a United States taxpayer, such as us, to indefinitely defer United States taxation on the profits earned by its controlled foreign corporations and affiliates by retaining the earnings in such entities. We do not currently have any plans to repatriate any of our retained earnings from any of our controlled foreign subsidiaries or affiliates and we do not currently have any plans to declare or pay any dividends from such entities.
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.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The provisions of the legislation that were effective for fiscal 2025 did not have a material impact on the Company's fiscal 2025 income tax expense. The Company is currently assessing the impact of the provisions of the OBBBA that are effective in future years on its future consolidated financial statements.
The current presidential administration in the United States modified the rules governing taxation of controlled foreign corporations and affiliates and any such changes were not expected to result in our having to pay applicable taxes in the United States on income earned by such entities.
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Taiwan tax treatment. The corporate income tax rate in Taiwan is 20% for the year ended August 31, 2025 and 2024. Corporate income taxes payable, however, are subject to an alternative minimum tax. The Taiwan government enacted the Taiwan Alternative Minimum Tax Act, or the AMT Act, on January 1, 2006. Under the AMT Act, a taxpayer must pay the higher of its taxable income multiplied by the corporate income tax rate or the alternative minimum tax, or AMT. In calculating the AMT amount, the taxpayer must include income that would otherwise be exempt from taxation pursuant to various tax holidays or investment tax credits, other than certain exemptions or tax credits that have been grandfathered for the purposes of calculating AMT. The AMT rate for business entities is 12%. In addition to the statutory corporate taxes payable, or the AMT, corporate taxpayers in Taiwan are subject to an additional tax on distributable retained earnings (after statutory legal reserves) to the extent that such earnings are not distributed prior to the end of the subsequent year. This undistributed earnings surtax is determined in the subsequent year when the distribution plan relating to earnings attributable to the prior year is approved by a company’s stockholders and is payable in the subsequent year. The surtax rate has been reduced from 10% to 5%, starting applicable to the undistributed retained earnings of the year ended August 31, 2019. Because most of our subsidiaries in Taiwan incurred losses before income tax for both our fiscal year 2025 and 2024, we do not expect to pay such taxes on undistributed earnings.
In addition, in accordance with the Taiwan Income Tax Act, dividends distributed by companies incorporated in accordance with the Taiwan Company Act shall be deemed as income derived from sources in Taiwan and income taxes shall be levied on the shareholders receiving such dividends. In the event that a Taiwan incorporated company distributes dividends to its foreign shareholders, it will be required to withhold tax payable by the foreign shareholders at the time of payment at a rate of 20% or a lower tax treaty rate if applicable. Therefore, dividends received from our subsidiaries in Taiwan, if any, will be subjected to withholding tax under Taiwan law.
As of August 31, 2025, we had total foreign net operating loss carryforwards of $37 million, arising primarily from certain of our consolidated and majority owned subsidiaries in Taiwan, which will expire in various amounts in future years. Pursuant to the Taiwan Income Tax Act, as amended in January 2009, net operating loss carryforwards can be carried forward for a period of ten years.
Income Taxes
We are subject to income taxes in both the United States and foreign jurisdictions. Significant management judgment is required in determining our income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Our deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in our consolidated statements of operations become deductible expenses under applicable income tax laws or when loss or credit carryforwards are utilized. Realization of these deferred tax assets is dependent on our ability to earn future taxable income against which these deductions, losses and credits can be utilized. Therefore, we assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not more likely than not, a valuation allowance is established. These estimates and judgments about our future taxable income are based on assumptions that are consistent with our future plans. A net cumulative loss in recent years is a significant piece of negative evidence in determining the realization of the benefits of deferred tax assets. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We have provided a full valuation allowance on our deferred tax assets because our cumulative in recent years causes us to believe that realization of our deferred tax assets is not more likely than not.
Inventory Valuation
Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value. We determine cost using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of our production overhead. At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence, and we write down our inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. Our estimation of future demand is primarily based on the backlog of customer orders as of the balance sheet date and projections based on our actual historical sales trends and customers’ demand forecast. We evaluated our inventories on an individual item basis. For our finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Market for raw materials is based on replacement cost. We also write down items that are considered obsolete based upon changes in customer demand, manufacturing process changes or new product introductions that may eliminate demand for the product. Once written down, inventories are carried at this lower amount until sold or scrapped. Provisions for inventory write‑downs are included in our costs of revenues in the consolidated statements of operations. There is significant judgment involved with the estimates of excess and and if our estimates regarding customer demand or other factors are or actual market conditions or technological changes are less than those estimated by management, additional future inventory write‑downs may be required that could affect our operating results. Inventory write‑downs totaled $323 thousand and $411 thousand for the years ended August 31, 2025 and 2024, respectively. A majority of our inventory write‑downs during the years ended August 31, 2025 and 2024 was related to finished goods and work in process, primarily as a result of .
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Useful Life of Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation on property, plant and equipment is calculated using the straight‑line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight‑line method over the shorter of the lease term or the estimated useful life of the asset. We make estimates of the useful life of our property, plant and equipment in order to determine depreciation expense to be recorded each reporting period based on similar assets purchased in the past and our historical experience with such similar assets, as well anticipated technological or market changes. The estimated useful life of our property, plant and equipment directly impacts the timing of when our depreciation expense is recognized. There is significant judgment involved with estimating the useful lives of our property, plant and equipment, and a change in the estimates of such useful lives could cause our depreciation expense in future periods to increase significantly.
Impairment of Long ‑ lived Assets
In assessing the recoverability of our long‑lived assets, we first, determine whether indicators of impairment are present. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, a history of negative operating cash flow, or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review. Second, if we determine that indicators of impairment are present, we determine whether the estimated undiscounted cash flows expected to be generated from the use and eventual disposal of the potentially impaired assets (or asset group) are less than the carrying amount. Third, if such estimated undiscounted cash flows do not exceed the carrying amount, we estimate the fair value of the asset (or asset group) and recognize an impairment charge if the carrying amount is greater than the fair value of the asset (or asset group). Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third‑party independent appraisers, as considered necessary. We group our long‑lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are generated, or an asset group. We determined that we have two asset groups for testing purposes, one of which is associated with the manufacture and sale of LED chips and LED components, and the other is associated with our Ning Xiang subsidiary, which is engaged in the manufacture and sale of lighting fixtures and systems.
The estimates of future cash flows involve subjective judgments and represent our best estimate at each date of assessment about future developments, determined based on reasonable and supportable assumptions and projections taking into account past experience, as well as market data obtained from independent external sources. The use of different assumptions could increase or decrease the estimates of expected future cash flows and consequently, increase or decrease the related impairment charges. For example, if the average selling prices continue to decline beyond the assumptions used in our forecast of future cash flows expected to be generated by the asset groups, or if demand for our LED products does not grow as we anticipate, or if utilization rates are lower than anticipated, it is reasonably possible that the estimate of expected future cash flows may change in the near term resulting in the need to adjust our determination of fair value.
For the year ended August 31, 2025, lower than projected sales of our LED products and lower market capitalization compared to our consolidated net book values again indicated potential impairment of our long‑lived assets. We projected undiscounted future cash flows to analyze potential impairment, based upon a variety of factors, including primarily our continuous efforts to suppress gross loss from chip sales and the cooperation model discussed with other parties, considering all known trends and uncertainties. The significant assumptions used in determining the estimated undiscounted cash flows for the LED chips and components asset group were revised to reflect the new operation status. Based on the assessment, the expected undiscounted cash flows to be generated by this asset group exceeded its carrying value. Consequently, no asset impairment was recognized during the year ended August 31, 2025.
Critical Accounting Policies and Estimates
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements.
Revenue Recognition
The Company recognizes the amount of revenue when the Company satisfies a performance obligation to which it expects to be entitled for the transfer of promised goods or services to customers. The Company obtains written purchase authorizations from its customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. Generally, the Company considers delivery to have occurred at the time of shipment as this is generally when title and risk of loss for the products will pass to the customer. The Company provides its customers with limited rights of return for non-conforming shipments and product warranty claims. Based on historical return percentages, which have not been material to date, and other relevant factors, the Company estimates its potential future exposure on recorded product sales, which reduces product revenues in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets. The Company also provides standard product warranties on its products, which generally range from three months to two years. Management estimates the Company’s warranty obligations as a percentage of revenues,
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based on historical knowledge of warranty costs and other relevant factors. To date, the related estimated warranty provisions have been insignificant. Refer to Note 2 to the Consolidated Financial Statements for our revenue recognition policies.
Accounts Receivable
The allowance for doubtful accounts is based on management’s assessment of the collectability of customer accounts. Management regularly reviews the allowance by considering certain factors such as historical experience, industry data, credit quality, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. Bad debt expenses were $115 thousand and zero for the years ended August 31, 2025 and 2024, respectively.
Write-down of Inventories
The Company writes down excess and obsolete inventory to its estimated net realizable value. The net realized value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realized value is based on current market conditions and historical experience with product sales of similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped. Inventory write‑downs to estimated net realizable values for the years ended August 31, 2025 and 2024 were $323 thousand and $411 thousand, respectively.
Exchange Rate Information
We are a Delaware corporation and, under SEC requirements, must report our financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. At the same time, our subsidiaries use the local currency as their functional currency. For example, the functional currency for Taiwan Bandaoti Zhaoming Co., Ltd. is the NT dollar. The assets and liabilities of the subsidiaries are, therefore, translated into U.S. dollars at exchange rates in effect at each balance sheet date, and income and expense accounts are translated at average exchange rates during the period. The resulting translation adjustments are recorded to a separate component of accumulated other comprehensive income (loss) within equity. Any gains and losses from transactions denominated in currencies other than their functional currencies are recognized in the consolidated statements of operations as a separate component of other income (expense). Due to exchange rate fluctuations, such translated amounts may vary from quarter to quarter even in circumstances where such amounts have not materially changed when denominated in their functional currencies.
The translations from NT dollars to U.S. dollars were made at the exchange rates set forth in the statistical release of the Bank of Taiwan. On August 31, 2025 the exchange rate was 30.59 NT dollars to one U.S. dollar. On November 20, 2025, the exchange rate was 31.29 NT dollars to one U.S. dollar.
No representation is made that the NT dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or NT dollars, as the case may be, at any particular rate or at all.
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Results of Operations
The following table sets forth, for the periods presented, our consolidated statements of operations information. In the table below and throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following consolidated statement of operations data for the years ended August 31, 2025 and 2024 has been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10‑K. The information contained in the table below should be read in conjunction with our consolidated financial statements and notes thereto included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10‑K. The historical results presented below are not necessarily indicative of the results that may be expected for any future period:
Years Ended August 31,
Revenues
Revenues
(in thousands)
Consolidated Statement of Operations Data:
Revenues, net
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling, general and administrative
Gain on disposals of long-lived assets, net
Total operating expenses
Loss from operations
Other income (expenses):
Investment loss from unconsolidated entities
Interest expenses, net
Other income, net
Foreign currency transaction gain (loss), net
Total other income, net
Loss before income taxes
Income tax expense
Net loss
Less: Net income attributable to noncontrolling interests
Net loss attributable to SemiLEDs stockholders
Year Ended August 31, 2025 Compared to Year Ended August 31, 2024
Years Ended August 31,
Change
Change
Revenues
Revenues
(in thousands)
LED chips
LED components
Lighting products
Other revenues (1)
Total revenues, net
Cost of revenues
Gross profit
(1) Other revenues for the year ended August 31, 2025 primarily represent revenues attributable to buy-sell purchase orders of equipment. Other revenues for the year ended August 31, 2024 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.
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Revenues, net
Our revenues increased by 730% from $5.2 million for the year ended August 31, 2024 to $43 million for the year ended August 31, 2025. The increase in revenues was driven almost entirely by $38 million in sales of other revenues as a result of buy-sell purchase orders of equipment.
Revenues attributable to the sales of our LED components were $2.0 million and $2.7 million of our revenues for the years ended August 31, 2025 and 2024, respectively. The decrease in sales of LED components was primarily due to less volumes sold for the LED components.
Revenues attributable to the sales of lighting products were $228 thousand and $212 thousand of our revenues for the years ended August 31, 2025 and 2024, respectively. The increase in sales of lighting products was primarily due to varying volumes sold for lighting products.
Revenues attributable to the sales of our LED chips were $149 thousand and $93 thousand of our revenues for the years ended August 31, 2025 and 2024, respectively. The increase in sales of LED chips was primarily due to varying volumes sold for LED chips.
Revenues attributable to other revenues were $41 million and $2 million of our revenues for the years ended August 31, 2025 and 2024, respectively. The increase in other revenues was primarily due to buy-sell purchase orders of equipment.
Cost of Revenues
Our cost of revenues increased by 883% from $4.1 million for the year ended August 31, 2024 to $41 million for the year ended August 31, 2025. The increase in cost of revenues was due to the cost of equipment relating to buy-sell purchase orders of equipment.
Gross Profit
Our gross profit represented 6% and 20% of our revenues for the year ended August 31, 2025 and 2024, respectively. The decrease in gross margin for the year ended August 31, 2025 was primarily due to the buy-sell purchase orders of equipment, which have lower margins to sales of our products.
Operating Expenses
Years Ended August 31,
Change
Change
Revenues
Revenues
(in thousands)
Research and development
Selling, general and administrative
Gain on disposals of long-lived assets, net
Total operating expenses
Research and development. Our research and development expenses were $1.2 million for both the year ended August 31, 2025 and 2024. The slight decrease was primarily due to a $64 thousand decrease in materials and supplies, partially offset by a $10 thousand increase in payroll expense.
Selling, general and administrative. Our selling, general and administrative expenses were $2.9 million for both the years ended August 31, 2025 and 2024. The slight decrease was mainly attributable to a $134 thousand decrease in payroll expense, offset by a $115 thousand increase in bad debt expense.
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Gain on disposal of long ‑ lived assets, net. We recognized zero and $49 thousand of gain on the disposal of long-lived assets for the years ended August 31, 2025 and 2024, respectively. Due to the excess capacity charges that we have suffered for many years, and considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of certain of our idle equipment in the year ended August 31, 2024.
Other Income (Expenses)
Years Ended August 31,
Revenues
Revenues
(in thousands)
Investment loss from unconsolidated entities
Interest expenses, net
Other income, net
Foreign currency transaction gain (loss), net
Total other income, net
Investment loss from unconsolidated entities. Investment loss from unconsolidated entities increased from $3 thousand for the year ended August 31, 2024 to $958 thousand for the year ended August 31, 2025, primarily due to the increased losses of the unconsolidated entities.
Interest expenses, net. Interest expenses, net, which primarily consisted of accrued interest payments on loans with our Chairman and Chief Executive Officer and our largest shareholder, decreased from $247 thousand for the year ended August 31, 2024 to $140 thousand for the year ended August 31, 2025. The decrease in interest expense, net was primarily due to the repayment $1.6 million of loan principal in fiscal year 2025.
Other income, net. Other income, net decreased from $1.2 million for the year ended August 31, 2024 to $1.1 million for the year ended August 31, 2025, primarily due to reduced payments received under the Patent Cross-License Agreement with CrayoNano AS.
Foreign currency transaction gain (loss), net. We recognized a net foreign currency transaction gain of $464 thousand and a net foreign currency transaction loss of $13 thousand for the years ended August 31, 2025 and 2024, respectively, primarily due to the impact of fluctuations in the exchange rate of the U.S. dollar against the NT dollar from bank deposits and accounts receivable.
Income Tax Expense (Benefit)
Our effective tax rate is expected to be approximately zero for both fiscal year 2025 and 2024, since Taiwan Bandaoti Zhaoming Co., Ltd. incurred losses, and because we provided a full valuation allowance on all deferred tax assets, which consisted primarily of net operating loss carryforwards and foreign investment loss.
As of August 31, 2025 and 2024, we recognized full valuation allowances of $10.8 million and $13.6 million, respectively, on our net deferred tax assets to reflect uncertainties related to our ability to utilize these deferred tax assets, which consist primarily of certain net operating loss carryforwards and foreign investment loss. We considered both positive and negative evidence, including forecasts of future taxable income and our cumulative loss position, and continued to report a full valuation allowance against our deferred tax assets as of both August 31, 2025 and 2024. We continue to review all available positive and negative evidence in each jurisdiction and our valuation allowance may need to be adjusted in the future as a result of this ongoing review. Given the magnitude of our valuation allowance, future adjustments to this allowance based on actual results could result in a significant adjustment to our results of operations.
As of August 31, 2025, we had U.S. federal net operating loss (“NOLs”) carryforwards of $4.3 million, which will expire in various amounts beginning in our fiscal 2026. NOLs generated in tax years prior to August 31, 2018 can be carried forward for twenty years, whereas NOLs generated after August 31, 2018 can be carried forward indefinitely. Utilization of these net operating losses carryforwards may be subject to an annual limitation due to applicable provisions of the Internal Revenue Code and local tax laws if we have experienced an “ownership change” in the past, or if an ownership change occurs in the future.
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As of August 31, 2025, we had total foreign net operating loss carryforwards of $37 million, arising primarily from certain of our consolidated and majority owned subsidiaries in Taiwan. Pursuant to the Taiwan Income TaxAct, as amended in January 2009, net operating losses carryforwards can be carried forward for a period of ten years.
Net Income Attributable to Noncontrolling Interests
Years Ended August 31,
Revenues
Revenues
(in thousands)
Net Income attributable to noncontrolling interests
We recognized zero and $5 thousand net income attributable to non-controlling interests for the year ended August 31, 2025 and 2024, respectively, which was attributable to the share of the net income of Taiwan Bandaoti Zhaoming Co., Ltd. held by the non-controlling holders. Non-controlling interests represented zero and 2.63% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., as of August 31, 2025 and 2024, respectively.
Liquidity and Capital Resources
This section includes a discussion and analysis of our cash requirements, contingencies, sources and uses of cash, operations, working capital and long-term assets and liabilities.
Contingencies
We have several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between August 2026 and December 2040. See Note 6, "Commitments and Contingencies" in the notes to our audited consolidated financial statements in this Form 10-K.
Sources and Uses of Cash
As of August 31, 2025 and 2024, we had cash and cash equivalents of $2.6 million and $1.7 million, respectively, which were predominately held in U.S. dollar denominated demand deposits and/or money market funds. We require cash to fund our operating expenses, working capital requirements and service our debts, including principal and interest.
Long-term assets and liabilities
Our long-term assets consist primarily of property, plant and equipment, intangible assets, operating lease assets and investments in unconsolidated entities. Our manufacturing rationalization plans have included efforts to utilize our existing manufacturing assets and supply arrangements more efficiently. We believe that near-term access to additional manufacturing capacity, should it be required, could be readily obtained on reasonable terms through manufacturing agreements with third parties. We will continue to look for opportunities to make strategic manufacturing in the future for additional capacity.
Our long-term liabilities consist primarily long-term debt and operating lease liabilities.
Our long-term debt, which consisted of NT dollar denominated long-term notes, convertible unsecured promissory notes, and loans from our Chairman and our largest shareholder, totaled $1.7 million and $3.7 million as of August 31, 2025 and 2024, respectively.
Our NT dollar denominated long-term notes, totaled $908 thousand and $1.3 million as of August 31, 2025 and 2024, respectively. These long-term notes consist of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million). The first loan originally for $2.0 million (NT$62 million) has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 2.415% currently), and was exclusively used to repay the existing loans. The second loan originally for $1.2 million (NT$38 million) has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 2.795% currently) and is available for operating capital. These loans are secured by an $82 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.
Starting from May 2021, the first note payable requires monthly payments of principal in the amount of $25 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of August 31, 2025, our outstanding balance on this note payable was approximately $563 thousand.
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Starting from May 2021, the second note payable requires monthly payments of principal in the amount of $15 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of August 31, 2025, our outstanding balance on this note payable was approximately $345 thousand .
Property, plant and equipment pledged as collateral for our notes payable were $1.7 million and $2.0 million as of August 31, 2025 and 2024, respectively.
On January 8, 2019, we entered into secured loan agreements with Trung Doan, our Chairman and Chief Executive Officer and J.R. Simplot Company, our largest shareholder, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of 8% (the “Loan Agreements”). The Loan Agreements are secured by a second priority security interest on our headquarters building. The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021, respectively. On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022, and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023. On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024.
On January 7, 2024, J.R. Simplot Company entered into an assignment agreement (the “Assignment”) pursuant to which J.R. Simplot assigned and transferred all of its right, title and interest in and to the Loan Agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the Loan Agreement.
On January 7, 2024, we entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc. and Trung Doan. The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc. (i) extended the maturity date to January 15, 2025, and (ii) upon mutual agreement of us and Simplot Taiwan Inc., permitted us to repay any principal amount or accrued interest, in an amount not to exceed $400,000, by issuing shares of our common stock in the name of Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement with Simplot Taiwan Inc. remained the same. The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025. All other terms and conditions of the Loan Agreement with Trung Doan remained the same.
On January 7, 2024, we issued 305,343 shares of our common stock at a price of $1.31 per share to repay $400,000 of accrued interest on the loan agreement with Simplot Taiwan Inc.
On February 9, 2024, we entered into the Fifth Amendment to the Loan Agreement with Trung Doan. The Fifth Amendment to the Loan Agreement with Trung Doan (i) amended the Loan Agreement to permit us to repay up to $800,000 of principal under the Loan Agreement by issuing shares of the our common stock and (ii) elected to prepay $800,000 of loan principal by delivering 629,921 shares of the our common stock to Trung Doan, based on the closing price of $1.27 per share on February 8, 2024. All other terms and conditions of the Loan Agreement remained the same.
On February 9, 2024, we repaid $800,000 of loan principal by delivering 629,921 shares of our common stock to Mr. Doan, based on the closing price of $1.27 per share on February 8, 2024.
On July 3, 2024, we and Trung Doan entered into the Sixth Amendment to the Loan Agreement. The Sixth Amendment to the Loan Agreement amended the Loan Agreement to permit us, upon the mutual agreement of us and Trung Doan, to repay a portion of the principal amount or accrued interest under the Loan Agreement, by issuing shares of our common stock to Trung Doan as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement, as amended by the Sixth Amendment to the Loan Agreement, remained the same. On January 15, 2025, we entered into the Seventh Amendment to the Loan Agreement with Trung Doan and Fifth Amendment to the Loan Agreement with Simplot Taiwan Inc. to extend the maturity dates to January 15, 2026. All other terms and conditions of the Loan Agreements remained the same.
On February 28, 2025, we and Simplot Taiwan Inc. entered into the Sixth Amendment to the Loan Agreement (the “Amended Loan Agreement”). The Amended Loan Agreement, upon the mutual agreement of us and Simplot Taiwan Inc., permits us to repay any principal amount or accrued interest, in an amount not to exceed $1,200,000, by issuing shares of our common stock to Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.
On February 28, 2025, we delivered payment notices indicating our intent to repay $1,200,000 and $400,000 of loan principal by delivering 722,891 shares and 240,963 shares of our common stock to Simplot Taiwan Inc. and Trung Doan, respectively, based on the closing price of $1.66 per share on February 27, 2025.
As of August 31, 2025 and 2024, these loans totaled $800 thousand and $2.4 million, respectively.
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Working Capital
We have incurred significant losses since inception, including net losses attributable to SemiLEDs stockholders of $1.1 million and $2.0 million during the years ended August 31, 2025 and 2024. Net cash provided by operating activities for the year ended August 31, 2025 was $2.2 million. As of August 31, 2025, we had cash and cash equivalents of $2.6 million. We have undertaken actions to decrease losses incurred and implemented cost reduction programs in an effort to transform the Company into a profitable operation. In addition, we are planning to issue additional equity to our stockholders.
We estimate that our cash requirements to service debt and contractual obligations in fiscal 2026 is approximately $1.9 million, which we expect to fund through the issuance of additional equity to repay principal and accrued interest and through loan extensions. Based on our current financial projections and assuming the successful implementation of our liquidity plans, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months and beyond. The remaining loans with each of our Chairman and Chief Executive Officer and our largest shareholder are expected to be extended upon maturity or repaid with equity. However, there can be no assurances that our planned activities will be successful in raising additional capital, reducing losses and preserving cash. If we are not able to generate positive cash flows from operations, we may need to consider alternative financing sources and seek additional funds through public or private equity financings or from other sources, or refinance our indebtedness, to support our working capital requirements or for other purposes. There can be no assurance that additional debt or equity financing will be available to us or that, if available, such financing will be available on terms favorable to us.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial conditions, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our common stock.
Cash Flows
The following summary of our cash flows for the periods indicated has been derived from our consolidated financial statements, which are included elsewhere in this Annual Report on Form 10‑K (in thousands):
Years Ended August 31,
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash used in financing activities
Cash Flows Provided by (Used In) Operating Activities
Net cash provided by operating activities for the years ended August 31, 2025 was $2.2 million, and net cash used in operating activities for the years ended August 31, 2024 was $365 thousand. The increase in cash flows used in operating activities was primary attributable to an $900 thousand decrease of net loss, an $5.3 million increase of accounts payable, an $955 thousand increase of investment loss from unconsolidated entities and an $840 thousand increase of accrued expenses and other current liabilities, partially offset by a $3.6 million increase of accounts receivable, a $1.5 million increase of inventory and a $234 thousand increase of prepaid expenses and other current assets.
Cash Flows Used in Investing Activities
Net cash used in investing activities for the years ended August 31, 2025 and 2024 was $595 thousand and $101 thousand, respectively, primarily for the purchases of property, plant and equipment during each period.
Cash Flows Used in Financing Activities
Net cash used in financing activities for the years ended August 31, 2025 and 2024 was $622 thousand and $449 thousand, respectively. The increase in cash flows used in financing activities was primarily due to an increase in acquisition of noncontrolling interest.
Capital Expenditures
We had capital expenditures of $569 thousand and $123 thousand for the years ended August 31, 2025 and 2024, respectively. Our capital expenditures consisted primarily of the purchases of machinery and equipment, construction in progress, prepayments for our manufacturing facilities and prepayments for equipment purchases. We expect to continue investing in capital expenditures in the future as we expand our business operations and invest in such expansion of our production capacity as we deem appropriate under market conditions
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and customer demand. However, in response to controlling capital costs and maintaining financial flexibility, our management continues to monitor prices and, consistent with its existing contractual commitments, may decrease its activity level and capital expenditures as appropriate.
Accounting Pronouncements Not Yet Adopted
Please refer to ‘Summary of Significant Accounting Policies Recent Accounting Pronouncements’ for more details.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk
Not applicable.
Item 8. Financial Statemen ts and Supplementary Data
Pages
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 6781 and 2851 )
Page
CONSOLIDATED BALANCE SHEETS AS OF AUGUST 31, 2025 AND 2024
Page
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED AUGUST 31, 2025 AND 2024
Page
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED AUGUST 31, 2025 AND 2024
Page
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED AUGUST 31, 2025 AND 2024
Page
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED AUGUST 31, 2025 AND 202 4
Pages
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the board of directors of SemiLEDs Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of SemiLEDs Corporation and its subsidiaries (the “Company”) as of August 31, 2025, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2025 and the results of its operations and its cash flows for the year then ended in conformity with the U.S. generally accepted accounting principles.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company incurred recurring losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Critical Audit Matter Description
As described in Note 2 to the consolidated financial statements, the Company’s revenue is derived from the delivery of its products. The sale of products by the Company is considered complete when the products are delivered at that time the ownership and risk of loss have been transferred to the customer.
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The Company considers each contract with each customer to contain one performance obligation, and the Company is entitled to the consideration when the performance obligation is satisfied at a point in time. The amount of revenue to be recognized is determined by the contract between the Company and each customer. The Company recognizes revenue when each product is delivered.
The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of the timing and amount of revenue recognition, is a critical audit matter involved judgment exercised by management in identifying and evaluating the performance obligation. Auditor judgement is involved in performing our audit procedures to evaluate whether the timing and amount of revenue recognition was appropriately stated.
How the Critical Audit Matter Will Be Addressed in the Audit
Our audit procedures over determining the timing and amount of revenue recognition involved, among others, evaluation of management’s assessment in regard to the identification of performance obligations related to revenue. We selected customer agreements and performed the following procedures:
Evaluated the terms and conditions of each selected contract and the appropriateness of the accounting treatment within the context of the five-step model prescribed by ASC 606, Revenue from Contracts with Customers, and evaluated whether management’s conclusions were appropriate.
Tested the accuracy of management’s recognition of revenue for the performance obligation.
/s/ YCM CPA INC.
We have served as the Company’s auditor since 2025.
PCAOB ID 6781
Irvine, California
November 28, 2025
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A udit T ax C onsulting F inancial A dvisory
Registered with Public Company Accounting Oversight Board (PCAOB)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the board of directors of SemiLEDs Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of SemiLEDs Corporation and its subsidiaries (the “Company”) as of August 31, 2024, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with the U.S. generally accepted accounting principles.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 2 to the financial statements, the Company incurred recurring losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Critical Audit Matter Description
As described in Note 2 to the consolidated financial statements, the Company’s revenue is derived from the delivery of its products. The sale of products by the Company is considered complete when the products are delivered at that time the ownership and risk of loss have been transferred to the customer.
The Company considers the contracts with its customer contain one performance obligation, and the Company is entitled to the consideration when performance obligation is satisfied at a point in time. The amount of revenue to be recognized is determined by the contracts between the Company and its customer. The Company recognizes revenue when the product is delivered.
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The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of the timing and amount of revenue recognition, is a critical audit matter, involved judgment exercised by management in identifying and evaluating the performance obligation. Auditor judgement is involved in performing our audit procedures to evaluate whether the timing and amount of revenue recognition was appropriately stated.
How the Critical Audit Matter Will Be Addressed in the Audit
Our audit procedures over determining the timing and amount of revenue recognition involved, among others, evaluation of management’s assessment in regard to the identification of performance obligation of revenue. We selected customer agreements and performed the following procedures:
Evaluated the terms and conditions of each selected contract and the appropriateness of the accounting treatment within the context of the five-step model prescribed by ASC 606, Revenue from Contracts with Customers, and evaluated whether management’s conclusions were appropriate.
Tested the accuracy of management’s recognition of revenue for the performance obligation.
/s/ KCCW Accountancy Corp.
We have served as the Company’s auditor since 2019.
Diamond Bar, California
November 26, 2024
KCCW Accountancy Corp.
3333 South Brea Canyon Rd. #206, Diamond Bar, CA 91765, USA
Tel: +1 909 348 7228 ● Fax: +1 909 895 4155 ● info@kccwcpa.com
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SEMILEDS CORPORATION AND SUBSIDIARIES
CONSOLIDATED B ALANCE SHEETS
(In thousands of U.S. dollars and shares, except par value)
August 31,
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable (including related parties), net of allowance for doubtful accounts
of $ 180 and $ 173 as of August 31, 2025 and 2024, respectively)
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Operating lease right of use assets
Intangible assets, net
Investments in unconsolidated entities
Other assets
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt
Accounts payable
Accrued expenses and other current liabilities
Other payable to related parties
Operating lease liabilities, current portion
Total current liabilities
Long-term debt, excluding current installments
Operating lease liabilities, less current portion
Total liabilities
Commitments and contingencies (Note 6)
EQUITY:
SemiLEDs stockholders’ equity
Common stock, $ 0.0000056 par value— 15,000 shares authorized; 8,226 shares
and 7,212 shares issued and outstanding as of August 31, 2025 and 2024,
respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total SemiLEDs stockholders’ equity
Noncontrolling interests
Total stockholders’ equity
TOTAL LIABILITIES AND EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
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SEMILEDS CORPORATION AND SUBSIDIARIES
CONSOLID ATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars and shares, except per share data)
Years Ended August 31,
Revenues, net
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling, general and administrative
Gain on disposals of long-lived assets, net
Total operating expenses
Loss from operations
Other income (expenses):
Investment loss from unconsolidated entities
Interest expenses, net
Other income, net
Foreign currency transaction gain (loss), net
Total other income, net
Loss before income taxes
Income tax expense
Net loss
Less: Net income attributable to noncontrolling interests
Net loss attributable to SemiLEDs stockholders
Net loss per share attributable to SemiLEDs stockholders:
Basic and diluted
Shares used in computing net loss per share attributable to SemiLEDs stockholders:
Basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
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SEMILEDS CORPORATION AND SUBSIDIARIES
CONSOLIDATE D STATEMENTS OF COMPREHENSIVE LOSS
(In thousands of U.S. dollars)
Years Ended August 31,
Net loss
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $ 0 for both periods
Comprehensive loss
Comprehensive income attributable to noncontrolling interests
Comprehensive loss attributable to SemiLEDs stockholders
The accompanying notes are an integral part of these consolidated financial statements.
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SEMILEDS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT S OF CHANGES IN EQUITY
(In thousands of U.S. dollars and shares)
Accumulated
Total
Additional
Other
SemiLEDs
Non-
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders’
Controlling
Total
Shares
Amount
Capital
Income
Deficit
Equity
Interests
Equity
BALANCE—September 1, 2023
Issuance of common stock upon vesting of RSUs
Stock-based compensation
Conversion of convertible notes payable to common stock
Issuance of common stock to repay long-term loan
Comprehensive loss
Other comprehensive loss
Net loss
BALANCE—August 31, 2024
Issuance of common stock upon vesting of RSUs
Stock-based compensation
Issuance of common stock to repay long-term loan
Change ownership in SBDI
Comprehensive loss
Other comprehensive income
Net loss
BALANCE—August 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
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SEMILEDS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEM ENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Years Ended August 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Stock-based compensation expense
Bad debt expense
Provisions for inventory write-downs
Loss from unconsolidated entities
Gain on disposals of long-lived assets, net
Changes in :
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other current liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for development of intangible assets
Placement of refundable deposits
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
Acquisition of noncontrolling interests
Net cash used in financing activities
Changes in cash balance included in deconsolidated subsidiaries
Effect of exchange rate changes on cash and cash equivalents
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of year
CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—End of year
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for income taxes
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible notes payable to common stock
Issuance of common stock to repay long-term loan
The accompanying notes are an integral part of these consolidated financial statements.
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SEMILEDS CORPORATION AND SUBSIDIARIES
NOT ES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
SemiLEDs Corporation (“SemiLEDs” or the “parent company”) was incorporated in Delaware on January 4, 2005 and is a holding company for various wholly owned subsidiaries. SemiLEDs and its subsidiaries (collectively, the “Company”) develop, manufacture and sell high performance light emitting diodes (“LEDs”). The Company’s core products are LED components, LED modules and systems, as well as LED chips and lighting products. LED components, modules and systems have become the most important part of its business. A portion of the Company’s business consists of the sale of contract manufactured LED products. The Company’s customers are concentrated in a few select markets, including India, Japan, the Netherlands, and the United States.
As of August 31, 2025, SemiLEDs had one wholly owned operating subsidiary, Taiwan Bandaoti Zhaoming Co., Ltd., which conducts its research, development, manufacturing, marketing and sale of LED components and employs the Company’s employees.
SemiLEDs’ common stock trades on the NASDAQ Capital Market under the symbol “LEDS”.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Going Concern — The accompanying 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 has suffered losses from operations of $ 1.6 million and $ 2.9 million, and net cash provided by operating activities of $ 2.2 million and net cash used in operating activities of $ 365 thousand, for the years ended August 31, 2025 and 2024, respectively. These facts and conditions have raised substantial doubt about the Company’s ability to continue as a going concern, even though gross profit on product sales was $ 2.4 million for the year ended August 31, 2025 compared to $ 1.1 million for the year ended August 31, 2024. On August 31, 2025, the Company’s cash and cash equivalents increased to $ 2.6 million mainly due to operating income. Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business. The plan includes:
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 products into many other applications or devices.
Growing buy-sell purchase orders of equipment to improve the Company’s future gross margin, operating results and cash flows.
Continuing to monitor prices, work with current and potential vendors to decrease costs and, consistent with its existing contractual commitments, possibly decrease its activity level and capital expenditures further. This plan reflects its strategy of controlling capital costs and maintaining financial flexibility.
Raising additional cash through potential equity offerings, sales of assets and/or issuance of debt as considered necessary and looking at other potential business opportunities.
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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. Failure to successfully implement the liquidity plan may have a material adverse effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.
R estricted Cash Equivalents — Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan, including compensating balances required under the Company's long-term loan requirements. As of August 31, 2025 and 2024, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $ 177 thousand and $ 169 thousand, respectively.
Revenue Recognition — Effective September 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method. The Company applied the following five steps to achieve the core principles of ASC 606: 1) identified the contract with a customer; 2) identified the performance obligations (promises) in the contract; 3) determined the transaction price; 4) allocated the transaction price to the performance obligations in the contract; and 5) recognized revenue when (or as) the Company satisfies a performance obligation. The Company recognizes the amount of revenue, when the Company satisfies a performance obligation, to which it expects to be entitled for the transfer of promised goods or services to customers. The Company obtains written purchase authorizations from its customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. Generally, the Company considers delivery to have occurred at the time of shipment as this is generally when title and risk of loss for the products will pass to the customer. The Company provides its customers with limited rights of return for non‑conforming shipments and product warranty claims. Based on historical return percentages, which have not been material to date, and other relevant factors, the Company estimates its potential future exposure on recorded product sales, which reduces product revenues in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets. The Company also provides standard product warranties on its products, which generally range from three months to two years . Management estimates the Company’s warranty obligations as a percentage of revenues, based on historical knowledge of warranty costs and other relevant factors. To date, the related estimated warranty provisions have been insignificant.
Principles of Consolidation — The consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation.
On September 1, 2018, the Company adopted ASC 825-10, “Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. This standard allows equity investments that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of impairment. The standard also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period.
Investments in which the Company has the ability to exercise significant influence over the investee but not a controlling financial interest, are accounted for using the equity method of accounting and are not consolidated. These investments are in joint ventures that are not subject to consolidation under the variable interest model, and for which the Company: (i) does not have a majority voting interest that would allow it to control the investee, or (ii) has a majority voting interest but for which other shareholders have significant participating rights, but for which the Company has the ability to exercise significant influence over operating and financial policies. Under the equity method, investments are stated at cost after adding or removing the Company’s portion of equity in undistributed earnings or losses, respectively. The Company’s investment in these equity‑method entities is reported in the consolidated balance sheets in investments in unconsolidated entities, and the Company’s share of the income or loss of these equity‑method entities, after the elimination of unrealized intercompany profits, is reported in the consolidated statements of operations in equity in losses from unconsolidated entities. When net losses from an equity‑method investee exceed its carrying amount, the carrying amount of the investment is reduced to zero. The Company then suspends using the equity method to provide for additional unless the Company has guaranteed obligations or is otherwise committed to provide further financial support to the equity‑method investee. The Company resumes accounting for the investment under the equity method if the investee subsequently returns to and the Company’s share of the investee’s income exceeds its share of the cumulative that have not been previously recognized during the period the equity method is .
Investments in entities that are not consolidated or accounted for under the equity method are recorded as investments without readily determinable fair values. Investments without readily determinable fair values are reported on the consolidated balance sheets in investments in unconsolidated entities, 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. Dividend income, if any, received is reported in the consolidated statements of operations in equity in losses from unconsolidated entities.
If the fair value of an equity investment declines below its respective carrying amount and the decline is determined to be other‑than‑temporary, the investment will be written down to its fair value.
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Use of Estimates — The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the preparation of the Company’s consolidated financial statements on the basis that the Company will continue as a going concern, the collectability of accounts receivable, inventory net realizable values, realization of deferred tax assets, valuation of stock-based compensation expense, the useful lives of property, plant and equipment and intangible assets, the recoverability of the carrying amount of property, plant and equipment, intangible assets and investments in unconsolidated entities, the fair value of acquired tangible and intangible assets, income tax uncertainties, provision for potential litigation costs and other contingencies. Management bases its estimates on historical experience and also on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however, actual results could differ materially from those estimates.
Reclassifications of prior year presentation — The Company reclassified restricted cash from current assets to non-current assets based on management’s assessment of the expected timing of the release of such restrictions. As a result, restricted cash of $ 78 thousand as of August 31, 2024, previously presented within current assets, have been reclassified to non-current assets. These reclassifications had no impact on total assets, total liabilities, stockholders’ equity, or net income for any of the periods presented.
Certain Significant Risks and Uncertainties — The Company is subject to certain risks and uncertainties that could have a material and adverse effect on the Company’s future financial position or results of operations, which risks and uncertainties include, among others: 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. The loss of any of these suppliers and contract manufacturers may cause the Company to incur transition costs to another supplier or contract manufacturer, result in delays in the manufacturing and delivery of the Company’s products, or cause it to carry excess or obsolete inventory. The Company relies on a limited number of such suppliers and contract manufacturers for the fulfillment of its customer orders. Any failure of such suppliers and contract manufacturers to perform could have an adverse effect upon the Company’s reputation and its ability to distribute its products or satisfy customers’ orders, which could adversely affect the Company’s business, financial position, results of operations and cash flows.
Concentration of Credit Risk — Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable.
The Company keeps its cash and cash equivalents in demand deposits with prominent banks of high credit quality and invests only in money market funds. Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation in the United States or Central Deposit Insurance Corporation in Taiwan up to certain limits. At times, such deposits may be in excess of the insurance limit. U.S. accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $ 250,000 . As of August 31, 2025 and 2024, the Company had no cash in excess of FDIC insured limits. The Company maintains cash in state-owned banks in Taiwan. In Taiwan, the insurance coverage of each bank is NTD$ 3,000,000 (approximately USD$ 98,070 ). As of August 31, 2025 and 2024, the Company had $ 2,281 thousand and $ 1,268 thousand cash in excess of the insured amount, respectively. The Company has not experienced any losses in such accounts. As of August 31, 2025 and 2024, cash and cash equivalents of the Company consisted of the following (in thousands):
August 31,
Cash and Cash Equivalents by Location
United States;
Denominated in U.S. dollars
Taiwan;
Denominated in U.S. dollars
Denominated in New Taiwan dollars
Denominated in other currencies
Total cash and cash equivalents
During fiscal year 2025, the Company’s revenues were substantially derived from buy-sell purchase orders of equipment. Net revenues generated from buy-sell purchase orders of equipment to two customers represented 89% for the year ended August 31, 2025. A significant portion of the Company’s revenues are derived from a limited number of customers, and sales are concentrated in a few select markets.
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Management performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. Management evaluates the need to establish an allowance for doubtful accounts for estimated potential credit losses at each reporting period. The allowance for doubtful accounts is based on the management’s assessment of the collectability of its customer accounts. Management regularly reviews the allowance by considering certain factors, such as historical experience, industry data, credit quality, ages of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.
Customers that accounted for 10% or more of the Company’s total accounts receivable as of August 31, 2025 and 2024 consist of the following:
August 31,
Customers
Customer A
Customer B
Customer C
Customer D
The customers accounted for 10% or more of the Company’s total net revenues for the years ended August 31, 2025 and 2024, as follows (in thousands, except percentages):
Years Ended August 31,
Customers
Amount
Revenues
Amount
Revenues
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
Customer G
Cash and Cash Equivalents — The Company considers all highly liquid investment instruments purchased with initial maturities of three months or less to be cash equivalents.
As of August 31, 2025 and 2024, cash and cash equivalents of the Company consist of the following (in thousands):
August 31,
Cash and Cash Equivalents
Cash;
Cash and demand deposits
Total cash and cash equivalents
Restricted Cash Equivalents — Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan, including compensating balances required under the Company's long-term loan requirements. As of August 31, 2025 and 2024 , the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $ 177 thousand and $ 169 thousand, respectively.
Foreign Currency — The Company’s subsidiaries use the local currency as their functional currency. The asset s and liabilities of the subsidiaries are, therefore, translated into the U.S. dollars at exchange rates in effect at each balance sheet date, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive income (loss) within equity. Income and expense accounts are translated at average exchange rates during the period. Any gains and losses from transactions denominated in foreign currencies are recognized in the consolidated statements of operations as a separate component of other income (expense).
Accounts Receivable — Accounts receivable (including related parties with zero net book value as of August 31, 2025 and 2024, respectively) are recorded at invoiced amounts, net of allowances for doubtful accounts, and do not bear interest. The allowance for doubtful accounts is based on management’s assessment of the collectability of customer acc ounts. Management regularly reviews the allowance by considering certain factors such as historical experience, industry data, credit quality, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. Bad debt expenses were $ 115 thousand and zero for the years ended August 31, 2025 and 2024, respectively.
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Inventories — Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value. Cost is determined using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Company’s production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write‑downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped.
Property, Plant and Equipment — Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment. Depreciation on property, plant and equipment is calculated using the straight‑line method over the estimated useful lives, less estimated salvage values of the assets. Leasehold improvements are amortized using the straight‑line method over the shorter of the lease term or estimated useful life of the asset.
The estimated useful lives of property, plant and equipment are as follows:
Buildings and improvements
years
Machinery and equipment
years
Leasehold improvements
years
Other equipment
years
Major Maintenance Activities — The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.
Intangible Assets — Intangible assets consist of patents, trademarks and acquired technology. Intangible assets are initially recognized at their respective acquisition costs. All of the Company’s intangible assets have been determined to have finite useful lives and are, therefore, amortized using the straight‑line method over their estimated useful lives:
Patents and trademarks
years
Acquired technology
years
Impairment of Long ‑ Lived Assets — Management evaluates the Company’s long‑lived assets, excluding goodwill, that consist of property, plant and equipment and intangible assets, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying amount of the asset over the estimated fair value of the asset. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third‑party independent appraisers, as considered necessary.
No impairment charge was recognized in the years ended August 31, 2025 and 2024.
Recovery of Investments in Unconsolidated Entities — Management evaluates the recoverability of the carrying amount of the Company’s equity investments accounted for using the equity method and cost method when there is an indication of potential impairment. If the estimated realizable value of an equity investment falls below its carrying amount and management determines that this shortfall is other‑than‑temporary, the carrying amount of such investment is written down to its estimated realizable value. In determining whether a decline in value is other‑than‑temporary, management considers the length of time and the extent to which such value has been less than the carrying amount, the financial condition and prospects of the investee, and the Company’s ability and intent to retain the equity investment for a period of time sufficient to allow for any anticipated recovery in value.
Impairment charges of $ 930 thousand and zero were recognized for the years ended August 31, 2025 and 2024, respectively.
Income Taxes — The Company accounts for income taxes under the asset and liability method. As part of the process of preparing the consolidated financial statements, the Company estimates its income taxes in each of the jurisdictions in which it operates. The Company estimates actual current tax expense together with assessing temporary differences resulting from differing accounting treatment for items such as accruals and allowances that are not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities which are included in the Company’s consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s consolidated statements of operations become deductible expenses under applicable income tax laws or when operating loss or tax credit carryforwards are utilized. Accordingly, realization of the deferred tax assets
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is dependent on the Company’s ability to earn future taxable income against which these deductions, losses and credits can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applicable to the taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the Company’s deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period the change in the tax law was enacted.
Management assesses the likelihood that the Company’s deferred tax assets will be recovered from future taxable income and, to the extent management believes that recovery is not more likely than not, a valuation allowance is established. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Stock ‑ based Compensation — Compensation costs related to employee stock options and restricted stock units are based on the fair value of the options and stock units on the date of grant, net of estimated forfeitures. The Company determines the grant date fair value of the options using the Black‑Scholes option‑pricing model. The related stock‑based compensation expense is generally recognized on a straight‑line basis over the period in which an employee is required to provide service in exchange for the options and stock units, or the vesting period of the respective options and stock units.
Research and Development Costs — Research and development costs are expensed as incurred. Research and development costs are presented as a separate line item in the consolidated statements of operatio ns.
Advertising Costs — Advertising costs are expensed as incurred. Advertising costs totaled zero and $ 3 thousand for the years ended August 31, 2025 and 2024, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.
Segment Reporting — The Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Company’s reportable segments. During the years ended August 31, 2025 and 2024, the Chief Executive Officer has been identified as the chief operating de cision maker. The Company’s chief operating decision maker regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the Company does not have any operating segments as defined in the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 280‑10‑50‑1, “Segment Reporting.”
Shipping and Handling Costs — The Company includes costs from shipping and handling within cost of revenues in the period in which they are incurred.
Net Income (Loss) Per Share of SemiLEDs Common Stock — Basic net income (loss) per share is computed by dividing net income (loss) attributable to SemiLEDs stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) attributable to SemiLEDs stockholders is determined by allocating undistributed earnings as if all of the earnings for the period had been distributed. Diluted net income (loss) per share is computed by using the weighted‑average shares of common stock outstanding, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options and unvested restricted stock units using the treasury stock method.
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. Changes in ownership interest in a consolidated subsidiary that do not result in a loss of control are accounted for as an equity transaction. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.
On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd. (“SBDI”), the Company’s wholly owned operating subsidiary, issued 414,000 common shares and amended its certificate of incorporation to increase its common stock issued from 12,087,715 shares to 12,501,715 shares. As of the issuance date, the increased capital of $ 176 thousand (NT$ 5.4 million) had been completely received in cash by SBDI. SemiLEDs Optoelectronics Co., Ltd. (“Taiwan SemiLEDs”) did not subscribe for the newly issued common shares, and, as a result, the noncontrolling interest in Taiwan SemiLEDs increased from zero to 3.31 %. From January 2019 to September 2020, Taiwan SemiLEDs purchased an additional 33,000 common shares of SBDI from non-controlling shareholders. From March 2022 to May 2022, Taiwan SemiLEDs purchased an additional 52,000 common shares of SBDI from non-controlling shareholders. On September 1, 2024, Taiwan SemiLEDs purchased the remaining 329,000 common shares of SBDI from non-controlling shareholders. On April 1, 2025, Taiwan Bandaoti Zhaoming Co., Ltd. merged with and into Taiwan SemiLEDs. Taiwan Bandaoti Zhaoming Co., Ltd. now functions as a division of Taiwan SemiLEDs with all property, obligations, and capital being transferred to Taiwan SemiLEDs. Taiwan SemiLEDs changed its company name to Taiwan Bandaoti Zhaoming Co., Ltd. after the merger. The noncontrolling interest in former Taiwan Bandaoti Zhaoming Co., Ltd. was zero and 2.63 % as of August 3 1 , 2025 and 2024, respectively.
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Commitments and Contingencies — Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
Fair Value Measurements — The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level2 Inputs: Other than quoted prices included in Level1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
See Note12 for further details.
Recent Accounting Pronouncements
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 was effective for fiscal years beginning after December 15, 2023. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). 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 was effective for the fiscal year beginning September 1, 2022, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (CODM). In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. ASU 2023-07 will be effective for annual reporting periods beginning after December 15, 2023, and interim periods within annual reporting periods beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
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3. BALANCE SHEET COMPONENTS
Inventories
Inventories as of August 31, 2025 and 2024 consist of the following (in thousands):
August 31,
Raw materials
Work in process
Finished goods
Total
Inventory write‑downs to estimated net realizable values for the years ended August 31, 2025 and 2024 were $ 323 thousand and $ 411 thousand, respectively.
Property, Plant and Equipment
Property, plant and equipment as of August 31, 2025 and 2024 consist of the following (in thousands):
August 31,
Buildings and improvements
Machinery and equipment
Leasehold improvements
Other equipment
Construction in progress
Total property, plant and equipment
Less: Accumulated depreciation and amortization
Property, plant and equipment, net
Depreciation expense was $ 696 thousand and $ 595 thousand for the years ended August 31, 2025 and 2024, respectively.
Property, plant and equipment pledged as collateral for the Company’s notes payable were $ 1.7 million and $ 2.0 millio n as of August 31, 2025 and 2024, respectively.
Intangible Assets
Intangible assets as of August 31, 2025 and 2024 consist of the following (in thousands):
August 31, 2025
Weighted
Average
Gross
Net
Amortization
Carrying
Accumulated
Carrying
Period (Years)
Amount
Amortization
Amount
Patents and trademarks
Acquired technology
Total
August 31, 2024
Weighted
Average
Gross
Net
Amortization
Carrying
Accumulated
Carrying
Period (Years)
Amount
Amortization
Amount
Patents and trademarks
Acquired technology
Total
Amortization expense was $ 21 tho usand and $ 17 thousand for the years ended August 31, 2025 and 2024, respectively.
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No impairment charge was recognized in the years ended August 31, 2025 and 2024.
The estimated future amortization expense for the Company’s intangible assets as of August 31, 2025 is as follows (in thousands):
Years Ending August 31,
Total
Thereafter
Total
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of August 31, 2025 and 2024 consist of the following (in thousands):
August 31,
Accrued compensation and benefits
Customer deposits
Accrued business expenses
Accrued professional service fees
Other (individually less than 5 % of total accrued expenses and other current liabilities)
Total
4. INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of August 31, 2025 and 2024 consist of the following (in thousands, except percentages):
August 31, 2025
August 31, 2024
Percentage
Percentage
Ownership
Amount
Ownership
Amount
Equity method investments, net
Equity investment without readily determinable fair value - Beginning Balance
Various
Various
Dissolution of investee
Equity investment without readily determinable fair value - Ending Balance
Total investments in unconsolidated entities
There were no dividends received from unconsolidated entities through August 31, 2025.
Equity Investment 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 issuers. The recoverable value of the investment was determined based on the Company’s best estimate of the amount that could be realized from the investment, which considered the latest financial information. As of August 31, 2025, the Company held an equity investment without readily determinable fair value in High Power Optoelectronics, Inc., for which the Company recognized an impairment loss of $ 930 thousand during fiscal year 2025 based on the latest available financial information and the estimated recoverable value of the investment. The impairment losses for the equity investments without readily determinable fair value were $ 930 thousand and zero for the years ended August 31, 2025 and 2024, respectively.
Equity Method Investments
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In July 2023, TSLC Corporation, the Company’s subsidiary, had a board resolution to hold an equity interest in Yi Yang Optoelectronics Co., Ltd., accounting for its equity interest using the equity method to accounts for its equity investment as prescribed in ASC 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. As of August 31, 2025 and 2024 , the Company owns 47.62 % common stock shares of Yi Yang Optoelectronics Co., Ltd.
INDEBTEDNESS
Long ‑ term Debt
Long‑term debt as of August 31, 2025 and 2024 consist of the following loans (in thousands):
August 31,
First note payable- Mega Bank
Second note payable- Mega Bank
Loans from Chairman and Shareholders
Total long-term debt
Less: Current installments
Total long-term debt, excluding current installments
Our long-term debt, which consisted of New Taiwan dollar (“NTD”) denominated long-term notes and loans from the Chairman and the largest shareholder of the Company, total ed $ 1.7 million and $ 3.7 million as of August 31, 2025 and 2024, respectively.
On July 5, 2019, the Company and Mega International Commercial Bank (“Mega Bank”) entered into two NTD denominated loan agreements in an aggregate amount of $ 3.2 million (NT$ 100 million). The first note of $ 2.0 million (NT$ 62 million) payable to Mega Bank has an annual floating interest rate equal to the NTD base lending rate plus 0.64 % (or 2.415 % currently), and was exclusively used to repay original notes with E Sun Bank. The second note of $ 1.2 million (NT$ 38 million) payable to Mega Bank has an annual floating interest rate equal to the NTD base lending rate plus 1.02 % (or 2.795 % currently) and is available for operating capital. Both note payables are secured by a first priority security interest on the Company’s headquarters building. Income from renting the collateral must be deposited into a reserved account opened with Mega Bank, and only the balance of deposits exceeding $ 82 thousand (NT$ 2.5 million) after deducting the principal and interest payable for the current month (including the accumulated outstanding amount) may be transferred outwards. The balance of the reserve account is $ 82 thousand and $ 78 thousand as of August 31, 2025 and 2024, respectively. Due to the impact of the COVID-19 pandemic, Mega bank agreed to give the Company a deferment period for twelve months starting from May 2020 until April 2021. During this period, the Company did not need to pay the monthly payments of the principal but only the interest. Starting from May 2021, the two notes payables to Mega Bank require monthly payments of principal in the amount of $ 24 thousand plus interest and $ 14 thousand plus interest, respectively, over the 74 -month term of the notes with final payment to occur in July 2027 .
On January 8, 2019, the Company entered into secured loan agreements with Trung Doan, its Chairman and Chief Executive Officer and J.R. Simplot Company, its largest shareholder, with aggregate amounts of $ 1.7 million and $ 1.5 million, respectively, and an annual interest rate of 8 % (the “Loan Agreements”). The Loan Agreements are secured by a second priority security interest on the Company’s headquarters building. The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021 , respectively. On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022 , and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023 . On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024 .
On January 7, 2024, J.R. Simplot Company entered into an assignment agreement (the “Assignment”) pursuant to which J.R. Simplot assigned and transferred all of its right, title and interest in and to the Loan Agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the Loan Agreement.
On January 7, 2024, the Company entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc. and Trung Doan. The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc. (i) extended the maturity date to January 15, 2025 , and (ii) upon mutual agreement of the Company and Simplot Taiwan Inc., permitted the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 400,000 , by issuing shares of the Company’s common stock in the name of Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement with Simplot Taiwan Inc. remained the same. The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025 . All other terms and conditions of the Loan Agreement with Trung Doan remained the same.
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On January 7, 2024, the Company issued 305,343 shares of its common stock at a price of $ 1.31 per share to repay $ 400,000 of accrued interest on the loan agreement with Simplot Taiwan Inc.
On February 9, 2024, the Company entered into the Fifth Amendment to the Loan Agreement with Trung Doan. The Fifth Amendment to the Loan Agreement with Trung Doan (i) amended the Loan Agreement to permit the Company to repay up to $ 800,000 of principal under the Loan Agreement by issuing shares of the Company’s common stock and (ii) elected to prepay $800,000 of loan principal by delivering 629,921 shares of the Company’s common stock to Trung Doan, based on the closing price of $ 1.27 per share on February 8, 2024. All other terms and conditions of the Loan Agreement remained the same.
On February 9, 2024, the Company repaid $ 800,000 of loan principal by delivering 629,921 shares of the Company’s common stock to Mr. Doan, based on the closing price of $ 1.27 per share on February 8, 2024.
On July 3, 2024, the Company and Trung Doan entered into the Sixth Amendment to the Loan Agreement. The Sixth Amendment to the Loan Agreement amended the Loan Agreement to permit the Company, upon the mutual agreement of the Company and Trung Doan, to repay a portion of the principal amount or accrued interest under the Loan Agreement, by issuing shares of the Company’s common stock to Trung Doan as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement, as amended by the Sixth Amendment to the Loan Agreement, remained the same. On January 15, 2025, the Company entered into the Seventh Amendment to the Loan Agreement with Trung Doan and Fifth Amendment to the Loan Agreement with Simplot Taiwan Inc. to extend the maturity dates to January 15, 2026 . All other terms and conditions of the Loan Agreements remained the same.
On February 28, 2025, the Company and Simplot Taiwan Inc. entered into the Sixth Amendment to the Loan Agreement (the “Amended Loan Agreement”) . The Amended Loan Agreement, upon the mutual agreement of the Company and Simplot Taiwan Inc., permits the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 1,200,000 , by issuing shares of the Company’s common stock to Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.
On February 28, 2025, the Company delivered payment notices indicating its intent to repay $ 1,200,000 and $ 400,000 of loan principal by delivering 722,891 shares and 240,963 shares of the Company’s common stock to Simplot Taiwan Inc. and Trung Doan, respectively, based on the closing price of $ 1.66 per share on February 27, 2025.
As of August 31, 2025 and 2024, these loans totaled $ 800 thousand and $ 2.4 million, respectively.
The scheduled principal payments for the Company’s long-term debt as of August 31, 2025 consist of the following (in thousands):
Scheduled
Principal
Years Ending August 31,
Payments
Total
COMMITMENTS AND CONTINGENCIES
Operating Lease Agreements — The Company has several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancelable and noncancelable leases that expire at various dates between August 2026 and December 2040 . Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company did not combine lease and non-lease components.
Most leases do not include options to renew. The exercise of lease renewal options has to be agreed by the lessors. The depreciable life of assets and leasehold improvements are limited by the term of leases, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease expense is recognized on a straight-line basis over the term of the lease. Lease expense related to these noncancelable operating leases were $ 166 thousand and $ 155 thousand for the years ended August 31, 2025 and 2024, respectively.
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Balance sheet information related to the Company’s leases is presented below (in thousands):
August 31,
Assets
Operating lease right of use assets
Liabilities
Operating lease liabilities, current portion
Operating lease liabilities, less current portion
Total
The following provides details of the Company’s lease expenses (in thousands):
August 31,
Operating lease expenses
Other information related to leases is presented below (in thousands):
August 31,
Cash Paid for amounts Included In Measurement of Liabilities:
Operating cash flows from operating leases
Weighted Average Remaining Lease Term:
Operating leases
13.84 years
15.55 years
Weighted Average Discount Rate
Operating leases
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 % bas ed 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 August 31, 2025 consist of the following (in thousands):
Operating
Years Ending August 31,
Leases
Thereafter
Total future minimum lease payments, undiscounted
Less: Imputed interest
Present value of future minimum lease payments
Purchase Obligations — The Company had purchase commitments for inventory, property, plant and equipment in the amount of $ 461 th ousand and $ 521 thousand as of August 31, 2025 and 2024, 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. The Company recognizes a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. 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.
As of August 31, 2025, there was no pending litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.
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COMMON STOCK
On February 28, 2025, the Company delivered payment notices indicating its intent to repay $ 1,200,000 and $ 400,000 of loan principal by delivering 722,891 shares and 240,963 shares of the Company’s common stock to Simplot Taiwan Inc. and Trung Doan, respectively, based on the closing price of $ 1.66 per share on February 27, 2025.
8. STOCK ‑ BASED COMPENSATION
The Company currently has one equity incentive plan (the “2010 Plan”), which provides for awards in the form of restricted shares, stock units, stock options or stock appreciation rights to the Company’s employees, officers, directors and consultants. In April 2014, SemiLEDs’ stockholders approved an amendment to the 2010 Plan that increases the number of shares authorized for issuance under the plan by an additional 250 thousand shares. 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 March 17, 2023, the Board approved the amendment of the 2010 Plan to extend the term to March 17, 2033 , which was approved by the Company's stockholders at the annual meeting held on May 18, 2023.
A total of 1,421 thousand and 1,421 thousand shares were reserved for issuance under the 2010 Plan as of August 31, 2025 and 2024, respectively. As of August 31, 2025 and 2024, there were 444 tho usand and 544 thousand shares of common stock available for future issuance under the 2010 Plan, respectively.
In July 2025, SemiLEDs granted 96 thousand restricted stock units to its employees, which vest 12.5 % every three months from the vesting commencement date of July 10, 2025 and will become fully vested upon a change in control. The grant-date fair value of the restricted stock units was $ 2.81 per unit.
In November 2024, SemiLEDs granted 15 thousand restricted stock units to its directors, which vest 25 % every three months from the vesting commencement date of November 27, 2024 and will become fully vested upon a change in control. The grant-date fair value of the restricted stock units was $ 1.28 per unit.
Stock ‑ based Compensation Expense
The total stock-based compensation expense consists of stock-based compensation expense for stock options and restricted stock units granted to employees, directors and nonemployees. A summary of the stock-based compensation expense for the years ended August 31, 2025 and 2024 is as follows (in thousands):
Years Ended August 31,
Cost of revenues
Research and development
Selling, general and administrative
Stock‑based compensation expense is recorded net of estimated forfeitures such that expense is recorded only for those stock-based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. 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.
There was no recognized stock-based compensation tax benefit for the years ended August 31, 2025 and 2024, as the Company recorded a full valuation allowance on net deferred tax assets as of August 31, 2025 and 2024.
Stock Options Awards
The grant date fair value of stock options is determined using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs including the market price of SemiLEDs’ common stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several of the Company’s publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of stock units is based upon the market price of SemiLEDs’ common stock on the date of the grant. This fair value is amortized to compensation expense over the vesting term. During the years ended August 31, 2025 and 2024, the Company has
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no options granted, forfeited, or exercised. As of August 31, 2025 and 2024, the Company has no unvested stock options and the unrecognized compensation costs related to unvested stock options were nil .
Restricted Stock Units Awards
The grant date fair value of stock units is based upon the market price of SemiLEDs’ common stock on the date of the grant. This fair value is amortized to compensation expense over the vesting term.
A summary of the restricted stock unit awards outstanding and changes for the years ended August 31, 2025 and 2024 is presented below:
Weighted-
Number of
Average
Stock Units
Grant Date
Outstanding
Fair Value
(In thousands)
Outstanding—September 1, 2023
Granted
Vested
Forfeited
Outstanding—August 31, 2024
Granted
Vested
Forfeited
Outstanding—August 31, 2025
As of August 31, 2025 and 2024, unrecognized compensation cost related to unvested restricted stock unit awards o f $ 322 thousand and $ 109 thousand, respectively, is expected to be recognized over a weighted average period of 1.82 years and 1.35 years, respectiv ely, and will be adjusted for subsequent changes in estimated forfeitures .
9. NET LOSS PER SHARE OF COMMON STOCK
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 an antidilutive effect on the net loss per share (in thousands of shares):
Years Ended August 31,
Stock units and stock options to purchase common stock
10. INCOME TAXES
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
United States
SemiLEDs Corporation is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to the U.S. corporate income tax system including, among other things, lowering the U.S. statutory federal tax rate to 21%. The reduction of the U.S. corporate tax rate caused the Company to adjust its U.S. deferred tax assets and liabilities to the lower federal rate of 21 % in the fiscal year ended August 31, 2019. The Tax Act also added many new provisions, including a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries (“transition tax”), changes to bonus depreciation, limits on deductions for executive compensation and interest expense, a tax on global intangible low-taxed income (“GILTI”), the base erosion anti-abuse tax (“BEAT”) and a deduction for foreign-derived intangible income. The Company has
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elected to account for the tax on GILTI and BEAT as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax. However, the Company has considered the potential impact of GILTI and BEAT on its U.S. federal net operating loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions.
The changes included in the Tax Act are broad and complex. The SEC issued Staff Accounting Bulletin No. 118 (SAB 118), as amended by ASU 2018-05, which provides guidance for companies related to the Tax Act. ASU 2018-05 allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The Company’s accounting for the tax effects of the Tax Act were completed in fiscal 2019. Although the Company believes the effects of the Tax Act have been appropriately recorded, it will continue to monitor, among other things, changes in interpretations of the Tax Act, any legislative action arising because of the Tax Act and any changes in accounting standards for income taxes or related interpretations in response to the Tax Act. The Company intends to assess the impact of any such changes in legislative interpretations or standards and adjust its provision as new information becomes available.
In accordance with SAB 118, the Company has made reasonable estimates related to (1) the remeasurement of its U.S. deferred tax balances for the reduction in the statutory tax rate, (2) the liability for the transition tax and (3) the partial valuation allowance recorded against its federal NOL carryforward due to the impact of the GILTI and BEAT provisions. In fiscal 2025, the Company determined that there were no material changes to the provisional amounts recorded as of August 31, 2025.
Taiwan
The Company’s loss before income taxes is primarily derived from the operations in Taiwan, and income tax expense is primarily incurred in Taiwan.
As a result of amendments to the “Taiwan Income Tax Act” enacted by the Office of the President of Taiwan on February 7, 2018, the statutory income tax rate increased from 17 % to 20 % and the undistributed earning tax, or a surtax, decreased from 10 % to 5 % effective from January 1, 2018. As a result, the statutory income tax rate in Taiwan is 20 % for the years ended August 31, 2025 and 2024. An additional surtax, of which rate was reduced from 10 % to 5 % being applied to the Company starting from September 1, 2018, is assessed on undistributed income for the entities in Taiwan, but only to the extent such income is not distributed or set aside as a legal reserve before the end of the following year. The 5 % surtax is recorded in the period the income is earned, and the reduction in the surtax liability is recognized in the period the distribution to stockholders or the setting aside of legal reserve is finalized in the following year.
The Company’s loss before income taxes for the years ended August 31, 2025 and 2024 was attributable to the following jurisdictions (in thousands):
Years Ended August 31,
U.S. operations
Foreign operations
Loss before income taxes
Income tax expense differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21 % to loss before income taxes for the years ended August 31, 2025 and 2024, as a result of the following (in thousands):
Years Ended August 31,
Computed “expected” income tax benefit
Foreign tax rate differential
Valuation allowance
Other
Income tax expense
Net deferred tax assets (liabilities) as of August 31, 2025 and 2024 consist of the following (in thousands):
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August 31,
Deferred tax assets:
Inventories, primarily due to inventory obsolescence and lower of cost or market provisions
Allowance for doubtful accounts
Accruals and other
Property, plant and equipment
Stock-based compensation
Net operating loss carryforwards
Total gross deferred tax assets
Less: Valuation allowance
Deferred tax assets, net of valuation allowance
A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and operating loss carryforwards utilizable. Management considers the scheduled reversal of deferred tax liabilities, carryback availability, projected future income, and tax-planning strategies in making this assessment. The Company established full valuation allowances to offset all of its deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.
As of August 31, 2025 the Company had the U.S. net operating losses (the “U.S. NOLs”) of approximately $ 4,319 thousand, which begins to expire in 2024 . The U.S. NOLs generated in tax years prior to August 31, 2018, can be carryforward for twenty years , whereas U.S. NOLs generated after August 31, 2018 can be carryforward indefinitely. The unused net operating loss carryforwards were as follows (in thousands):
August 31,
Expiration
Year
U.S. federal net operating loss carryforwards (after August 31, 2018)
Foreign net operating loss carryforwards (expiring over the next 5 years)
Foreign net operating loss carryforwards (expiring in more than 5 years)
Total unused net operating loss carryforwards and income tax credits
Unrecognized Tax Benefits
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. Provisional estimate of the Company is that no tax will be due under this provision.
As of August 31, 2025 and 2024, the Company had no unrecognized tax benefits.
The Company is subject to taxation in the United States and various states and certain foreign jurisdictions. As of August 31, 2025, the 2020 through 2023 tax years remain subject to examination by the U.S. tax authorities . With few exceptions, as of August 31, 2025, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for tax years before 2020. Below is a summary of open tax years by major tax jurisdiction:
Open
Tax Year
U.S. federal
U.S. state
Foreign—Taiwan
The Company is not currently under examination by income tax authorities in any federal, state or foreign jurisdictions. The Company does not expect that the total amount of unrecognized tax benefits will change significantly within the next 12 months.
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11. PRODUCT AND GEOGRAPHIC INFORMATION
Revenues by products for the years ended August 31, 2025 and 2024 are as follows (in thousands):
Years Ended August 31,
LED chips
LED components
Lighting products
Other (1)
Total
(1) Other revenues for the year ended August 31, 2025 primarily represent revenues attributable to buy-sell purchase orders of equipment. Other revenues for the year ended August 31, 2024 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.
Revenues by geography are based on the billing address of the customer. The following table sets forth revenues by geographic area for the years ended August 31, 2025 and 2024 (in thousands):
Years Ended August 31,
India
Japan
Other (individually less than 5 % of total net revenues)
Total
Tangible Long ‑ Lived Assets
Substantially all of the Company’s tangible long‑lived assets are located in Taiwan.
12. FAIR VALUE MEASUREMENTS
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of August 31, 2025 and 2024 (in thousands):
August 31, 2025
August 31, 2024
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Financial assets:
Cash and cash equivalents and restricted cash
Receivables (including related parties)
Other assets (non-derivatives)
Financial liabilities:
Payables (including related parties)
Long-term debt (including current installments)
The fair values of the financial instruments shown in the above table as of August 31, 2025 and 2024 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects management’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by management based on the best information available in the circumstances, including expected cash flows and appropriately risk‑adjusted discount rates, available observable and unobservable inputs.
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The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Cash, cash equivalents, restricted cash, receivables and payables (including related parties) and notes payable to banks: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.
Other assets (non‑derivatives) include primarily value‑added tax (“VAT”) refund receivables, refundable deposits, and restricted time deposits. The fair value of VAT refund receivables approximates the carrying amount because of the short maturity. The fair value of refundable deposits and restricted time deposits with no fixed maturity is based on the carrying amount.
Long‑term debt: The fair value of the Company’s variable rate long‑term debt is estimated based on the prevailing market rate adjusted by the Company’s credit spread.
13. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
As a holding company, dividends received from SemiLEDs’ subsidiaries in Taiwan, if any, will be subject to withholding tax under Taiwan law, as well as statutory and other legal restrictions. The condensed parent company only financial information for SemiLEDs is presented below (in thousands):
August 31,
Condensed Balance Sheets
ASSETS
Cash and cash equivalents
Prepaid expenses and other current assets
Total current assets
Intangible assets, net
Investments in subsidiaries
TOTAL ASSETS
LIABILITIES AND EQUITY
Accrued expenses and other current liabilities
Long-term debt, current portion
Total current liabilities
Total equity
TOTAL LIABILITIES AND EQUITY
SemiLEDs had no contingencies, long‑term obligations and guarantees as of August 31, 2025 or August 31, 2024.
Years Ended August 31,
Condensed Statements of Operations
Operating expenses:
Selling, general and administrative
Loss from operations
Other expenses:
Equity in losses from subsidiaries, net
Interest expenses
Other income (expense), net
Total other expenses, net
Net loss
Years Ended August 31,
Condensed Statements of Cash Flows
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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14. RELATED PARTY TRANSACTIONS
On January 8, 2019, the Company entered into secured loan agreements with Trung Doan, its Chairman and Chief Executive Officer and J.R. Simplot Company, its largest shareholder, with aggregate amounts of $ 1.7 million and $ 1.5 million, respectively, and an annual interest rate of 8 % (the “Loan Agreements”). The Loan Agreements are secured by a second priority security interest on the Company’s headquarters building. The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021 , respectively. On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022 , and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023 . On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024 .
On January 7, 2024, J.R. Simplot Company entered into an assignment agreement (the “Assignment”) pursuant to which J.R. Simplot assigned and transferred all of its right, title and interest in and to the Loan Agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the Loan Agreement.
On January 7, 2024, the Company entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc. and Trung Doan. The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc. (i) extended the maturity date to January 15, 2025 , and (ii) upon mutual agreement of the Company and Simplot Taiwan Inc., permitted the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 400,000 , by issuing shares of the Company’s common stock in the name of Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement with Simplot Taiwan Inc. remained the same. The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025 . All other terms and conditions of the Loan Agreement with Trung Doan remained the same.
On January 7, 2024, the Company issued 305,343 shares of its common stock at a price of $ 1.31 per share to repay $ 400,000 of accrued interest on the loan agreement with Simplot Taiwan Inc.
On February 9, 2024, the Company entered into the Fifth Amendment to the Loan Agreements with Trung Doan. The Fifth Amendment to the Loan Agreements with Trung Doan (i) amended the Loan Agreement to permit the Company to repay up to $ 800,000 of principal under the Loan Agreement by issuing shares of the Company’s common stock and (ii) elected to prepay $ 800,000 of loan principal by delivering 629,921 shares of the Company’s common stock to Trung Doan, based on the closing price of $ 1.27 per share on February 8, 2024. All other terms and conditions of the Loan Agreement remained the same.
On February 9, 2024, the Company repaid $ 800,000 of loan principal by delivering 629,921 shares of the Company’s common stock to Mr. Doan, based on the closing price of $ 1.27 per share on February 8, 2024.
On July 3, 2024, the Company and Trung Doan entered into the Sixth Amendment to the Loan Agreement. The Sixth Amendment to the Loan Agreement amended the Loan Agreement to permit the Company, upon the mutual agreement of the Company and Trung Doan, to repay a portion of the principal amount or accrued interest under the Loan Agreement, by issuing shares of the Company’s common stock to Trung Doan as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement, as amended by the Sixth Amendment to the Loan Agreement, remained the same. On January 15, 2025, the Company entered into the Seventh Amendment to the Loan Agreement with Trung Doan and Fifth Amendment to the Loan Agreement with Simplot Taiwan Inc. to extend the maturity dates to January 15, 2026 . All other terms and conditions of the Loan Agreements remained the same.
On February 28, 2025, the Company and Simplot Taiwan Inc. entered into the Sixth Amendment to the Loan Agreement (the “Amended Loan Agreement”) . The Amended Loan Agreement, upon the mutual agreement of the Company and Simplot Taiwan Inc., permits the Company to repay any principal amount or accrued interest, in an amount not to exceed $ 1,200,000 , by issuing shares of the Company’s common stock to Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of the Company’s common stock immediately preceding the business day of the payment notice date.
On February 28, 2025, the Company delivered payment notices indicating its intent to repay $ 1,200,000 and $ 400,000 of loan principal by delivering 722,891 shares and 240,963 shares of the Company’s common stock to Simplot Taiwan Inc. and Trung Doan, respectively, based on the closing price of $ 1.66 per share on February 27, 2025.
As of August 31, 2025 and 2024, these loans totaled $ 800 thousand and $ 2.4 million, respectively.
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15. SUBSEQUENT EVENTS
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company has analyzed its operations subsequent to August 31, 2025 to the date these consolidated financial statements were issued, finding that no material subsequent events need to be disclosed.
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