[10-Q] SemiLEDS Corporation Quarterly Earnings Report
SemiLEDs Corporation (NASDAQ: LEDS) reported a sharp upswing in top-line results for the quarter ended 31 May 2025. Net revenue grew to $17.7 million, more than twelve times the $1.3 million posted in the prior-year quarter, driven almost entirely by buy-sell purchase orders of equipment that accounted for 94 % of sales. Cost of revenue rose proportionally, compressing gross margin to 5.3 % (vs. 41 % a year ago) and leaving gross profit at $0.9 million.
Operating expenses were kept largely flat at $1.0 million, resulting in an operating loss of $0.06 million. Other income—mainly foreign-exchange gains and miscellaneous income of $0.29 million—pushed the company to a net profit of $0.22 million, or $0.03 per basic and diluted share, versus a loss of $0.32 million (-$0.04/share) in the comparable period.
Nine-month figures show revenue of $29.8 million (2024: $3.9 million) and net income of $0.06 million compared with a loss of $1.47 million last year, reflecting similar buy-sell dynamics. Operating cash flow turned positive at $1.94 million, helped by a $7.5 million rise in accounts payable that effectively financed an $8.3 million inventory build.
Balance sheet: Total assets doubled to $23.2 million, while total liabilities reached $19.2 million. Current assets and current liabilities were nearly equal ($17.7 million vs. $17.6 million), giving a current ratio of 1.0. Cash and restricted cash improved to $2.62 million but remain modest. Long-term and related-party debt fell to $0.8 million after debt-for-equity swaps totalling $1.6 million; shares outstanding increased to 8.22 million from 7.21 million.
The filing still cites substantial doubt about the company’s ability to continue as a going concern, noting prior-year operating losses and dependence on equipment resale orders and niche LED markets. Management’s liquidity plan centres on additional buy-sell transactions, higher-margin UV/module products, strict cost control and potential capital raises.
Key concentration risks: Top ten customers provided 99 % of revenue; one customer represented 94 % in the quarter. Geographic exposure is concentrated in India, Japan, the Netherlands and the United States (98 % of sales).
- Revenue grew 1,233 % YoY to $17.7 million due to buy-sell equipment orders.
- Returned to profitability with $0.22 million net income vs. prior-year loss.
- Operating cash flow turned positive at $1.94 million for nine months.
- Related-party debt reduced by $1.6 million through share issuance, lowering interest expense.
- Gross margin collapsed to 5.3 % as equipment resale is low-margin.
- Inventory and accounts payable surged, straining working capital once payables come due.
- Going-concern uncertainty remains explicitly stated.
- Extreme customer concentration: one buyer generated 94 % of quarterly revenue.
- Equity dilution raised outstanding shares by ~14 % YoY.
- Current ratio only 1.0, leaving limited liquidity buffer.
Insights
TL;DR – Revenue surge and small profit are welcome, but ultra-low margins, working-capital strain and going-concern warning limit upside; net impact neutral.
Quarterly sales jumped to $17.7 million on equipment buy-sell orders, a non-recurring, low-margin activity that yielded only 5 % gross margin. Core LED margins were far higher last year, so the mix shift clouds quality of earnings. Positive factors include reduced related-party debt via $1.6 million share issuance, positive operating cash flow and a return to profitability. However, inventories ballooned three-fold and payables increased sharply, signalling cash could reverse once payables are settled. The current ratio of 1.0 and $2.4 million cash provide limited cushion, and management still flags substantial doubt about going concern. Customer concentration (94 % to a single buyer) heightens volatility. Overall, the filing is neutral: it removes some near-term liquidity pressure but does not yet establish a sustainable earnings model.
TL;DR – Liquidity still fragile; dependence on one-off equipment deals and single customer elevates credit and operational risk.
The large revenue spike is financed by payables and matched by inventory, indicating transactional, pass-through business rather than structural growth. Gross profit covers only one-third of fixed costs absent other income, highlighting vulnerability if equipment orders dry up. Buy-sell margins are minimal, so any delay or cancellation could push the firm back into losses and negative cash flow. Equity dilution has eased leverage but signals limited debt capacity. The going-concern statement remains in place, and future funding may require further share issuance or asset sales. Overall impact skews slightly negative as risk profile remains high despite temporary profit.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Table of Contents
SEMILEDS CORPORATION
FORM 10-Q for the Quarter Ended May 31, 2025
INDEX
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Page No. |
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Part I. Financial Information |
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Item 1. |
Financial Statements |
1 |
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Condensed Consolidated Balance Sheets as of May 31, 2025 (Unaudited) and August 31, 2024 |
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Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2025 and 2024 |
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Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended May 31, 2025 and 2024 |
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Unaudited Condensed Consolidated Statement of Changes in Equity for the three and nine months ended May 31, 2025 and 2024 |
4 |
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Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2025 and 2024 |
6 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
33 |
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Item 4. |
Controls and Procedures |
33 |
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Part II. Other Information |
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Item 1. |
Legal Proceedings |
35 |
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Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
36 |
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Item 3. |
Defaults Upon Senior Securities |
36 |
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Item 4. |
Mine Safety Disclosures |
36 |
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Item 5. |
Other Information |
36 |
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Item 6. |
Exhibits |
36 |
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Signatures |
37 |
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Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
SEMILEDS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands of U.S. dollars and shares, except par value)
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May 31, |
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August 31, |
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2025 |
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2024 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash and cash equivalents |
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Accounts receivable (including related parties), net of allowance for doubtful accounts of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right of use assets |
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Intangible assets, net |
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Investments in unconsolidated entities |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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CURRENT LIABILITIES: |
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Current installments of long-term debt |
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$ |
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$ |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Other payable to related parties |
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Operating lease liabilities, current |
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Total current liabilities |
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Long-term debt, excluding current installments |
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Operating lease liabilities, less current portion |
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Total liabilities |
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Commitments and contingencies (Note 5) |
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SHAREHOLDERS‘ EQUITY: |
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Common stock, $ |
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— |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Total SemiLEDs stockholders' equity |
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Noncontrolling interests |
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— |
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Total shareholders' equity |
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TOTAL LIABILITIES AND EQUITY |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
1
Table of Contents
SEMILEDS CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands of U.S. dollars and shares, except per share data)
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Three Months Ended |
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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May 31, 2025 |
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May 31, 2024 |
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Revenues, net |
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$ |
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$ |
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$ |
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$ |
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Cost of revenues |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Gain on disposals of long-lived assets, net |
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— |
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— |
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Total operating expenses |
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Loss from operations |
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Other income (expenses): |
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Investment loss from unconsolidated entities |
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Interest expenses, net |
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Other income, net |
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Foreign currency transaction gain (loss), net |
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Total other income, net |
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Income (loss) before income taxes |
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Income tax expense |
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— |
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— |
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— |
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— |
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Net income (loss) |
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( |
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Less: Net income attributable to noncontrolling interests |
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— |
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— |
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Net income (loss) attributable to SemiLEDs stockholders |
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$ |
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$ |
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$ |
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Net income (loss) per share attributable to SemiLEDs stockholders: |
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Basic |
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$ |
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$ |
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Diluted |
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Shares used in computing net income (loss) per share attributable to SemiLEDs stockholders: |
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Basic |
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Diluted |
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See notes to unaudited condensed consolidated financial statements.
2
Table of Contents
SEMILEDS CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands of U.S. dollars)
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Three Months Ended |
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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May 31, 2025 |
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May 31, 2024 |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive gain (loss), net of tax: |
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Foreign currency translation adjustments, net of tax of $ |
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Comprehensive income (loss) attributable to noncontrolling interests |
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$ |
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$ |
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Comprehensive income (loss) attributable to noncontrolling interests |
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— |
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$ |
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$ |
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Comprehensive income (loss) loss attributable to SemiLEDs stockholders |
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See notes to unaudited condensed consolidated financial statements.
3
Table of Contents
SEMILEDS CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Changes in Equity
(In thousands of U.S. dollars and shares)
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Accumulated |
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Total |
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Additional |
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Other |
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SemiLEDs |
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Non- |
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Common Stock |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Shareholders' |
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Controlling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income |
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Deficit |
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Equity |
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Interests |
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Equity |
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BALANCE—September 1, 2024 |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Change ownership in SBDI |
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( |
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— |
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— |
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( |
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Comprehensive loss: |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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BALANCE—November 30, 2024 |
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— |
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— |
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( |
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— |
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Stock-based compensation |
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— |
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( |
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— |
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— |
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Issuance of common stock to repay long-term loan |
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— |
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— |
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— |
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— |
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— |
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— |
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Comprehensive income: |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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BALANCE—February 28, 2025 |
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— |
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— |
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— |
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( |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock to repay long-term loan |
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— |
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— |
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— |
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— |
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— |
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— |
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|
— |
|
|
|
— |
|
|
|
— |
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
BALANCE—May 31, 2025 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
4
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
SemiLEDs |
|
|
Non- |
|
|
|
|
||||||||||
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Shareholders' |
|
|
Controlling |
|
|
Total |
|
||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Deficit |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
||||||||||
BALANCE—September 1, 2023 |
|
|
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Stock-based compensation |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
BALANCE—November 30, 2023 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||||
Stock-based compensation |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Conversion of convertible notes payable to common stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Issuance of common stock to repay long-term loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
BALANCE—February 29, 2024 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||||
Stock-based compensation |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
BALANCE—May 31, 2024 |
|
|
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
See notes to unaudited condensed consolidated financial statements.
5
Table of Contents
SEMILEDS CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
|
|
Nine Months Ended |
|
|||||
|
|
May 31, 2025 |
|
|
May 31, 2024 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Provisions for inventory write-downs |
|
|
|
|
|
|
||
Investment income from unconsolidated entities |
|
|
|
|
|
|
||
Gain on disposals of long-lived assets, net |
|
|
— |
|
|
|
( |
) |
Changes in: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other |
|
|
( |
) |
|
|
( |
) |
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 |
|
|
— |
|
|
|
|
|
Placement of refundable deposits |
|
|
( |
) |
|
|
— |
|
Payments for development of intangible assets |
|
|
( |
) |
|
|
( |
) |
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 |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
|
|
|
( |
) |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period |
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—End of period |
|
$ |
|
|
$ |
|
||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
— |
|
|
$ |
— |
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Accrual related to property, plant and equipment |
|
$ |
|
|
$ |
|
||
Conversion of convertible notes payable to common stock |
|
$ |
— |
|
|
$ |
|
|
Issuance of common stock to repay long-term loan |
|
$ |
|
|
$ |
|
||
See notes to unaudited condensed consolidated financial statements.
6
Table of Contents
SEMILEDS CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. Business
SemiLEDs Corporation (“SemiLEDs” or the “parent company”) was incorporated in Delaware on
As of May 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 take place, 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 unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable provisions of the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the rules and regulations of the SEC. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on November 27, 2024. The unaudited condensed consolidated balance sheet as of August 31, 2024 included herein was derived from the audited consolidated financial statements as of that date.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s unaudited condensed consolidated balance sheet as of May 31, 2025, the unaudited condensed statements of operations and comprehensive loss for the three and nine months ended May 31, 2025 and 2024, the unaudited condensed statement of changes in equity for the three and nine months ended May 31, 2025 and 2024, and the unaudited condensed statements of cash flows for the nine months ended May 31, 2025 and 2024. The results for the three or nine months ended May 31, 2025 are not necessarily indicative of the results to be expected for the year ending August 31, 2025.
Going Concern —The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.
7
Table of Contents
The Company suffered losses from operations of $
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 unaudited interim condensed 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.
Restricted Cash Equivalents —Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan. As of May 31, 2025 and August 31, 2024, the Company’s restricted cash equivalents at current portion amounted $
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
Principles of Consolidation —The unaudited interim condensed consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation.
8
Table of Contents
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 losses 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 profitability and the Company’s share of the investee’s income exceeds its share of the cumulative losses that have not been previously recognized during the period the equity method is suspended.
Investments in entities that are not consolidated or accounted for under the equity method are recorded as investments without readily determinable fair values. 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.
Use of Estimates —The preparation of unaudited interim condensed 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 unaudited interim condensed 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.
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.
9
Table of Contents
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 $
|
|
May 31, |
|
|
August 31, |
|
||
Cash and Cash Equivalents by Location |
|
2025 |
|
|
2024 |
|
||
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 the three and nine months ended May 31, 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 one customer represented 94% of the Company's revenues for the three months ended May 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. 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.
Net revenues generated from sales to the top ten customers represented both
The Company’s revenues have been concentrated in a few select markets, including India, Japan, the Netherlands and the United States. Net revenues generated from sales to customers in these markets, in the aggregate, accounted for
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.
10
Table of Contents
On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd. (“SBDI”), the Company’s wholly owned operating subsidiary, issued
11
Table of Contents
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 the Company's unaudited condensed consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 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 the Company's unaudited condensed 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 the Company's unaudited condensed consolidated financial statements.
3. Balance Sheet Components
Inventories
Inventories as of May 31, 2025 and August 31, 2024 consisted of the following (in thousands):
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May 31, |
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August 31, |
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2025 |
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2024 |
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Raw materials |
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$ |
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$ |
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Work in process |
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Finished goods |
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Total |
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$ |
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$ |
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Inventory write-downs to estimated net realizable values were $
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Property, Plant and Equipment
Property, plant and equipment as of May 31, 2025 and August 31, 2024 consisted of the following (in thousands):
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May 31, |
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August 31, |
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2025 |
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2024 |
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Buildings and improvements |
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$ |
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$ |
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Machinery and equipment |
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Leasehold improvements |
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Other equipment |
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Total property, plant and equipment |
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Less: Accumulated depreciation and amortization |
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( |
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( |
) |
Property, plant and equipment, net |
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$ |
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$ |
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Intangible Assets
Intangible assets as of May 31, 2025 and August 31, 2024 consisted of the following (in thousands):
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May 31, 2025 |
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Weighted |
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Average |
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Gross |
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Net |
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Amortization |
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Carrying |
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Accumulated |
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Carrying |
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Period (Years) |
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Amount |
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Amortization |
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Amount |
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Patents and trademarks |
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$ |
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$ |
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$ |
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Acquired technology |
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Total |
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$ |
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$ |
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$ |
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August 31, 2024 |
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Weighted |
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Average |
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Gross |
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Net |
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Amortization |
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Carrying |
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Accumulated |
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Carrying |
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Period (Years) |
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Amount |
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Amortization |
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Amount |
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Patents and trademarks |
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$ |
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$ |
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$ |
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Acquired technology |
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Total |
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$ |
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$ |
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$ |
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Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of May 31, 2025 and August 31, 2024 consisted of the following (in thousands):
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May 31, |
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August 31, |
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2025 |
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2024 |
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Accrued compensation and benefits |
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$ |
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$ |
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Customer deposits |
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Accrued business expenses |
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Accrued professional service fees |
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Other (individually less than |
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Total |
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$ |
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$ |
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4. Investments in Unconsolidated Entities
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The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of May 31, 2025 and August 31, 2024 consisted of the following (in thousands, except percentages):
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May 31, 2025 |
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August 31, 2024 |
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Percentage |
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Percentage |
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Ownership |
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Amount |
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Ownership |
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Amount |
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Equity investments without readily determinable fair value |
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Various |
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$ |
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Various |
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Equity method investments, net |
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$ |
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$ |
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Total investments in unconsolidated entities |
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$ |
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$ |
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There were
Equity Investments without Readily Determinable Fair Value
Equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the Company) which do not have readily determinable fair values are recorded as equity investment without readily determinable fair value. All equity investments without readily determinable fair value are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable, and measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuers.
Equity Method Investments
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. The Company owned
5. Commitments and Contingencies
Operating Lease Agreements —
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 leases. Lease expense related to these noncancelable operating leases was $
Balance sheet information related to the Company’s leases is presented below:
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May 31, 2025 |
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August 31, 2024 |
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Assets |
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Operating lease right of use assets |
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$ |
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$ |
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Liabilities |
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Operating lease liabilities, current |
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$ |
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$ |
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Operating lease liabilities, less current portion |
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Total |
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$ |
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$ |
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The following provides details of the Company’s lease expenses:
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Three Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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Operating lease expenses, net |
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$ |
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$ |
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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Operating lease expenses, net |
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$ |
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$ |
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Other information related to leases is presented below:
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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Cash Paid for amounts Included In Measurement of Liabilities: |
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Operating cash flows from operating leases |
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$ |
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$ |
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Weighted Average Remaining Lease Term: |
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Operating leases |
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Weighted Average Discount Rate |
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Operating leases |
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% |
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% |
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As most of the Company’s leases do not provide an implicit rate, the Company uses its average borrowing rate from non-related parties of
The aggregate future noncancelable minimum rental payments for the Company’s operating leases as of May 31, 2025 consisted of the following (in thousands):
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Operating |
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Years Ending August 31, |
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Leases |
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Remainder of 2025 |
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$ |
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2026 |
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2027 |
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2028 |
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2029 |
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Thereafter |
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Total future minimum lease payments, undiscounted |
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Less: Imputed interest |
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( |
) |
Present value of future minimum lease payments |
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$ |
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Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $
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 May 31, 2025, there was no pending or threatened litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.
6. Common Stock
At its Annual Meeting held on August 30, 2024 (Taiwan time), the Company’s stockholders approved an amendment to its Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), to increase the number of authorized common stock from
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On February 28, 2025, the Company delivered payment notices indicating its intent to repay $
7. Stock-based Compensation
The Company currently has
A total of
In November 2024, SemiLEDs granted
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.
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
A summary of the stock-based compensation expense for the three and nine months ended May 31, 2025 and 2024 was as follows (in thousands):
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Three Months Ended |
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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May 31, 2025 |
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May 31, 2024 |
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Cost of revenues |
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$ |
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$ |
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$ |
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$ |
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Research and development |
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Selling, general and administrative |
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$ |
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$ |
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$ |
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$ |
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8. Net Income (Loss) Per Share of Common Stock
The following stock-based compensation plan awards were excluded from the computation of diluted net income (loss) per share of common stock for the periods presented because including them would have been anti-dilutive (in thousands of shares):
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Three Months Ended |
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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May 31, 2025 |
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May 31, 2024 |
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Stock units and stock options to purchase common stock |
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9. Income Taxes
The Company’s income (loss) before income taxes for the three and nine months ended May 31, 2025 and 2024 consisted of the following (in thousands):
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Three Months Ended |
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Nine Months Ended |
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May 31, 2025 |
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May 31, 2024 |
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May 31, 2025 |
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May 31, 2024 |
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U.S. operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
Foreign operations |
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( |
) |
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( |
) |
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Income (loss) before income taxes |
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$ |
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$ |
( |
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$ |
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$ |
( |
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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
As of both May 31, 2025 and August 31, 2024, the Company had
10. Related Party Transactions
On January 8, 2019, the Company entered into a secured loan agreements with Trung Doan, its Chairman and Chief Executive Officer and J.R. Simplot Company, its largest shareholder, with aggregate amounts of $
On January 7, 2024, J.R. Simplot Company and the 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
On January 7, 2024, the Company issued
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 $
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principal by delivering
On February 9, 2024, the Company repaid $
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, upon the mutual agreement of the Company and Trung Doan, the Company 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 date to
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 $
On February 28, 2025, the Company delivered payment notices indicating its intent to repay $
As of May 31, 2025 and August 31, 2024, these loans totaled $
On November 25, 2019 and on December 10, 2019, the Company issued convertible unsecured promissory notes (the “Notes”) to J.R. Simplot Company and Trung Doan (together, the “Holders”) with a principal sum of $
After the close of market on January 5, 2024, the Company entered into the Fourth Amendment to the Notes (the “ Note Fourth Amendments”) to amend the Notes to (i) convert the total principal and accrued interest on the Notes to common stock of the Company to be issued in the names of the Holders, and (ii) change the conversion price of the Notes from $
On January 5, 2024, the Holders converted the total principal and accrued interest of the Notes, in an aggregate amount of $
As of May 31, 2025 and August 31, 2024, the outstanding principal of these notes was
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11. 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 May 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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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding the future results of operations of SemiLEDs Corporation, or “we,” “our” or the “Company,” and financial position, strategy and plans, and our expectations for future operations, including the execution of our restructuring plan and any resulting cost savings, are forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. The words “believe,” “may,” “should,” “plan,” “potential,” “project,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, and actual results and the timing of certain events could differ materially and adversely from those anticipated or implied in the forward-looking statements as a result of many factors. These factors include, among other things:
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Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We have not assumed any obligation to, and you should not expect us to, update or revise these statements because of new information, future events or otherwise.
For more information on the significant risks that could affect the outcome of these forward-looking statements, see Item 1A “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, or the 2024 Annual Report, and those contained in Part II, Item 1A of this Quarterly Report, and other information provided from time to time in our filings with the Securities and Exchange Commission, or the SEC.
The following discussion and analysis of our financial condition and results of operations is based upon and should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes and other information included elsewhere in this Quarterly Report, in our 2024 Annual Report, and in other filings with the SEC.
Company Overview
We develop, manufacture and sell light emitting diode (LED) chips and LED components, LED modules and systems. Our products are used for general lighting and specialty industrial applications, including ultraviolet, or UV, curing of polymers, LED light
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therapy in medical/cosmetic applications, counterfeit detection, germicidal and viricidal devices LED lighting for horticulture applications, architectural lighting and entertainment lighting.
Utilizing our patented and proprietary technology, our manufacturing process begins by growing upon the surface of a sapphire wafer, or substrate, several very thin separate semiconductive crystalline layers of gallium nitride, or GaN, a process known as epitaxial growth, on top of which a mirror‑like reflective silver layer is then deposited. After the subsequent addition of a copper alloy layer and finally the removal of the sapphire substrate, we further process this multiple‑layered material to create individual vertical LED chips.
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. We sell our LED chips to packagers or to distributors, who in turn sell to packagers. 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.
We have developed advanced capabilities and proprietary know-how in:
These technical capabilities enable us to produce LED chips, LED component, LED modules and System products. We believe these capabilities and know-how should also allow us to reduce our manufacturing costs and our dependence on sapphire, a costly raw material used in the production of sapphire-based LED devices.
We were incorporated in the State of Delaware on January 4, 2005. 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.
Recent Development
In the third quarter of fiscal 2025, we received buy-sell purchase orders, pursuant to which we purchased equipment and then resold the goods to our customer. The revenue relating to these purchase orders was $16.5 million in the third quarter of fiscal 2025, and the associated cost of revenue was $15.7 million.
We anticipate more buy-sell purchase orders in the fourth quarter of fiscal 2025. As a result of these purchase orders and associated uncertainty of the business, our revenue, cost of revenues, receivables, inventories and customer deposits over the next quarter may vary significantly. We cannot assure you when, or if, the revenue will be recognized, when payments will be received, or if we will receive further orders in the future.
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:
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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 Item 1 to the Unaudited Consolidated Financial Statements.
Revenue Recognition
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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. Refer to Note 2 to the Unaudited Condensed 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. No bad debt expenses were recognized during the three months ended May 31, 2025 and 2024.
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 were $39 thousand and $119 thousand for the three months ended May 31, 2025 and 2024, respectively. Inventory write‑downs to estimated net realizable values were $185 thousand and $300 thousand for the nine months ended May 31, 2025 and 2024, 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 SemiLEDs 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.
25
Table of Contents
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 May 31, 2025, the exchange rate was 29.91 NT dollars to one U.S. dollar. On July 7, 2025, the exchange rate was 29.03 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.
Results of Operations
Three Months Ended May 31, 2025 Compared to the Three Months Ended May 31, 2024
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
May 31, 2025 |
|
|
|
May 31, 2024 |
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Change |
|
|
Change |
|
|
||||||
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
% |
|
|
||||||
|
(in thousands) |
|
|
||||||||||||||||||||||||
LED chips |
|
$ |
30 |
|
|
|
— |
|
% |
|
$ |
33 |
|
|
|
2 |
|
% |
|
$ |
(3 |
) |
|
|
(9 |
) |
% |
LED components |
|
|
360 |
|
|
|
2 |
|
% |
|
|
520 |
|
|
|
39 |
|
% |
|
|
(160 |
) |
|
|
(31 |
) |
% |
Lighting products |
|
|
47 |
|
|
|
— |
|
% |
|
|
72 |
|
|
|
6 |
|
% |
|
|
(25 |
) |
|
|
(35 |
) |
% |
Other revenues (1) |
|
|
17,214 |
|
|
|
98 |
|
% |
|
|
698 |
|
|
|
53 |
|
% |
|
|
16,516 |
|
|
|
2,366 |
|
% |
Total revenues, net |
|
|
17,651 |
|
|
|
100 |
|
% |
|
|
1,323 |
|
|
|
100 |
|
% |
|
|
16,328 |
|
|
|
1,234 |
|
% |
Cost of revenues |
|
|
16,712 |
|
|
|
95 |
|
% |
|
|
780 |
|
|
|
59 |
|
% |
|
|
15,932 |
|
|
|
2,043 |
|
% |
Gross profit |
|
$ |
939 |
|
|
|
5 |
|
% |
|
$ |
543 |
|
|
|
41 |
|
% |
|
$ |
396 |
|
|
|
73 |
|
% |
____________________
(1) Other revenues for the three months ended May 31, 2025 primarily represent revenues attributable to the buy-sell purchase orders of equipment, and other revenues for the three months ended May 31, 2024 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services and a joint development project with CrayoNano AS.
Revenues, net
Our revenues increased to $17.7 million for the three months ended May 31, 2025 from $1.3 million for the three months ended May 31, 2024. The increase in revenues was driven almost entirely by the $16.5 million increase in sales of other revenues as a result of buy-sell purchase orders of equipment.
Revenues attributable to the sales of our LED chips were $30 thousand and $33 thousand of our revenues for the three months ended May 31, 2025 and 2024, respectively. The decrease in sales of LED chips was primarily due to varying volumes sold for the LED chips.
Revenues attributable to the sales of our LED components were $360 thousand and $520 thousand for the three months ended May 31, 2025 and 2024, respectively. The decrease in sales of LED components was primarily due to less volumes sold.
Revenues attributable to the sales of lighting products were $47 thousand and $72 thousand for the three months ended May 31, 2025 and 2024, respectively. The decrease in sales of lighting products was primarily due to less volumes sold.
Revenues attributable to other revenues were $17.2 million and $698 thousand of our revenues for the three months ended May 31, 2025 and 2024, respectively. The increase in revenues attributable to other revenues in the three months ended May 31 2025 was primarily due to buy-sell purchase orders of equipment.
Cost of Revenues
Our cost of revenues increased from $780 thousand for the three months ended May 31, 2024 to $16.7 million for the three months ended May 31, 2025. The increase in cost of revenues was due to the buy-sell purchase orders of equipment.
Gross Profit
Our gross profit represented 5% and 41% of our revenues for the three months ended May 31, 2025 and 2024, respectively. The decrease in gross profit for the three months ended May 31, 2025 was primarily due to the buy-sell purchase orders of equipment, which have lower margins that sales of our products.
26
Table of Contents
Operating Expenses
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
May 31, 2025 |
|
|
|
May 31, 2024 |
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Change |
|
|
Change |
|
|
||||||
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
% |
|
|
||||||
|
|
(in thousands) |
|
|
|||||||||||||||||||||||
Research and development |
|
$ |
292 |
|
|
|
2 |
|
% |
|
$ |
320 |
|
|
|
24 |
|
% |
|
$ |
(28 |
) |
|
|
(9 |
) |
% |
Selling, general and administrative |
|
|
709 |
|
|
|
4 |
|
% |
|
|
696 |
|
|
|
53 |
|
% |
|
|
13 |
|
|
|
2 |
|
% |
Total operating expenses |
|
$ |
1,001 |
|
|
|
6 |
|
% |
|
$ |
1,016 |
|
|
|
78 |
|
% |
|
$ |
(15 |
) |
|
|
(1 |
) |
% |
Research and development
Our research and development expenses decreased from $320 thousand for the three months ended May 31, 2024 to $292 thousand for the three months ended May 31, 2025. The decrease was primarily due to a $31 thousand decrease in materials and supplies used in research and development.
Selling, general and administrative
Our selling, general and administrative expenses increased from $696 thousand for the three months ended May 31, 2024 to $709 thousand for the three months ended May 31, 2025. The increase was mainly attributable to an $20 thousand increase in shipping expense and an $8 thousand increase in payroll expense, partially offset by a $16 thousand decrease in professional service fees.
Other Income (Expenses)
|
|
Three Months Ended |
|
|
||||||||||||||
|
|
May 31, 2025 |
|
|
|
May 31, 2024 |
|
|
||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
||||
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
Revenues |
|
|
||||
|
|
(in thousands) |
|
|
||||||||||||||
Investment loss from unconsolidated entities |
|
$ |
(9 |
) |
|
|
— |
|
% |
|
|
(3 |
) |
|
|
— |
|
% |
Interest expenses, net |
|
|
(20 |
) |
|
|
— |
|
|
|
|
(58 |
) |
|
|
(4 |
) |
% |
Other income, net |
|
|
266 |
|
|
|
2 |
|
% |
|
|
277 |
|
|
|
21 |
|
% |
Foreign currency transaction gain (loss), net |
|
|
48 |
|
|
|
— |
|
% |
|
|
(59 |
) |
|
|
(4 |
) |
% |
Total other income, net |
|
$ |
285 |
|
|
|
2 |
|
% |
|
$ |
157 |
|
|
|
13 |
|
% |
Investment loss from unconsolidated entities Investment loss from unconsolidated entities increased from $3 thousand for the three months ended May 31, 2024 to $9 thousand for the three months ended May 31, 2025, primarily due to the decrease in equity method investments.
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. The decrease in interest expenses, net was primarily due to the repayment $800,000 of loan principal in fiscal year 2024.
Other income, net Other income, net, which primarily consisted of rental income, decreased from $277 thousand for the three months ended May 31, 2024, to $266 thousand for the three months ended May 31, 2025, primarily due to the decrease of rental income.
Foreign currency transaction gain (loss), net We recognized a net foreign currency transaction gain of $48 thousand and a net foreign currency transaction loss of $59 thousand for the three months ended May 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
Our effective tax rate is expected to be approximately zero for fiscal 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.
27
Table of Contents
Net Income Attributable to Noncontrolling Interests
|
|
Three Months Ended |
|
|
|||||||||||||
|
|
May 31, 2025 |
|
|
May 31, 2024 |
|
|
||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
||||
|
|
$ |
|
|
Revenues |
|
|
$ |
|
|
Revenues |
|
|
||||
|
|
(in thousands) |
|
|
|||||||||||||
Net income attributable to noncontrolling interests |
|
$ |
— |
|
|
|
— |
|
% |
$ |
3 |
|
|
|
1 |
|
% |
We recognized net income attributable to non-controlling interests of zero and $3 thousand for the three months ended May 31, 2025 and 2024, respectively, which was attributable to the share of the net income of Taiwan Bandaoti Zhaoming Co., Ltd., held by the remaining non-controlling holders. Non-controlling interests represented zero and 2.63% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., as of May 31, 2025 and 2024, respectively.
Nine Months Ended May 31, 2025 Compared to the Nine Months Ended May 31, 2024
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
May 31, 2025 |
|
|
|
May 31, 2024 |
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Change |
|
|
Change |
|
|
||||||
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
% |
|
|
||||||
|
(in thousands) |
|
|
||||||||||||||||||||||||
LED chips |
|
$ |
124 |
|
|
|
— |
|
% |
|
$ |
93 |
|
|
|
2 |
|
% |
|
$ |
31 |
|
|
|
33 |
|
% |
LED components |
|
|
1,604 |
|
|
|
5 |
|
% |
|
|
2,139 |
|
|
|
56 |
|
% |
|
|
(535 |
) |
|
|
(25 |
) |
% |
Lighting products |
|
|
163 |
|
|
|
1 |
|
% |
|
|
169 |
|
|
|
4 |
|
% |
|
|
(6 |
) |
|
|
(4 |
) |
% |
Other revenues (1) |
|
|
27,893 |
|
|
|
94 |
|
% |
|
|
1,458 |
|
|
|
38 |
|
% |
|
|
26,435 |
|
|
|
1,813 |
|
% |
Total revenues, net |
|
|
29,784 |
|
|
|
100 |
|
% |
|
|
3,859 |
|
|
|
100 |
|
% |
|
|
25,925 |
|
|
|
672 |
|
% |
Cost of revenues |
|
|
27,582 |
|
|
|
93 |
|
% |
|
|
2,959 |
|
|
|
77 |
|
% |
|
|
24,623 |
|
|
|
832 |
|
% |
Gross profit |
|
$ |
2,202 |
|
|
|
7 |
|
% |
|
$ |
900 |
|
|
|
23 |
|
% |
|
$ |
1,302 |
|
|
|
145 |
|
% |
_____________________
(1) Other revenues for the nine months ended May 31, 2025 primarily represent revenues attributable to the buy-sell purchase orders of equipment, and other revenues for the nine months ended May 31, 2024 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services and a joint development project with CrayoNano AS.
Revenues, net
Our revenues increased from $3.9 million for the nine months ended May 31, 2024 to $29.8 million for the nine months ended May 31, 2025. The increase in revenues was driven almost entirely by the $26.4 million increase in sales of other revenues as a result of buy-sell purchase orders of equipment.
Revenues attributable to the sales of our LED chips were $124 thousand and $93 thousand for the nine months ended May 31, 2025 and 2024, respectively. The increase in sales of LED chips was primarily due to varying volumes sold for the LED chips.
Revenues attributable to the sales of our LED components were $1.6 million and $2.1 million for the nine months ended May 31, 2025 and 2024, respectively. The decrease in sales of LED components was primarily due to less volumes sold.
Revenues attributable to the sales of lighting products were $163 thousand and $169 thousand for the nine months ended May 31, 2025 and 2024, respectively. The decrease in sales of lighting products was primarily due to less volumes sold.
Revenues attributable to other revenues were $27.9 million and $1.5 million for the nine months ended May 31, 2025 and 2024, respectively. The increase in revenues attributable to other revenues in the nine months ended May 31, 2025 was primarily due to the buy-sell purchase orders of equipment.
Cost of Revenues
Our cost of revenues were $27.6 million and $3.0 million for the nine months ended May 31, 2025 and 2024, respectively. The increase in cost of revenues was due to the buy-sell purchase orders of equipment.
28
Table of Contents
Gross Profit
Our gross profit represented 7% and 23% of our revenues for the nine months ended May 31, 2025 and 2024, respectively. The decrease in gross profit for the nine months ended May 31, 2025 was primarily due to the buy-sell purchase orders of equipment, which have lower margins than sales of our products.
Operating Expenses
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
May 31, 2025 |
|
|
|
May 31, 2024 |
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Change |
|
|
Change |
|
|
||||||
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
% |
|
|
||||||
|
|
(in thousands) |
|
|
|||||||||||||||||||||||
Research and development |
|
$ |
792 |
|
|
|
3 |
|
% |
|
$ |
943 |
|
|
|
24 |
|
% |
|
$ |
(151 |
) |
|
|
(16 |
) |
% |
Selling, general and administrative |
|
|
2,019 |
|
|
|
6 |
|
% |
|
|
2,131 |
|
|
|
55 |
|
% |
|
|
(112 |
) |
|
|
(5 |
) |
% |
Gain on disposals of long-lived assets, net |
|
|
— |
|
|
|
— |
|
% |
|
|
(50 |
) |
|
|
(1 |
) |
% |
|
|
50 |
|
|
|
— |
|
% |
Total operating expenses |
|
$ |
2,811 |
|
|
|
9 |
|
% |
|
$ |
3,024 |
|
|
|
78 |
|
% |
|
$ |
(213 |
) |
|
|
(7 |
) |
% |
Research and development
Our research and development expenses were $792 thousand and $943 thousand for the nine months ended May 31, 2025 and 2024, respectively. The decrease was primary due to a $10 thousand decrease in payroll expense, a $59 thousand decrease in compensation expense, and a $75 thousand decrease in materials and supplies used in research and development.
Selling, general and administrative
Our selling, general and administrative expenses were $2.0 million for the nine months ended May 31, 2025 and $2.1 million for the nine months ended May 31, 2024, respectively. The decrease was mainly attributable to a decrease in compensation expense and professional service fees.
Gain on disposal of long-lived assets, net
We recognized zero and a net gain of $50 thousand on the disposal of long-lived assets for the nine months ended May 31, 2025 and 2024, respectively. Due to the excess capacity charges that we have suffered for the last few 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.
Other Income (Expenses)
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
May 31, 2025 |
|
|
|
May 31, 2024 |
|
|
||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
||||
|
|
$ |
|
|
Revenues |
|
|
|
$ |
|
|
Revenues |
|
|
||||
|
|
(in thousands) |
|
|
||||||||||||||
Investment loss from unconsolidated entities |
|
$ |
(22 |
) |
|
|
— |
|
% |
|
$ |
— |
|
|
|
— |
|
% |
Interest expenses, net |
|
|
(130 |
) |
|
|
— |
|
% |
|
|
(211 |
) |
|
|
(5 |
) |
% |
Other income, net |
|
|
814 |
|
|
|
3 |
|
% |
|
|
913 |
|
|
|
24 |
|
% |
Foreign currency transaction gain (loss), net |
|
|
11 |
|
|
|
— |
|
% |
|
|
(47 |
) |
|
|
(1 |
) |
% |
Total other income, net |
|
$ |
673 |
|
|
|
2 |
|
% |
|
$ |
655 |
|
|
|
18 |
|
% |
Investment loss from unconsolidated entities Investment loss from unconsolidated entities was $22 thousand and zero for the nine months ended May 31, 2025 and 2024, respectively, primarily due to the decrease in equity method investments.
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. The decrease in interest expenses, net was primarily due to the repayment $800,000 of loan principal in fiscal year 2024.
29
Table of Contents
Other income, net Other income, net which primarily consisted of rental income, decreased from $913 thousand for the nine months ended May 31, 2024, to $814 thousand for the nine months ended May 31, 2025, primarily due to the decrease in rental income.
Foreign currency transaction gain (loss), net We recognized a net foreign currency transaction gain of $11 thousand and a net foreign currency transaction loss of $47 thousand for the nine months ended May 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
Our effective tax rate is expected to be approximately zero for fiscal 2025 and was zero for fiscal 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.
Net Income Attributable to Noncontrolling Interests
|
|
Nine Months Ended |
|
|||||||||||||
|
|
May 31, 2025 |
|
|
May 31, 2024 |
|
||||||||||
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|
|
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|
% of |
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|
|
|
|
% of |
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||||
|
|
$ |
|
|
Revenues |
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|
$ |
|
|
Revenues |
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||||
|
|
(in thousands) |
|
|||||||||||||
Net income attributable to noncontrolling interests |
|
$ |
— |
|
|
|
— |
|
% |
$ |
7 |
|
|
|
— |
|
We recognized net income of attributable to non-controlling interests of zero and $7 thousand for the nine months ended May 31, 2025 and 2024, respectively, which was attributable to the share of the net income of Taiwan Bandaoti Zhaoming Co., Ltd., held by the remaining non-controlling holders. Non-controlling interests represented zero and 2.63% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., as of May 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, as of May 31, 2025, expire at various dates between August 2025 and December 2040. See Note 5, "Commitments and Contingencies" in the notes to our unaudited consolidated financial statements in this Form 10-Q.
Sources and Uses of Cash
As of May 31, 2025 and August 31, 2024, we had cash and cash equivalents of $2.4 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.
As of July 7, 2025, we had no available credit facility.
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 of long-term debt and operating lease liabilities.
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Our long-term debt, which consisted of NT dollar denominated long-term notes and loans from our Chairman and our largest shareholder, totaled $1.9 million and $3.7 million as of May 31, 2025 and August 31, 2024, respectively.
Our NT dollar denominated long-term notes, totaled $1.1 million and $1.3 million as of May 31, 2025 and August 31, 2024, respectively. These long-term notes consisted of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million). 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 $84 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.
Property, plant and equipment pledged as collateral for our notes payable were $1.9 million and $2.0 million as of May 31, 2025 and August 31, 2024, respectively.
On January 8, 2019, we entered into a 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 and us 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 to amend the loans 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. The shares of common stock were issued in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.
On February 9, 2024, we 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 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. The shares of common stock were issued on February 9, 2024 in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
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, upon the mutual agreement of us and Trung Doan, us to repay a portion of
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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 date to January 15, 2026. All other terms and conditions of the Loan Agreement 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. The shares of common stock were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
As of May 31, 2025 and August 31, 2024, these loans totaled $800 thousand and $2.4 million, respectively. The loans are secured by a second priority security interest on our headquarters building.
On November 25, 2019 and on December 10, 2019, we issued convertible unsecured promissory notes (the “Notes”) to J.R. Simplot Company and Trung Doan (together, the “Holders”) with a principal sum of $1.5 million and $500 thousand, respectively, and an annual interest rate of 3.5%. Principal and accrued interest is due on demand by the Holders on and at any time after May 30, 2021. On February 7, 2020, J.R. Simplot Company assigned all of its right, title and interest in the Notes to Simplot Taiwan Inc. The outstanding principal and unpaid accrued interest of the Notes may be converted into shares of our common stock at a conversion price of $3.00 per share, at the option of the Holders any time from the date of the Notes. On May 25, 2020, each of the Holders converted $300,000 of the Notes into 100,000 shares of our common stock. On May 26, 2021, the Notes were extended with the same terms and interest rate for one year and a maturity date of May 30, 2022. On May 26, 2022, the Notes were second extended with the same terms and interest rate for one year and a maturity date of May 30, 2023. On June 6, 2023, we entered into the Third Amendment to the Notes (the “Third Amendments”) to amend the Notes to (i) extend the maturity date from May 30, 2023 to May 30, 2024, and (ii) change the conversion price from $3.00 to $2.046 per share. All other terms and conditions of the Notes remained the same.
After the close of market on January 5, 2024, we entered into the Fourth Amendment to the Notes (the “Note Fourth Amendments”) to amend the Notes to (i) convert the total principal and accrued interest on the Notes to our common stock to be issued in the names of the Holders, and (ii) change the conversion price of the Notes from $2.046 per share to the closing price immediately preceding the signing of the Note Fourth Amendments, or $1.31 per share. All other terms and conditions of the Notes remained the same.
On January 5, 2024, the Holders converted the total principal and accrued interest of the Notes, in an aggregate amount of $1,608,848, to 1,228,128 shares of our common stock at a conversion price of $1.31 per share.
As of May 31, 2025 and August 31, 2024, the outstanding principal of these notes was zero.
Working Capital
We have incurred significant losses since inception, including net income attributable to SemiLEDs stockholders of $223 thousand and net loss attributable to SemiLEDs stockholders of $319 thousand during the three months ended May 31, 2025 and 2024, respectively. Net cash provided by operating activities for the nine months ended May 31, 2025 was $1.9 million. As of May 31, 2025, we had cash and cash equivalents of $2.4 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.
We estimate that our cash requirements to service debt and contractual obligations in fiscal 2025 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
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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 unaudited interim condensed consolidated financial statements, which are included elsewhere in this Quarterly Report (in thousands):
|
|
Nine Months Ended |
|
|||||
|
|
May 31, 2025 |
|
|
May 31, 2024 |
|
||
Net cash provided by (used in) operating activities |
|
$ |
1,940 |
|
|
$ |
(570 |
) |
Net cash used in investing activities |
|
$ |
(571 |
) |
|
$ |
(46 |
) |
Net cash used in financing activities |
|
$ |
(502 |
) |
|
$ |
(336 |
) |
Cash Flows Provided by (Used In) Operating Activities
Net cash provided by operating activities for the nine months ended May 31, 2025 was $1.9 million, and net cash used in operating activities for the nine months ended May 31, 2024 was $570 thousand. The increase in cash flows provided by operating activities for the nine months ended May 31, 2025 was primary attributable to an increase of $1.5 million of net income, an increase of $4.5 million of accrued expenses and other current liabilities and an increase of $7.7 million of accounts payable, partially offset by an increase of $8.3 million of inventory and an increase of $2.9 million of prepaid expenses and other current assets.
Cash Flows Used In Investing Activities
Net cash used in investing activities for the nine months ended May 31, 2025 and 2024 was $571 thousand and $46, 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 nine months ended May 31, 2025 and 2024 was $502 thousand and $336 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 $548 thousand and $80 thousand for the nine months ended May 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 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Our management, with the participation of our chief executive officer, or CEO, and our chief financial officer, or CFO, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of May 31, 2025. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls
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and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based upon the aforementioned evaluation, our CEO and CFO have concluded that, as of May 31, 2025, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended May 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Due to the complex technology required to compete successfully in the LED industry, participants in our industry are often engaged in significant intellectual property licensing arrangements, negotiations, disputes and litigation. We are directly or indirectly involved from time to time and may be named in various other claims or legal proceedings arising in the ordinary course of our business or otherwise.
There were no material pending legal proceedings or claims as of May 31, 2025.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our 2024 Annual Report, other than as described below:
We may fail to qualify for continued listing on Nasdaq which could make it more difficult for investors to sell their shares.
Our common stock is listed on the Nasdaq Capital Market. To maintain that listing, we must satisfy the continued listing requirements of Nasdaq for continued listing on the Nasdaq Capital Market, including among other things, a minimum stockholders’ equity of $2.5 million and a minimum bid price for our common stock of $1.00 per share.
On December 4, 2024, we received a notice from Nasdaq indicating that we did not meet the minimum of $2.5 million in stockholders’ equity required by Nasdaq Listing Rule 5550(b)(1) for continued listing or the alternatives of market value of listed securities or net income from continuing operations. Pursuant to the Nasdaq listing rule, we submitted a plan to Nasdaq. Nasdaq accepted our plan, and we were granted an extension of up to 180 calendar days from December 4, 2024 to evidence compliance.
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. The shares of common stock were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. As a result of the repayment in shares, our stockholders’ equity exceeded $2.5 million as of February 28, 2025. Based on these transactions, Nasdaq issued a conditional compliance letter on April 17, 2025.
There can be no assurance that we will be able to maintain compliance with Nasdaq’s continued listing requirements or that our common stock will not be delisted from Nasdaq.
If our common stock is delisted by Nasdaq, we expect prices for our common stock to be quoted on one of the OTC Markets or the OTC Bulletin Board. Under such circumstances, stockholders may find it more difficult to sell, or to obtain accurate quotations, for our common stock, and our common stock would become substantially less attractive to certain purchasers such as financial institutions, hedge funds and other similar investors. There is no assurance, however, that prices of our common stock would be quoted on one of these other trading systems or that an active trading market for our common stock would thereafter exist, which would materially and adversely impact the market value of our common stock.
We may delay the recognition of revenues if the shipment is delayed.
In the third quarter of fiscal 2025, we received buy-sell purchase orders, pursuant to which we purchased equipment and then resold the goods to our customer. The revenue relating to these purchase orders was $16.5 million in the third quarter of fiscal 2025, and the associated cost of revenue was $15.7 million.
We anticipate more buy-sell purchase orders in the fourth quarter of fiscal 2025. As a result of these purchase orders and associated uncertainty of the business, our revenue, cost of revenues, receivables, inventories and customer deposits over the next quarter may vary significantly. We cannot assure you when, or if, the revenue will be recognized, when payments will be received, or if we will receive further orders in the future.
Trade matters, including tariffs, may impact our ability to compete cost-effectively.
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Our operations are subject to complex trade and customs laws, regulations, and tax requirements. The countries in which our products are sold from time to time impose duties, tariffs, or other restrictions on our sales or adversely change existing restrictions. For example, the United States has recently imposed or proposed imposing substantial tariffs on goods imported from many countries, including a 32% tariff on goods imported from Taiwan. In fiscal 2024, 28 percent of our products, by dollar value, was sold into the United States. The current political landscape, including with respect to the United States’ foreign policy priorities and relations with trading partners, has introduced greater uncertainty with respect to future tax and trade policy. We are unable to determine the impact that changes in tax and trade policy could have on our sales into the United States or other countries, but it could be material.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
None.
Repurchases
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended May 31, 2025, no director or officer of the Company
Item 6. Exhibits
Exhibit No. |
|
Description |
|
|
|
31.1 |
|
Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2 |
|
Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1 |
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2 |
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
SEMILEDS CORPORATION |
|
|
|
|
(Registrant) |
|
|
|
|
|
|
Dated: |
July 14, 2025 |
|
By: |
/s/ Christopher Lee |
|
|
|
Name: |
Christopher Lee |
|
|
|
Title: |
Chief Financial Officer |
|
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |
37
FAQ
How did LEDS revenue change in Q3 FY25?
What was SemiLEDs’ gross margin for the quarter ended 31 May 2025?
Did SemiLEDs post a profit or loss this quarter?
What is the company’s cash position?
Why did inventories increase to $11.9 million?
What concentration risks exist for LEDS?
