SemiLEDs Corporation
SemiLEDs Corporation
01/14/2026 | Press release | Distributed by Public on 01/14/2026 05:08
Quarterly Report for Quarter Ending November 30, 2025 (Form 10-Q)
Management's Discussion and Analysis ofFinancial 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:
•
Our cash position.
•
Our ability to continue or grow with buy-sell revenue.
•
Our ability to improve our liquidity, access alternative sources of funding and obtain additional equity capital or credit when necessary for our operations, the difficulty of which may increase if our common stock is delisted from the Nasdaq Capital Market.
•
Our ability to remain in compliance with the continued listing requirements to avoid our stock being delisted from the Nasdaq Capital Market.
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The inability of our suppliers or other contract manufacturers to produce products that satisfy our requirements.
•
The risk that trade matters, including tariffs on goods imported from Taiwan, could impact our ability to compete cost-effectively;
•
Our ability to implement our cost reduction programs and to execute our restructuring plan effectively.
•
Our ability to improve our gross margins, reduce our net losses and restore our operations to profitability.
•
Our ability to successfully introduce new products that we can produce and that customers will purchase in such amounts as to be sufficiently profitable to cover the costs of developing and producing these products, as well as providing us additional net income from operations.
•
Our ability to effectively develop, maintain and expand our sales and distribution channels, especially in the niche LED markets, including the UV LED and architectural lighting that we focus on.
•
Our ability to successfully manage our operations in the face of the cyclicality, rapid technological change, rapid product obsolescence, declining average selling prices and wide fluctuations in supply and demand typically found in the LED market.
•
Competitive pressures from existing and new companies.
•
Our ability to grow our revenues from the sales of our products and to control our expenses.
•
Loss of any of our key personnel, or our failure to attract, assimilate and retain other highly qualified personnel.
•
Intellectual property infringement or misappropriation claims by third parties against us or our customers, including our distributor customers.
•
The failure of LEDs to achieve widespread adoption in the general lighting market, or if alternative technologies gain market acceptance.
•
The loss of key suppliers or contract manufacturers.
•
Our ability to effectively expand or upgrade our production facilities or do so in a timely or cost-effective manner.
•
Difficulty in managing our future growth or in responding to a need to contract operations, and the associated changes to our operations.
•
Adverse macroeconomic developments in those selected markets, including India, Japan, the Netherlands and the United States, where our revenues are concentrated, including supply chain delays and the impact of inflation on customer demand.
•
Our ability to develop and execute upon a new strategy to exploit the China and India markets.
•
The reduction or elimination of government investment in LED lighting or the elimination of, or changes in, policies in certain countries that encourage the use of LEDs over some traditional lighting technologies.
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Loss of customers.
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Failure of our strategy of marketing and selling our products in jurisdictions with limited intellectual property enforcement regimes.
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Lack of marketing and distribution success by our third-party distributors.
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Our customers' ability to produce and sell products incorporating our LED products.
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Our failure to adequately prevent disclosure of trade secrets and other proprietary information.
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Ineffectiveness of our disclosure controls and procedures and our internal control over financial reporting.
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Our ability to profit from future joint ventures, investments, acquisitions and other strategic alliances.
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Impairment of long-lived assets or investments.
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Undetected defects in our products that harm our sales and reputation and adversely affect our manufacturing yields.
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The availability of adequate and timely supply of electricity and water for our manufacturing facilities.
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Our ability to comply with existing and future environmental laws and the cost of such compliance.
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The ability of Taiwan Banadaoti Zhaoming Co., Ltd. to make dividends and other payments to SemiLEDs Corporation.
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Our ability to obtain necessary regulatory approvals to make further investments in Taiwan Banadaoti Zhaoming Co., Ltd.
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Catastrophic events such as fires, earthquakes, floods, tornados, tsunamis, typhoons, pandemics, wars, terrorist activities and other similar events, particularly if these events occur at or near our operations, or the operations of our suppliers, contract manufacturers and customers.
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The effect of the legal system in the People's Republic of China, or the PRC.
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Labor shortages, strikes and other disturbances that affect our operations.
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Deterioration in the relations between the PRC and Taiwan governments.
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Fluctuations in the exchange rate among the U.S. dollar, the New Taiwan, or NT, dollar, the Japanese Yen and other currencies in which our sales, raw materials and component purchases and capital expenditures are denominated.
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, 2025, or the 2025 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 2025 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
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. In addition, beginning in fiscal year 2025, we have entered into number buy-sell orders for equipment that we purchased and then sold to our customer.
We have developed advanced capabilities and proprietary know-how in:
•
reusing sapphire substrate in subsequent production runs;
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optimizing our epitaxial growth processes to create layers that efficiently convert electrical current into light;
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employing a copper alloy base manufacturing technology to improve our chip's thermal and electrical performance;
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utilizing nanoscale surface engineering to improve usable light extraction;
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manufacturing extremely small footprint LEDs with optimized yield, ideal for Mini LED applications;
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developing a LED structure that generally consists of multiple epitaxial layers which are vertically-stacked on top of a copper alloy base;
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developing low cost Chip Scaled Packaging (CSP) technology;
•
developing multi-pixel Mini LED packages for commercial displays; and
•
developing small format AI sensors having a light source and photodetector in cooperation with our Japanese partners for various applications such as dot projectors and photoplethysmogram (PPG) sensors.
These technical capabilities enable us to produce LED chips, LED components, 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 first quarter of fiscal 2026, we entered into 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 $1.3 million in the first quarter of fiscal 2026, and the associated cost of revenue was $1.2 million.
We anticipate buy-sell purchase orders in the second quarter of fiscal 2026. As a result of these purchase orders and associated uncertainty of the business, our revenue, cost of revenues, receivables, inventories and customer deposits over future quarters may vary significantly. In addition, if our shipments are delayed, revenue recognition may be delayed into future quarters. 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:
•
Our ability to continue or grow with buy-sell revenue. Our recent reliance on buy-sell purchase orders of equipment has improved our gross profit, operating results and cash flows. We anticipate our buy-sell purchase orders will continue from
period to period. However, if orders diminish or cease altogether, our gross margin, operating results, and cash flows could be adversely affected.
•
Our ability to raise additional debt funding, sell additional equity securities and improve our liquidity.We need to improve our liquidity, access alternative sources of funding and obtain additional equity capital or debt when necessary for our operations. However, we may not be able to obtain such debt funding or sell equity securities on terms that are favorable to us, or at all. The raising of additional debt funding by us, if required and available, would result in increased debt service obligations and could result in additional operating and financing covenants, or liens on our assets, that would restrict our operations. The sale of additional equity securities, if required and available, could result in dilution to our stockholders.
•
Our ability to source chips from other chip suppliers. Our reliance on our chip suppliers exposes us to a number of significant risks, including reduced control over delivery schedules, quality assurance and production costs, lack of guaranteed production capacity or product supply. If our chip suppliers are unable or unwilling to continue to supply our chips at requested quality, quantity, performance and costs, or in a timely manner, our business and reputation could be seriously harmed. Our inability to procure chips from other chip suppliers at the desired quality, quantity, performance and cost might result in unforeseen manufacturing and operations problems. In such events, our customer relationships, business, financial condition and results of operations would be adversely affected.
•
Industry growth and demand for products and applications using LEDs.The overall adoption of LED lighting devices to replace traditional lighting sources is expected to influence the growth and demand for LED chips and component products and impact our financial performance. We believe the potential market for LED lighting will continue to expand. LEDs for efficient generation of UV light are also starting to gain attention for various medical, germicidal and industrial applications. Since a substantial portion of our LED chips, LED components and our lighting products are used by end-users in general lighting applications and specialty industrial applications such as UV curing, medical/cosmetic, counterfeit detection, horticulture, architectural lighting and entertainment lighting the adoption of LEDs into these applications will have a strong impact on the demand of LED chips generally and, as a result, for our LED chips, LED components and LED lighting products.
•
Average selling price of our products.The average selling price of our products may decline for a variety of factors, including prices charged by our competitors, the efficacy of our products, our cost basis, changes in our product mix, the size of the order and our relationship with the relevant customer, as well as general market and economic conditions. Competition in the markets for LED products is intense, and we expect that competition will continue to increase, thereby creating a highly aggressive pricing environment. For example, some of our competitors have in the past reduced their average selling prices, and the resulting competitive pricing pressures have caused us to similarly reduce our prices, accelerating the decline in our revenues and the gross margin of our products. When prices decline, we must also write down the value of our inventory. Furthermore, the average selling prices for our LED products have typically decreased over product life cycles. Therefore, our ability to continue to innovate and offer competitive products that meet our customers' specifications and pricing requirements, such as higher efficacy LED products at lower costs, will have a material influence on our ability to improve our revenues and product margins, although in the near term the introduction of such higher performance LED products may further reduce the selling prices of our existing products or render them obsolete.
•
Changes in our product mix.We anticipate that our gross margins will continue to fluctuate from period to period as a result of the mix of products that we sell and the utilization of our manufacturing capacity in any given period, among other things. For example, we continue to pursue opportunities for profitable growth in areas of business where we see the best opportunity to develop as an end-to-end LED module solution supplier by providing our customers with high quality, flexible and more complete LED system solution, customer technical support and LED module/system design, as opposed to just providing customers with individual components. As a strategic plan, we have placed greater emphasis on the sales of LED components rather than the sales of LED chips where we have been forced to cut prices on older inventory. The growth of our module products and the continued commercial sales of our UV LED product are expected to improve our gross margin, operating results and cash flows. In addition, we have adjusted the lower-priced LED components strategy as appropriate. We have adopted a strategy to adjust our product mix by exiting certain high volume but low unit selling price product lines in response to the general trend of lower average selling prices for products that have been available in the market for some time. However, as we expand and diversify our product offerings and with varying average selling prices, or execute new business initiatives, a change in the mix of products that we sell in any given period may increase volatility in our revenues and gross margin from period to period.
•
Our ability to reduce cost to offset lower average selling prices. Competitors may reduce average selling prices faster than our ability to reduce costs, and competitive pricing pressures may accelerate the rate of decline of our average selling prices. To address increased pricing pressure, we have improved and increased our production yields to reduce the per-unit cost of production of our products. However, such cost savings currently have limited impact on our gross profit, as we currently suffer from the underutilization of manufacturing capacity and must absorb a high level of fixed costs, such as depreciation. While we intend to focus on managing our costs and expenses, over the long term we expect to be required to invest substantially in LED components product development and production equipment if we are to grow.
•
Our ability to continue to innovate.As part of our growth strategy, we plan to continue to be innovative in product design, to deliver new products and to improve our manufacturing efficiencies. Our continued success depends on our ability to develop and introduce new, technologically advanced and lower cost products, such as more efficient, better performance LED components product. If we are unable to introduce new products that are commercially viable and meet rapidly evolving customer requirements or keep pace with evolving technological standards and market developments or are otherwise unable to execute our product innovation strategy effectively, we may not be able to take advantage of market opportunities as they arise, execute our business plan or be able to compete effectively. To differentiate ourselves from other LED package manufacturers, we are putting more resources towards module and system design. Along with our technical know-how in the chip and package sectors, we are able to further integrate electrical, thermal and mechanical manufacturing resources to provide customers with one-stop system services. Services include design, prototyping, OEM and ODM. Key markets that we intend to target at the system end include different types of UV LED industrial printers, aquarium lighting, medical applications, niche imaging light engines, horticultural lighting and high standard commercial lighting. The modules are designed for various printing, curing, and PCB exposure industrial equipment, providing uncompromised reliability and optical output. Our LED components include different sizes and wattage to accommodate different demands in the LED market.
•
General economic conditions and geographic concentration.Many countries including the United States and the European Union (the "E.U.") members have instituted, or have announced plans to institute, government regulations and programs designed to encourage or mandate increased energy efficiency in lighting. These actions include in certain cases banning the sale after specified dates of certain forms of incandescent lighting, which are advancing the adoption of more energy efficient lighting solutions such as LEDs. When the global economy slows or a financial crisis occurs, consumer and government confidence declines, with levels of government grants and subsidies for LED adoption and consumer spending likely to be adversely impacted. Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands and the United States. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets. For example, the aggressive support by the Chinese government for the LED industry through significant government incentives and subsidies to encourage the use of LED lighting and to establish the LED-sector companies has resulted in production overcapacity in the market and intense competition. Furthermore, due to Chinese package manufacturers increasing usage of domestic LED chips, prices are increasingly competitive, leading to Chinese manufacturers growing market share in the global LED industry. In addition, we have historically derived a significant portion of our revenues from a limited number of customers. Some of our largest customers and what we produce for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project-based purchases and broadening customer base, among other things. For the three months ended November 30, 2025 and 2024, sales to our three largest customers, in the aggregate, accounted for 69% and 78% of our revenues, respectively.
•
Intellectual property issues.Competitors of ours and other third parties have in the past and will likely from time to time in the future allege that our products infringe on their intellectual property rights. Defending against any intellectual property infringement claims would likely result in costly litigation and ultimately may lead to our not being able to manufacture, use or sell products found to be infringing. However, other third parties may also assert infringement claims against our customers with respect to our products, or our customers' products that incorporate our technologies or products. Any such legal action or the threat of legal action against us, or our customers, could impair such customers' continued demand for our products. This could prevent us from growing or even maintaining our revenues, or cause us to incur additional costs and expenses, and adversely affect our financial condition and results of operations.
•
Cash position. Our cash and cash equivalents increased to $2.9 million as of November 30, 2025 from $1.2 million as of November 30, 2024. We have implemented actions to accelerate operating cost reductions and improve operational efficiencies. The plan is further enhanced through the fabless business model in which we implemented certain workforce reductions and are exploring the opportunities to sell certain equipment related to the manufacturing of vertical LED chips, in order to reduce the idle capacity charges and minimize our research and development activities associated with chips manufacturing operation. Based on our current financial projections and assuming our outstanding notes are converted or extended, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months.
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
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.
Gross Versus Net Revenue
ASC 606 provides guidance on proper recognition of principal versus agent considerations which is used to determine gross versus net revenue recognition. Under ASC 606, the core objective of the guidance on gross versus net revenue recognition is to help determine whether an entity is a principal or an agent in a transaction. In general, the primary difference between these two is the performance obligation being satisfied. The principal has a performance obligation to provide the desired goods or services to the end customer, whereas the agent arranges for the principal to provide the desired goods or services. Additionally, a fundamental characteristic of a principal in a transaction is control. A principal substantively controls the goods and services before they are transferred to the customer as well as controls the price of the good or service being provided. An agent normally receives a commission or fee for these activities. In addition to control, the level at which an entity controls the price of the good or service being transferred determines principal versus agent status. The more discretion over setting price a company has in providing the good or service, the more likely they are considered a principal rather than an agent. Under the guidance when another party is involved in providing a good or service to a customer, an entity is a principal if the entity obtains control of the asset or right to a service performed by the other party.
The Company's revenues were substantially derived from buy-sell purchase orders of equipment.
Under buy-sell purchase orders, the Company purchases certain machinery and equipment (the Goods) from vendors and sells them to customers. Control of the Goods, including title and risk of loss, transfers to customers upon delivery at their designated seaport, and the Company has discretion in establishing prices. Accordingly, revenue from these transactions is recognized at the gross sales price.
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 November 30, 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 $152 thousand and $96 thousand for the three months ended November 30, 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 Bandaoti Zhaoming Co., Ltd. is the NT dollar. The assets and liabilities of the subsidiaries are, therefore, translated into U.S. dollars at exchange rates in effect at each balance sheet date, and income and expense accounts are translated at average exchange rates during the period. The resulting translation adjustments are recorded to a separate component of accumulated other comprehensive income (loss) within equity. Any gains and losses from transactions denominated in currencies other than their functional currencies are recognized in the consolidated statements of operations as a separate component of other income (expense). Due to exchange rate fluctuations, such translated amounts may vary from quarter to quarter even in circumstances where such amounts have not materially changed when denominated in their functional currencies.
The translations from NT dollars to U.S. dollars were made at the exchange rates set forth in the statistical release of the Bank of Taiwan. On November 30, 2025, the exchange rate was 31.4 NT dollars to one U.S. dollar. On January 6, 2026, the exchange rate was 31.52 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 November 30, 2025 Compared to the Three Months Ended November 30, 2024
|
Three Months Ended |
|||||||||||||||||||||||||||
|
November 30, 2025 |
November 30, 2024 |
||||||||||||||||||||||||||
|
% of |
% of |
Change |
Change |
||||||||||||||||||||||||
|
$ |
Revenues |
$ |
Revenues |
$ |
% |
||||||||||||||||||||||
|
(in thousands) |
|||||||||||||||||||||||||||
|
LED chips |
$ |
5 |
- |
% |
$ |
65 |
5 |
% |
$ |
(60 |
) |
(92 |
) |
% |
|||||||||||||
|
LED components |
692 |
27 |
% |
561 |
44 |
% |
131 |
23 |
% |
||||||||||||||||||
|
Lighting products |
47 |
2 |
% |
59 |
5 |
% |
(12 |
) |
(20 |
) |
% |
||||||||||||||||
|
Other revenues (1) |
1,825 |
71 |
% |
576 |
46 |
% |
1,249 |
217 |
% |
||||||||||||||||||
|
Total revenues, net |
2,569 |
100 |
% |
1,261 |
100 |
% |
1,308 |
104 |
% |
||||||||||||||||||
|
Cost of revenues |
2,551 |
99 |
% |
1,001 |
79 |
% |
1,550 |
155 |
% |
||||||||||||||||||
|
Gross profit |
$ |
18 |
1 |
% |
$ |
260 |
21 |
% |
$ |
(242 |
) |
(93 |
) |
% |
|||||||||||||
____________________
(1) Other revenues for the three months ended November 30, 2025 primarily represent revenues attributable to buy-sell purchase orders of equipment, and other revenues for the three months ended November 30, 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 by 104% from $1.3 million for the three months ended November 30, 2024 to $2.6 million for the three months ended November 30, 2025. The increase in revenues was driven almost entirely by the $1.3 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 $5 thousand and $65 thousand of our revenues for the three months ended November 30, 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 $692 thousand and $561 thousand for the three months ended November 30, 2025 and 2024, respectively. The increase in sales of LED components was primarily due to varying volumes sold for the LED components.
Revenues attributable to the sales of our lighting products were $47 thousand and $59 thousand for the three months ended November 30, 2025 and 2024, respectively. The decrease in sales of lighting products was primarily due to varying volumes sold for lighting products.
Revenues attributable to our other revenues were $1.8 million and $576 thousand of our revenues for the three months ended November 30, 2025 and 2024, respectively. The increase in other revenues was primarily due to buy-sell purchase orders of equipment.
Cost of Revenues
Our cost of revenues increased by 155% from $1.0 million for the three months ended November 30, 2024 to $2.5 million for the three months ended November 30, 2025. The increase in cost of revenues was due to the cost of equipment relating to buy-sell purchase orders of equipment.
Gross Profit
Our gross profit represented 1% and 21% of our revenues for the three months ended November 30, 2025 and 2024, respectively. The decrease in gross margin for the three months ended November 30, 2025 was primarily due to the buy-sell purchase orders of equipment, which have lower margins compared to sales of our products.
Operating Expenses
|
Three Months Ended |
|||||||||||||||||||||||||||
|
November 30, 2025 |
November 30, 2024 |
||||||||||||||||||||||||||
|
% of |
% of |
Change |
Change |
||||||||||||||||||||||||
|
$ |
Revenues |
$ |
Revenues |
$ |
% |
||||||||||||||||||||||
|
(in thousands) |
|||||||||||||||||||||||||||
|
Research and development |
$ |
356 |
14 |
% |
$ |
221 |
18 |
% |
$ |
135 |
61 |
% |
|||||||||||||||
|
Selling, general and administrative |
703 |
27 |
% |
696 |
55 |
% |
7 |
1 |
% |
||||||||||||||||||
|
Gain on disposals of long-lived assets, net |
(30 |
) |
(1 |
) |
% |
- |
- |
% |
(30 |
) |
100 |
% |
|||||||||||||||
|
Total operating expenses |
$ |
1,029 |
40 |
% |
$ |
917 |
73 |
% |
$ |
112 |
12 |
% |
|||||||||||||||
Research and development
Our research and development expenses increased from $221 thousand for the three months ended November 30, 2024 to $356 thousand for the three months ended November 30, 2025. The increase was primarily due to a $77 thousand increase in payroll expense and a $49 thousand increase 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 November 30, 2024 to $703 thousand for the three months ended November 30, 2025. The increase was mainly attributable to a $28 thousand increase in shipping expense and a $22 thousand increase in cleaning expense, partially offset by a $48 thousand decrease in payroll expense.
Other Income
|
Three Months Ended |
||||||||||||||||||
|
November 30, 2025 |
November 30, 2024 |
|||||||||||||||||
|
% of |
% of |
|||||||||||||||||
|
$ |
Revenues |
$ |
Revenues |
|||||||||||||||
|
(in thousands) |
||||||||||||||||||
|
Investment loss from unconsolidated entities |
$ |
(9 |
) |
- |
% |
(3 |
) |
- |
% |
|||||||||
|
Interest expenses, net |
(12 |
) |
- |
(67 |
) |
(5 |
) |
% |
||||||||||
|
Other income, net |
269 |
10 |
% |
282 |
22 |
% |
||||||||||||
|
Foreign currency transaction gain (loss), net |
21 |
1 |
% |
(102 |
) |
(8 |
) |
% |
||||||||||
|
Total other income, net |
$ |
269 |
10 |
% |
$ |
110 |
8 |
% |
||||||||||
Investment loss from unconsolidated entitiesInvestment loss from unconsolidated entities increased from $3 thousand for the three months ended November 30, 2024 to $9 thousand for the three months ended November 30, 2025, primarily due to the decrease in the fair value of equity method investments.
Interest expenses, netInterest expenses, net, which primarily consisted of accrued interest payments on loans with our Chairman and Chief Executive Officer and our largest shareholder, decreased from $67 thousand for three months ended November 30, 2024 to $12 thousand for three months ended November 30, 2025. The decrease in interest expense, net was primarily due to the repayment $1.6 million of loan principal in fiscal year 2025.
Other income, netOther income, net decreased from $282 thousand for three months ended November 30, 2024 to $269 thousand for three months ended November 30, 2025, primarily due to reduced rental income.
Foreign currency transaction gain (loss), netWe recognized a net foreign currency transaction gain of $21 thousand and a net foreign currency transaction loss of $102 thousand for three months ended November 30, 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 both fiscal year 2026 and 2025, 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.
Liquidity and Capital Resources
This section includes a discussion and analysis of our cash requirements, contingencies, sources and uses of cash, operations, working capital and long-term assets and liabilities.
Contingencies
We have several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between August 2026 and December 2040. See Note 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 November 30, 2025 and August 31, 2025, we had cash and cash equivalents of $2.9 million and $2.6 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 January 6, 2026, 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 long-term debt and operating lease liabilities.
Our long-term debt, which consisted of NT dollar denominated long-term notes and loans from our Chairman and our largest shareholder, totaled $1.6 million and $1.7 million as of November 30, 2025 and August 31, 2025, respectively.
Our NT dollar denominated long-term notes totaled $769 thousand and $908 thousand as of November 30, 2025 and August 31, 2025, respectively. These long-term notes consist of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million). The first loan originally for $2.0 million (NT$62 million) has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 2.415% currently), and was exclusively used to repay the existing loans. The second loan originally for $1.2 million (NT$38 million) has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 2.795%
currently) and is available for operating capital. These loans are secured by an $80 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company's headquarters building.
•
Starting from May 2021, the first note payable requires monthly payments of principal in the amount of $25 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of November 30, 2025, our outstanding balance on this note payable was approximately $477 thousand.
•
Starting from May 2021, the second note payable requires monthly payments of principal in the amount of $15 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of November 30, 2025, our outstanding balance on this note payable was approximately $292 thousand.
Property, plant and equipment pledged as collateral for our notes payable were $1.6 million and $1.7 million as of November 30, 2025 and August 31, 2025, respectively.
On January 8, 2019, we entered into secured loan agreements with Trung Doan, our Chairman and Chief Executive Officer and J.R. Simplot Company, our largest shareholder, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of 8% (the "Loan Agreements"). The Loan Agreements are secured by a second priority security interest on our headquarters building. The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021, respectively. On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022, and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023. On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024.
On January 7, 2024, J.R. Simplot Company entered into an assignment agreement (the "Assignment") pursuant to which J.R. Simplot assigned and transferred all of its right, title and interest in and to the Loan Agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the Loan Agreement.
On January 7, 2024, we entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc. and Trung Doan. The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc. (i) extended the maturity date to January 15, 2025, and (ii) upon mutual agreement of us and Simplot Taiwan Inc., permitted us to repay any principal amount or accrued interest, in an amount not to exceed $400,000, by issuing shares of our common stock in the name of Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement with Simplot Taiwan Inc. remained the same. The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025. All other terms and conditions of the Loan Agreement with Trung Doan remained the same.
On January 7, 2024, we issued 305,343 shares of our common stock at a price of $1.31 per share to repay $400,000 of accrued interest on the loan agreement with Simplot Taiwan Inc.
On February 9, 2024, we entered into the Fifth Amendment to the Loan Agreement with Trung Doan. The Fifth Amendment to the Loan Agreement with Trung Doan (i) amended the Loan Agreement to permit us to repay up to $800,000 of principal under the Loan Agreement by issuing shares of the our common stock and (ii) elected to prepay $800,000 of loan principal by delivering 629,921 shares of the our common stock to Trung Doan, based on the closing price of $1.27 per share on February 8, 2024. All other terms and conditions of the Loan Agreement remained the same.
On February 9, 2024, we repaid $800,000 of loan principal by delivering 629,921 shares of our common stock to Mr. Doan, based on the closing price of $1.27 per share on February 8, 2024.
On July 3, 2024, we and Trung Doan entered into the Sixth Amendment to the Loan Agreement. The Sixth Amendment to the Loan Agreement amended the Loan Agreement to permit us, upon the mutual agreement of us and Trung Doan, to repay a portion of the principal amount or accrued interest under the Loan Agreement, by issuing shares of our common stock to Trung Doan as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the Loan Agreement, as amended by the Sixth Amendment to the Loan Agreement, remained the same. On January 15, 2025, we entered into the Seventh Amendment to the Loan Agreement with Trung Doan and Fifth Amendment to the Loan Agreement with Simplot Taiwan Inc. to extend the maturity dates to January 15, 2026. All other terms and conditions of the Loan Agreements remained the same.
On February 28, 2025, we and Simplot Taiwan Inc. entered into the Sixth Amendment to the Loan Agreement (the "Amended Loan Agreement"). The Amended Loan Agreement, upon the mutual agreement of us and Simplot Taiwan Inc., permits us to repay any
principal amount or accrued interest, in an amount not to exceed $1,200,000, by issuing shares of our common stock to Simplot Taiwan Inc. as partial repayment of the Loan Agreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date.
On February 28, 2025, we repaid $1,200,000 and $400,000 of loan principal by delivering 722,891 shares and 240,963 shares of our common stock to Simplot Taiwan Inc. and Trung Doan, respectively, based on the closing price of $1.66 per share on February 27, 2025.
As of November 30, 2025 and August 31, 2025, these loans totaled $800 thousand.
Working Capital
We have incurred significant losses since inception, including net loss attributable to SemiLEDs stockholders of $742 thousand and $547 thousand during the three months ended November 30, 2025 and 2024, respectively. Net cash provided by operating activities for the three months ended November 30, 2025 was $361 thousand. As of November 30, 2025, we had cash and cash equivalents of $2.9 million. We have undertaken actions to decrease losses incurred and implemented cost reduction programs in an effort to transform the Company into a profitable operation. In addition, we are planning to issue additional equity to our stockholders.
We estimate that our cash requirements to service debt and contractual obligations in fiscal 2026 is approximately $1.9 million, which we expect to fund through the issuance of additional equity to repay principal and accrued interest and through loan extensions. Based on our current financial projections and assuming the successful implementation of our liquidity plans, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months and beyond. The remaining loans with each of our Chairman and Chief Executive Officer and our largest shareholder are expected to be extended upon maturity or repaid with equity. However, there can be no assurances that our planned activities will be successful in raising additional capital, reducing losses and preserving cash. If we are not able to generate positive cash flows from operations, we may need to consider alternative financing sources and seek additional funds through public or private equity financings or from other sources, or refinance our indebtedness, to support our working capital requirements or for other purposes. There can be no assurance that additional debt or equity financing will be available to us or that, if available, such financing will be available on terms favorable to us.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial conditions, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our common stock.
Cash Flows
The following summary of our cash flows for the periods indicated has been derived from our unaudited interim condensed consolidated financial statements, which are included elsewhere in this Quarterly Report (in thousands):
|
Three Months Ended |
||||||||
|
November 30, 2025 |
November 30, 2024 |
|||||||
|
Net cash provided by (used in) operating activities |
$ |
361 |
$ |
(158 |
) |
|||
|
Net cash used in investing activities |
$ |
(1 |
) |
$ |
(122 |
) |
||
|
Net cash used in financing activities |
$ |
(116 |
) |
$ |
(244 |
) |
||
Cash Flows Provided by (Used In) Operating Activities
Net cash provided by operating activities for the three months ended November 30, 2025 was $361 thousand, and net cash used in operating activities for the three months ended November 30, 2024 was $158 thousand. The increase in cash flows provided by operating activities was primary attributable to a $2.9 million increase of accrued expenses, a $1.5 million decrease of accounts receivables, a $883 thousand decrease of inventory and a $56 thousand increase of inventory write downs, partially offset by a $3.4 million decrease of accounts payable, a $1.2 million increase of prepaid expenses and other current assets and a $195 thousand increase in net loss.
Cash Flows Used In Investing Activities
Net cash used in investing activities for the three months ended November 30, 2025 and 2024 was $1 thousand and $122 thousand, respectively, primarily for the purchases of property, plant and equipment during each period.
Cash Flows Used In Financing Activities
Net cash used in financing activities for the three months ended November 30, 2025 and 2024 was $116 thousand and $244 thousand, respectively. The decrease in cash flows used in financing activities was primarily due to the acquisition of noncontrolling interest of $132 thousand during the three months ended November 30, 2024.
Capital Expenditures
We had capital expenditures of $30 thousand and $118 thousand for the three months ended November 30, 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.
SemiLEDs Corporation published this content on January 14, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on January 14, 2026 at 11:09 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]